<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(X) COMBINED QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1995
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.
1-1443 Central and South West Corporation 51-0007707
(A Delaware Corporation)
1616 Woodall Rodgers Freeway
Dallas, Texas 75202-1234
(214) 777-1000
0-346 Central Power and Light Company 74-0550600
(A Texas Corporation)
539 North Carancahua Street
Corpus Christi, Texas 78401-2802
(512) 881-5300
0-343 Public Service Company of Oklahoma 73-0410895
(An Oklahoma Corporation)
212 East 6th Street
Tulsa, Oklahoma 74119-1212
(918) 599-2000
1-3146 Southwestern Electric Power Company 72-0323455
(A Delaware Corporation)
428 Travis Street
Shreveport, Louisiana 71156-0001
(318) 222-2141
0-340 West Texas Utilities Company 75-0646790
(A Texas Corporation)
301 Cypress Street
Abilene, Texas 79601-5820
(915) 674-7000
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
Common Stock Outstanding at November 3, 1995 Shares
Central and South West Corporation 192,397,599
Central Power and Light Company 6,755,535
Public Service Company of Oklahoma 9,013,000
Southwestern Electric Power Company 7,536,640
West Texas Utilities Company 5,488,560
This combined Form 10-Q is separately filed by Central
and South West Corporation, Central Power and Light Company,
Public Service Company of Oklahoma, Southwestern Electric
Power Company and West Texas Utilities Company. Information
contained herein relating to any individual Registrant is
filed by such Registrant on its own behalf. Each other
Registrant makes no representation as to information relating
to the other Registrants.
<PAGE> 2
CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY COMPANIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
SEPTEMBER 30, 1995
Page
Number
GLOSSARY OF TERMS 3-4
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements. (Unaudited)
Central and South West Corporation and Subsidiary Companies 5
Consolidated Statements of Income 6
Consolidated Balance Sheets 7-8
Consolidated Statements of Cash Flows 9
Results of Operations 10-13
Central Power and Light Company 14
Statements of Income 15
Balance Sheets 16-17
Statements of Cash Flows 18
Results of Operations 19-21
Public Service Company of Oklahoma 22
Consolidated Statements of Income 23
Consolidated Balance Sheets 24-25
Consolidated Statements of Cash Flows 26
Results of Operations 27-29
Southwestern Electric Power Company 30
Statements of Income 31
Balance Sheets 32-33
Statements of Cash Flows 34
Results of Operations 35-37
West Texas Utilities Company 38
Statements of Income 39
Balance Sheets 40-41
Statements of Cash Flows 42
Results of Operations 43-45
Index to Notes to Financial Statements 46
Notes to Financial Statements 47-54
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 55-57
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. 58-61
Item 2. Changes in Securities. Inapplicable
Item 3. Defaults Upon Senior Securities. Inapplicable
Item 4. Submission of Matters to a Vote of Security Holders. Inapplicable
Item 5. Other Information. 61-62
Item 6. Exhibits and Reports on Form 8-K. 63-64
Signatures. 65
<PAGE> 3
GLOSSARY OF TERMS
The following abbreviations or acronyms used in this text are defined below:
Abbreviation or Acronym Definition
AFUDC........................ Allowance for Equity and Borrowed Funds Used
During Construction
ALJ.......................... Administrative Law Judge
ANI.......................... American Nuclear Insurance
Burlington Northern.......... Burlington Northern Railroad Company
Court of Appeals............. Court of Appeals, Third District of Texas,
Austin, Texas
CPL.......................... Central Power and Light Company, Corpus Christi,
Texas
CPL 1995 Agreement........... Settlement Agreement filed by CPL with the Texas
Commission to settle certain CPL regulatory
matters
CSW.......................... Central and South West Corporation, Dallas, Texas
CSW Credit................... CSW Credit, Inc., Dallas, Texas
CSW International............ CSW International, Inc., Dallas, Texas, a wholly
owned subsidiary of CSW
CSW Suit..................... Suit filed by CSW against El Paso in the United
States Bankruptcy Court in Austin, Texas
CSW System................... Central and South West Corporation and
subsidiaries
CSW (UK)..................... CSW (UK) plc, a public limited company
organized in the United Kingdom which is wholly
owned, indirectly through subsidiaries, by CSW
International
CSW UK Investments........... CSW UK Investments, an unlimited company organized
in the United Kingdom which is wholly owned,
indirectly through subsidiaries, by CSW
International
CSWE......................... CSW Energy, Inc., Dallas, Texas
CWIP......................... Construction work in progress
Electric Operating Companies. CPL, PSO, SWEPCO and WTU
El Paso...................... El Paso Electric Company
El Paso Suit................. Suit filed by El Paso against CSW in state
district court in El Paso, Texas
EPA.......................... Environmental Protection Agency
ERCOT........................ Electric Reliability Council of Texas
FMB.......................... First Mortgage Bonds
HLP.......................... Houston Lighting & Power Company, the project
manager of STP
Kwh.......................... Kilowatt-hour
Merger....................... The proposed merger whereby El Paso would become
a wholly owned subsidiary of CSW
Merger Agreement............. Agreement and Plan of Merger between El Paso and
CSW, dated as of May 8, 1993, as amended
MDEQ......................... Mississippi Department of Environmental Quality
MGP.......................... Manufactured gas plant or coal gasification plant
Mirror CWIP.................. Mirror Construction Work in Progress
Mississippi Power............ Mississippi Power Company
Mmbtu........................ Million Btu (British thermal unit)
Mw........................... Megawatt
NEIL......................... Nuclear Electric Insurance Limited
North West Water............. North West Water plc, a water utility company
organized in the United Kingdom
Norweb....................... NORWEB plc, a regional electric company organized
in the United Kingdom
NRC.......................... Nuclear Regulatory Commission
Oklaunion.................... Oklaunion Power Station Unit No. 1
PCB.......................... Polychlorinated Biphenyl
PCRB......................... Pollution Control Revenue Bonds
PRP.......................... Potentially Responsible Party
PSO.......................... Public Service Company of Oklahoma, Tulsa,
Oklahoma
PURA......................... Public Utility Regulatory Act of the State of
Texas
Registrants.................. CSW, CPL, PSO, SWEPCO and WTU
Restructuring................ Restructuring undertaken by the CSW System in
November 1993
RFP.......................... Rate Filing Package
SEC.......................... Securities and Exchange Commission
SEEBOARD..................... SEEBOARD plc, a regional electric company
organized in the United Kingdom
STP.......................... South Texas Project nuclear electric generating
station
SWEPCO....................... Southwestern Electric Power Company, Shreveport,
Louisiana
Texas Commission............. Public Utility Commission of Texas
Texas Energy Partners........ A public limited company organized in the United
Kingdom owned indirectly 50% by CSW and 50% by
Houston Industries, Inc., through wholly owned
subsidiaries
<PAGE> 4
GLOSSARY OF TERMS (continued)
The following abbreviations or acronyms used in this text are defined below:
Abbreviation or Acronym Definition
Transok...................... Transok, Inc. and subsidiaries, Tulsa, Oklahoma
TSCA......................... Toxic Substance Control Act of 1976
Westinghouse................. Westinghouse Electric Corporation
WTU.......................... West Texas Utilities Company, Abilene, Texas
WTU Settlement and Agreement. Stipulation and Agreement to settle certain WTU
regulatory matters
<PAGE> 5
CSW
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
PART I. FINANCIAL INFORMATION.
Item 1. Financial Statements.
<PAGE> 6
CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
REVENUES (millions, except per share amounts)
Electric $ 933 $ 951 $2,221 $2,409
Gas 139 110 409 398
Other diversified 15 12 36 25
1,087 1,073 2,666 2,832
OPERATING EXPENSES AND TAXES
Fuel and purchased power 305 338 797 918
Gas purchased for resale 76 53 224 223
Gas extraction and marketing 28 24 80 69
Other operating 140 149 398 445
Charges for terminated Merger -- -- 42 --
Maintenance 36 39 114 125
Depreciation and amortization 94 89 280 265
Taxes, other than Federal income 54 53 140 153
Federal income taxes 87 89 64 150
820 834 2,139 2,348
OPERATING INCOME 267 239 527 484
OTHER INCOME AND DEDUCTIONS
Mirror CWIP liability amortization 10 17 31 51
Other 11 10 45 25
21 27 76 76
INCOME BEFORE INTEREST CHARGES 288 266 603 560
INTEREST CHARGES
Interest on long-term debt 60 56 172 164
Interest on short-term debt and other 25 21 77 52
85 77 249 216
NET INCOME 203 189 354 344
Preferred stock dividends 4 5 14 14
NET INCOME FOR COMMON STOCK $ 199 $ 184 $ 340 $ 330
AVERAGE COMMON SHARES OUTSTANDING 191.9 189.6 191.4 189.1
EARNINGS PER SHARE OF COMMON STOCK $ 1.04 $ 0.97 $ 1.78 $ 1.75
DIVIDENDS PAID PER SHARE OF COMMON STOCK $ 0.43 $ 0.425 $ 1.29 $ 1.275
The accompanying notes to consolidated financial statements as they relate
to CSW are an integral part of these statements.
<PAGE> 7
CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1995 1994
(Unaudited)
ASSETS (Millions)
PLANT
Electric Utility
Production $ 5,851 $ 5,802
Transmission 1,442 1,377
Distribution 2,641 2,539
General 807 764
Construction work in progress 441 412
Nuclear fuel 164 161
Total electric 11,346 11,055
Gas 840 798
Other diversified 17 15
12,203 11,868
Less - Accumulated depreciation 4,146 3,870
8,057 7,998
CURRENT ASSETS
Cash and temporary cash investments 61 27
Accounts receivable 1,006 837
Materials and supplies, at average cost 169 162
Electric fuel inventory, substantially at
average cost 133 118
Gas inventory/products for resale 28 23
Under-recovered fuel costs -- 54
Accumulated deferred income taxes 34 2
Prepayments and other 52 42
1,483 1,265
DEFERRED CHARGES AND OTHER ASSETS
Deferred plant costs 515 516
Mirror CWIP asset 314 322
Other non-utility investments 328 394
Income tax related regulatory assets, net 278 216
Other 321 274
1,756 1,722
$ 11,296 $ 10,985
The accompanying notes to consolidated financial statements as they relate
to CSW are an integral part of these statements.
<PAGE> 8
CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1995 1994
(Unaudited)
CAPITALIZATION AND LIABILITIES (Millions)
CAPITALIZATION
Common stock: $3.50 par value $ 673 $ 667
Authorized shares: 350.0 million
Outstanding shares:
September 30, 1995: 192.3 million
December 31, 1994: 190.6 million
Paid-in capital 597 561
Retained earnings 1,914 1,824
Total Common Stock Equity 3,184 3,052
Preferred stock
Not subject to mandatory redemption 292 292
Subject to mandatory redemption 34 35
Long-term debt 3,001 2,940
TOTAL CAPITALIZATION 6,511 6,319
CURRENT LIABILITIES
Long-term debt and preferred stock due within
twelve months 32 7
Short-term debt 758 910
Short-term debt - CSW Credit, Inc. 786 573
Accounts payable 253 286
Accrued taxes 167 111
Accrued interest 70 61
Refund due customers 22 --
Over-recovered fuel costs 35 21
Other 124 138
2,247 2,107
DEFERRED CREDITS
Income taxes 2,111 2,048
Investment tax credits 309 320
Mirror CWIP liability and other 118 191
2,538 2,559
$ 11,296 $ 10,985
The accompanying notes to consolidated financial statements as they relate
to CSW are an integral part of these statements.
<PAGE> 9
CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
1995 1994
OPERATING ACTIVITIES (Millions)
Net Income $ 354 $ 344
Non-cash Items Included in Net Income
Depreciation and amortization 312 298
Deferred income taxes and investment tax credits (41) 49
Mirror CWIP liability amortization (31) (51)
Charges for terminated Merger 42 --
Regulatory assets established for previously
incurred Restructuring charges (34) --
Changes in Assets and Liabilities
Accounts receivable (185) (57)
Over- and under-recoveries of fuel 68 13
Accounts payable (24) (72)
Accrued taxes 56 79
Refund due customers 22 --
Accrued restructuring charges (4) (28)
Other (30) (45)
505 530
INVESTING ACTIVITIES
Capital expenditures and acquisitions (339) (414)
Non-affiliated accounts receivable collections (81) (124)
CSWE projects 37 (25)
Other (3) (10)
(386) (573)
FINANCING ACTIVITIES
Common stock sold 42 35
Proceeds from issuance of long-term debt 337 147
Retirement of long-term debt (8) (2)
Reacquisition of long-term debt (255) (14)
Redemption of preferred stock -- (33)
Change in short-term debt 61 137
Payment of dividends (262) (255)
(85) 15
NET CHANGE IN CASH AND CASH EQUIVALENTS 34 (28)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 27 62
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 61 $ 34
SUPPLEMENTARY INFORMATION
Interest paid less amounts capitalized $ 225 $ 194
Income taxes paid $ 68 $ 40
The accompanying notes to consolidated financial statements as they relate
to CSW are an integral part of these statements.
<PAGE> 10
CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY COMPANIES
Set forth below is information concerning the consolidated
results of operations for CSW for the three and nine month
periods ending September 30, 1995. For information concerning
the results of operations for each of the Electric Operating
Companies, see the discussions below under the heading RESULTS OF
OPERATIONS following the financial statements of each of the
Electric Operating Companies.
RESULTS OF OPERATIONS
COMPARISON OF THE QUARTERS ENDED SEPTEMBER 30, 1995 AND 1994
Net Income for Common Stock. Net income for common stock
increased to $199 million for the third quarter of 1995 compared
to $184 million for the third quarter of 1994. Earnings per
share increased to $1.04 from $0.97. Third quarter 1995 earnings
increased due to higher non-fuel electric revenues and lower
operating and maintenance expenses. Partially offsetting these
factors were lower Mirror CWIP earnings, higher interest expense
and higher depreciation and amortization expense.
Operating Revenues. Operating revenues increased 1% to
$1,087 million in the third quarter of 1995 from $1,073 million
in the third quarter of 1994. This increase reflects higher gas
revenues and non-fuel electric revenues offset partially by
decreased electric fuel revenues. Gas revenues increased $29
million or 26% to $139 million due to higher gas sales volumes
which was offset in part by lower gas prices. Electric revenues
decreased 2% or $18 million as compared to the third quarter of
1994 primarily as a result of recording a $21 million reserve for
a base rate refund pursuant to the WTU Settlement and Agreement
in addition to the lower fuel revenues that resulted from the
lower average unit fuel costs as discussed below. These
decreases were partially offset by higher non-fuel revenues
resulting from higher sales. Total retail Kwh sales increased
3.7% in the third quarter of 1995 as compared to the third
quarter of 1994. Residential, commercial and industrial sales
increased 6.7%, 3.4% and 1.0%, respectively. Increased usage,
primarily by residential customers, contributed to the Kwh sales
growth.
Fuel and Purchased Power. Fuel and purchased power expense
decreased 10% to $305 million in the third quarter of 1995 from
$338 million in the third quarter of 1994, due primarily to a $30
million reduction in fuel expense. Fuel expense was lower due
primarily to a decrease in the average unit cost of fuel to $1.51
per Mmbtu in the third quarter of 1995 from $1.74 per Mmbtu in
the third quarter of 1994, reflecting lower gas, lignite and coal
prices.
Gas Purchased for Resale. Gas purchased for resale
increased 43% to $76 million in the third quarter of 1995 from
$53 million in the third quarter of 1994 due to an increase in
gas sales volumes which was partially offset by a decrease in the
average cost of gas.
Other Operating. Other operating expense decreased 6% to
$140 million during the third quarter of 1995 from $149 million
during the third quarter of 1994. This decrease was due
primarily to the recognition of a regulatory asset established in
accordance with the WTU Settlement and Agreement for previously
recorded charges incurred during the Restructuring, partially
offset by higher transmission expenses at the Electric Operating
Companies as a result of a new transmission facility.
Maintenance. Maintenance decreased 8% to $36 million in the
third quarter of 1995 from $39 million in the third quarter of
1994. This decrease was due primarily to lower levels of maintenance
<PAGE> 11
CSW RESULTS OF OPERATIONS (continued)
COMPARISON OF THE QUARTERS ENDED SEPTEMBER 30, 1995 AND 1994 (continued)
resulting from the postponement of previously scheduled plant
maintenance in the third quarter of 1995 and storm damage that
occurred in the third quarter of 1994.
Depreciation and Amortization. Depreciation and
amortization increased 6% from $89 million in the third quarter
of 1994 to $94 million in the third quarter of 1995 due primarily
to increases in all classes of depreciable plant.
Other Income and Deductions. Mirror CWIP liability
amortization decreased 41% to $10 million in the third quarter of
1995 from $17 million in the third quarter of 1994. In
accordance with the original liability amortization schedule
agreed upon in the settlement of its rate cases in 1990 and 1991,
CPL is amortizing its Mirror CWIP liability in declining amounts
over the years 1991 through 1995.
Interest on Long-Term Debt. Interest on long-term debt
increased $4 million or 7% during the third quarter of 1995 as
compared to the third quarter of 1994 due to higher levels of
long-term debt outstanding.
Interest on Short-Term Debt and Other. Interest on short-
term debt and other increased $4 million or 19% during the third
quarter of 1995 as compared to the third quarter of 1994 due to
higher levels of short-term borrowings and higher short-term
interest rates.
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
Net Income for Common Stock. Net income for common stock
increased 3% to $340 million during the first nine months of 1995
from $330 million during the first nine months of 1994. Earnings
per share increased to $1.78 from $1.75, reflecting higher
electric non-fuel revenues due to greater customer usage and an
increase in customers. Also contributing to increased earnings
were lower operating and maintenance expenses and prior year tax
adjustments. Partially offsetting these factors were the
establishment of a $42 million reserve for deferred merger and
acquisition costs associated with CSW's termination of the El
Paso Merger in June 1995, lower earnings from Mirror CWIP,
increased interest expense and the impact of the CPL 1995
Agreement. See NOTE 2. Litigation and Regulatory Proceedings for
information related to the CPL 1995 Agreement.
Operating Revenues. Operating revenues decreased 6% to
$2,666 million during the nine months ended September 30, 1995
from $2,832 million during the nine months ended September 30,
1994. This decrease reflects a $62 million disallowance of fuel
under-recovery and a $50 million base rate refund recorded in the
first quarter of 1995 as a result of the CPL 1995 Agreement, as
well as a $21 million reserve for a base rate refund as a result
of the WTU Settlement and Agreement. In addition, fuel revenues
were lower in the first nine months of 1995 as compared to the
first nine months of 1994 due to lower average unit fuel costs as
discussed below. These decreases were offset in part by
increased non-fuel revenues resulting from a 2.9% increase in
total retail Kwh sales in the first nine months of 1995 as
compared to the first nine months of 1994. Residential,
commercial and industrial sales increased 3.6%, 2.6% and 2.6%,
respectively, during the nine months ended September 30, 1995,
due to increased usage and residential and commercial customer
growth. Gas revenues increased 3% to $409 million during the
first nine months of 1995 from $398 million during the first nine
months of 1994. This increase was due to increased gas sales
volumes, transportation volumes and other gas revenues, partially
offset by lower gas
<PAGE> 12
CSW RESULTS OF OPERATIONS (continued)
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (continued)
prices. Other diversified revenues increased $11 million or 44%
to $36 million for the first nine months of 1995 from $25 million
for the first nine months of 1994 due primarily to two CSWE
projects that went into operation during the second and third
quarter of 1994 and increased factoring revenues at CSW Credit.
Fuel and Purchased Power. Fuel and purchased power expense
decreased 13% to $797 million during the nine months ended
September 30, 1995 from $918 million during the nine months ended
September 30, 1994, due primarily to a $110 million reduction in
fuel expense. Fuel expense was lower due primarily to a
decrease in the average unit cost of fuel to $1.57 per Mmbtu in
the first nine months of 1995 from $1.86 per Mmbtu in the first
nine months of 1994, reflecting lower gas and lignite prices and
increased use of less costly nuclear fuel.
Gas Extraction and Marketing. Gas extraction and marketing
expenses increased $11 million or 16% to $80 million during the
nine months ended September 30, 1995 as compared to the
comparable period in 1994. The increase was due to higher
natural gas liquids sales volumes.
Other Operating. Other operating expense decreased 11% to
$398 million during the nine months ended September 30, 1995 from
$445 million during the nine months ended September 30, 1994.
This decrease was primarily due to the recognition of $34 million
in regulatory assets established in accordance with the CPL 1995
Agreement and the WTU Settlement and Agreement for previously
recorded charges incurred during the Restructuring.
Charges for Terminated Merger. CSW recorded a $42 million
charge for the establishment of a reserve for deferred merger and
acquisition costs as a result of CSW's termination of the Merger
in June 1995. See Part II - Other Information - Item 1. for
information related to the termination of the Merger and
litigation arising in connection therewith.
Maintenance. Maintenance decreased 9% to $114 million
during the nine months ended September 30, 1995 from $125 million
during the nine months ended September 30, 1994. This decrease
was due primarily to storm damage experienced in 1994 and nuclear
maintenance incurred in 1994 while STP was out of service.
Depreciation and Amortization. Depreciation and
amortization increased 6% from $265 million to $280 million due
primarily to increases in all classes of depreciable plant.
Taxes, Other than Federal Income. Taxes, other than Federal
income decreased 8% to $140 million during the nine months ended
September 30, 1995 from $153 million during the nine months ended
September 30, 1994. This decrease was due primarily to lower ad
valorem tax expense as a result of a true-up of prior year
estimates.
Federal Income Taxes. Federal income taxes decreased $86
million during the first nine months of 1995 compared to the
first nine months of 1994. This decrease was due to a $34
million reduction of deferred Federal income taxes resulting from
the CPL 1995 Agreement, a $23 million reduction of deferred
Federal income taxes due to prior year tax adjustments at the
Electric Operating Companies, a $7 million reduction of deferred
Federal income taxes resulting from the WTU Settlement and
Agreement and lower
<PAGE> 13
CSW RESULTS OF OPERATIONS (continued)
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(continued)
pre-tax income. See NOTE 6. Federal Income Taxes for additional
information related to the tax adjustments.
Other Income and Deductions. Mirror CWIP liability
amortization decreased 39% to $31 million during the nine months
ended September 30, 1995 from $51 million during the nine months
ended September 30, 1994. In accordance with the original
liability amortization schedule agreed upon in the settlement of
its rate cases in 1990 and 1991, CPL is amortizing its Mirror
CWIP liability in declining amounts over the years 1991 through
1995. Other income increased $20 million to $45 million during
the nine months ended September 30, 1995 from $25 million during
the nine months ended September 30, 1994. This increase was due
primarily to $10 million of previously deferred factoring income
pursuant to the CPL 1995 Agreement, increased interest income of
$5 million as well as a $3 million pre-tax gain on PSO's sale of
non-utility fiber optic telecommunication property during the
first quarter of 1995.
Interest on Long-Term Debt. Interest on long-term debt
increased $8 million or 5% as a result of higher levels of long-
term debt outstanding.
Interest on Short-Term Debt and Other. Interest on short-
term debt and other increased $25 million to $77 million in the
first nine months of 1995 from $52 million during the first nine
months of 1994. This increase reflects higher levels of short-
term borrowing and higher short-term interest rates.
<PAGE> 14
CPL
CENTRAL POWER AND LIGHT COMPANY
PART I. FINANCIAL INFORMATION.
Item 1. Financial Statements.
<PAGE> 15
CENTRAL POWER AND LIGHT COMPANY
STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
(Thousands)
ELECTRIC OPERATING REVENUES $358,790 $364,044 $810,597 $960,442
OPERATING EXPENSES AND TAXES
Fuel 87,606 94,015 223,670 260,091
Purchased power 4,409 9,834 11,436 39,682
Other operating 52,578 58,510 133,567 168,191
Maintenance 12,842 15,050 44,744 52,778
Depreciation and amortization 37,552 35,455 111,924 104,695
Taxes, other than Federal income 20,426 18,811 50,423 60,128
Federal income taxes 39,295 36,307 3,677 66,802
254,708 267,982 579,441 752,367
OPERATING INCOME 104,082 96,062 231,156 208,075
OTHER INCOME AND DEDUCTIONS
Mirror CWIP liability amortization 10,250 17,000 30,750 51,000
Allowance for equity funds used
during construction 630 492 515 468
Other 2,199 (40) 12,773 1,350
13,079 17,452 44,038 52,818
INCOME BEFORE INTEREST CHARGES 117,161 113,514 275,194 260,893
INTEREST CHARGES
Interest on long-term debt 32,082 28,567 89,176 83,199
Interest on short-term debt and other 3,991 2,830 15,340 9,218
Allowance for borrowed funds used
during construction (1,150) (760) (3,566) (1,857)
34,923 30,637 100,950 90,560
NET INCOME 82,238 82,877 174,244 170,333
Preferred stock dividends 3,535 3,385 10,899 10,484
NET INCOME FOR COMMON STOCK $ 78,703 $ 79,492 $163,345 $159,849
The accompanying notes to financial statements as they relate
to CPL are an integral part of these statements.
<PAGE> 16
CENTRAL POWER AND LIGHT COMPANY
BALANCE SHEETS
September 30, December 31,
1995 1994
(Unaudited)
ASSETS (Thousands)
ELECTRIC UTILITY PLANT
Production $ 3,090,843 $ 3,070,005
Transmission 457,729 451,050
Distribution 854,724 828,350
General 219,695 216,888
Construction work in progress 192,372 142,724
Nuclear fuel 164,176 161,152
4,979,539 4,870,169
Less - Accumulated depreciation
and amortization 1,509,089 1,400,343
3,470,450 3,469,826
CURRENT ASSETS
Cash 1,469 642
Special deposits 824 668
Accounts receivable 46,679 29,865
Materials and supplies, at average cost 68,709 66,209
Fuel inventory, at average cost 22,301 22,916
Accumulated deferred income taxes 16,743 --
Under-recovered fuel costs -- 54,126
Prepayments and other 5,070 2,316
161,795 176,742
DEFERRED CHARGES AND OTHER ASSETS
Deferred STP costs 488,314 488,987
Mirror CWIP asset 314,309 321,825
Income tax related regulatory assets, net 348,669 288,444
Other 95,763 76,875
1,247,055 1,176,131
$ 4,879,300 $ 4,822,699
The accompanying notes to financial statements as they relate
to CPL are an integral part of these statements.
<PAGE> 17
CENTRAL POWER AND LIGHT COMPANY
BALANCE SHEETS
September 30, December 31,
1995 1994
(Unaudited)
CAPITALIZATION AND LIABILITIES (Thousands)
CAPITALIZATION
Common stock: $25 par value $ 168,888 $ 168,888
Authorized shares: 12,000,000
Issued and Outstanding shares: 6,755,535
Paid-in capital 405,000 405,000
Retained earnings 885,811 857,466
Total Common Stock Equity 1,459,699 1,431,354
Preferred stock 250,351 250,351
Long-term debt 1,517,887 1,466,393
TOTAL CAPITALIZATION 3,227,937 3,148,098
CURRENT LIABILITIES
Long-term debt due within twelve months 526 723
Advances from affiliates 144,614 161,320
Accounts payable 56,544 75,051
Accrued taxes 70,698 59,386
Accumulated deferred income taxes -- 13,812
Accrued interest 38,351 24,681
Over-recovered fuel costs 7,067 --
Other 21,812 31,476
339,612 366,449
DEFERRED CREDITS
Accumulated deferred income taxes 1,141,361 1,087,317
Investment tax credits 154,191 158,533
Mirror CWIP liability and other 16,199 62,302
1,311,751 1,308,152
$ 4,879,300 $ 4,822,699
The accompanying notes to financial statements as they relate
to CPL are an integral part of these statements.
<PAGE> 18
CENTRAL POWER AND LIGHT COMPANY
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
1995 1994
OPERATING ACTIVITIES (Thousands)
Net Income $ 174,244 $ 170,333
Non-cash Items Included in Net Income
Depreciation and amortization 129,827 124,829
Deferred income taxes and investment tax
credits (41,244) 28,370
Mirror CWIP liability amortization (30,750) (51,000)
Regulatory asset established for previously
incurred Restructuring charges (20,652) --
Allowance for equity funds used during
construction (515) (468)
Changes in Assets and Liabilities
Accounts receivable (16,814) 14,769
Fuel inventory 615 (7,410)
Accounts payable (18,507) (13,712)
Accrued taxes 11,312 34,297
Over- and under-recovered fuel costs 61,193 (21,857)
Accrued restructuring charges (2,451) (8,637)
Other (11,028) (2,563)
235,230 266,951
INVESTING ACTIVITIES
Construction expenditures (112,868) (121,636)
Allowance for borrowed funds used during
construction (3,566) (1,857)
(116,434) (123,493)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 297,851 99,190
Reacquisition of long-term debt (253,278) (618)
Retirement of long-term debt -- (459)
Retirement of preferred stock -- (27,021)
Change in advances from affiliates (16,706) (140,862)
Payment of dividends (145,836) (75,620)
(117,969) (145,390)
NET CHANGE IN CASH AND CASH EQUIVALENTS 827 (1,932)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 642 2,435
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,469 $ 503
SUPPLEMENTARY INFORMATION
Interest paid less amounts capitalized $ 81,377 $ 71,543
Income taxes paid $ 25,280 $ 2,547
The accompanying notes to financial statements as they relate
to CPL are an integral part of these statements.
<PAGE> 19
CENTRAL POWER AND LIGHT COMPANY
RESULTS OF OPERATIONS
COMPARISON OF THE QUARTERS ENDED SEPTEMBER 30, 1995 AND 1994
Net Income for Common Stock. Net income for common stock
decreased to $78.7 million during the third quarter of 1995 from
$79.5 million in the third quarter of 1994. The decrease was due
primarily to reduced Mirror CWIP liability amortization and
higher interest expense partially offset by decreased operating
expenses and increased non-fuel revenues.
Electric Operating Revenues. Total revenues decreased to
$358.8 million during the third quarter of 1995 from $364.0
million during the third quarter of 1994 due primarily to a $13.6
million reduction in fuel revenue resulting from the lower
average unit fuel costs and purchased power as discussed below.
Partially offsetting the decrease in fuel revenue was an $8.7
million increase in non-fuel revenue resulting from a 4% increase
in retail Kwh sales and a 28% increase in lower margin sales for
resale. The increase in Kwh sales was attributable to increased
usage per customer as well as customer growth.
Fuel. Fuel expense decreased 7% to $87.6 million during the
third quarter of 1995 from $94.0 million during the third quarter
of 1994. The decrease in fuel expense was due primarily to a 22%
decrease in the average unit cost of fuel from $1.67 per Mmbtu in
the third quarter of 1994 to $1.31 per Mmbtu in the third
quarter of 1995. The decrease in the average unit cost of fuel
resulted from the expiration of higher priced gas contracts that
were replaced with lower cost spot market natural gas and the
renegotiation of a coal contract. The decrease in the cost of
fuel was partially offset by a 14% increase in generation.
Purchased Power. Purchased power decreased $5.4 million
during the third quarter of 1995 as compared to the third quarter
of 1994 due primarily to an unscheduled outage at a fossil-fueled
generating plant during the third quarter of 1994.
Other Operating. Other operating expense decreased $5.9
million, or 10%, during the third quarter of 1995 as compared to
the third quarter of 1994. This decrease was due primarily to
lower insurance costs and decreased employee related benefits,
partially offset by higher transmission expenses resulting from a
new transmission facility.
Maintenance. Maintenance expense decreased $2.2 million, or
15%, during the third quarter of 1995 as compared to the third
quarter of 1994 due primarily to decreased production and
distribution maintenance expense as a result of the postponement
of previously scheduled plant maintenance and a change in
capitalization policy.
Depreciation and Amortization. Depreciation and
amortization increased $2.1 million, or 6%, during the third
quarter of 1995 as compared to the third quarter of 1994 as a
result of an increase in depreciable property and the
amortization of regulatory assets associated with the CPL 1995
Agreement.
Taxes, Other than Federal Income. Taxes, other than Federal
income increased $1.6 million, or 9%, in the third quarter of
1995 as compared to the third quarter of 1994 due primarily to a
state franchise tax refund in 1994 partially offset by lower ad
valorem taxes in 1995.
Federal Income Taxes. Federal income taxes increased $3.0
million, or 8%, in the third quarter of 1995 as compared to the
third quarter of 1994 due primarily to an increase in pre-tax
income.
<PAGE> 20
CPL RESULTS OF OPERATIONS (continued)
COMPARISON OF THE QUARTERS ENDED SEPTEMBER 30, 1995 AND 1994 (continued)
Other Income and Deductions. Mirror CWIP liability
amortization decreased $6.8 million in the third quarter of 1995
as compared to the third quarter of 1994. In accordance with the
original liability amortization schedule agreed upon in the
settlement of its rate cases in 1990 and 1991, CPL is amortizing
its Mirror CWIP liability in declining amounts over the years
1991 through 1995. Other income was higher in the third quarter
of 1995 when compared to the third quarter of 1994 due primarily
to the recognition of factoring income pursuant to the CPL 1995
Agreement.
Interest Charges. Interest on long-term debt increased $3.5
million in the third quarter of 1995 as compared to the third
quarter of 1994 as a result of increased long-term debt
outstanding. Interest on short-term debt and other increased
$1.2 million in the third quarter of 1995 as compared to the
third quarter of 1994 as a result of higher levels of short-term
debt outstanding at higher interest rates.
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
Net Income for Common Stock. Net income for common stock
increased 2% to $163.3 million during the first nine months of
1995 from $159.8 million in the first nine months of 1994 due
primarily to increased non-fuel revenue, decreased maintenance
and prior year tax adjustments. The increase was partially
offset by decreased Mirror CWIP liability amortization and higher
depreciation and interest expense as well as the effects of the
CPL 1995 Agreement. See NOTE 2. Litigation and Regulatory
Proceedings for additional information related to the CPL 1995
Agreement.
Electric Operating Revenues. Total revenues decreased
$149.8 million, or 16%, during the first nine months of 1995 as
compared to the first nine months of 1994 due primarily to a
$50.0 million base rate refund and a $62.3 million disallowance
of under-recovered fuel costs resulting from the CPL 1995
Agreement. Under the CPL 1995 Agreement, CPL provided customers
a one-time base rate refund of $50.0 million. Furthermore, CPL
did not charge customers for $62.3 million in replacement power
costs associated with the STP outage.
Also contributing to the decrease in revenue was a $67.0
million decrease in fuel revenue resulting from the lower average
unit fuel costs and purchased power as discussed below.
Partially offsetting the decrease in fuel revenue was a $29.4
million increase in non-fuel revenue resulting from a 7% increase
in Kwh sales. The increase in sales was attributable to
increased usage per customer, customer growth and a new contract
with an existing wholesale customer.
Fuel. Fuel expense decreased $36.4 million, or 14%, during
the first nine months of 1995 as compared to the first nine
months of 1994. The decrease in fuel expense was due primarily
to a 28% decrease in the average unit cost of fuel from $1.88 per
Mmbtu for the first nine months of 1994 to $1.35 per Mmbtu for
the first nine months of 1995. The decrease in the average unit
cost of fuel resulted from the expiration of higher priced gas
contracts that were replaced with lower cost spot market natural
gas, the renegotiation of a coal contract and increased usage of
lower unit cost nuclear fuel. The decrease in the cost of fuel
was partially offset by an 18% increase in generation.
Purchased Power. Purchased power decreased $28.2 million
during the first nine months of 1995 as compared to the first
nine months of 1994 due to increased generation at STP, which
replaced power
<PAGE> 21
CPL RESULTS OF OPERATIONS (continued)
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (continued)
that had been purchased during the first half of 1994 when STP
was out of service and an unscheduled outage at a fossil-fueled
generating plant during the third quarter of 1994.
Other Operating. Other operating expense decreased $34.6
million, or 21%, during the first nine months of 1995 as compared
to the first nine months of 1994. The decrease was due primarily
to the recognition of a $20.7 million regulatory asset
established in accordance with the CPL 1995 Agreement for
previously recorded charges incurred during the Restructuring and
the reversal of $4.3 million in rate case costs pursuant to the
agreement. Also contributing to the decrease was a reduction in
employee related costs.
Maintenance. Maintenance expense decreased $8.0 million, or
15%, during the first nine months of 1995 as compared to the
first nine months of 1994 due primarily to lower nuclear
maintenance expenses than were incurred during 1994 while STP was
out of service and the postponement of previously scheduled plant
maintenance. Distribution maintenance also decreased due to a
change in capitalization policy.
Depreciation and Amortization. Depreciation and
amortization increased $7.2 million, or 7%, during the first nine
months of 1995 as compared to first nine months of 1994 as a
result of increased depreciable property and the amortization of
regulatory assets associated with the CPL 1995 Agreement.
Taxes, Other than Federal Income. Taxes, other than Federal
income decreased $9.7 million during the first nine months of
1995 as compared to the first nine months of 1994 due primarily
to lower ad valorem tax expense resulting from a true-up of prior
year estimates.
Federal Income Taxes. Federal income taxes decreased $63.1
million in the first nine months of 1995 as compared to the first
nine months of 1994 due primarily to the reduction of $34.3
million of deferred income taxes in accordance with the CPL 1995
Agreement, prior year tax adjustments and lower pre-tax income.
See NOTE 6. Federal Income Taxes for additional information
related to the tax adjustments.
Other Income and Deductions. Mirror CWIP liability
amortization decreased $20.3 million during the first nine months
of 1995 as compared to the first nine months of 1994. In
accordance with the original liability amortization schedule
agreed upon in the settlement of its rate cases in 1990 and 1991,
CPL is amortizing its Mirror CWIP liability in declining amounts
over the years 1991 through 1995. Other income was higher in the
first nine months of 1995 when compared to 1994 due primarily to
the recognition of factoring income pursuant to the CPL 1995
Agreement.
Interest Charges. Interest on long-term debt increased $6.0
million during the first nine months of 1995 as compared to the
first nine months of 1994 as a result of increased long-term debt
outstanding. Interest on short-term debt and other increased
$6.1 million during the first nine months of 1995 when compared
to the first nine months of 1994 as a result of higher levels of
short-term debt outstanding at higher interest rates and the
recognition of interest expense associated with over-recovered
fuel.
<PAGE> 22
PSO
PUBLIC SERVICE COMPANY OF OKLAHOMA
PART I. FINANCIAL INFORMATION.
Item 1. Financial Statements.
<PAGE> 23
PUBLIC SERVICE COMPANY OF OKLAHOMA
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
(Thousands)
ELECTRIC OPERATING REVENUES $232,156 $246,378 $542,215 $578,517
OPERATING EXPENSES AND TAXES
Fuel 76,434 105,258 209,895 246,805
Purchased power 6,220 5,256 16,614 28,093
Other operating 28,241 32,881 86,201 92,696
Maintenance 8,716 10,275 23,778 27,719
Depreciation and amortization 16,916 15,679 49,981 46,686
Taxes, other than Federal income 10,549 10,384 24,322 24,971
Federal income taxes 26,556 19,449 31,682 28,115
173,632 199,182 442,473 495,085
OPERATING INCOME 58,524 47,196 99,742 83,432
OTHER INCOME AND DEDUCTIONS
Allowance for equity funds used
during construction 641 151 1,180 390
Other (853) 411 2,363 519
(212) 562 3,543 909
INCOME BEFORE INTEREST CHARGES 58,312 47,758 103,285 84,341
INTEREST CHARGES
Interest on long-term debt 7,398 7,399 22,196 22,196
Interest on short-term debt and other 1,352 759 4,888 2,972
Allowance for borrowed funds used
during construction (1,120) (403) (2,442) (1,063)
7,630 7,755 24,642 24,105
NET INCOME 50,682 40,003 78,643 60,236
Preferred stock dividends 204 204 612 612
NET INCOME FOR COMMON STOCK $ 50,478 $ 39,799 $ 78,031 $ 59,624
The accompanying notes to consolidated financial statements as they relate
to PSO are an integral part of these statements.
<PAGE> 24
PUBLIC SERVICE COMPANY OF OKLAHOMA
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1995 1994
(Unaudited)
ASSETS (Thousands)
ELECTRIC UTILITY PLANT
Production $ 925,006 $ 902,602
Transmission 358,514 346,433
Distribution 699,033 668,346
General 162,067 150,898
Construction work in progress 84,045 96,133
2,228,665 2,164,412
Less - Accumulated depreciation
and amortization 909,731 859,894
1,318,934 1,304,518
CURRENT ASSETS
Cash 3,097 5,453
Accounts receivable 18,864 21,531
Materials and supplies, at average cost 41,713 39,888
Fuel inventory, at LIFO cost 26,464 17,820
Accumulated deferred income taxes 7,125 6,670
Prepayments and other 1,865 7,889
99,128 99,251
DEFERRED CHARGES AND OTHER ASSETS 57,687 61,345
$1,475,749 $1,465,114
The accompanying notes to consolidated financial statements as they relate
to PSO are an integral part of these statements.
<PAGE> 25
PUBLIC SERVICE COMPANY OF OKLAHOMA
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1995 1994
(Unaudited)
CAPITALIZATION AND LIABILITIES (Thousands)
CAPITALIZATION
Common stock: $15 Par value $ 157,230 $ 157,230
Authorized shares: 11,000,000
Issued shares: 10,482,000
Outstanding shares: 9,013,000
Paid-in capital 180,000 180,000
Retained earnings 162,300 124,269
Total Common Stock Equity 499,530 461,499
Preferred stock 19,826 19,826
Long-term debt 378,876 402,752
TOTAL CAPITALIZATION 898,232 884,077
CURRENT LIABILITIES
Long-term debt due within twelve months 25,000 --
Advances from affiliates 43,308 55,160
Payables to affiliates 17,613 27,876
Accounts payable 31,616 59,899
Payables to customers 24,289 22,655
Accrued taxes 40,054 17,356
Accrued interest 10,618 8,867
Other 16,732 15,157
209,230 206,970
DEFERRED CREDITS
Accumulated deferred income taxes 283,028 281,139
Investment tax credits 46,919 49,011
Income tax related regulatory liabilities, net 16,685 18,611
Other 21,655 25,306
368,287 374,067
$1,475,749 $1,465,114
The accompanying notes to consolidated financial statements as they relate
to PSO are an integral part of these statements.
<PAGE> 26
PUBLIC SERVICE COMPANY OF OKLAHOMA
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
1995 1994
OPERATING ACTIVITIES (Thousands)
Net Income $ 78,643 $ 60,236
Non-cash Items Included in Net Income
Depreciation and amortization 54,256 50,471
Deferred income taxes and investment tax
credits (2,584) 1,637
Allowance for equity funds used during
construction (1,180) (390)
Changes in Assets and Liabilities
Accounts receivable 2,667 15,613
Fuel inventory (8,644) 8,328
Prepayments and other 6,024 (9,997)
Accounts payable (27,936) 4,812
Accrued taxes 22,698 24,238
Accrued restructuring charges (727) (6,449)
Other 5,300 (7,512)
128,517 140,987
INVESTING ACTIVITIES
Construction expenditures (70,942) (86,360)
Allowance for borrowed funds used during
construction (2,442) (1,063)
Other (5,024) (1,397)
(78,408) (88,820)
FINANCING ACTIVITIES
Changes in advances from affiliates (11,852) (21,389)
Payment of dividends (40,613) (27,612)
(52,465) (49,001)
NET CHANGE IN CASH AND CASH EQUIVALENTS (2,356) 3,166
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,453 2,429
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,097 $ 5,595
SUPPLEMENTARY INFORMATION
Interest paid less amounts capitalized $ 21,393 $ 17,906
Income taxes paid $ 20,949 $ 10,106
The accompanying notes to consolidated financial statements as they relate
to PSO are an integral part of these statements.
<PAGE> 27
PUBLIC SERVICE COMPANY OF OKLAHOMA
RESULTS OF OPERATIONS
COMPARISON OF THE QUARTERS ENDED SEPTEMBER 30, 1995 AND 1994
Net Income for Common Stock. Net income for common stock
increased 27% to $50.5 million during the third quarter of 1995
from $39.8 million during the third quarter of 1994. The
increase resulted primarily from an increase in non-fuel revenue
and a reduction in operating and maintenance expenses.
Electric Operating Revenues. Electric operating revenues
decreased 6% to $232.2 million during the third quarter of 1995
from $246.4 million during the third quarter of 1994. The
decreased revenues were due primarily to a $23.5 million
reduction in fuel revenues resulting from lower average unit fuel
costs as discussed below, offset in part by a 3% increase in
retail Kwh sales attributable to increased weather-related demand
and customer growth.
Fuel. Fuel expense decreased 27% to $76.4 million during
the third quarter of 1995 as compared to $105.3 million during
the third quarter of 1994. This decrease was due primarily to a
reduction in previously over-recovered fuel costs, as well as a
reduction in average unit fuel costs from $1.88 per Mmbtu in 1994
to $1.70 per Mmbtu in 1995. The decrease in average unit fuel
costs was primarily attributable to a reduction in the spot
market price of natural gas.
Purchased Power. Purchased power increased 18% to $6.2
million during the third quarter of 1995 from $5.3 million during
the third period of 1994 due primarily to increased purchases of
economy energy.
Other Operating Expenses. Other operating expenses
decreased 14% to $28.2 million during the third quarter of 1995
from $32.9 million in the third quarter of 1994. The decrease
was due primarily to the accrual of additional expenses in the
third quarter of 1994 related to the estimated costs of the
Restructuring and decreased employee related expenses in the
third quarter of 1995.
Maintenance Expenses. Maintenance expenses decreased 15% to
$8.7 million during the third quarter of 1995 from $10.3 million
in the third quarter of 1994 due primarily to overhead line
maintenance activities required as a result of storms occurring
during the third quarter of 1994.
Depreciation and Amortization. Depreciation and
amortization expenses increased 8% to $16.9 million during the
third quarter of 1995 from $15.7 million in the third quarter of
1994 due primarily to increases in depreciable plant.
Federal Income Taxes. Federal income taxes increased 37% to
$26.6 million during the third quarter of 1995 from $19.4 million
as compared to the third quarter of 1994 primarily as a result of
higher pre-tax income.
Other Income and Deductions - Other. Other income and
deductions - other decreased $1.3 million during the third
quarter of 1995 as compared to the third quarter of 1994
primarily as a result of an adjustment to reallocate parent
company tax benefits. See NOTE 6. Federal Income Taxes for
additional information related to this tax adjustment.
<PAGE> 28
PSO RESULTS OF OPERATIONS (continued)
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
Net Income for Common Stock. Net income for common stock
increased 31% to $78.0 million for the nine months ended
September 30, 1995 from $59.6 million for the nine months ended
September 30, 1994. The increase resulted primarily from an
increase in non-fuel revenue, a sale of non-utility fiber optic
telecommunication property during the first quarter of 1995,
decreased operating and maintenance expenses and prior year tax
adjustments.
Electric Operating Revenues. Electric operating revenues
decreased 6% to $542.2 million during the first nine months of
1995 from $578.5 million during the first nine months of 1994 due
primarily to a $46.3 million reduction in fuel revenues resulting
from lower average unit fuel costs as discussed below offset in
part by an increase in non-fuel revenue.
Fuel. Fuel expense decreased approximately 15% to $209.9
million during the first nine months of 1995 as compared to
$246.8 million in the same period of 1994. This decrease was due
primarily to a reduction in the over-recovery of fuel costs, as
well as a reduction in average fuel costs from $1.91 per Mmbtu in
1994 to $1.76 per Mmbtu in 1995. The decrease in average fuel
costs was attributable to the settlement of certain coal
transportation litigation and a reduction in the spot market
price of natural gas. Such decreases were partially offset by a
4% increase in Kwh generation and the reversal in 1994 of prior
year accruals for potential liabilities related to coal
transportation. See Part II - OTHER INFORMATION - Item 1. Legal
Proceedings for additional information related to pending coal
transportation litigation.
Purchased Power. Purchased power decreased 41% to $16.6
million during the first nine months of 1995 from $28.1 million
as compared to the same period of 1994 due primarily to decreased
purchases of economy energy.
Other Operating Expenses. Other operating expenses
decreased 7% to $86.2 million for the first nine months of 1995
from $92.7 million for the same period of 1994. The decrease was
due primarily to the accrual of additional expenses in 1994
related to the estimated costs of the Restructuring and decreased
employee related expenses in the first nine months of 1995.
Maintenance Expenses. Maintenance expenses decreased 14% to
$23.8 million for the nine months ended September 30, 1995 from
$27.7 million for the same period of 1994. Maintenance expenses
were higher in the third quarter of 1994 than 1995 due primarily
to overhead line maintenance activities required as a result of
storms occurring during the third quarter of 1994.
Depreciation and Amortization. Depreciation and
amortization expense increased 7% to $50.0 million during the
first nine months of 1995 from $46.7 million in the first nine
months of 1994 due primarily to increases in depreciable plant.
Federal Income Taxes. Federal income taxes increased 13% to
$31.7 million during the first nine months of 1995 from $28.1
million during the same period of 1994 primarily as a result of
higher pre-tax income, offset in part by prior year tax
adjustments. See NOTE 6. Federal Income Taxes for additional
information related to the tax adjustments.
<PAGE> 29
PSO RESULTS OF OPERATIONS (continued)
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (continued)
Other Income and Deductions - Other. Other income and
deductions - other increased $1.8 million during the first nine
months of 1995 as compared to the same period of 1994 primarily
as a result of a $2.7 million pre-tax gain on the sale of non-
utility fiber optic telecommunication property during the first
quarter of 1995, offset in part by an adjustment to reallocate
parent company tax benefits. See NOTE 6. Federal Income Taxes
for additional information related to this tax adjustment.
Interest on Short-term Debt and Other. Short-term debt and
other increased $1.9 million during the first nine months of 1995
as compared to the same period of 1994 due primarily to higher
levels of short-term debt outstanding at higher short-term
interest rates.
<PAGE> 30
SWEPCO
SOUTHWESTERN ELECTRIC POWER COMPANY
PART I. FINANCIAL INFORMATION.
Item 1. Financial Statements.
<PAGE> 31
SOUTHWESTERN ELECTRIC POWER COMPANY
STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
(Thousands)
ELECTRIC OPERATING REVENUES $266,268 $245,331 $648,468 $647,386
OPERATING EXPENSES AND TAXES
Fuel 101,811 93,229 243,655 267,732
Purchased power 4,074 6,893 13,806 15,502
Other operating 32,533 29,431 90,482 86,724
Maintenance 10,849 9,846 31,665 29,777
Depreciation and amortization 20,853 20,077 61,496 59,717
Taxes, other than Federal income 13,676 13,265 36,748 38,969
Federal income taxes 22,592 19,286 35,271 34,022
206,388 192,027 513,123 532,443
OPERATING INCOME 59,880 53,304 135,345 114,943
OTHER INCOME AND DEDUCTIONS
Allowance for equity funds used
during construction 1,430 789 3,535 2,193
Other (1,056) 510 396 1,877
374 1,299 3,931 4,070
INCOME BEFORE INTEREST CHARGES 60,254 54,603 139,276 119,013
INTEREST CHARGES
Interest on long-term debt 10,986 10,978 33,423 32,691
Interest on short-term debt and other 2,235 2,234 7,919 5,368
Allowance for borrowed funds used
during construction (1,440) (463) (4,134) (1,288)
11,781 12,749 37,208 36,771
NET INCOME 48,473 41,854 102,068 82,242
Preferred stock dividends 854 840 2,472 2,521
NET INCOME FOR COMMON STOCK $ 47,619 $ 41,014 $ 99,596 $ 79,721
The accompanying notes to financial statements as they relate
to SWEPCO are an integral part of these statements.
<PAGE> 32
SOUTHWESTERN ELECTRIC POWER COMPANY
BALANCE SHEETS
September 30, December 31,
1995 1994
(Unaudited)
ASSETS (Thousands)
ELECTRIC UTILITY PLANT
Production $1,407,422 $1,401,418
Transmission 430,002 385,113
Distribution 769,103 733,707
General 229,729 213,563
Construction work in progress 131,252 149,508
2,967,508 2,883,309
Less - Accumulated depreciation
and amortization 1,090,374 1,026,751
1,877,134 1,856,558
CURRENT ASSETS
Cash 446 1,296
Accounts receivable 44,915 54,344
Materials and supplies, at average cost 29,408 28,109
Fuel inventory, at average cost 65,822 61,701
Accumulated deferred income taxes 5,196 6,592
Prepayments and other 17,163 13,071
162,950 165,113
DEFERRED CHARGES AND OTHER ASSETS 57,471 57,536
$2,097,555 $2,079,207
The accompanying notes to financial statements as they relate
to SWEPCO are an integral part of these statements.
<PAGE> 33
SOUTHWESTERN ELECTRIC POWER COMPANY
BALANCE SHEETS
September 30, December 31,
1995 1994
(Unaudited)
CAPITALIZATION AND LIABILITIES (Thousands)
CAPITALIZATION
Common stock: $18 par value $ 135,660 $ 135,660
Authorized shares: 7,600,000
Issued and Outstanding shares: 7,536,640
Paid-in capital 245,000 245,000
Retained earnings 324,059 297,462
Total Common Stock Equity 704,719 678,122
Preferred stock
Not subject to mandatory redemption 16,032 16,032
Subject to mandatory redemption 33,578 34,828
Long-term debt 594,650 595,833
TOTAL CAPITALIZATION 1,348,979 1,324,815
CURRENT LIABILITIES
Long-term debt and preferred stock due within
twelve months 6,300 5,270
Advances from affiliates 63,065 81,868
Accounts payable 42,360 50,138
Over-recovered fuel cost 10,516 12,200
Customer deposits 11,263 13,075
Accrued taxes 46,790 12,495
Accrued interest 13,469 17,175
Other 25,386 30,615
219,149 222,836
DEFERRED CREDITS
Accumulated deferred income taxes 369,376 365,441
Investment tax credits 77,434 81,023
Income tax related regulatory liabilities, net 39,518 44,836
Other 43,099 40,256
529,427 531,556
$2,097,555 $2,079,207
The accompanying notes to financial statements as they relate
to SWEPCO are an integral part of these statements.
<PAGE> 34
SOUTHWESTERN ELECTRIC POWER COMPANY
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
1995 1994
OPERATING ACTIVITIES (Thousands)
Net Income $102,068 $ 82,242
Non-cash Items Included in Net Income
Depreciation and amortization 69,269 66,860
Deferred income taxes and investment tax
credits (3,576) 1,549
Allowance for equity funds used during
construction (3,535) (2,193)
Changes in Assets and Liabilities
Accounts receivable 9,429 (46,050)
Fuel inventory (4,121) 11,710
Accounts payable (7,778) 12,339
Accrued taxes 34,295 32,578
Accrued interest (3,706) (4,050)
Over- and under-recovered fuel cost (1,684) 8,786
Accrued restructuring charges (519) (6,666)
Other (4,181) 18,405
185,961 175,510
INVESTING ACTIVITIES
Construction expenditures (79,261) (94,715)
Allowance for borrowed funds used during
construction (4,134) (1,288)
Other (5,064) (3,160)
(88,459) (99,163)
FINANCING ACTIVITIES
Change in advances from affiliates (18,803) (22,714)
Retirement of long-term debt (3,262) (1,559)
Reacquisition of long-term debt -- (1,713)
Redemption of preferred stock (50) (1,200)
Payment of dividends (76,237) (49,522)
(98,352) (76,708)
NET CHANGE IN CASH AND CASH EQUIVALENTS (850) (361)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,296 6,723
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 446 $ 6,362
SUPPLEMENTARY INFORMATION
Interest paid less amounts capitalized $ 39,402 $ 39,141
Income taxes paid $ 21,598 $ 13,030
The accompanying notes to consolidated financial statements as they relate
to SWEPCO are an integral part of these statements.
<PAGE> 35
SOUTHWESTERN ELECTRIC POWER COMPANY
RESULTS OF OPERATIONS
COMPARISON OF THE QUARTERS ENDED SEPTEMBER 30, 1995 AND 1994
Net Income for Common Stock. Net income for common stock
increased 16% to $47.6 million during the third quarter of 1995
from $41.0 million during the third quarter of 1994. The
increase was due primarily to an increase in non-fuel revenue
resulting from higher sales partially offset by an increase in
other operating and maintenance expenses and a prior period tax
adjustment to reallocate parent company tax benefits.
Electric Operating Revenues. Electric operating revenues
increased $21.0 million to $266.3 million during the third
quarter of 1995 from $245.3 million during the third quarter of
1994 due primarily to a $12.8 million increase in non-fuel
revenue. The increase in non-fuel revenue was attributable to a
14% increase in Kwh sales resulting from weather-related demand
and customer growth. Also contributing to the increase in
revenue was an $8.2 million increase in fuel revenue attributable
to an increase in generation partially offset by the lower
average unit fuel costs as discussed below.
Fuel. Fuel expense increased 9% to $101.8 million during the
third quarter of 1995 when compared to the third quarter of 1994
due primarily to a 19% increase in generation offset in part by a
decrease in the average unit fuel cost from $1.74 per Mmbtu in
1994 to $1.56 per Mmbtu in 1995. The decrease in average unit
fuel cost was due primarily to the settlement of coal contract
litigation with fuel suppliers and a decrease in the spot market
price of natural gas.
Purchased Power. Purchased power expense decreased $2.8
million, or 41%, during the third quarter of 1995 when compared
to the third quarter of 1994 due primarily to a decrease in
economy purchases.
Other Operating. Other operating expenses increased $3.1
million, or 11%, during the third quarter of 1995 when compared
to the third quarter of 1994 due primarily to higher transmission
expenses as a result of a new transmission facility and a
reduction in 1994 of the original estimated cost of the
Restructuring partially offset by decreased compensation expense
and outside services.
Maintenance. Maintenance increased $1.0 million, or 10%,
during the third quarter of 1995 when compared to the third
quarter of 1994 due primarily to an increase in power plant and
general plant maintenance partially offset by decreased
miscellaneous distribution line maintenance.
Federal Income Taxes. Federal income taxes increased 17% to
$22.6 million during the third quarter of 1995 from $19.3 million
during the third quarter of 1994 due primarily to higher pre-tax
income.
Other Income and Deductions - Other. Other income and
deductions - other decreased $1.6 million during the third
quarter of 1995 when compared to the third quarter of 1994
primarily as a result of an adjustment to reallocate parent
company tax benefits. See NOTE 6. Federal Income Taxes for
additional information related to this tax adjustment.
Allowance for Equity and Borrowed Funds Used During
Construction. AFUDC increased $1.6 million during the third
quarter of 1995 when compared to the third quarter of 1994 due
primarily to an increase in CWIP balances accruing AFUDC and a
prior period true-up.
<PAGE> 36
SWEPCO RESULTS OF OPERATIONS (continued)
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
Net Income for Common Stock. Net income for common stock
increased 25% to $99.6 million during the nine months ended
September 30, 1995 from $79.7 million during the nine months
ended September 30, 1994. This increase was due primarily to an
increase in non-fuel revenue partially offset by increases in
other operating and maintenance expenses as well as interest on
short-term debt and other.
Electric Operating Revenues. Electric operating revenues
increased $1.1 million to $648.5 million during the first nine
months of 1995 when compared to the first nine months of 1994 due
primarily to a $30.3 million increase in non-fuel revenues. The
increase in non-fuel revenue was attributable to a 5% increase in
retail Kwh sales resulting from weather-related demand and
customer growth. The increase in non-fuel revenues was offset in
part by a $29.2 million decrease in fuel revenue due to lower
average fuel costs as discussed below.
Fuel. Fuel expense decreased 9% to $243.7 million during
the first nine months of 1995 when compared to the first nine
months of 1994 due primarily to a decrease in the average unit
cost of fuel from $1.79 per Mmbtu in 1994 to $1.61 per Mmbtu in
1995. The decrease in the average unit fuel cost was due
primarily to the settlement of coal contract litigation with fuel
suppliers and a decrease in the spot market price of natural gas.
Purchased Power. Purchased power expense decreased $1.7
million, or 11%, during the first nine months of 1995 as compared
to the first nine months of 1994 due primarily to an 11% decrease
in purchased Kwh partially offset by contractual terms with a
third party that call for increased operating reserves and on-
peak capacity.
Other Operating. Other operating expenses increased $3.8
million, or 4%, during the first nine months of 1995 when
compared to the first nine months of 1994 due primarily to higher
transmission expenses as a result of a new transmission facility
and higher employee medical costs. Also contributing to the
increase was a reduction in 1994 of the original estimated cost
of the Restructuring. The increase was partially offset by
decreased compensation expenses and outside services expense
during 1995.
Maintenance. Maintenance increased $1.9 million, or 6%, in
the first nine months of 1995 from $29.8 million during the first
nine months of 1994 due primarily to increased power plant
maintenance. The increase was partially offset by a decrease in
overhead line maintenance that resulted from an ice storm that
impacted SWEPCO's distribution system during the first nine
months of 1994.
Taxes, Other than Federal Income. Taxes, other than Federal
income decreased $2.2 million, or 6%, during the first nine
months of 1995 when compared to the first nine months of 1994 due
primarily to a decrease in ad valorem taxes partially offset by
an increase in state franchise taxes and gross receipts taxes.
Federal Income Taxes. Federal income taxes increased $1.2
million, or 4%, to $35.3 million during the first nine months of
1995 from $34.0 million during the first nine months of 1994 due
primarily to higher pre-tax income, partially offset by prior
year tax adjustments. See NOTE 6. Federal Income Taxes for
additional information related to the tax adjustments.
<PAGE> 37
SWEPCO RESULTS OF OPERATIONS (continued)
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (continued)
Other Income and Deductions - Other. Other income and
deductions - other decreased $1.5 million during the first nine
months of 1995 when compared to the first nine months of 1994 due
primarily to an adjustment to reallocate parent company tax
benefits. See NOTE 6. Federal Income Taxes for additional
information related to this tax adjustment.
Interest on Short-Term Debt and Other. Interest expense on
short-term debt and other increased $2.6 million, or 48%, during
the first nine months of 1995 when compared to the first nine
months of 1994 due primarily to higher levels of short-term debt
outstanding at higher short-term interest rates.
Allowance for Equity and Borrowed Funds Used During
Construction. AFUDC increased $4.2 million during the first nine
months of 1995 when compared to the first nine months of 1994 due
primarily to increased CWIP balances accruing AFUDC and a prior
period true-up.
WEST TEXAS UTILITIES COMPANY
PART I. FINANCIAL INFORMATION.
Item 1. Financial Statements.
<PAGE> 39
WEST TEXAS UTILITIES COMPANY
STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
(Thousands)
ELECTRIC OPERATING REVENUES $ 87,178 $109,348 $245,148 $275,683
OPERATING EXPENSES AND TAXES
Fuel 29,963 32,609 90,891 103,337
Purchased power 4,373 2,386 8,198 4,424
Other operating 2,959 17,603 34,520 50,939
Maintenance 3,133 3,679 10,130 11,465
Depreciation and amortization 8,147 7,904 24,264 23,561
Taxes, other than Federal income 6,108 5,773 17,448 16,933
Federal income taxes 2,063 11,407 6,183 15,592
56,746 81,361 191,634 226,251
OPERATING INCOME 30,432 27,987 53,514 49,432
OTHER INCOME AND DEDUCTIONS
Allowance for equity funds used
during construction 150 67 260 70
Other (618) 609 316 1,708
(468) 676 576 1,778
INCOME BEFORE INTEREST CHARGES 29,964 28,663 54,090 51,210
INTEREST CHARGES
Interest on long-term debt 5,297 4,744 15,435 13,871
Interest on short-term debt and
other 833 746 2,987 2,532
Allowance for borrowed funds used
during construction (187) (98) (512) (202)
5,943 5,392 17,910 16,201
NET INCOME 24,021 23,271 36,180 35,009
Preferred stock dividends 66 84 198 386
NET INCOME FOR COMMON STOCK $ 23,955 $ 23,187 $ 35,982 $ 34,623
The accompanying notes to financial statements as they relate
to WTU are an integral part of these statements.
<PAGE> 40
WEST TEXAS UTILITIES COMPANY
BALANCE SHEETS
September 30, December 31,
1995 1994
(Unaudited)
ASSETS (Thousands)
ELECTRIC UTILITY PLANT
Production $ 427,804 $ 427,736
Transmission 195,452 194,402
Distribution 318,339 308,905
General 82,617 73,938
Construction work in progress 32,385 23,257
1,056,597 1,028,238
Less - Accumulated depreciation
and amortization 383,317 364,383
673,280 663,855
CURRENT ASSETS
Cash 3,784 2,501
Accounts receivable 28,489 23,165
Materials and supplies, at average cost 16,807 16,519
Fuel inventory, at average cost 8,180 9,229
Coal inventory, at LIFO cost 10,664 6,442
Accumulated deferred income taxes 5,048 3,068
Prepayments and other 2,854 1,091
75,826 62,015
DEFERRED CHARGES AND OTHER ASSETS
Deferred Oklaunion costs 26,298 26,914
Restructuring charges related regulatory asset 13,213 --
Other 29,214 26,111
68,725 53,025
$ 817,831 $ 778,895
The accompanying notes to financial statements as they relate
to WTU are an integral part of these statements.
<PAGE> 41
WEST TEXAS UTILITIES COMPANY
BALANCE SHEETS
September 30, December 31,
1995 1994
(Unaudited)
CAPITALIZATION AND LIABILITIES (Thousands)
CAPITALIZATION
Common stock: $25 par value $137,214 $137,214
Authorized shares: 7,800,000
Issued and Outstanding shares: 5,488,560
Paid-in capital 2,236 2,236
Retained earnings 141,486 132,504
Total Common Stock Equity 280,936 271,954
Preferred stock 6,291 6,291
Long-term debt 249,518 210,047
TOTAL CAPITALIZATION 536,745 488,292
CURRENT LIABILITIES
Long-term debt due within twelve months 650 650
Advances from affiliates 12,232 46,315
Accounts payable 24,657 35,407
Accrued taxes 8,786 7,452
Accrued interest 7,881 4,394
Over-recovered fuel costs 8,159 1,586
Refund due customers 22,335 --
Other 3,192 2,743
87,892 98,547
DEFERRED CREDITS
Accumulated deferred income taxes 143,385 146,146
Investment tax credits 30,891 31,882
Income tax related regulatory liabilities, net 14,215 9,217
Other 4,703 4,811
193,194 192,056
$817,831 $778,895
The accompanying notes to financial statements as they relate
to WTU are an integral part of these statements.
<PAGE> 42
WEST TEXAS UTILITIES COMPANY
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
1995 1994
OPERATING ACTIVITIES (Thousands)
Net Income $ 36,180 $ 35,009
Non-cash Items Included in Net Income
Depreciation and amortization 25,288 24,925
Deferred income taxes and investment tax
credits (734) 3,298
Regulatory asset established for previously
incurred Restructuring charges (13,213) --
Allowance for equity funds used during
construction (260) (70)
Changes in Assets and Liabilities
Accounts receivable (5,324) 827
Accounts payable (10,816) (31,087)
Accrued taxes 1,334 4,093
Over- and under-recovered fuel costs 6,573 (72)
Accrued restructuring charges (388) (3,282)
Refunds due customers 22,335 --
Other (1,997) (6,772)
58,978 26,869
INVESTING ACTIVITIES
Construction expenditures (31,931) (29,844)
Other (1,841) (1,054)
(33,772) (30,898)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 39,411 39,354
Reacquisition of long-term debt (2,053) (12,127)
Retirement of preferred stock -- (4,700)
Change in advances from affiliates (34,083) 2,977
Payment of dividends (27,198) (20,454)
(23,923) 5,050
NET CHANGE IN CASH AND CASH EQUIVALENTS 1,283 1,021
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,501 706
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,784 $ 1,727
SUPPLEMENTARY INFORMATION
Interest paid less amounts capitalized $ 12,548 $ 11,511
Income taxes paid $ 14,155 $ 12,720
The accompanying notes to financial statements as they relate
to WTU are an integral part of these statements.
<PAGE> 43
WEST TEXAS UTILITIES COMPANY
RESULTS OF OPERATIONS
COMPARISON OF THE QUARTERS ENDED SEPTEMBER 30, 1995 AND 1994
Net Income for Common Stock. Net income for common stock
increased 3% to $24.0 million during the third quarter of 1995
from $23.2 million in the third quarter of 1994. This increase
was due primarily to lower other operating expense as well as the
initial effects of the WTU Settlement and Agreement. See NOTE 2.
Litigation and Regulatory Proceedings for information related to
the WTU Settlement and Agreement.
Electric Operating Revenues. Electric operating revenues
decreased 20% in the third quarter of 1995 as compared to the
third quarter of 1994. The decrease was attributable primarily
to the recording of a $21 million reserve for a base rate refund
pursuant to the WTU Settlement and Agreement. Under the WTU
Settlement and Agreement, WTU is providing customers a one-time
base rate refund of $21 million during the billing months of
October and November 1995. Excluding the effects of the
provision for base rate refund, electric operating revenues
remained stable for the third quarter of 1995 as compared to the
third quarter of 1994.
Fuel. Fuel expense decreased $2.6 million, or 8%, during
the third quarter of 1995 as compared to the third quarter of
1994 due primarily to a decrease in average unit fuel costs to
$1.55 per Mmbtu in 1995 from $1.65 per Mmbtu in 1994. The
decrease in unit fuel costs resulted from a decrease in the per
unit cost of natural gas, which was due to lower spot gas market
prices.
Purchased Power. Purchased power increased $2.0 million
during the third quarter of 1995 as compared to the third quarter
of 1994 primarily as a result of additional energy purchases made
during the third quarter of 1995 required to serve the increased
load resulting from the addition of a wholesale customer and
increased economy purchases.
Other Operating. Other operating expenses decreased $14.6
million, or 83%, during the third quarter of 1995 as compared to
the third quarter of 1994. The decrease was primarily due to
recording a $13.2 million regulatory asset in accordance with the
WTU Settlement and Agreement for previously recorded costs
associated with the Restructuring as well as the accrual in 1994
of additional expenses related to the estimated costs of the
Restructuring.
Federal Income Taxes. Federal income taxes decreased $9.3
million, or 82%, during the third quarter of 1995 as compared to
the third quarter of 1994 due primarily to a reduction of $6.9
million of deferred income taxes in accordance with the WTU
Settlement and Agreement and lower pre-tax income.
Other Income and Deductions - Other. Other income and
deductions - other decreased $1.2 million in the third quarter of
1995 as compared to the third quarter of 1994 due primarily to an
adjustment to reallocate parent company tax benefits. See NOTE
6. Federal Income Taxes for additional information related to
this tax adjustment.
Interest on Long-Term Debt. Interest charges on long-term
debt increased 12% to $5.3 million during the third quarter of
1995 from $4.7 million in the third quarter of 1994 due to higher
levels of long-term debt outstanding.
<PAGE> 44
WTU RESULTS OF OPERATIONS (continued)
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
Net Income for Common Stock. Net income for common stock
increased 4% to $36.0 million during the first nine months of
1995 from $34.6 million in the first nine months of 1994. The
increase was due primarily to decreased other operating and
maintenance expenses as well as the initial effects of the WTU
Settlement and Agreement. See NOTE 2. Litigation and Regulatory
Proceedings for information related to the WTU Settlement and
Agreement.
Electric Operating Revenues. Electric operating revenues
decreased $30.5 million, or 11%, in the first nine months of 1995
as compared to the first nine months of 1994. This decrease was
attributable primarily to the recording of a $21 million reserve
for a base rate refund pursuant to the WTU Settlement and
Agreement. Under the WTU Settlement and Agreement, WTU is
providing customers a one-time base rate refund of $21 million
during the billing months of October and November 1995.
Excluding the effects of the provision for base rate refund,
electric operating revenues decreased 3% due primarily to an 8%
decrease in fuel revenues related to the lower average unit fuel
prices as discussed below.
Fuel. Fuel expense decreased $12.4 million, or 12%, for the
first nine months of 1995 as compared to the first nine months of
1994 due primarily to a 7% decrease in average unit fuel costs
from $1.91 per Mmbtu in 1994 to $1.77 per Mmbtu in 1995. The
decrease in unit fuel costs was due primarily to lower spot gas
market prices.
Purchased Power. Purchased power increased $3.8 million
during the first nine months of 1995 when compared to the first
nine months of 1994 primarily as a result of additional energy
purchases made during the third quarter of 1995 required to serve
the increased load resulting from the addition of a wholesale
customer and from increased economy purchases.
Other Operating. Other operating expenses decreased $16.4
million, or 32%, in the first nine months of 1995 as compared to
the first nine months of 1994 due primarily to the recognition of
a $13.2 million regulatory asset in accordance with the WTU
Settlement and Agreement for previously recorded charges
associated with the Restructuring as well as the accrual of
additional expenses in 1994 related to the estimated costs of the
Restructuring.
Maintenance. Maintenance expenses decreased by $1.3
million, or 12%, during the first nine months of 1995 as compared
to the first nine months of 1994. This decrease was due
primarily to higher transmission and distribution substation
maintenance expenses incurred as a result of substation
transformer failures which occurred in 1994 but not in 1995.
Federal Income Taxes. Federal income taxes decreased $9.4
million, or 60%, during the first nine months of 1995 as compared
to the first nine months of 1994 due primarily to the reduction
of $6.9 million of deferred income taxes in accordance with the
WTU Settlement and Agreement, prior year tax adjustments and
lower pre-tax income. See NOTE 6. Federal Income Taxes for
additional information related to the tax adjustments.
Other Income and Deductions - Other. Other income and
deductions - other decreased $1.4 million during the first nine
months of 1995 as compared to the first nine months of 1994 due
primarily to an adjustment to reallocate parent company tax
benefits. See NOTE 6. Federal Income Taxes for additional
information related to this tax adjustment.
<PAGE> 45
WTU RESULTS OF OPERATIONS (continued)
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (continued)
Interest on Long-Term Debt. Interest charges on long-term
debt increased 11% to $15.4 million during the first nine months
of 1995 from $13.9 million in the first nine months of 1994 due
to higher levels of long-term debt outstanding.
<PAGE> 46
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
INDEX TO APPLICABLE NOTES TO
FINANCIAL STATEMENTS BY REGISTRANT
Note 1 Principles of Preparation CSW, CPL, PSO, SWEPCO, WTU
Note 2 Litigation and Regulatory Proceedings CSW, CPL, SWEPCO, WTU
Note 3 Dividends CSW, CPL, PSO, SWEPCO, WTU
Note 4 CSW Earnings and Dividends Per Share of CSW
Common Stock
Note 5 Commitments and Contingent Liabilities CSW, CPL, PSO, SWEPCO
Note 6 Federal Income Taxes CSW, CPL, PSO, SWEPCO, WTU
<PAGE> 47
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Principles of Preparation
The condensed financial statements of the Registrants
included herein have been prepared by each Registrant pursuant to
the rules and regulations of the SEC. Certain information and
note 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 each Registrant believes that the
disclosures are adequate to make the information presented not
misleading. It is suggested that these condensed financial
statements be read in conjunction with the financial statements
and the notes thereto included in the Registrant's combined
Annual Report on Form 10-K for the year ended December 31, 1994
and the Combined Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1995 and June 30, 1995.
The unaudited financial information furnished herewith
reflects all adjustments which are, in the opinion of management
of such Registrant, necessary for a fair statement of the results
of operations for the interim periods. Information for quarterly
periods is affected by seasonal variations in sales, rate
changes, timing of fuel expense recovery and other factors.
Certain financial statement items for prior years have been
reclassified to conform to the 1995 presentation.
2. Litigation and Regulatory Proceedings
See the Registrants' combined Annual Report on Form 10-K for
the year ended December 31, 1994 and Combined Quarterly Reports
on Form 10-Q for the quarters ended March 31, 1995 and June 30,
1995 for additional discussion of litigation and regulatory
proceedings. Reference is also made to Part II-OTHER
INFORMATION-Item 1. Legal Proceedings for additional discussion
of litigation matters.
CPL Rate Proceedings
Dockets No. 12820 and 13126
On April 5, 1995, CPL reached an agreement in principle with
other parties to pending regulatory proceedings involving base
rate, fuel and prudence issues relating to STP. On May 16, 1995,
CPL filed the CPL 1995 Agreement with the Texas Commission.
Pursuant to the CPL 1995 Agreement, base rate refunds, fuel
refunds and the reduction of CPL's fuel factors were implemented
on an interim basis during the summer of 1995. Under the CPL
1995 Agreement, CPL provided customers a one-time base rate
refund of $50 million. In addition, CPL refunded approximately
$30 million in over-recovered fuel costs through April 1995.
Furthermore, CPL did not charge customers for $62.25 million in
replacement power costs and related interest primarily associated
with the 1993-1994 STP outage. The CPL 1995 Agreement did not
result in any ongoing change in base rate levels and provided
that there would be no new rate review requests filed prior to
September 28, 1995. CPL also reduced its fuel factors, effective
in July 1995, by approximately $55 million on an annual basis due
to projections of lower fuel costs. Hearings on the CPL 1995
Agreement were held on July 19, 1995, and the final written Texas
Commission order approving the CPL 1995 Agreement was received on
October 4, 1995.
<PAGE> 48
Details of the items in the CPL 1995 Agreement and the
estimated 1995 total earnings impact for CPL including certain
accounting provisions, are set forth in the table below:
Pre-tax After-tax
(millions)
Base rate refund $(50.0) $(32.5)
Fuel disallowance (62.3) (40.5)
Wholesale fuel refund (3.2) (2.1)
Current flowback of excess
deferred Federal income taxes 34.3 34.3
Capitalization of previously
expensed Restructuring and
rate case costs 27.6 17.9
Recognition of factoring income 16.1 10.5
Amortization, interest and other (6.6) (4.4)
CPL Rate Review Request
On November 6, 1995, CPL filed with the Texas Commission a
request to increase its base rates by $71 million and reduce its
annual retail fuel factors by $17 million. The net effect of
these proposals is an increase of $54 million or 4.6% of total
retail revenues on an annual basis. CPL is not seeking interim
rate relief but reserves its right to implement bonded rates in
May 1996, the earliest date provided by law. CPL also is seeking
to reconcile $229 million of fuel costs incurred during the
period July 1, 1994 through June 30, 1995. If the requested
increase and other treatments are approved, CPL will commit to
not increasing its base rates prior to January 1, 2001, subject
to certain force majeure events. A final decision on the rate
request is anticipated from the Texas Commission in the fourth
quarter of 1996.
CPL is requesting this review as a result of its increasing
costs since 1991, including the effects of the expiration of the
Mirror CWIP liability amortization at the end of 1995, which
occurs in accordance with the original liability amortization
schedule agreed upon in the settlement of its rate cases in 1990
and 1991. Also included in the request are CPL's proposals to
accelerate recovery of nuclear and regulatory assets as a way to
proactively address certain assets that could become "stranded"
in a more competitive environment.
CPL Deferred Accounting
CPL was granted deferred accounting treatment for certain
STP Unit 1 and 2 costs by Texas Commission orders issued in
October 1990 and December 1990, respectively. In 1994, the
Supreme Court of Texas sustained deferred accounting as an
appropriate mechanism for the Texas Commission to use in
preserving the financial integrity of CPL, but remanded CPL's
case to the Court of Appeals to consider certain substantial
evidence points of error not previously decided by the Court of
Appeals given its prior determinations. On August 16, 1995, the
Court of Appeals rendered its opinion in the remand proceeding
and affirmed the Texas Commission's order in all respects.
CPL believes that the language of the Supreme Court of
Texas' opinion suggests that the appropriateness of allowing
deferred accounting may again be reviewed under a financial
integrity standard in the first case in which the deferred STP
costs will begin being recovered through rates. If the courts
decide that subsequent review under the financial integrity
standard is required, that review would be conducted in a remand
of the STP Unit 1 and 2 orders. Pending the ultimate resolution
of CPL's deferred accounting issues, CPL is unable to predict how
its deferred accounting orders will ultimately be resolved by the
Texas Commission.
<PAGE> 49
If CPL's deferred accounting matters are not favorably
resolved, CSW and CPL could experience a material adverse effect
on their respective results of operations and financial
condition. While CPL's management is unable to predict the
ultimate outcome of these matters, management believes CPL will
receive approval of its deferred accounting orders or will be
successful in renegotiation of its rate orders, so that there
will be no material adverse effect on CSW's or CPL's results of
operation or financial condition
For additional information on CPL's deferred accounting
proceedings, see CSW's and CPL's combined Annual Report on Form
10-K for the year ended December 31, 1994 and Combined Quarterly
Report on Form 10-Q for the quarters ended March 31, 1995 and
June 30, 1995.
CPL Civil Penalties
In October 1995, the NRC notified HLP of a Notice of
Violation and proposed penalties totaling $160,000 related to
events that occurred at STP in May 1992. The Notice of Violation
and penalties reflect the NRC's belief that certain STP employees
were terminated as a result of raising safety concerns with the
NRC. The Notice of Violation was the result of a Department of
Labor decision and order in April 1995 and is awaiting final
action by the Secretary of Labor. HLP is not required to reply
to the NRC's Notice of Violation or pay the penalties pending the
Secretary of Labor's final decision. The NRC indicated that the
proposed civil penalties reflect minimum penalties allowed
because of improvements made to the STP Employee Concerns Program
since 1992. CPL's share of any penalty that is ultimately paid
would be approximately 25%, reflecting its ownership interest in
STP.
SWEPCO Fuel Factor Proceedings
Docket No. 14819
On October 6, 1995, SWEPCO filed a petition, designated as
Docket No. 14819, with the Texas Commission to revise its fixed
fuel factors for the recovery of fuel and purchased power costs.
SWEPCO is experiencing an over-recovery of fuel costs based on
its current factors which became effective in July 1994. SWEPCO
is proposing to revise its fixed fuel factors with the first
billing cycle of January 1996. If approved, the proposed fixed
fuel factors would decrease SWEPCO's fuel and purchased power
revenues by approximately $4.8 million on an annual basis.
SWEPCO also requested authority to make an interim refund of
$7.1 million of cumulative over-recovery of fuel and purchased
power costs that existed as of June 1995. SWEPCO anticipates
receiving a final order in the fourth quarter of 1995.
WTU Regulatory Proceedings
Rate Proceeding Docket No. 13369, Appeal of Docket No. 7510 and
Deferred Accounting Proceeding No. 13949
WTU had been the subject of several regulatory matters.
Such matters, which covered a variety of issues, included the
following: (i) current rate proceeding and fuel reconciliation
before the Texas Commission in Docket No. 13369; (ii) Writ of
Error to the Supreme Court of Texas - review of WTU's 1987 Texas
rate case on Docket No. 7510; and (iii) the Texas Commission's
proceeding on remand in Docket No. 13949 regarding deferred
accounting treatment for Oklaunion Power Station Unit No. 1
originally authorized in the Texas Commission's Docket No. 7289.
On September 6, 1995, WTU announced that it had entered into
a settlement in principle with major parties to settle these
pending regulatory proceedings. On September 25, 1995, the WTU
Settlement and Agreement was filed with the Texas Commission in
Docket No. 13369. The WTU Settlement and Agreement has been
signed by ten of the twelve parties, and the two non-signing
parties have not contested the WTU Settlement and Agreement.
<PAGE> 50
The WTU Settlement and Agreement is a unified package that
includes: (i) a Texas retail base rate reduction of
approximately $13.5 million effective retroactive to October 1,
1994 (approximately $5.7 million of which has been in effect
since that time on an interim basis); (ii) a $21 million retail
refund which is not attributed to any specific causes but is
inclusive of all claims related to the three dockets and the
retroactive base rate reduction impact; (iii) reduced fixed fuel
factors of approximately 2%; (iv) various rate and accounting
treatments including a reasonable return on equity for WTU of
11.375%; and (v) a retail base rate freeze until October 1,
1998, subject to certain force majeure provisions.
The WTU Settlement and Agreement is expected to impact WTU's
results of operations for the next several years, reducing annual
earnings by approximately $8 million after-tax beginning in 1996.
Details of the items with significant earnings impact, including
certain accounting treatments, are set forth in the table below
for 1995 and 1996:
1995 1996
Pre-tax After-tax Pre-tax After-tax
(millions)
Refund to retail customers $(21.0) $(13.7) $ -- $ --
Effect of retail rate reduction (1.7) (1.1) (7.6) (4.9)
Current flowback of property
related excess deferred federal
income taxes 6.9 6.9 -- --
Five year flowback of non-property
related excess deferred Federal
income taxes 0.1 0.1 0.5 0.5
Capitalization and amortization of
previously expensed Restructuring
costs 13.2 8.6 (1.9) (1.2)
Accelerated amortization of
deferred Oklaunion plant costs
(accelerated from the remaining
31 to 7 years) -- -- (2.9) (2.3)
Other amortization (0.2) (0.1) (0.8) (0.5)
The WTU Settlement and Agreement also eliminated several
significant risks that have been the subject of regulatory
proceedings relating to deferred accounting and rates and will
enable WTU's rates to remain at competitive levels for the
foreseeable future. Notwithstanding the anticipated adverse
impact on WTU's future results of operations, management believes
that it was prudent to accept the WTU Settlement and Agreement in
light of the uncertainty and expense of otherwise pursuing the
pending regulatory proceedings.
On September 27, 1995, the ALJs issued an interim order in
Docket No. 13369 finding that beginning with the October 1995
billing month, interim implementation of the proposed rate
reduction, refund and reduced fuel factors was appropriate. In
addition, the ALJs approved on an interim basis, tariffs
implementing the WTU Settlement and Agreement subject to refund
or surcharge pending final order of the Texas Commission. On
November 9, 1995, the Texas Commission voted to approve the order
implementing the WTU Settlement and Agreement. The parties will
now seek to have the appeal of Docket No. 7510, currently before
the Supreme Court of Texas, remanded to the Texas Commission to
obtain an order consistent with the WTU Settlement and Agreement.
For additional information regarding WTU's regulatory
matters, see CSW's and WTU's combined Annual Report on Form 10-K
for the year ended December 31, 1994, Combined Quarterly Reports
on Form 10-Q for the quarters ended March 31, 1995 and June 30,
1995 and combined Current Reports on Form 8-K dated July 10, 1995
and September 6, 1995.
<PAGE> 51
3. Dividends
The Electric Operating Companies' mortgage indentures, as
amended and supplemented, contain certain restrictions on the use
of their retained earnings for cash dividends on their common
stock. These restrictions do not limit the ability of CSW to pay
dividends to its shareholders. At September 30, 1995,
approximately $1.5 billion of the subsidiary companies' retained
earnings were available for payment of cash dividends by such
subsidiaries to CSW. At September 30, 1995, the amount of
retained earnings available for payment of cash dividends to CSW
by the Electric Operating Companies was as follows:
CPL - $754 million PSO - $160 million SWEPCO - $324 million
WTU - $141 million
4. CSW Earnings and Dividends Per Share of Common Stock
Earnings per share of common stock are computed by dividing
net income for common stock by the average number of common
shares outstanding for the respective periods. Dividends per
common share reflect per share amounts paid during the periods.
5. Commitments and Contingent Liabilities
Termination of El Paso Merger
For information regarding the commitments and contingent
liabilities relating to the termination of the Merger, reference
is made to PART II - OTHER INFORMATION-Item 1. Legal
Proceedings.
Environmental Matters
For information regarding environmental matters, reference
is made to PART II - OTHER INFORMATION-Item 5. Other
Information.
CSWE Projects and Commitments
CSWE, a wholly owned subsidiary of CSW, is authorized to
develop various independent power and cogeneration facilities and
to own and operate such non-utility projects, subject to
regulatory approval. The table below summarizes CSWE's
participation in projects:
<TABLE>
<CAPTION>
Capacity Commercial
(in Mw) Operation Ownership Thermal
Project Location Total Sold Date Interest Host Host Utility
<S> <C> <C> <C> <C> <C> <C> <C>
Orange Cogen Polk County, FL 103 97 June 1995 50% Orange Juice Florida Power Corporation
Processor Tampa Electric Company
Ft. Lupton Ft. Lupton, CO 272 272 June 1994 50% Greenhouse Public Service Company
of Colorado
Mulberry Polk County, FL 117 110 August 1994 50% Distilled Florida Power Corporation
Water Plant
Brush II Brush, CO 68 68 January 1994 47% Greenhouse Public Service Company
of Colorado
Phillips Sweeny Sweeny, TX 300 90* April 1998 50% Refinery Undetermined*
*The Phillips Sweeney project has the unexercised option to sell 90 Mw of capacity to Phillips Petroleum Company.
</TABLE>
<PAGE> 52
CSW and CSWE have provided loans and other credit support to
these projects and certain development partnerships. The
following table summarizes the investment and commitments in the
projects at September 30, 1995:
Letters of Credit
Project Equity and Guarantees Loans
(millions)
Orange Cogen $ 4.6 $ 104.4
Ft. Lupton $ 44.0 57.0
Mulberry 74.7
Phillips Sweeny 3.0
Various developmental projects 9.0 50.0
CSWE has provided construction services to the Mulberry
cogeneration facility through Dev-I, a wholly owned subsidiary of
CSWE. Additionally, Dev-I entered into a fixed price contract of
$14 million to construct the Mulberry thermal host. At September
30, 1995, the thermal host was substantially completed for an
aggregate cost of approximately $43 million. On November 2,
1995, CSWE reached an agreement and settlement with its business
partner regarding the $29 million cost overruns for the Mulberry
thermal host. These negotiations also resulted in a change in
the business partner for the Mulberry and Orange project. Under
the terms of the settlement, the newly admitted partner paid to
CSWE 50%, or $52.2 million, of the outstanding obligations of the
Orange facility and assumed 50%, or $2.3 million, of the Letters
of Credit and guarantees of the project. Concurrently, CSWE
contributed as partners capital the remaining debt of $52.2
million to Orange Cogeneration. On the same date, the Mulberry
project obtained term financing and CSWE's credit support was
reduced from $74.7 million to $32.3 million.
CPL's Nuclear Insurance
In connection with the licensing and operation of STP, the
owners have purchased the maximum limits of nuclear liability
insurance, as required by law, and have executed indemnification
agreements with the NRC in accordance with the financial
protection requirements of the Price-Anderson Act.
The Price-Anderson Act, a comprehensive statutory
arrangement providing limitations on nuclear liability and
governmental indemnities, is in effect until August 1, 2002. The
limit of liability under the Price-Anderson Act for licensees of
nuclear power plants is $8.92 billion per incident, effective as
of January 1995. The owners of STP are insured for their share
of this liability through a combination of private insurance
amounting to $200 million and a mandatory industry-wide program
for self-insurance totaling $8.72 billion. The maximum amount
that each licensee may be assessed under the industry-wide
program of self-insurance following a nuclear incident at an
insured facility is $75.5 million per reactor, which may be
adjusted for inflation, plus a five percent charge for legal
expenses, but not more than $10 million per reactor for each
nuclear incident in any one year. CPL and each of the other STP
owners are subject to such assessments, which CPL and other
owners have agreed will be allocated on the basis of their
respective ownership interests in STP. For purposes of these
assessments, STP has two licensed reactors.
The owners of STP currently maintain on-site decontamination
liability and property damage insurance in the amount of $2.75
billion provided by ANI and NEIL. Policies of insurance issued
by ANI and NEIL stipulate that policy proceeds must be used first
to pay decontamination and clean-up costs before being used to
cover direct losses to property. Under project agreements, CPL
and the other owners of STP will share the total cost of
decontamination liability and property insurance for STP,
including premiums and assessments, on a pro rata basis,
according to each owner's respective ownership interest in STP.
<PAGE> 53
CPL purchases, for its own account, a NEIL I Business
Interruption and/or Extra Expense policy. This insurance will
reimburse CPL for extra expenses incurred, up to $1.3 million per
week, for replacement generation or purchased power as the result
of a covered accident that shuts down production at STP for more
than 21 weeks. The maximum amount recoverable for Unit 1 is
$86.0 million and for Unit 2 is $86.0 million. CPL is subject to
an additional assessment up to $1.6 million for the current
policy year in the event that losses as a result of a covered
accident at a nuclear facility insured under the NEIL I policy
exceeds the accumulated funds available under the policy.
On August 28, 1994, CPL filed a claim under the NEIL I
policy relating to the 1993 - 1994 outage at STP Units 1 and 2.
NEIL is currently reviewing the claim. CPL management is unable
to predict the ultimate outcome of this matter.
PSO's PCB Cases
For information regarding the commitments and contingent
liabilities relating to the PSO's PCB cases, reference is made to
PART II - OTHER INFORMATION-Item 1. Legal Proceedings.
SWEPCO's Henry W. Pirkey Power Plant
In connection with the lignite mining contract for its Henry
W. Pirkey Power Plant, SWEPCO has agreed, under certain
conditions, to assume the obligations of the mining contractor.
As of September 30, 1995, the maximum SWEPCO would have to assume
is $72.5 million. The maximum amount may vary as the mining
contractor's need for funds fluctuates. The contractor's actual
obligation outstanding as of September 30, 1995 was approximately
$61.1 million.
6. Federal Income Taxes
CSW files a consolidated Federal income tax return and
participates in a tax sharing agreement with its subsidiaries.
Total income taxes (income taxes included in Operating Expenses
and Taxes as well as Other Income and Deductions) differ from the
amounts computed by applying the statutory income tax rates to
income before taxes for a number of reasons. The tax
implications of the CPL 1995 Agreement and the WTU Settlement and
Agreement whereby the flowback of unprotected excess deferred
income taxes was accelerated contributed to the difference as did
adjustments that were made to eliminate tax obligations that no
longer exist. These differences, as well as other differences
between the statutory rate and the effective tax rate, are as
follows:
Three Months Nine Months
Ended Ended
September % September %
30, 1995 30, 1995
CSW ($ in millions)
Tax at statutory rates $103.3 35.0% $147.1 35.0%
Differences:
Amortization of ITC (4.0) (1.4)% (11.0) (2.6)%
Mirror CWIP (2.7) (0.9)% (8.1) (1.9)%
CPL 1995 Agreement -- --% (34.3) (8.2)%
WTU Settlement and Agreement (6.9) (2.3)% (6.9) (1.6)%
Tax balance adjustments -- --% (23.4) (5.6)%
Prior period adjustments/Other (3.7) (1.2) (0.7) (0.1)%
$86.0 29.2% $62.7 15.0%
<PAGE> 54
Three Months Nine Months
Ended Ended
September % September %
30, 1995 30, 1995
CPL ($ in thousands)
Tax at statutory rates $42,182 35.0% $62,424 35.0%
Differences:
Amortization of ITC (1,447) (1.2)% (4,342) (2.4)%
Mirror CWIP (2,711) (2.2)% (8,132) (4.6)%
CPL 1995 Agreement -- --% (34,289) (19.2)%
Tax balance adjustments -- --% (12,893) (7.3)%
Other 258 0.2% 1,341 0.8%
$38,282 31.8% $4,109 2.3%
PSO ($ in thousands)
Tax at statutory rates $27,243 35.0% $38,741 35.0%
Differences:
Amortization of ITC (697) (0.9)% (2,092) (1.9)%
Tax balance adjustments -- --% (3,624) (3.3)%
Adjustment for allocation of
parent company tax benefits 1,264 1.6% 1,264 1.1%
Prior period adjustments/Other (656) (0.8)% (2,243) (1.9)%
$27,154 34.9% $32,046 29.0%
SWEPCO ($ in thousands)
Tax at statutory rates $25,246 35.0% $47,925 35.0%
Differences:
Amortization of ITC (1,552) (2.1)% (3,590) (2.6)%
Tax balance adjustments -- --% (6,253) (4.6)%
Adjustment for allocation of
parent company tax benefits 2,342 3.2% 2,342 1.7%
Other (2,378) (3.3)% (5,565) (4.0)%
$23,658 32.8% 34,859 25.5%
WTU ($ in thousands)
Tax at statutory rates $9,458 35.0% $15,029 35.0%
Differences:
Amortization of ITC (330) (1.2)% (991) (2.3)%
WTU Settlement and Agreement (6,859) (25.4)% (6,859) (16.0)%
Tax balance adjustments -- --% (663) (1.5)%
Adjustment for allocation of
parent company tax benefits 1,247 4.6% 1,247 2.9%
Other (514) (1.9)% (1,004) (2.4)%
$3,002 11.1% $6,759 15.7%
<PAGE> 55
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Reference is made to Management's Discussion and Analysis of
Financial Condition and Results of Operations included in the
Registrants' combined Annual Report on Form 10-K for the year
ended December 31, 1994 and Combined Quarterly Reports on Form 10-
Q for the quarters ended March 31, 1995 and June 30, 1995.
Reference is also made to each Registrant's unaudited Financial
Statements and related Notes to Financial Statements included
herein. The information included therein should be read in
conjunction with, and is essential in understanding, the
following discussion and analysis.
Results of Operations
Reference is made to PART I-FINANCIAL INFORMATION - Item 1.
Financial Statements for each of the Registrants' Results of
Operations.
Capital Requirements, Liquidity and Financing
Construction and Capital Expenditures
Construction expenditures for the CSW System for the nine
months ended September 30, 1995 were $335 million. Such
expenditures for the Electric Operating Companies totaled $112.9
million, $70.9 million, $79.3 million and $31.9 million, for CPL,
PSO, SWEPCO and WTU, respectively. Construction expenditures for
the CSW System were primarily for improvements to existing
production, transmission and distribution facilities, as well as
enhancements by Transok of existing gas gathering and
transmission systems. The improvements are required to meet the
needs of new customers and to satisfy the changing requirements
of existing customers. The CSW System anticipates that the
majority of all funds required for construction for the remainder
of the year will be provided from internal sources.
Short-Term Financing
The CSW System uses short-term debt to meet fluctuations in
working capital requirements and other interim capital needs.
The Registrants, together with other members of the CSW System,
have established a money pool to coordinate short-term borrowings
and to make borrowings outside the money pool through CSW's
issuance of commercial paper. As of September 30, 1995, CSW had
two revolving credit facilities totaling $1.2 billion to back up
its commercial paper program.
Long-Term Financing
The CSW System is committed to maintaining financial
flexibility by maintaining a strong capital structure and
favorable securities ratings which help to assure future access
to capital markets when required. CSW, in order to strengthen
its capital structure and support growth from time to time, may
issue additional shares of its common stock. At September 30,
1995, the capitalization ratios of each of the Registrants were
as follows:
Common Preferred Long-Term
Equity Stock Debt
CSW 49% 5% 46%
CPL 45% 8% 47%
PSO 56% 2% 42%
SWEPCO 52% 4% 44%
WTU 52% 1% 47%
CPL Financings
On July 19, 1995, CPL sold to underwriters $200 million of 6
5/8% FMB, Series KK, due July 1, 2005. The proceeds were
principally used to redeem $139.2 million of 9 3/8% FMB, Series
<PAGE> 56
Z, due December 1, 2019. The remainder of the proceeds were used
to repay short-term debt, to provide working capital and for
other general corporate purposes.
On July 27, 1995, CPL sold to underwriters $100.6 million of
6.1% PCRB, Series 1995, due July 1, 2028. The proceeds were used
to redeem two separate outstanding PCRB issues, $68.9 million of
10 1/8%, Series 1984 PCRB, due October 15, 2014 and $31.8 million
of 9 3/4%, Series U FMB (secures Series 1985A collateralized
PCRB), due July 1, 2015.
On November 2, 1995, CPL sold to underwriters $40.9 million
of floating rate PCRB, Series 1995, due November 1, 2015. The
initial rate for the Series 1995 Bonds was set in a daily mode at
3.60%. The new bonds are enhanced by a letter of credit. The
proceeds will be used to refund CPL's outstanding $7.4 million of
7 1/8%, Series 1974A, due June 1, 2004 and $33.5 million of 6%,
Series 1977, due November 1, 2007.
WTU Financings
On October 24, 1995, WTU sold to underwriters $80 million of
6 3/8% FMB, Series U, due October 1, 2005. The proceeds will be
used for the December 1, 1995 scheduled redemption of $53.3
million of 9 1/4% FMB, Series O, due December 1, 2019, to repay
short-term debt, to provide working capital and for other general
corporate purposes.
SEEBOARD Tender Offer
On November 6, 1995, CSW, indirectly through CSW (UK),
announced its intention to commence a $2.52 billion cash tender
offer in the United Kingdom for all of the outstanding shares of
capital stock of SEEBOARD. Immediately following announcement of
the tender offer, CSW (UK) commenced open market purchases of
shares of SEEBOARD's capital stock. As of November 8, 1995, CSW
(UK) had acquired approximately 27% of the outstanding shares of
capital stock of SEEBOARD. The tender offer has received the
recommendation of SEEBOARD's board of directors and is
conditioned upon the satisfaction, prior to closing, of certain
customary conditions, including non-referral of the transaction
to the Monopolies and Mergers Commission. Assuming the tender
offer is successful and all necessary conditions are satisfied,
CSW expects that the transaction will be consummated during the
first quarter of 1996. The tender offer price is subject to
reduction to reflect the distribution by SEEBOARD to its
shareholders of its ownership interest in the National Grid
Company.
CSW has committed to contribute to CSW (UK) up to $850
million to complete the tender offer. CSW expects to obtain such
funds through the proceeds of borrowings under a $850 million
senior credit agreement entered into on November 6, 1995 for that
purpose and through internally generated funds. Borrowings under
the credit agreement are unsecured and mature on November 6,
2000, subject to prepayment by CSW at any time. As of November
9, 1995, CSW had notified the banks party to the credit agreement
that it intended to borrow approximately $680 million under the
credit agreement to fund, indirectly through CSW (UK), open
market purchases of capital stock of SEEBOARD.
CSW (UK) intends to obtain the remaining amounts necessary
to complete the tender offer, approximately $1.67 billion, from
capital contributions or loans to be made to CSW (UK) by its sole
shareholder, CSW UK Investments, which has arranged a senior
secured credit facility for that purpose. Neither CSW nor CSW
International has guaranteed or otherwise has recourse for
amounts borrowed by CSW UK Investments under the credit facility.
SEEBOARD is a retail electric company headquartered in
Crawley, West Sussex, and has a distribution territory that
covers approximately 6,000 square miles and extends from the
<PAGE> 57
outlying areas of London to the English Channel. SEEBOARD serves
approximately 2 million customers, approximately 80% of which are
residential and commercial and approximately 20% of which are
industrial. For the year ended March 31, 1995, SEEBOARD had
electricity sales of 17.6 billion kwh and a profit before tax of
approximately $224 million on revenues of approximately $1.9
billion. SEEBOARD is also involved in certain non-regulated
activities, including electrical contracting and retailing, gas
supply and electricity generation. CSW believes that SEEBOARD
will be a positive addition to its existing business due to,
among other reasons, its strong management, excellent financial
characteristics and innovative growth strategies. The earnings
of SEEBOARD have been converted into U.S. dollar amounts for
illustrative purposes only at an exchange rate of 1.00 pound
= $1.5788, which was the prevailing rate of exchange at the close
of business on November 3, 1995, the business day prior to the
announcement of the tender offer.
Regulatory Matters
Reference is made to NOTE 2. Litigation and Regulatory
Proceedings for a discussion of CPL, SWEPCO and WTU regulatory
matters.
Competition
Amendments to PURA, the legal foundation of electric
regulation in Texas, became effective on September 1, 1995.
Among other things, the amendments deregulate the wholesale bulk
power market in ERCOT, permit pricing flexibility for utilities
facing competitive challenges, provide for a market-driven
integrated resource planning process and mandate comparable open
access transmission service.
PURA also requires that the Texas Commission adopt a rule on
comparable open transmission access by March 1, 1996. In
conjunction with this rulemaking proceeding (Docket No. 14045),
Texas Commission Chairman Pat Wood issued a proposal on September
6, 1995, for the purpose of maximizing competition in the ERCOT
wholesale bulk power market. The proposal calls for the
functional unbundling of integrated utilities where distribution
entities could purchase their power requirements from any
generator or set of generators in ERCOT. Those generators which
are currently regulated would be deregulated after provisions are
in place to recover stranded costs. The proposal has been
assigned to a separate proceeding (Docket No. 15000), but the
Texas Commission has not yet developed a schedule for pursuing
this docket. CSW expects this docket to provide the vehicle for
the Texas Commission and other interested parties to develop
positions on industry restructuring before the Texas Legislature
convenes in January 1997.
Litigation Relating to Termination of El Paso Merger
For information regarding the commitments and contingent
liabilities relating to the termination of the Merger, reference
is made to PART II-OTHER INFORMATION-Item 1. Legal Proceedings.
<PAGE> 58
PART II - OTHER INFORMATION
For background and earlier developments relating to Part II
information reference is made to each Registrants' combined
Annual Report on Form 10-K for the year ended December 31, 1994
and Combined Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1995 and June 30, 1995.
Item 1. Legal Proceedings.
Litigation Relating to Termination of El Paso Merger
In May 1993, CSW entered into a Merger Agreement pursuant to
which El Paso would emerge from bankruptcy as a wholly owned
subsidiary of CSW. El Paso is an electric utility company
headquartered in El Paso, Texas, which had filed a voluntary
petition for reorganization under Chapter 11 of the Bankruptcy
Code on January 8, 1992.
On June 9, 1995, CSW sent a letter to El Paso declining to
extend the termination date under the Merger Agreement as
requested by El Paso and terminating the Merger Agreement. CSW's
June 9, 1995 letter also informed El Paso that it was revoking
the Modified Third Amended Plan of Reorganization for the
proposed Merger with El Paso by a contemporaneous filing with the
United States Bankruptcy Court for the Western District of Texas,
Austin Division, before which the El Paso bankruptcy
reorganization proceeding is pending.
On June 9, 1995, following CSW's notification that it was
terminating the Merger and withdrawing the Modified Third Amended
Plan of Reorganization, El Paso filed the El Paso Suit against
CSW in state district court in El Paso, Texas, claiming breach of
contract, breach of duty of good faith and fair dealing, breach
of fiduciary duty, business disparagement, tortious interference
with contract and fraud in the inducement. El Paso's suit seeks
a $25 million termination fee from CSW, certain costs related to
the Modified Third Amended Plan of Reorganization, additional
unspecified damages, punitive damages, interest as permitted by
law, reasonable attorneys fees and court costs. On June 15,
1995, CSW filed suit against El Paso in the United States
Bankruptcy Court in Austin, Texas seeking a $25 million
termination fee from El Paso due to El Paso's breaches of the
Merger Agreement, at least $3.6 million in rate case expenses
incurred by CSW on behalf of El Paso related to state regulatory
merger proceedings and a declaratory judgment that CSW properly
terminated the Merger Agreement. CSW also removed the El Paso
Suit from state district court to the United States Bankruptcy
Court in El Paso, Texas and requested that the action be
transferred to the United States Bankruptcy Court in Austin,
Texas, the bankruptcy court that has jurisdiction over El Paso's
bankruptcy case. The action has since been transferred to the
United States Bankruptcy Court in Austin, Texas.
On August 4, 1995, El Paso filed motions with the Austin
bankruptcy court to remand the El Paso Suit back to the state
district court in El Paso and abstain from hearing the CSW Suit.
The bankruptcy court denied El Paso's motions, and in connection
therewith the judge presiding over El Paso's bankruptcy
proceeding recused himself from hearing the El Paso Suit and the
CSW Suit. Both lawsuits have since been assigned to another
judge of the United States Bankruptcy Court in Austin, Texas. A
motion by CSW to consolidate the El Paso Suit and the CSW Suit is
currently before the court. On October 19, 1995, El Paso filed
motions (i) to withdraw the reference in the lawsuits from the
United States Bankruptcy Court in Austin, Texas to the United
States District Court for the Western District of Texas and (ii)
to change venue in both lawsuits to the El Paso Division of the
United States District Court for the Western District. No
hearing has been set on these motions. CSW and El Paso have also
recently filed separate status reports with the bankruptcy court.
No trial date has been set for the lawsuits.
<PAGE> 59
CSW believes that it has substantial defenses to the El Paso
Suit and intends to defend the El Paso Suit, and to pursue the
CSW Suit, vigorously. However, the outcome of the two lawsuits
cannot presently be predicted.
CPL's Westinghouse Litigation
CPL and other owners of STP are plaintiffs in a lawsuit
filed in October 1990 in District Court in Matagorda County,
Texas against Westinghouse seeking damages and other relief. The
suit alleges that Westinghouse supplied STP with defective steam
generator tubes that are susceptible to stress corrosion
cracking. Westinghouse filed an answer to the suit in March 1992
denying the plaintiffs' allegations. A jury trial commenced on
July 5, 1995 in Bay City, Texas.
Inspections detected early indications of stress corrosion
cracking in steam generator tubes at STP. Management believes
the steam generator tubes will continue to deteriorate. The STP
owners have received competitive bids for procurement of Unit 1
and Unit 2 replacement steam generators based on delivery in
1999, and have entered into specific negotiations with the
selected vendor.
A revised damages report (based on selected bid) prepared by
experts for the STP owners estimates that the replacement of the
STP Unit 1 and Unit 2 steam generators will cost approximately
$258 million in 1995 dollars, of which CPL's share would be
approximately 25%. The estimated replacement cost of $258
million does not include replacement power costs, additional
operating expenses and other costs that are being sought from
Westinghouse in the pending litigation. Recoverability of these
amounts and the steam generator replacement costs from
Westinghouse is uncertain. However, management believes that the
ultimate resolution of this matter will not have a material
adverse effect on CSW's or CPL's results of operations or
financial condition.
PSO's Burlington Northern Transportation Contracts
In June 1992, PSO filed suit in Federal District Court in
Tulsa, Oklahoma, against Burlington Northern seeking declaratory
relief under a long-term contract for the transportation of coal.
In July 1992, Burlington Northern asserted counterclaims against
PSO alleging that PSO breached the contract. The counterclaims
sought damages in an unspecified amount. In December 1993, PSO
amended its suit against Burlington Northern seeking damages and
declaratory relief under federal and state antitrust laws. PSO
and Burlington Northern filed motions for summary judgment on
certain issues in the litigation. In March 1994, the court
issued an order granting PSO's motions for summary judgment and
denying Burlington Northern's motion. It was not necessary for
the court to decide the federal and state antitrust claims raised
by PSO. Judgment was rendered in favor of PSO by the United
States District Court in May 1994. In June 1994, Burlington
Northern appealed this judgment to the United States Court of
Appeals for the Tenth Circuit. In April 1995, the Tenth Circuit
entered an order reversing the District Court's decision in part
and affirming the order in part. On May 2, 1995, PSO filed a
petition for rehearing by the Tenth Circuit. The petition for
rehearing was denied May 31, 1995 and the case was remanded to
the District Court. Following remand of the case to the District
Court, PSO reasserted its antitrust claims against Burlington
Northern. Further proceedings are being conducted in the
District Court on PSO's antitrust claims and Burlington
Northern's contract counter claim. Management believes the
ultimate resolution of this matter will not have a material
adverse effect on CSW's or PSO's consolidated results of
operations or financial condition.
PSO's Burlington Northern Arbitration
In May 1994, in a related arbitration, an arbitration panel
made an award favorable to PSO concerning basic transportation
rates under the coal transportation contract described above, and
concerning the contract mechanism for adjustment of future
transportation rates. These arbitrated issues were not involved
<PAGE> 60
in the related lawsuit described above. Burlington Northern
filed an action to vacate the arbitrated award in the District
Court for Dallas County, Texas. PSO removed this action to the
United States District for the Northern District of Texas, and
filed a motion to either dismiss this action or have it
transferred to the United States District Court for the Northern
District of Oklahoma. Burlington Northern moved to remand the
action to state court. In September 1994, the United States
District Court for the Northern District of Texas denied
Burlington Northern's motion to remand, and granted PSO's motion
to transfer the action to the United States District Court for
the Northern District of Oklahoma. Separately, PSO filed an
action to confirm the arbitration award in the United States
District Court for the Northern District of Oklahoma, and
Burlington Northern filed a motion to dismiss this confirmation
action. On December 6, 1994, the District Court entered an order
denying Burlington Northern's motion to vacate the arbitration
award, and granting PSO's motion to confirm the arbitration
award. On December 29, 1994, the District Court entered judgment
confirming the arbitration award, including a money judgment in
PSO's favor of $16.4 million, with interest at 7.2% per annum
compounded annually from December 21, 1994 until paid. In
January 1995, Burlington Northern appealed the District Court's
judgment to the United States Court of Appeals for the Tenth
Circuit. On October 20, 1995, the Court of Appeals issued an
order and judgment affirming the judgment of the District Court.
The time within which Burlington Northern may file a petition for
a Writ of Certiorari with the United States Supreme Court.
PSO's PCB Cases
As previously reported, PSO has been named defendant in
complaints filed in state court in Oklahoma alleging, among other
things, that some of the plaintiffs were contaminated with PCBs
and other toxic by-products following transformer malfunctions.
To date the complaints have totaled approximately $395 million,
of which amount approximately one-third represents punitive
damages. As a result of settlements with certain plaintiffs,
some claims have been dismissed. The settlements have not had a
material adverse effect on CSW's or PSO's consolidated results of
operations or financial condition. Although management cannot
predict the outcome of these proceedings, management believes
that PSO has defenses to these claims and intends to pursue them
vigorously. Moreover, management has reason to believe that
PSO's insurance may cover some of these claims. Management also
believes that the ultimate resolution of these cases will not
have a material adverse effect on CSW's or PSO's consolidated
results of operations or financial condition.
PSO's Gas Purchase Contracts
PSO has been named defendant in complaints filed in Federal
and state courts of Oklahoma and Texas in 1984 through October
1995 by gas suppliers alleging claims arising out of certain gas
purchase contracts. The plaintiffs seek relief through the
filing dates as well as attorney's fees. In October 1995,
complaints representing approximately $17 million were dismissed,
certain of which resulted from settlements among the parties.
Remaining complaints currently total approximately $11 million in
actual damages, together with claims for punitive damages which,
in compliance with pleading code requirements, are alleged to be
in excess of $10,000. The settlements did not have a significant
effect on PSO's consolidated results of operations. The
remaining suits are in the preliminary stages. Management cannot
predict the outcome of these proceedings. However, management
believes that PSO has defenses to these complaints and intends to
pursue them vigorously. Management also believes that the
ultimate resolution of the remaining complaints will not have a
material adverse effect on CSW's or PSO's consolidated results of
operations or financial condition.
Other CSW System Legal Claims and Proceedings
The CSW System is party to various other legal claims and
proceedings arising in the normal course of business. Management
does not expect disposition of these matters to have a material
<PAGE> 61
adverse effect on the Registrants' results of operations or
financial condition. See NOTE 2. Litigation and Regulatory
Proceedings for a discussion of each of the Electric Operating
Companies regulatory matters.
Item 5. Other Information.
Environmental Matters
CPL's Toxic Substances Control Act of 1976
As previously reported, under the TSCA, the storage, use and
disposal, among other things, of PCBs are regulated. Violations
of the TSCA may lead to fines and penalties. CPL was inspected
by the EPA in 1992 and found to have TSCA record-keeping and
other violations for PCBs. CPL negotiated a settlement, signed a
consent agreement and, in September 1995, paid a penalty of
approximately $76,000.
CPL's Sol Lynn Superfund Site
As previously reported, the Sol Lynn salvage yard was
declared a Superfund site by the EPA after it was found to
contain a number of contaminants including PCBs. Gulf States
Utilities Company remediated the site for approximately $2
million and sought to recover a portion of the remediation costs
from alleged PRPs, including CPL. In March 1995, CPL and Gulf
States Utilities Company reached an agreement pursuant to which
CPL agreed to pay $50,000 as its share of remediation costs. On
September 30, 1995 the courts approved the settlement.
PSO's PCB Storage Facilities
As previously reported, PSO investigated and identified PCB
contamination at one of its PCB storage facilities in Sand
Springs, Oklahoma. PSO made proper notification to the EPA of
the contamination that was caused by spills prior to the adoption
of PCB spill regulations. PSO negotiated a remediation plan with
the EPA. Remediation began in November 1994, and the remediation
costs were $235,000. As part of the remediation plan, the EPA
requested PSO to sample the land surrounding the PCB storage
building site. The land includes an active PSO substation and a
privately owned industrial area. Testing of the PSO property
conducted during the third quarter of 1995 revealed minor
contamination and the resulting clean was completed. PSO has not
been able to get permission to test the adjoining industrial
area.
PSO Coal Mine Reclamation
As previously reported, in August 1994, PSO received
approval from the Wyoming Department of Environmental Quality to
begin reclamation of a coal mine in Sheridan, Wyoming owned by
Ash Creek Mining Company, a wholly owned subsidiary of PSO. Ash
Creek Mining recorded a $3 million liability in 1993 for the
estimated reclamation costs and subsequently accrued an
additional $500,000 in August 1995. Actual reclamation work
commenced in September 1995, with completion estimated in late
1996. Surveillance monitoring will continue for ten years after
final reclamation. Management believes the ultimate resolution
of this matter will not have a material adverse effect on CSW's
or PSO's consolidated results of operations or financial
condition.
SWEPCO's Suspected MGP Sites in Texarkana, Texas and Arkansas and
Shreveport, Louisiana
As previously reported, SWEPCO owns a suspected former MGP
site in Texarkana, Texas and Arkansas. The EPA ordered an initial
investigation of this site, as well as a site in Shreveport,
Louisiana, which is no longer owned by SWEPCO. The contractor who
performed the investigations of these two sites recommended to the
EPA that no further action be taken at this time. Also, an
underground storage tank was discovered in place at the Texarkana
site and it was leaking. SWEPCO removed the tank in early 1995
and has made a request for closure from the Arkansas Department of
Pollution Control and Ecology based on soil and ground water
quality results.
<PAGE> 62
SWEPCO's Suspected Biloxi, Mississippi MGP Site
As previously reported, SWEPCO has been notified by
Mississippi Power that it may be a PRP at the former Biloxi MGP
site formerly owned and operated by a predecessor of SWEPCO.
SWEPCO is working with Mississippi Power to investigate the
extent of contamination at this site. The MDEQ approved a site
investigation work plan and, in January 1995, SWEPCO and
Mississippi Power initiated sampling pursuant to that work plan.
On an interim basis, SWEPCO and Mississippi Power are each paying
fifty percent of the cost of implementing the site investigation
work plan. That interim allocation is subject to a final
allocation in the future. SWEPCO and Mississippi Power are
investigating whether there are other PRPs at the Biloxi site.
SWEPCO continues to work with Mississippi Power in
conducting the site investigation of the Biloxi service center
property and adjacent properties that may be impacted by either
the former MGP operation and/or the historical service center
operations. Contamination has been identified as the result of
the investigation and SWEPCO and Mississippi Power are now in the
process of completing a risk assessment that will be used to
evaluate remediation alternatives for the site. A Remedial
Investigation Report has been submitted to the MDEQ for review
and comment.
Norweb
On September 28, 1995, Texas Energy Partners announced that
it had commenced an offer, which was subsequently withdrawn, to
acquire all of the outstanding ordinary shares of Norweb for
approximately $2.7 billion. On October 3, 1995, in response to a
higher bid for Norweb by North West Water, Texas Energy Partners
increased its initial bid for Norweb to an aggregate of
approximately $2.72 billion. On October 12, 1995, the day
following North West Water's announcement that it had raised its
offer for Norweb to approximately $2.83 billion, Texas Energy
Partners announced that it had elected not to proceed with its
takeover bid for Norweb.
Board of Directors Elections
CSW
On October 18, 1995, Mr. Thomas H. Cruikshank was elected to the
CSW board of directors. Mr. Cruikshank is currently chairman of
the board of Halliburton Company, which is headquartered in
Dallas, Texas. Mr. Cruikshank previously served as Halliburton's
chief executive officer.
CPL
On October 27, 1995, Mr. John F. Brimberry was elected to the CPL
board of directors. Mr. Brimberry is currently the president and
chief executive officer of four independent insurance agencies
located in south Texas.
SWEPCO
On October 23, 1995, Mrs. Maxine P. Sarpy was elected to the
SWEPCO board of directors. Mrs. Sarpy currently serves in many
capacities for a variety of organizations, including the Southern
University Foundation Board, the Association for Community
Training and the Auxiliary to the Louisiana Medical Association.
<PAGE> 63
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
(10) Material Contracts
CSW - Credit Agreement dated as of November 6, 1995 among
Central and South West Corporation and the Banks listed
therein (Exhibit 10.1).
(12) Computation of Ratio of Earnings to Fixed Charges
CPL - (Exhibit 12.1)
PSO - (Exhibit 12.3)
SWEPCO - (Exhibit 12.4)
WTU - (Exhibit 12.5)
Computation of Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends
CPL - (Exhibit 12.2)
(27) Financial Data Schedules
CSW - (Exhibit 27.1)
CPL - (Exhibit 27.2)
PSO - (Exhibit 27.3)
SWEPCO - (Exhibit 27.4)
WTU - (Exhibit 27.5)
(b) CSW Current Reports filed on Form 8-K:
Item 5. Other Events, reporting an ALJ recommendation
regarding WTU deferred accounting, dated July 10, 1995.
Item 5. Other Events, reporting developments in its
regulatory matters, dated September 6, 1995.
Item 5. Other Events, reporting CPL's intent to file
a retail base rate review request in November 1995, dated
September 27, 1995.
Item 5. Other Events and Item 7. Financial
Statements and Exhibits, reporting two joint offers by CSW
and a partner to acquire Norweb, dated September 28, 1995.
Item 5. Other Events, reporting the termination of
CSW's and its partner's bid to acquire Norweb, dated
October 12, 1995.
CPL Current Reports filed on Form 8-K:
Item 5. Other Events, reporting its intent to file a
retail base rate review request in November 1995, dated
September 27, 1995.
Item 5. Other Events, providing unaudited financial
information for the quarter and year ended September 30,
1995, in anticipation of a debt offering by CPL, dated
October 19, 1995.
PSO Current Reports filed on Form 8-K:
No reports were filed for PSO.
<PAGE> 64
SWEPCO Current Reports filed on Form 8-K:
No reports were filed for SWEPCO.
WTU Current Reports filed on Form 8-K:
Item 5. Other Events, reporting an ALJ recommendation
regarding deferred accounting, dated July 10, 1995.
Item 5. Other Events, reporting developments in its
regulatory matters, dated September 6, 1995.
Item 5. Other Events, providing unaudited financial
information for the quarter ended and year ended September
30, 1995, in connection with a debt offering by WTU, dated
October 19, 1995.
<PAGE> 65
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, each Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized. The
signature for each undersigned Registrant shall be deemed to
relate only to matters having reference to such Registrant or its
subsidiaries.
CENTRAL AND SOUTH WEST CORPORATION
Date: November 10, 1995 /s/ Wendy G. Hargus
Wendy G. Hargus
Controller and Chief Accounting Officer
(Principal Accounting Officer)
CENTRAL POWER AND LIGHT COMPANY
PUBLIC SERVICE COMPANY OF OKLAHOMA
SOUTHWESTERN ELECTRIC POWER COMPANY
WEST TEXAS UTILITIES COMPANY
Date: November 10, 1995 /s/ R. Russell Davis
R. Russell Davis
Controller and Chief Accounting Officer
(Principal Accounting Officer)
$850,000,000
CREDIT AGREEMENT
dated as of
November 6, 1995
among
Central and South West Corporation,
The Banks Listed Herein
and
Union Bank of Switzerland,
as Agent
Citibank, N.A.
Credit Suisse
Union Bank of Switzerland
Co-Arrangers and Syndication Co-Agents
Credit Suisse
Documentation Agent
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS
1.1. Definitions. . . . . . . . . . . . . . . . . . . . . 1
1.2. Accounting Terms and Determinations. . . . . . . . . 12
1.3. Types of Borrowings. . . . . . . . . . . . . . . . . 12
ARTICLE 2
THE CREDITS
2.1. Commitments. . . . . . . . . . . . . . . . . . . . . 13
2.2. Loans. . . . . . . . . . . . . . . . . . . . . . . . 13
2.3. Notice of Borrowing. . . . . . . . . . . . . . . . . 13
2.4. Notice to Banks; Funding of Loans. . . . . . . . . . 13
2.5. Notes. . . . . . . . . . . . . . . . . . . . . . . . 14
2.6. Maturity of Loans. . . . . . . . . . . . . . . . . . 15
2.7. Interest Rates . . . . . . . . . . . . . . . . . . . 15
2.8. Fees . . . . . . . . . . . . . . . . . . . . . . . . 18
2.9. Termination and Reduction of Commitments . . . . . . 18
2.10. Method of Electing Interest Rates. . . . . . . . . . 19
2.11. Optional Prepayments . . . . . . . . . . . . . . . . 21
2.12. General Provisions as to Payments. . . . . . . . . . 21
2.13. Funding Losses . . . . . . . . . . . . . . . . . . . 22
2.14. Computation of Interest and Fees . . . . . . . . . . 22
2.15. Regulation D Compensation. . . . . . . . . . . . . . 23
ARTICLE 3
CONDITIONS
3.1. Initial Funding. . . . . . . . . . . . . . . . . . . 24
3.2. Borrowings . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1. Corporate Existence and Power. . . . . . . . . . . . 25
4.2. Corporate and Governmental Authorization;
No Contravention. . . . . . . . . . . . . . . . . 25
4.3. Binding Effect . . . . . . . . . . . . . . . . . . . 26
4.4. Financial Information. . . . . . . . . . . . . . . . 26
4.5. Litigation . . . . . . . . . . . . . . . . . . . . . 27
4.6. Compliance with ERISA. . . . . . . . . . . . . . . . 27
4.7. Environmental Matters. . . . . . . . . . . . . . . . 28
4.8. Taxes. . . . . . . . . . . . . . . . . . . . . . . . 28
4.9. Subsidiaries . . . . . . . . . . . . . . . . . . . . 28
4.10. Full Disclosure. . . . . . . . . . . . . . . . . . . 29
4.11. No Defaults. . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 5
COVENANTS
5.1. Information. . . . . . . . . . . . . . . . . . . . . 29
5.2. Payment of Obligations . . . . . . . . . . . . . . . 31
5.3. Maintenance of Property; Insurance . . . . . . . . . 31
5.4. Conduct of Business and Maintenance of
Existence . . . . . . . . . . . . . . . . . . . . 31
5.5. Compliance with Laws . . . . . . . . . . . . . . . . 32
5.6. Inspection of Property, Books and Records. . . . . . 32
5.7. Use of Proceeds. . . . . . . . . . . . . . . . . . . 32
5.8. Negative Pledge. . . . . . . . . . . . . . . . . . . 33
5.9. Transactions with Affiliates . . . . . . . . . . . . 34
5.10. Sale of Material Subsidiaries. . . . . . . . . . . . 35
5.11. Prohibition of Fundamental Changes.. . . . . . . . . 35
5.12. Minimum Consolidated Net Worth . . . . . . . . . . . 35
5.13. Syndication. . . . . . . . . . . . . . . . . . . . . 35
ARTICLE 6
DEFAULTS
6.1. Events of Default. . . . . . . . . . . . . . . . . . 36
6.2. Notice of Default. . . . . . . . . . . . . . . . . . 38
ARTICLE 7
THE AGENT
7.1. Appointment and Authorization. . . . . . . . . . . . 38
7.2. Agent and Affiliates . . . . . . . . . . . . . . . . 39
7.3. Action by Agent. . . . . . . . . . . . . . . . . . . 39
7.4. Consultation with Experts. . . . . . . . . . . . . . 39
7.5. Liability of Agent . . . . . . . . . . . . . . . . . 39
7.6. Indemnification. . . . . . . . . . . . . . . . . . . 40
7.7. Credit Decision. . . . . . . . . . . . . . . . . . . 40
7.8. Successor Agent. . . . . . . . . . . . . . . . . . . 40
7.9. Agent's Fee. . . . . . . . . . . . . . . . . . . . . 41
7.10. Co-Arrangers, etc. . . . . . . . . . . . . . . . . . 41
ARTICLE 8
CHANGE IN CIRCUMSTANCES
8.1. Basis for Determining Interest Rate Inadequate
or Unfair . . . . . . . . . . . . . . . . . . . . 41
8.2. Illegality . . . . . . . . . . . . . . . . . . . . . 42
8.3. Increased Cost and Reduced Return. . . . . . . . . . 42
8.4. Taxes. . . . . . . . . . . . . . . . . . . . . . . . 44
8.5. Base Rate Loans Substituted for Affected Fixed
Rate Loans. . . . . . . . . . . . . . . . . . . . 46
8.6. Replacement of Bank. . . . . . . . . . . . . . . . . 47
ARTICLE 9
MISCELLANEOUS
9.1. Notices. . . . . . . . . . . . . . . . . . . . . . . 49
9.2. No Waivers . . . . . . . . . . . . . . . . . . . . . 49
9.3. Expenses; Indemnification. . . . . . . . . . . . . . 50
9.4. Sharing of Set-Offs. . . . . . . . . . . . . . . . . 50
9.5. Amendments and Waivers . . . . . . . . . . . . . . . 51
9.6. Successors and Assigns . . . . . . . . . . . . . . . 51
9.7. Collateral . . . . . . . . . . . . . . . . . . . . . 53
9.8. Governing Law; Submission to Jurisdiction. . . . . . 53
9.9. Counterparts; Integration; Effectiveness . . . . . . 53
9.10. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . 54
EXHIBIT A - Note
EXHIBIT B - Opinion of Special Counsel for the Borrower
EXHIBIT C - Opinion of Special Counsel for the Agent and
the Co-Arrangers
EXHIBIT D - Assignment and Assumption Agreement
<PAGE>
AGREEMENT dated as of November 6, 1995 among CENTRAL
AND SOUTH WEST CORPORATION, the BANKS listed on the
signature pages hereof and UNION BANK OF SWITZERLAND, as
Agent.
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions. The following terms, as
used herein, have the following meanings:
"Adjusted CD Rate" has the meaning set forth in
Section 2.7(b).
"Administrative Questionnaire" means, with respect
to each Bank, an administrative questionnaire in the form
prepared by the Agent and submitted to the Agent (with a
copy to the Borrower) duly completed by such Bank.
"Affiliate" means (i) any Person that directly, or
indirectly through one or more intermediaries, controls the
Borrower (a "Controlling Person") or (ii) any Person (other
than the Borrower or a Subsidiary) which is controlled by or
is under common control with a Controlling Person. As used
herein, the term "control" means possession, directly or
indirectly, of the power to direct or cause the direction of
the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
Notwithstanding the foregoing, no individual shall be an
Affiliate solely by reason of his or her being a director,
officer or employee of the Borrower or any of its
Subsidiaries.
"Agent" means Union Bank of Switzerland, in its
capacity as administrative agent for the Banks hereunder,
and its successors in such capacity.
"Announcement Date" means the date of the press
release or other public announcement by or on behalf of
Bidco of the Offer.
"Applicable Lending Office" means, with respect to
any Bank, (i) in the case of its Domestic Loans, its
Domestic Lending Office and (ii) in the case of its
Euro-Dollar Loans, its Euro-Dollar Lending Office.
"Assessment Rate" has the meaning set forth in
Section 2.7(b).
"Assignee" has the meaning set forth in
Section 9.6(c).
"Availability Period" means the period commencing on
and including the Effective Date and ending on and including
the earlier of (i) the 180th day after the Announcement Date
and (ii) July 2, 1996.
"Bank" means each bank listed on the signature pages
hereof, each Replacement Bank which becomes a Bank pursuant
to Section 8.6, each Assignee which becomes a Bank pursuant
to Section 9.6(c), and their respective successors.
"Base Rate" means, for any day, a rate per annum
equal to the higher of (i) the Prime Rate for such day
and (ii) the sum of 1/2 of 1% plus the Federal Funds Rate
for such day.
"Base Rate Loan" means (i) a Loan which bears
interest at the Base Rate pursuant to the applicable Notice
of Borrowing or Notice of Interest Rate Election or the
provisions of Article 8 or (ii) an overdue amount which was
a Base Rate Loan immediately before it became overdue.
"Benefit Arrangement" means at any time an employee
benefit plan within the meaning of Section 3(3) of ERISA
which is not a Plan or a Multiemployer Plan and which is
maintained or otherwise contributed to by any member of the
ERISA Group.
"Bidco" means CSW (UK) plc, a limited company
incorporated in England and Wales.
"Bidding Agreement" has the meaning set forth in the
Facility Agreement.
"Borrower" means Central and South West Corporation,
a Delaware corporation, and its successors.
"Borrower's 1994 Form 10-K" means the Borrower's
annual report on Form 10-K for 1994, as filed with the
Commission pursuant to the Securities Exchange Act of 1934.
"Borrower's Latest Form 10-Q" means the Borrower's
quarterly report on Form 10-Q for the quarter ended June 30,
1995, as filed with the Commission pursuant to the
Securities Exchange Act of 1934.
"Borrowing" has the meaning set forth in
Section 1.3.
"CD Base Rate" has the meaning set forth in
Section 2.7(b).
"CD Loan" means (i) a Loan which bears interest at a
CD Rate pursuant to the applicable Notice of Borrowing or
Notice of Interest Rate Election or (ii) an overdue amount
which was a CD Loan immediately before it became overdue.
"CD Margin" means a rate per annum determined in
accordance with the Pricing Schedule.
"CD Rate" means a rate of interest determined
pursuant to Section 2.7(b) on the basis of an Adjusted
CD Rate.
"CD Reference Banks" means the principal New York
offices of Citibank, N.A., Credit Suisse and Union Bank of
Switzerland.
"Closing Date" means each date on or after the
Effective Date on which Loans are made to the Borrower
pursuant to a Notice of Borrowing.
"Co-Arrangers" means Citibank, N.A., Credit Suisse
and Union Bank of Switzerland, in their respective
capacities as co-arrangers of the credit facility hereunder.
"Commission" means the Securities and Exchange
Commission, or any entity succeeding to its responsibilities
under the Public Utility Holding Company Act of 1935, as
amended.
"Commitment" means, with respect to each Bank, the
amount set forth opposite the name of such Bank on the
signature pages hereof, as such amount may be reduced from
time to time pursuant to Section 2.9.
"Confidential Information Memorandum" has the
meaning set forth in Section 5.13.
"Consolidated Subsidiary" means at any date any
Subsidiary or other entity the accounts of which would be
consolidated with those of the Borrower in its consolidated
financial statements if such statements were prepared as of
such date.
"Consolidated Net Worth" means at any date the
consolidated common stock equity of the Borrower and its
Consolidated Subsidiaries determined as of such date.
"Debt" of any Person means at any date, without
duplication, (i) all obligations of such Person for borrowed
money, (ii) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred
purchase price of property or services, except trade
accounts payable arising in the ordinary course of business,
(iv) all obligations of such Person as lessee which are
capitalized in accordance with generally accepted accounting
principles, (v) all non-contingent obligations (and, for
purposes of Section 5.8 and the definition of Material Debt,
all contingent obligations) of such Person to reimburse any
bank or other Person in respect of amounts paid under a
letter of credit or similar instrument, (vi) all Debt
secured by a Lien on any asset of such Person, whether or
not such Debt is otherwise an obligation of such Person
and (vii) all Debt of others Guaranteed by such Person.
"Default" means any condition or event which
constitutes an Event of Default or which with the giving of
notice or lapse of time or both would, unless cured or
waived, become an Event of Default.
"Derivatives Obligations" of any Person means all
obligations of such Person in respect of any rate swap
transaction, basis swap, forward rate transaction, forward
purchase, commodity swap, commodity option, equity or equity
index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap
transaction, floor transaction, collar transaction, currency
swap transaction, cross-currency rate swap transaction,
currency option or any other similar transaction (including
any option with respect to any of the foregoing
transactions) or any combination of the foregoing
transactions.
"Documentation Agent" means Credit Suisse, in its
capacity as documentation agent of the credit facility
hereunder.
"Domestic Business Day" means any day except a
Saturday, Sunday or other day on which commercial banks in
New York City are authorized by law to close.
"Domestic Lending Office" means, as to each Bank,
its office located at its address set forth in its
Administrative Questionnaire (or identified in its
Administrative Questionnaire as its Domestic Lending Office)
or such other office as such Bank may hereafter designate as
its Domestic Lending Office by notice to the Borrower and
the Agent; provided that any Bank may so designate separate
Domestic Lending Offices for its Base Rate Loans, on the one
hand, and its CD Loans, on the other hand, in which case all
references herein to the Domestic Lending Office of such
Bank shall be deemed to refer to either or both of such
offices, as the context may require.
"Domestic Loans" means CD Loans or Base Rate Loans
or both.
"Domestic Reserve Percentage" has the meaning set
forth in Section 2.7(b).
"Effective Date" means the date this Agreement
becomes effective in accordance with Section 9.9.
"Environmental Laws" means any and all federal,
state, local and foreign statutes, laws, judicial decisions,
regulations, ordinances, rules, judgments, orders, decrees,
plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and other governmental
restrictions relating to the environment, the effect of the
environment on human health or to emissions, discharges or
releases of pollutants, contaminants, Hazardous Substances
or wastes into the environment including, without
limitation, ambient air, surface water, ground water, or
land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport
or handling of pollutants, contaminants, Hazardous
Substances or wastes or the clean-up or other remediation
thereof, in each case as in effect and applicable to the
Borrower and its Subsidiaries at the time the representation
in Section 4.7 is made or compliance with Section 5.5 is
determined.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended, or any successor statute.
"ERISA Group" means the Borrower, any Subsidiary and
all members of a controlled group of corporations and all
trades or businesses (whether or not incorporated) under
common control which, together with the Borrower or any
Subsidiary, are treated as a single employer under
Section 414 of the Internal Revenue Code.
"Euro-Dollar Business Day" means any Domestic
Business Day on which commercial banks are open for
international business (including dealings in dollar
deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank,
its office, branch or affiliate located at its address set
forth in its Administrative Questionnaire (or identified in
its Administrative Questionnaire as its Euro-Dollar Lending
Office) or such other office, branch or affiliate of such
Bank as it may hereafter designate as its Euro-Dollar
Lending Office by notice to the Borrower and the Agent.
"Euro-Dollar Loan" means (i) a Loan which bears
interest at a Euro-Dollar Rate pursuant to the applicable
Notice of Borrowing or Notice of Interest Rate Election or
(ii) an overdue amount which was a Euro-Dollar Loan
immediately before it became overdue.
"Euro-Dollar Margin" means a rate per annum
determined in accordance with the Pricing Schedule.
"Euro-Dollar Rate" means a rate of interest
determined pursuant to Section 2.7(c) on the basis of a
London Interbank Offered Rate.
"Euro-Dollar Reference Banks" means the principal
London offices of Citibank, N.A., Credit Suisse and Union
Bank of Switzerland.
"Euro-Dollar Reserve Percentage" has the meaning set
forth in Section 2.15.
"Event of Default" has the meaning set forth in
Section 6.1.
"Facility Agreement" means the Facility Agreement
dated on or about November 6, 1995, between Bidco, the
Arrangers and Original Banks named therein and Credit
Suisse, as Facility and Security Agent, as amended,
supplemented or otherwise modified from time to time.
"Federal Funds Rate" means, for any day, the rate
per annum (rounded upward, if necessary, to the nearest
1/100th of 1%) equal to the weighted average of the rates on
overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on
such day, as published by the Federal Reserve Bank of New
York on the Domestic Business Day next succeeding such day;
provided that (i) if such day is not a Domestic Business
Day, the Federal Funds Rate for such day shall be such rate
on such transactions on the next preceding Domestic Business
Day as so published on the next succeeding Domestic Business
Day, and (ii) if no such rate is so published on such next
succeeding Domestic Business Day, the Federal Funds Rate for
such day shall be the average rate quoted to Union Bank of
Switzerland on such day on such transactions as determined
by the Agent.
"Fixed Rate Loans" means CD Loans or Euro-Dollar
Loans or any combination of the foregoing.
"Group of Loans" means at any time a group of Loans
consisting of (i) all Loans which are Base Rate Loans at
such time, (ii) all Euro-Dollar Loans having the same
Interest Period at such time or (iii) all CD Loans having
the same Interest Period at such time, provided that, if a
Loan of any particular Bank is converted to or made as a
Base Rate Loan pursuant to Article 8, such Loan shall be
included in the same Group or Groups of Loans from time to
time as it would have been in if it had not been so
converted or made.
"Guarantee" by any Person means any obligation,
contingent or otherwise, of such Person directly or
indirectly guaranteeing any Debt of any other Person and,
without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of
such Person (i) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Debt (whether
arising by virtue of partnership arrangements, by agreement
to keep-well, to purchase assets, goods, securities or
services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for the
purpose of assuring in any other manner the holder of such
Debt of the payment thereof or to protect such holder
against loss in respect thereof (in whole or in part);
provided that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary
course of business. The term "Guarantee" used as a verb has
a corresponding meaning.
"Hazardous Substances" means any toxic, radioactive,
caustic or otherwise hazardous substance, including
petroleum, its derivatives, by-products and other
hydrocarbons, or any substance having any constituent
elements displaying any of the foregoing characteristics.
"Indemnitee" has the meaning set forth in
Section 9.3(b).
"Initial Funding Date" means the first Closing Date.
"Interest Period" means: (1) with respect to each
Euro-Dollar Loan, the period commencing on the date of
borrowing specified in the applicable Notice of Borrowing or
on the date specified in the applicable Notice of Interest
Rate Election and ending one, two, three or six months
thereafter, as the Borrower may elect in the applicable
notice; provided that:
(a) any Interest Period which would otherwise end
on a day which is not a Euro-Dollar Business Day shall,
subject to clause (c) below, be extended to the next
succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar month,
in which case such Interest Period shall end on the next
preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last
Euro-Dollar Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in
the calendar month at the end of such Interest Period)
shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end
after the Termination Date shall end on the Termination
Date.
(2) with respect to each CD Loan, the period
commencing on the date of borrowing specified in the
applicable Notice of Borrowing or on the date specified in
the applicable Notice of Interest Rate Election and ending
30, 60, 90 or 180 days thereafter, as the Borrower may elect
in the applicable notice; provided that:
(a) any Interest Period which would otherwise end
on a day which is not a Domestic Business Day shall,
subject to clause (b) below, be extended to the next
succeeding Domestic Business Day; and
(b) any Interest Period which would otherwise end
after the Termination Date shall end on the Termination
Date.
"Internal Revenue Code" means the Internal Revenue
Code of 1986, as amended, or any successor statute.
"Lien" means, with respect to any asset, any
mortgage, lien, pledge, charge, security interest or
encumbrance of any kind, or any other type of preferential
arrangement that has the practical effect of creating a
security interest, in respect of such asset. For the
purposes of this Agreement, the Borrower or any Subsidiary
shall be deemed to own subject to a Lien any asset which it
has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease
or other title retention agreement relating to such asset.
"Loan" means a Domestic Loan or a Euro-Dollar Loan
and "Loans" means Domestic Loans, Euro-Dollar Loans or any
combination thereof.
"London Interbank Offered Rate" has the meaning set
forth in Section 2.7(c).
"Material Debt" means Debt (other than the Notes) of
the Borrower and/or one or more of its Subsidiaries, arising
in one or more related or unrelated transactions, in an
aggregate principal or face amount exceeding $25,000,000.
"Material Plan" means at any time a Plan or Plans
having aggregate Unfunded Liabilities in excess of
$25,000,000.
"Material Subsidiary" means each Subsidiary which is
a "public utility company" within the meaning of
Section 2(a)(5) of the Public Utility Holding Company Act of
1935.
"Multiemployer Plan" means at any time an employee
pension benefit plan within the meaning of
Section 4001(a)(3) of ERISA (i) to which any member of the
ERISA Group is then making or accruing an obligation to make
contributions or has within the preceding five plan years
made contributions, including for these purposes any Person
which ceased to be a member of the ERISA Group during such
five-year period and (ii) which is covered by Title IV of
ERISA.
"Notes" means promissory notes of the Borrower,
substantially in the form of Exhibit A hereto, evidencing
the obligation of the Borrower to repay the Loans, and
"Note" means any one of such promissory notes issued
hereunder.
"Notice of Borrowing" has the meaning set forth in
Section 2.3.
"Notice of Interest Rate Election" has the meaning
set forth in Section 2.11.
"Offer" has the meaning set forth in the Facility
Agreement.
"Parent" means, with respect to any Bank, any Person
controlling such Bank.
"Participant" has the meaning set forth in
Section 9.6(b).
"PBGC" means the Pension Benefit Guaranty
Corporation or any entity succeeding to any or all of its
functions under ERISA.
"Person" means an individual, a corporation, a
partnership, an association, a trust or any other entity or
organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit
plan (other than a Multiemployer Plan) which is covered by
Title IV of ERISA or subject to the minimum funding
standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member
of the ERISA Group for employees of any member of the ERISA
Group or (ii) has at any time within the preceding five
years been maintained, or contributed to, by any Person
which was at such time a member of the ERISA Group for
employees of any Person which was at such time a member of
the ERISA Group.
"Pricing Schedule" means the Schedule attached
hereto identified as such.
"Prime Rate" means the rate of interest publicly
announced by Union Bank of Switzerland in New York City from
time to time as its Prime Rate.
"Quarterly Date" means March 31, June 30, September
30 and December 31.
"Reference Banks" means the CD Reference Banks or
the Euro-Dollar Reference Banks, as the context may require,
and "Reference Bank" means any one of such Reference Banks.
"Regulation U" means Regulation U of the Board of
Governors of the Federal Reserve System, as in effect from
time to time.
"Replacement Bank" has the meaning set forth in
Section 8.6.
"Required Banks" means at any time Banks having more
than 50% of the aggregate amount of the Commitments or, if
the Commitments shall have been terminated, holding Notes
evidencing more than 50% of the aggregate unpaid principal
amount of the Loans.
"SEC Authorization Date" means December 31, 1997,
the outside maturity date for bank borrowings by the
Borrower specified by the Commission in its order adopted
pursuant to the Public Utility Holding Company Act of 1935,
as amended (Release No. 35-26156; International Series
Release No. 743; 70-8423), as such order may be amended from
time to time, or such later outside maturity date as may be
established for such purpose by order of the Commission, a
copy of which order shall be furnished promptly to the
Agent.
"Subsidiary" means, as to any Person, any
corporation or other entity of which securities or other
ownership interests having ordinary voting power to elect a
majority of the board of directors or other Persons
performing similar functions are at the time directly or
indirectly owned by such Person; unless otherwise specified,
"Subsidiary" means a Subsidiary of the Borrower.
"Syndication Co-Agents" means Citibank, N.A., Credit
Suisse and Union Bank of Switzerland, in their respective
capacities as syndication co-agents of the credit facility
hereunder.
"Target" means SEEBOARD plc, a public limited
company incorporated in England and Wales.
"Termination Date" means the earlier of (i) the
fifth anniversary of the Initial Funding Date and (ii) the
SEC Authorization Date, or, if any such day is not a Euro-
Dollar Business Day, the next preceding Euro-Dollar Business
Day.
"Unfunded Liabilities" means, with respect to any
Plan at any time, the amount (if any) by which (i) the value
of all benefit liabilities (within the meaning of
Section 4001(a)(16) of ERISA) under such Plan, determined on
a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds
(ii) the fair market value of all Plan assets allocable to
such liabilities under Title IV of ERISA (excluding any
accrued but unpaid contributions), all determined as of the
then most recent valuation date for such Plan, but only to
the extent that such excess represents a potential liability
of a member of the ERISA Group to the PBGC or any other
Person under Title IV of ERISA.
"United States" means the United States of America,
including the States and the District of Columbia, but
excluding its territories and possessions.
SECTION 1.2. Accounting Terms and Determinations.
Unless otherwise specified herein, all accounting terms used
herein shall be interpreted, all accounting determinations
hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in
accordance with generally accepted accounting principles as
in effect from time to time, applied on a basis consistent
(except for changes concurred in by the Borrower's
independent public accountants) with the most recent audited
consolidated financial statements of the Borrower and its
Consolidated Subsidiaries delivered to the Banks; provided
that, if the Borrower notifies the Agent that the Borrower
wishes to amend any covenant in Article 5 to eliminate the
effect of any change in generally accepted accounting
principles on the operation of such covenant (or if the
Agent notifies the Borrower that the Required Banks wish to
amend Article 5 for such purpose), then the Borrower's
compliance with such covenant shall be determined on the
basis of generally accepted accounting principles in effect
immediately before the relevant change in generally accepted
accounting principles became effective, until either such
notice is withdrawn or such covenant is amended in a manner
satisfactory to the Borrower and the Required Banks.
SECTION 1.3. Types of Borrowings. The term
"Borrowing" denotes the aggregation of Loans of one or more
Banks to be made to the Borrower pursuant to Article 2 on
the same date, all of which Loans are of the same type
(subject to Article 8) and, except in the case of Base Rate
Loans, have the same initial Interest Period. Borrowings
are classified for purposes of this Agreement by reference
to the pricing of Loans comprising such Borrowing (e.g., a
"Fixed Rate Borrowing" is a Euro-Dollar Borrowing or a
CD Borrowing and a "Euro-Dollar Borrowing" is a Borrowing
comprised of Euro-Dollar Loans).
ARTICLE 2
THE CREDITS
SECTION 2.1. Commitments. On the terms and subject
to the conditions and relying upon the representations and
warranties herein set forth each Bank agrees, severally and
not jointly, to make Loans to the Borrower at any time and
from time to time during the Availability Period in an
aggregate principal amount not to exceed its Commitment.
Amounts paid or prepaid in respect of the Loans may not be
reborrowed.
SECTION 2.2. Loans. Each Loan shall be made as
part of a Borrowing consisting of Loans made by the Banks
ratably in accordance with their respective Commitments;
provided, however, that the failure of any Bank to make any
Loan shall not relieve any other Bank of its obligation to
lend hereunder (it being understood, however, that no Bank
shall be responsible for the failure of any other Bank to
make any Loan required to be made by such other Bank).
SECTION 2.3. Notice of Borrowing. The Borrower
shall give the Agent notice (a "Notice of Borrowing") not
later than 12:00 Noon (New York City time) on (x) the date
of each Base Rate Borrowing, (y) the second Domestic
Business Day before each CD Borrowing and (z) the third
Euro-Dollar Business Day before each Euro-Dollar Borrowing,
specifying:
(i) the date of such Borrowing, which shall be a
Domestic Business Day in the case of a Domestic Borrowing
or a Euro-Dollar Business Day in the case of a
Euro-Dollar Borrowing;
(ii) the aggregate amount of such Borrowing, which
shall be $10,000,000 or a larger multiple of $1,000,000;
(iii) whether the Loans comprising such Borrowing
are to bear interest initially at the Base Rate, a
CD Rate or a Euro-Dollar Rate; and
(iv) in the case of a Fixed Rate Borrowing, the
duration of the Interest Period applicable thereto,
subject to the provisions of the definition of Interest
Period.
SECTION 2.4. Notice to Banks; Funding of Loans.
(a) Upon receipt of a Notice of Borrowing, the Agent shall
promptly notify each Bank of the contents thereof and of
such Bank's share of such Borrowing and such Notice of
Borrowing shall not thereafter be revocable by the Borrower.
(b) Not later than 2:00 p.m. (New York City time)
on the date of each Borrowing, each Bank shall make
available its share of such Borrowing, in Federal or other
funds immediately available in New York City, to the Agent
at its address referred to in Section 9.1. Unless the Agent
determines that any applicable condition specified in
Article 3 has not been satisfied, the Agent will make the
funds so received from the Banks available to the Borrower
at the Agent's aforesaid address.
(c) Unless the Agent shall have received notice
from a Bank prior to the date of any Borrowing that such
Bank will not make available to the Agent such Bank's share
of such Borrowing, the Agent may assume that such Bank has
made such share available to the Agent on the date of such
Borrowing in accordance with subsection (b) of this
Section and the Agent may, in reliance upon such assumption,
make available to the Borrower on such date a corresponding
amount. If and to the extent that such Bank shall not have
so made such share available to the Agent, such Bank and, to
the extent such Bank has failed to do so within three
Domestic Business Days of demand therefor by the Agent, the
Borrower severally agree to repay to the Agent forthwith on
demand such corresponding amount (together with interest
thereon), for each day from the date such amount is made
available to the Borrower until the date such amount is
repaid to the Agent, at (i) in the case of the Borrower, a
rate per annum equal to the higher of the Federal Funds Rate
and the interest rate applicable thereto pursuant to
Section 2.7 and (ii) in the case of such Bank, the Federal
Funds Rate. If such Bank shall repay to the Agent such
corresponding amount, such amount so repaid shall constitute
such Bank's Loan included in such Borrowing for purposes of
this Agreement. If the Borrower shall repay to the Agent
such corresponding amount, such Bank's Loan included in such
Borrowing shall be deemed not to have been made. This
subsection (c) shall not limit any right of the Borrower
pursuant to Section 8.6.
SECTION 2.5. Notes. (a) The Loans of each Bank
shall be evidenced by a single Note payable to the order of
such Bank for the account of its Applicable Lending Office
in an amount equal to the aggregate unpaid principal amount
of such Bank's Loans.
(b) Each Bank may, by notice to the Borrower and
the Agent, request that its Loans of a particular type be
evidenced by a separate Note in an amount equal to the
aggregate unpaid principal amount of such Loans. Each such
Note shall be in substantially the form of Exhibit A hereto
with appropriate modifications to reflect the fact that it
evidences solely Loans of the relevant type. Each reference
in this Agreement to the "Note" of such Bank shall be deemed
to refer to and include any or all of such Notes, as the
context may require.
(c) Upon receipt of each Bank's Note pursuant to
Section 3.1(a), the Agent shall forward such Note to such
Bank. Each Bank shall record the date, amount and type of
each Loan made by it and the date and amount of each payment
of principal made by the Borrower with respect thereto, and
may, if such Bank so elects in connection with any transfer
or enforcement of its Note, endorse on the schedule forming
a part thereof appropriate notations to evidence the
foregoing information with respect to each such Loan then
outstanding; provided that the failure of any Bank to make
any such recordation or endorsement shall not affect the
obligations of the Borrower hereunder or under the Notes.
Each Bank is hereby irrevocably authorized by the Borrower
so to endorse its Note and to attach to and make a part of
its Note a continuation of any such schedule as and when
required.
SECTION 2.6. Maturity of Loans. (a) Each Loan
shall mature, and the principal amount thereof shall be due
and payable, together with accrued interest thereon, on the
Termination Date.
SECTION 2.7. Interest Rates. (a) Each Base Rate
Loan shall bear interest on the outstanding principal amount
thereof, for each day from the date such Loan is made until
it becomes due, at a rate per annum equal to the Base Rate
for such day. Such interest shall be payable quarterly in
arrears on each Quarterly Date and, with respect to the
principal amount of any Base Rate Loan converted to a
CD Loan or a Euro-Dollar Loan, on each date a Base Rate Loan
is so converted. Any overdue principal of or interest on
any Base Rate Loan shall bear interest, payable on demand,
for each day until paid at a rate per annum equal to the sum
of 2% plus the rate otherwise applicable to Base Rate Loans
for such day.
(b) Each CD Loan shall bear interest on the
outstanding principal amount thereof, for each day during
each Interest Period applicable thereto, at a rate per annum
equal to the sum of the CD Margin for such day plus the
Adjusted CD Rate applicable to such Interest Period;
provided that if any CD Loan shall, as a result of
clause (2)(b) of the definition of Interest Period, have an
Interest Period of less than 30 days, such CD Loan shall
bear interest during such Interest Period at the rate
applicable to Base Rate Loans during such period. Such
interest shall be payable for each Interest Period on the
last day thereof and, if such Interest Period is longer than
90 days, at intervals of 90 days after the first day
thereof. Any overdue principal of or interest on any
CD Loan shall bear interest, payable on demand, for each day
until paid at a rate per annum equal to the sum of 2% plus
the higher of (i) the rate applicable to Base Rate Loans for
such day and (ii) the sum of the CD Margin plus the Adjusted
CD Rate applicable to such Loan at the date such payment was
due.
The "Adjusted CD Rate" applicable to any Interest
Period means a rate per annum determined pursuant to the
following formula:
[ CDBR ]*
ACDR = [ ---------- ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
__________
* The amount in brackets being rounded upward, if
necessary, to the next higher 1/100 of 1%
The "CD Base Rate" applicable to any Interest Period
is the rate of interest determined by the Agent to be the
average (rounded upward, if necessary, to the next higher
1/100 of 1%) of the prevailing rates per annum bid at
10:00 A.M. (New York City time) (or as soon thereafter as
practicable) on the first day of such Interest Period by two
or more New York certificate of deposit dealers of
recognized standing for the purchase at face value from each
CD Reference Bank of its certificates of deposit in an
amount comparable to the principal amount of the CD Loan of
such CD Reference Bank to which such Interest Period applies
and having a maturity comparable to such Interest Period.
"Domestic Reserve Percentage" means for any day that
percentage (expressed as a decimal) which is in effect on
such day, as prescribed by the Board of Governors of the
Federal Reserve System (or any successor) for determining
the maximum reserve requirement (including without
limitation any basic, supplemental or emergency reserves)
for a member bank of the Federal Reserve System in New York
City with deposits exceeding five billion dollars in respect
of new non-personal time deposits in dollars in New York
City having a maturity comparable to the related Interest
Period and in an amount of $100,000 or more. The Adjusted
CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Domestic Reserve
Percentage.
"Assessment Rate" means for any day the annual
assessment rate in effect on such day which is payable by a
member of the Bank Insurance Fund classified as adequately
capitalized and within supervisory subgroup "A" (or a
comparable successor assessment risk classification) within
the meaning of 12 C.F.R. Section 327.4(a) (or any successor
provision) to the Federal Deposit Insurance Corporation (or
any successor) for such Corporation's (or such successor's)
insuring time deposits at offices of such institution in the
United States. The Adjusted CD Rate shall be adjusted
automatically on and as of the effective date of any change
in the Assessment Rate.
(c) Each Euro-Dollar Loan shall bear interest on
the outstanding principal amount thereof, for each day
during each Interest Period applicable thereto, at a rate
per annum equal to the sum of the Euro-Dollar Margin for
such day plus the London Interbank Offered Rate applicable
to such Interest Period. Such interest shall be payable for
each Interest Period on the last day thereof and, if such
Interest Period is longer than three months, at intervals of
three months after the first day thereof.
The "London Interbank Offered Rate" applicable to
any Interest Period means the average (rounded upward, if
necessary, to the next higher 1/16 of 1%) of the respective
rates per annum at which deposits in dollars are offered to
each of the Euro-Dollar Reference Banks in the London
interbank market at approximately 11:00 A.M. (London time)
two Euro-Dollar Business Days before the first day of such
Interest Period in an amount approximately equal to the
principal amount of the Euro-Dollar Loan of such Euro-Dollar
Reference Bank to which such Interest Period is to apply and
for a period of time comparable to such Interest Period.
(d) Any overdue principal of or interest on any
Euro-Dollar Loan shall bear interest, payable on demand, for
each day until paid at a rate per annum equal to the higher
of (i) the sum of 2% plus the Euro-Dollar Margin for such
day plus the quotient obtained (rounded upward, if
necessary, to the next higher 1/100 of 1%) by dividing
(x) the average (rounded upward, if necessary, to the next
higher 1/16 of 1%) of the respective rates per annum at
which one day (or, if such amount due remains unpaid more
than three Euro-Dollar Business Days, then for such other
period of time not longer than three months as the Agent may
select) deposits in dollars in an amount approximately equal
to such overdue payment due to each of the Euro-Dollar
Reference Banks are offered to such Euro-Dollar Reference
Bank in the London interbank market for the applicable
period determined as provided above by (y) 1.00 minus the
Euro-Dollar Reserve Percentage (or, if the circumstances
described in clause (a) or (b) of Section 8.1 shall exist,
at a rate per annum equal to the sum of 2% plus the rate
applicable to Base Rate Loans for such day) and (ii) the sum
of 2% plus the Euro-Dollar Margin for such day plus the
London Interbank Offered Rate applicable to such Loan at the
date such payment was due.
(e) The Agent shall determine each interest rate
applicable to the Loans hereunder. The Agent shall give
prompt notice to the Borrower and the participating Banks of
each rate of interest so determined, and its determination
thereof shall be conclusive in the absence of manifest
error.
(f) Each Reference Bank agrees to use its best
efforts to furnish quotations to the Agent as contemplated
by this Section. If any Reference Bank does not furnish a
timely quotation, the Agent shall determine the relevant
interest rate on the basis of the quotation or quotations
furnished by the remaining Reference Bank or Banks or, if
none of such quotations is available on a timely basis, the
provisions of Section 8.1 shall apply.
SECTION 2.8. Fees. The Borrower shall pay to the
Agent for the account of the Banks ratably a commitment fee
of 0.30% per annum of the average daily unused amount of the
Commitments from and including the date of this Agreement to
but excluding the termination of the Commitments in their
entirety.
SECTION 2.9. Termination and Reduction of
Commitments. (a) The Commitments shall be automatically
terminated in their entirety at 5:00 p.m., New York City
time, on the last day of the Availability Period (without
prejudice to any rights that the Borrower may have against
any Bank who fails to lend as required hereunder prior to
the date of termination of the Commitments). Prior to the
termination thereof in full, the Commitments shall be
automatically permanently reduced on each Closing Date,
immediately upon the funding of the Loans to be made on such
Closing Date, by an amount equal to the aggregate principal
amount of the Loans made on such date.
(b) The Borrower may, upon three Domestic Business
Days' notice to the Agent, in whole permanently terminate,
or from time to time in part permanently reduce, the
Commitments; provided, however, that each partial reduction
of the Commitments pursuant to this clause (b) shall be in
an integral multiple of $1,000,000 and in a minimum
principal amount of $25,000,000.
(c) Each reduction in the Commitments hereunder
shall be made ratably among the Banks in accordance with
their respective Commitments. The Borrower shall pay to the
Agent, for the account of the Banks, on each Closing Date
and on the date of each other termination or reduction, the
commitment fees on the amount of the Commitments so
terminated or reduced accrued through the date of such
termination or reduction.
SECTION 2.10. Method of Electing Interest Rates.
(a) The Loans included in each Borrowing shall bear
interest initially at the type of rate specified by the
Borrower in the applicable Notice of Borrowing. Thereafter,
the Borrower may from time to time elect to change or
continue the type of interest rate borne by each Group of
Loans (subject in each case to the provisions of Article 8),
as follows:
(i) if such Loans are Base Rate Loans, the Borrower
may elect to convert such Loans to CD Loans as of any
Domestic Business Day or to Euro-Dollar Loans as of any
Euro-Dollar Business Day;
(ii) if such Loans are CD Loans, the Borrower may
elect to convert such Loans to Base Rate Loans or
Euro-Dollar Loans or elect to continue such Loans as
CD Loans for an additional Interest Period, subject to
Section 2.13 in the case of any such conversion or
continuation effective on any day other than the last day
of the then current Interest Period applicable to such
Loans; and
(iii) if such Loans are Euro-Dollar Loans, the
Borrower may elect to convert such Loans to Base Rate
Loans or CD Loans or elect to continue such Loans as
Euro-Dollar Loans for an additional Interest Period,
subject to Section 2.13 in the case of any such
conversion or continuation effective on any day other
than the last day of the then current Interest Period
applicable to such Loans.
Each such election shall be made by delivering a notice (a
"Notice of Interest Rate Election") to the Agent not later
than 10:30 A.M. (New York City time) on the third
Euro-Dollar Business Day before the conversion or
continuation selected in such notice is to be effective
(unless the relevant Loans are to be converted to Domestic
Loans of the other type or are CD Rate Loans to be continued
as CD Rate Loans for an additional Interest Period, in which
case such notice shall be delivered to the Agent not later
than 10:30 A.M. (New York City time) on the second Domestic
Business Day before such conversion or continuation is to be
effective). A Notice of Interest Rate Election may, if it
so specifies, apply to only a portion of the aggregate
principal amount of the relevant Group of Loans; provided
that (i) such portion is allocated ratably among the Loans
comprising such Group and (ii) the portion to which such
Notice applies, and the remaining portion to which it does
not apply, are each $25,000,000 (or, if such remaining
portion is comprised of Base Rate Loans, $10,000,000) or any
larger multiple of $1,000,000.
(b) Each Notice of Interest Rate Election shall
specify:
(i) the Group of Loans (or portion thereof) to
which such notice applies;
(ii) the date on which the conversion or
continuation selected in such notice is to be effective,
which shall comply with the applicable clause of
subsection (a) above;
(iii) if the Loans comprising such Group are to be
converted, the new type of Loans and, if the Loans being
converted are to be Fixed Rate Loans, the duration of the
next succeeding Interest Period applicable thereto; and
(iv) if such Loans are to be continued as CD Loans
or Euro-Dollar Loans for an additional Interest Period,
the duration of such additional Interest Period.
Each Interest Period specified in a Notice of Interest Rate
Election shall comply with the provisions of the definition
of Interest Period.
(c) Upon receipt of a Notice of Interest Rate
Election from the Borrower pursuant to subsection (a) above,
the Agent shall promptly notify each Bank of the contents
thereof and such notice shall not thereafter be revocable by
the Borrower.
(d) An election by the Borrower to change or
continue the rate of interest applicable to any Group of
Loans pursuant to this Section shall not constitute a
"Borrowing" subject to the provisions of Section 3.2.
SECTION 2.11. Optional Prepayments. (a) Subject
in the case of any Fixed Rate Borrowing to Section 2.13, the
Borrower may, upon at least one Domestic Business Day's
notice to the Agent, prepay any Group of Domestic Loans or
upon at least three Euro-Dollar Business Days' notice to the
Agent, prepay any Group of Euro-Dollar Loans, in each case
in whole at any time, or from time to time in part in
amounts aggregating $25,000,000 or any larger multiple of
$1,000,000, by paying the principal amount to be prepaid
together with accrued interest thereon to the date of
prepayment. Each such optional prepayment shall be applied
to prepay ratably the Loans of the Banks included in such
Group.
(b) Upon receipt of a notice of prepayment pursuant
to this Section, the Agent shall promptly notify each Bank
of the contents thereof and of such Bank's ratable share (if
any) of such prepayment and such notice shall not thereafter
be revocable by the Borrower.
SECTION 2.12. General Provisions as to Payments.
(a) The Borrower shall make each payment of principal of,
and interest on, the Loans and of fees hereunder, not later
than 2:00 p.m. (New York City time) on the date when due, in
Federal or other funds immediately available in New York
City, to the Agent at its address referred to in
Section 9.1. The Agent will promptly distribute to each
Bank its ratable share of each such payment received by the
Agent for the account of the Banks. Whenever any payment of
principal of, or interest on, the Domestic Loans or of fees
shall be due on a day which is not a Domestic Business Day,
the date for payment thereof shall be extended to the next
succeeding Domestic Business Day. Whenever any payment of
principal of, or interest on, the Euro-Dollar Loans shall be
due on a day which is not a Euro-Dollar Business Day, the
date for payment thereof shall be extended to the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar
Business Day falls in another calendar month, in which case
the date for payment thereof shall be the next preceding
Euro-Dollar Business Day. If the date for any payment of
principal is extended by operation of law or otherwise,
interest thereon shall be payable for such extended time.
(b) Unless the Agent shall have received notice
from the Borrower prior to the date on which any payment is
due to the Banks hereunder that the Borrower will not make
such payment in full, the Agent may assume that the Borrower
has made such payment in full to the Agent on such date and
the Agent may, in reliance upon such assumption, cause to be
distributed to each Bank on such due date an amount equal to
the amount then due such Bank. If and to the extent that
the Borrower shall not have so made such payment, each Bank
shall repay to the Agent forthwith on demand such amount
distributed to such Bank together with interest thereon, for
each day from the date such amount is distributed to such
Bank until the date such Bank repays such amount to the
Agent, at the Federal Funds Rate.
SECTION 2.13. Funding Losses. If the Borrower
makes any payment of principal with respect to any Fixed
Rate Loan or any Fixed Rate Loan is converted (pursuant to
Article 2, 6 or 8 or otherwise) on any day other than the
last day of an Interest Period applicable thereto, or the
last day of an applicable period fixed pursuant to
Section 2.7(d), or if the Borrower fails to borrow, convert
or prepay any Fixed Rate Loans after notice has been given
to any Bank in accordance with Section 2.4(a), 2.10(c) or
2.11(b) the Borrower shall reimburse each Bank within
15 days after demand for any resulting loss or expense
incurred by it (or by an existing or prospective Participant
in the related Loan), including (without limitation) any
loss incurred in obtaining, liquidating or employing
deposits from third parties, but excluding loss of margin
for the period after any such payment or conversion or
failure to borrow, convert or prepay, provided that such
Bank shall have delivered to the Borrower a certificate as
to the amount of such loss or expense, which certificate
shall be conclusive in the absence of manifest error.
SECTION 2.14. Computation of Interest and Fees.
Interest based on the Prime Rate hereunder shall be computed
on the basis of a year of 365 days (or 366 days in a leap
year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). All
other interest and fees shall be computed on the basis of a
year of 360 days and paid for the actual number of days
elapsed (including the first day but excluding the last
day).
SECTION 2.15. Regulation D Compensation. For so
long as any Bank maintains reserves against "Eurocurrency
liabilities" (or any other category of liabilities which
includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of
extensions of credit or other assets which includes loans by
a non-United States office of such Bank to United States
residents), and as a result the cost to such Bank (or its
Euro-Dollar Lending Office) of making or maintaining its
Euro-Dollar Loans is increased, then such Bank may require
the Borrower to pay, contemporaneously with each payment of
interest on the Euro-Dollar Loans, additional interest on
the related Euro-Dollar Loan of such Bank at a rate per
annum up to but not exceeding the excess of (i) (A) the
applicable London Interbank Offered Rate divided by (B) one
minus the Euro-Dollar Reserve Percentage over (ii) the
applicable London Interbank Offered Rate. Any Bank wishing
to require payment of such additional interest (x) shall so
notify the Borrower and the Agent, in which case such
additional interest on the Euro-Dollar Loans of such Bank
shall be payable to such Bank at the place indicated in such
notice with respect to each Interest Period commencing at
least four Euro-Dollar Business Days after the giving of
such notice and (y) shall furnish to the Borrower at least
five Euro-Dollar Business Days prior to each date on which
interest is payable on the Euro-Dollar Loans an officer's
certificate setting forth the amount to which such Bank is
then entitled under this Section (which shall be consistent
with such Bank's good faith estimate of the level at which
the related reserves are maintained by it).
"Euro-Dollar Reserve Percentage" means for any day
that percentage (expressed as a decimal) which is in effect
on such day, as prescribed by the Board of Governors of the
Federal Reserve System (or any successor) for determining
the maximum reserve requirement for a member bank of the
Federal Reserve System in New York City with deposits
exceeding five billion dollars in respect of "Eurocurrency
liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which
the interest rate on Euro-Dollar Loans is determined or any
category of extensions of credit or other assets which
includes loans by a non-United States office of any Bank to
United States residents).
ARTICLE 3
CONDITIONS
SECTION 3.1. Initial Funding. The obligation of
any Bank to make a Loan on the Initial Funding Date shall be
subject to the satisfaction of each of the following
conditions:
(a) the Agent shall have received a duly executed
Note for the account of each Bank dated on or before the
Initial Funding Date complying with the provisions of
Section 2.5;
(b) the Agent shall have received an opinion of
Vinson & Elkins L.L.P., special counsel for the Borrower,
substantially in the form of Exhibit B hereto;
(c) the Agent shall have received an opinion of
Cravath, Swaine & Moore, special counsel for the Agent
and the Co-Arrangers, substantially in the form of
Exhibit C hereto; and
(d) the Agent shall have received (i) a copy of the
certificate of incorporation, including all amendments
thereto, of the Borrower, certified as of a recent date
by the Secretary of State of the State of Delaware, and a
certificate as to the good standing of the Borrower as of
a recent date, from such Secretary of State; (ii) a
certificate of the Secretary or Assistant Secretary of
the Borrower dated on or after the Effective Date and on
or prior to the Initial Funding Date and certifying
(A) that attached thereto is a true and complete copy of
the by-laws of the Borrower, as in effect on the date of
such certificate and at all times since a date prior to
the date of the resolutions described in
clause (B) below, (B) that attached thereto is a true and
complete copy of resolutions duly adopted by the
Borrower, authorizing the execution, delivery and
performance by the Borrower of this Agreement and the
Notes and the borrowings hereunder, and that such
resolutions have not been modified, rescinded or amended
and are in full force and effect as of the date of such
certificate, (C) that the certificate of incorporation of
the Borrower has not been amended since the date of the
last amendment thereto shown on the certificate of good
standing furnished pursuant to clause (i) above and
(D) as to the incumbency and specimen signature of each
officer executing this Agreement, any Note or any other
document delivered in connection herewith on behalf of
the Borrower; and (iii) a certificate of another officer
as to the incumbency and specimen signature of the
Secretary or Assistant Secretary executing the
certificate pursuant to (ii) above.
SECTION 3.2. Borrowings. The obligation of any
Bank to make a Loan on the occasion of any Borrowing is
subject to the satisfaction of the following conditions:
(a) the Agent shall have received a Notice of
Borrowing as required by Section 2.3;
(b) the fact that, immediately before and after
such Borrowing, no Default described in clause (f) or (g)
of Section 6.1 shall have occurred and be continuing; and
(c) the fact that the representations and
warranties of the Borrower contained in Sections 4.1, 4.2
and 4.3 shall be true in all material respects on and as
of the date of such Borrowing.
Each Borrowing hereunder shall be deemed to be a
representation and warranty by the Borrower on the date of
such Borrowing as to the facts specified in clauses (b) and
(c) of this Section.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.1. Corporate Existence and Power. The
Borrower is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware, and has all corporate powers and all material
governmental licenses, authorizations, consents and
approvals required to carry on its business as now
conducted.
SECTION 4.2. Corporate and Governmental
Authorization; No Contravention. The execution, delivery
and performance by the Borrower of this Agreement and the
Notes are within the corporate powers of the Borrower, have
been duly authorized by all necessary corporate action,
require no action by or in respect of, or filing with, any
governmental body, agency or official, except for the order
of the Commission contemplated by the definition of SEC
Authorization Date, which, as of each Closing Date, has been
obtained and is in full force and effect with respect to the
Borrowings to be made on such Closing Date, and do not
contravene, or constitute a default under, any provision of
applicable law or regulation or of the certificate of
incorporation or by-laws of the Borrower or of any agreement
or instrument governing Debt of the Borrower or any of its
Subsidiaries or of any material agreement, judgment,
injunction, order, decree or other instrument binding upon
the Borrower or any of its Subsidiaries or result in the
creation or imposition of any Lien on any material asset of
the Borrower or any of its Subsidiaries.
SECTION 4.3. Binding Effect. This Agreement
constitutes a valid and binding agreement of the Borrower
and each Note, when executed and delivered in accordance
with this Agreement, will constitute a valid and binding
obligation of the Borrower, in each case enforceable in
accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the rights of
creditors generally and except as the enforceability of the
Agreement and the Notes is subject to the application of
general principles of equity (regardless of whether
considered in a proceeding in equity or at law), including,
without limitation, (a) the possible unavailability of
specific performance, injunctive relief or any other
equitable remedy and (b) concepts of materiality,
reasonableness, good faith and fair dealing.
SECTION 4.4. Financial Information. (a) The
consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of December 31, 1994 and the
related consolidated statements of income and cash flows for
the fiscal year then ended, reported on by Arthur Andersen
LLP and set forth in the Borrower's 1994 Form 10-K, a copy
of which has been delivered to each of the Banks, fairly
present, in conformity with generally accepted accounting
principles, the consolidated financial position of the
Borrower and its Consolidated Subsidiaries as of such date
and their consolidated results of operations and cash flows
for such fiscal year.
(b) The unaudited consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as of June 30,
1995 and the related unaudited consolidated statements of
income and cash flows for the three months then ended, set
forth in the Borrower's Latest Form 10-Q, a copy of which
has been delivered to each of the Banks, fairly present, in
conformity with generally accepted accounting principles
applied on a basis consistent with the financial statements
referred to in subsection (a) of this Section, the
consolidated financial position of the Borrower and its
Consolidated Subsidiaries as of such date and their
consolidated results of operations and cash flows for such
three-month period (subject to normal year-end adjustments).
(c) Since June 30, 1995 there has been no material
adverse change in the business, financial position or
results of operations of the Borrower and its Consolidated
Subsidiaries, considered as a whole.
SECTION 4.5. Litigation. (a) Except for the
matters disclosed in the Borrower's 1994 Form 10-K, the
Borrower's Latest Form 10-Q and the Borrower's current
report on Form 8-K dated September 6, 1995 (the "Disclosed
Matters"), there is no action, suit or proceeding pending
against, or to the knowledge of the Borrower threatened
against or affecting, the Borrower or any of its
Subsidiaries before any court or arbitrator or any
governmental body, agency or official in which there is a
reasonable possibility of an adverse decision which could
materially adversely affect the business, consolidated
financial position or consolidated results of operations of
the Borrower and its Consolidated Subsidiaries, considered
as a whole, or which in any manner draws into question the
validity of this Agreement or the Notes.
(b) Since the date of the latest filing with the
Commission referred to in Section 4.5(a), there has been no
development in the Disclosed Matters which is likely to
materially and adversely affect the ability of the Borrower
to perform its obligation under this Agreement and the
Notes.
SECTION 4.6. Compliance with ERISA. Each member
of the ERISA Group has fulfilled its obligations under the
minimum funding standards of ERISA and the Internal Revenue
Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions
of ERISA and the Internal Revenue Code with respect to each
Plan. No member of the ERISA Group has (i) sought a waiver
of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Plan, (ii) failed to
make any contribution or payment to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement,
or made any amendment to any Plan or Benefit Arrangement,
which has resulted or could result in the imposition of a
Lien or the posting of a bond or other security under ERISA
or the Internal Revenue Code or (iii) incurred any liability
under Title IV of ERISA other than a liability to the PBGC
for premiums under Section 4007 of ERISA.
SECTION 4.7. Environmental Matters. In the
ordinary course of its business, the Borrower conducts an
ongoing review of the effect of Environmental Laws on the
business, operations and properties of the Borrower and its
Subsidiaries, in the course of which it identifies and
evaluates liabilities and costs arising under or imposed by
Environmental Laws (including, without limitation, any
capital or operating expenditures required for clean-up or
closure of properties presently or previously owned, any
capital or operating expenditures required to achieve or
maintain compliance with environmental protection standards
imposed by Environmental Law, any related constraints on
operating activities, including any periodic or permanent
shutdown of any facility or reduction in the level of or
change in the nature of operations conducted thereat, any
costs or liabilities in connection with off-site disposal of
wastes or Hazardous Substances, and any actual or potential
liabilities to third parties, including employees). On the
basis of this review, the Borrower has no reason to conclude
that such liabilities and costs arising under, including the
costs of compliance with, Environmental Laws, are likely to
have a material adverse effect on the business, financial
condition or results of operations of the Borrower and its
Consolidated Subsidiaries, considered as a whole.
SECTION 4.8. Taxes. The Borrower and its
Subsidiaries have filed all United States Federal income tax
returns and all other material tax returns which are
required to be filed by them and have paid all taxes due
pursuant to such returns or pursuant to any assessment
received by the Borrower or any Subsidiary, other than taxes
which are not delinquent, and other than those contested in
good faith and for which adequate reserves have been
established in accordance with generally accepted accounting
principles. The charges, accruals and reserves on the books
of the Borrower and its Subsidiaries in respect of taxes or
other governmental charges are, in the opinion of the
Borrower, adequate.
SECTION 4.9. Subsidiaries. Each of the Borrower's
corporate Subsidiaries is a corporation duly incorporated,
validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all corporate powers
and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as
now conducted.
SECTION 4.10. Full Disclosure. All information
(taken as a whole) heretofore furnished in writing by the
Borrower to the Agent or any Bank for purposes of or in
connection with this Agreement or any transaction
contemplated hereby is, and all such information hereafter
furnished by the Borrower to the Agent or any Bank
(including, without limitation, all information used in the
preparation of, or which forms part of, the Confidential
Information Memorandum) will be, to the knowledge of the
Borrower, true and accurate in all material respects on the
date as of which such information is stated or certified.
The Borrower has disclosed, either in reports on Form 10-K,
Form 10-Q or Form 8-K (or their equivalents) filed with the
Commission or otherwise in writing to the Banks, any and all
facts known to the Borrower which materially and adversely
affect or may affect (to the extent the Borrower can now
reasonably foresee), the business, financial condition or
results of operations of the Borrower and its Consolidated
Subsidiaries, taken as a whole, or the ability of the
Borrower to perform its obligations under this Agreement.
SECTION 4.11. No Defaults. On the Effective Date,
no Default or Event of Default exists under this Agreement.
ARTICLE 5
COVENANTS
The Borrower agrees that, so long as any Bank has
any Commitment hereunder or any amount payable under any
Note remains unpaid:
SECTION 5.1. Information. The Borrower will
deliver to the Agent:
(a) as soon as available and in any event within
120 days after the end of each fiscal year of the
Borrower, the annual report of the Borrower and its
Subsidiaries filed with the Commission on Form 10-K for
such year;
(b) as soon as available and in any event within
60 days after the end of each of the first three quarters
of each fiscal year of the Borrower, the quarterly report
of the Borrower and its Subsidiaries filed with the
Commission on Form 10-Q for such quarter;
(c) within five days after any officer of the
Borrower obtains knowledge of any Default, if such
Default is then continuing, a certificate of the chief
financial officer or the chief accounting officer of the
Borrower setting forth the details thereof and the action
which the Borrower is taking or proposes to take with
respect thereto;
(d) promptly upon the mailing thereof to the
shareholders of the Borrower generally, copies of all
financial statements, reports and proxy statements so
mailed;
(e) promptly upon the filing thereof, copies of all
registration statements (other than the exhibits thereto
and any registration statements on Form S-8 or its
equivalent) and reports on Form 8-K (or its equivalent)
which the Borrower shall have filed with the Commission;
(f) if and when any member of the ERISA Group
(i) gives notice to the PBGC of any "reportable event"
(as defined in Section 4043 of ERISA) with respect to any
Plan which might constitute grounds for a termination of
such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given notice of any such
reportable event, a copy of the notice of such reportable
event given to the PBGC; (ii) receives notice of complete
or partial withdrawal liability under Section 4201, 4203
or 4204 of ERISA or notice that any Multiemployer Plan is
in reorganization, is insolvent or has been terminated
under Section 4241, 4245 or 4041A of ERISA, a copy of
such notice; (iii) receives notice from the PBGC under
Title IV of ERISA of an intent to terminate, impose
liability (other than for premiums under Section 4007 of
ERISA) in respect of, or appoint a trustee to administer
any Plan, a copy of such notice; (iv) applies for a
waiver of the minimum funding standard under Section 412
of the Internal Revenue Code, a copy of such application;
(v) gives notice of intent to terminate any Plan under
Section 4041(c) of ERISA, a copy of such notice and other
information filed with the PBGC; (vi) gives notice of
withdrawal from any Plan pursuant to Section 4063 of
ERISA, a copy of such notice; or (vii) fails to make any
payment or contribution to any Plan or Multiemployer Plan
or makes any amendment to any Plan which has resulted or
which may reasonably be expected to result in the
imposition of a lien or the posting of a bond or other
security under Section 401(a)(29) or 412(n) of the
Internal Revenue Code, or Section 302(f) or 307 of ERISA,
a certificate of the chief financial officer or the chief
accounting officer of the Borrower setting forth details
as to such occurrence and action, if any, which the
Borrower or applicable member of the ERISA Group is
required or proposes to take; and
(g) from time to time such additional information
regarding the financial position or business of the
Borrower and its Subsidiaries as the Agent, at the
request of any Bank, may reasonably request.
SECTION 5.2. Payment of Obligations. The Borrower
will pay and discharge, and will cause each Subsidiary to
pay and discharge, at or before maturity, all their
respective material obligations and liabilities, except
where the same may be contested in good faith by appropriate
proceedings, and will maintain, and will cause each
Subsidiary to maintain, in accordance with and to the extent
required by generally accepted accounting principles,
appropriate reserves for the accrual of any of the same.
SECTION 5.3. Maintenance of Property; Insurance.
(a) The Borrower will keep, and will cause each Subsidiary
to keep, all property useful and necessary in its business
in good working order and condition, ordinary wear and tear
excepted.
(b) The Borrower will, and will cause each of its
Subsidiaries to, maintain (either in the name of the
Borrower or in such Subsidiary's own name) with financially
sound and responsible insurance companies, insurance on all
their respective properties in at least such amounts,
against at least such risks and with no greater than such
risk retention as are customarily maintained, insured
against or retained, as the case may be, in the same general
area by companies of established repute engaged in the same
or a similar business; and will furnish to the Agent, upon
reasonable request from the Agent, information presented in
reasonable detail as to the insurance so carried.
SECTION 5.4. Conduct of Business and Maintenance of
Existence. The Borrower will continue, and will cause each
Material Subsidiary to continue, to engage in business of
the same general type as now conducted by the Borrower and
its Subsidiaries, and will preserve, renew and keep in full
force and effect, and will cause each Subsidiary to
preserve, renew and keep in full force and effect their
respective corporate existence and their respective rights,
privileges and franchises necessary or desirable in the
normal conduct of business; provided that nothing in this
Section 5.4 shall prohibit (i) the merger of a Subsidiary
into the Borrower or the merger or consolidation of a
Subsidiary with or into another Person if the corporation
surviving such consolidation or merger is a Subsidiary and
if, in each case, after giving effect thereto, no Default
shall have occurred and be continuing, (ii) the transfer of
assets, rights, privileges, licenses, franchises or
businesses from one Subsidiary to another Subsidiary or
(iii) the termination of the corporate existence of any
Subsidiary if the Borrower in good faith determines that
such termination is in the best interest of the Borrower and
is not materially disadvantageous to the Banks.
SECTION 5.5. Compliance with Laws. The Borrower
will comply, and cause each Subsidiary to comply, in all
material respects with all applicable laws, ordinances,
rules, regulations, and requirements of governmental
authorities (including, without limitation, Environmental
Laws and ERISA and the rules and regulations thereunder)
except where the necessity or fact of compliance therewith
is contested in good faith by appropriate proceedings.
SECTION 5.6. Inspection of Property, Books and
Records. The Borrower will keep, and will cause each
Subsidiary to keep, proper books of record and account in
which full, true and correct entries shall be made of all
dealings and transactions in relation to its business and
activities; and will permit, and will cause each Subsidiary
to permit, representatives of any Bank at such Bank's
expense to visit and inspect any of their respective
properties, to examine and make abstracts from any of their
respective books and records and to discuss their respective
affairs, finances and accounts with their respective
officers, employees and independent public accountants, all
at such reasonable times and as often as may reasonably be
desired.
SECTION 5.7. Use of Proceeds. The proceeds of the
Loans made under this Agreement will be used by the Borrower
solely to acquire, directly or indirectly, ordinary shares
or subordinated debt of Bidco pursuant to the Bidding
Agreement (the proceeds of such ordinary shares or
subordinated debt of Bidco to be used by Bidco solely (i) to
acquire ordinary shares of the Target, either in the open
market, pursuant to the Offer or otherwise and (ii) to pay
costs and expenses relating to the Offer). None of the
proceeds of the Loans made under this Agreement will be
used, directly or indirectly, for any purpose that entails a
violation of, or that is inconsistent with, the provisions
of the Regulations of the Board of Governors of the Federal
Reserve System of the United States, including without
limitation Regulation U. After giving effect to the
consummation of the Offer and the financing thereof, "margin
stocks" (as defined in Regulation U) will not constitute
more than 25% of the assets of the Borrower and its
Subsidiaries on a consolidated basis.
SECTION 5.8. Negative Pledge. The Borrower will
not create, assume or suffer to exist any Lien on any asset
now owned or hereafter acquired by it, except:
(a) Liens existing on the date of this Agreement
securing obligations in an aggregate amount not exceeding
$25,000,000;
(b) any Lien on any asset securing Debt incurred or
assumed for the purpose of financing all or any part of
the cost of acquiring such asset; provided that such Lien
attaches to such asset concurrently with or within
90 days after the acquisition thereof;
(c) any Lien on any asset of any corporation
existing at the time such corporation is merged or
consolidated with or into the Borrower and not created in
contemplation of such event;
(d) any Lien existing on any asset prior to the
acquisition thereof by the Borrower and not created in
contemplation of such acquisition;
(e) any Lien arising out of the refinancing,
extension, renewal or refunding of any Debt secured by
any Lien permitted by any of the foregoing clauses of
this Section, provided that such Debt is not increased
and is not secured by any additional assets;
(f) Liens arising in the ordinary course of its
business which (i) do not secure Debt or Derivatives
Obligations, (ii) do not secure any obligation in an
amount exceeding $25,000,000 and (iii) do not in the
aggregate materially detract from the value of its assets
or materially impair the use thereof in the operation of
its business;
(g) Liens on cash and cash equivalents securing
Derivatives Obligations, provided that the aggregate
amount of cash and cash equivalents subject to such Liens
may at no time exceed $25,000,000;
(h) Liens imposed by any governmental authority for
taxes, assessments or charges not yet due or that are
being contested in good faith and by appropriate
proceedings if, unless the amount thereof is not material
with respect to it or its financial condition, adequate
reserves with respect thereto are maintained on the books
of the Borrower in accordance with generally accepted
accounting principles;
(i) carriers', warehousemen's, mechanics',
materialmen's, repairmen's or other like Liens arising in
the ordinary course of business that are not overdue for
a period of more than 30 days or that are being contested
in good faith and by appropriate proceedings and Liens
securing judgments but only to the extent for an amount
and for a period not resulting in an Event of Default
under Section 6.1(i) hereof;
(j) pledges or deposits under worker's
compensation, unemployment insurance and other social
security legislation;
(k) deposits to secure the performance of bids,
trade contracts (other than for Debt), leases, statutory
obligations, surety bonds, appeal bonds with respect to
judgments not exceeding $25,000,000, performance bonds
and other obligations of a like nature incurred in the
ordinary course of business;
(l) easements, rights-of-way, restrictions and
other similar encumbrances incurred in the ordinary
course of business and encumbrances consisting of zoning
restrictions, easements, licenses, restrictions on the
use of property or minor imperfections in title thereto
that, in the aggregate, are not material in amount, and
that do not in any case materially detract from the value
of the property subject thereto or interfere with the
ordinary conduct of the business of the Borrower; and
(m) Liens not otherwise permitted by the foregoing
clauses of this Section securing Debt in an aggregate
principal or face amount at any date not to exceed 5% of
Consolidated Net Worth.
SECTION 5.9. Transactions with Affiliates. The
Borrower will not, and will not permit any Subsidiary to,
directly or indirectly, pay any funds to or for the account
of, make any investment (whether by acquisition of stock or
indebtedness, by loan, advance, transfer of property,
guarantee or other agreement to pay, purchase or service,
directly or indirectly, any Debt, or otherwise) in, lease,
sell, transfer or otherwise dispose of any assets, tangible
or intangible, to, or participate in, or effect, any
transaction with, any Affiliate except on an arms-length
basis on terms at least as favorable to the Borrower or such
Subsidiary than could have been obtained from a third party
who was not an Affiliate; provided that the foregoing
provisions of this Section shall not prohibit any such
Person from declaring or paying any lawful dividend or other
payment ratably in respect of all of its capital stock of
the relevant class so long as, after giving effect thereto,
no Default shall have occurred and be continuing.
SECTION 5.10. Sale of Material Subsidiaries. The
Borrower will not and will not permit any Subsidiary to, at
any time, sell or otherwise transfer, directly or
indirectly, any capital stock of or other equity interest in
any Material Subsidiary if, after giving effect thereto,
such Material Subsidiary would no longer be a Subsidiary.
SECTION 5.11. Prohibition of Fundamental Changes.
The Borrower shall not:
(a) enter into any transaction of merger or
consolidation or amalgamation, or liquidate, wind up or
dissolve itself (or suffer any liquidation or
dissolution); or
(b) convey, sell, lease, transfer or otherwise
dispose of, in one transaction or a series of
transactions, all or substantially all of its business or
property.
Notwithstanding the foregoing provisions of this
Section 5.11, the Borrower may merge or consolidate with any
other Person if the Borrower is the surviving corporation or
the surviving corporation assumes the liabilities of the
Borrower by operation of law or otherwise.
SECTION 5.12. Minimum Consolidated Net Worth. The
Borrower shall not permit its Consolidated Net Worth to be
less than $2,000,000,000 at any time
SECTION 5.13. Syndication. The Borrower
acknowledges that the Co-Arrangers intend promptly to
commence to syndicate their Commitments or Loans in
accordance with the provisions of Section 9.6. The Borrower
agrees actively to assist the Co-Arrangers in achieving a
syndication that is satisfactory to them and to the
Borrower. Such assistance shall include but not be limited
to (i) the preparation with the Co-Arrangers of a
Confidential Information Memorandum and other marketing
materials (collectively, the "Confidential Information
Memorandum") and (ii) direct contact, including the hosting
of one or more bank meetings, between senior management of
the Borrower and its Subsidiaries (including, after
consummation of the Offer, the Target) on the one hand, and
potential Assignees and Participants on the other hand.
ARTICLE 6
DEFAULTS
SECTION 6.1. Events of Default. If one or more of
the following events ("Events of Default") shall have
occurred and be continuing:
(a) the Borrower shall fail to pay when due any
principal of any Loan or shall fail to pay within
five days of the due date thereof any interest, any fees
or any other amount payable hereunder;
(b) the Borrower shall fail to observe or perform
its obligations under Section 5.1(c), 5.7, 5.10, 5.11 or
5.12;
(c) the Borrower shall fail to observe or perform
any covenant or agreement contained in this Agreement
(other than those covered by clause (a) or (b) above) for
30 days after notice thereof has been given to the
Borrower by the Agent at the request of any Bank;
(d) any representation, warranty, certification or
statement made by the Borrower in this Agreement or in
any certificate, financial statement or other document
delivered pursuant to this Agreement shall prove to have
been incorrect in any material respect when made (or
deemed made);
(e) any event or condition shall occur which
results in the acceleration of any Material Debt;
(f) the Borrower or any Subsidiary shall commence a
voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian
or other similar official of it or any substantial part
of its property, or shall consent to any such relief or
to the appointment of or taking possession by any such
official in an involuntary case or other proceeding
commenced against it, or shall make a general assignment
for the benefit of creditors, or shall fail generally to
pay its debts as they become due, or shall take any
corporate action to authorize any of the foregoing;
(g) an involuntary case or other proceeding shall
be commenced against the Borrower or any Subsidiary
seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or
any substantial part of its property, and such
involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 60 days; or an
order for relief shall be entered against the Borrower or
any Subsidiary under the federal bankruptcy laws as now
or hereafter in effect;
(h) any member of the ERISA Group shall fail to pay
when due an amount or amounts aggregating in excess of
$25,000,000 which it shall have become liable to pay
under Title IV of ERISA; or notice of intent to terminate
a Material Plan shall be filed under Title IV of ERISA by
any member of the ERISA Group, any plan administrator or
any combination of the foregoing; or the PBGC shall
institute proceedings under Title IV of ERISA to
terminate, to impose liability (other than for premiums
under Section 4007 of ERISA) in respect of, or to cause a
trustee to be appointed to administer any Material Plan;
or a condition shall exist by reason of which the PBGC
would be entitled to obtain a decree adjudicating that
any Material Plan must be terminated; or there shall
occur a complete or partial withdrawal from, or a
default, within the meaning of Section 4219(c)(5) of
ERISA, with respect to, one or more Multiemployer Plans
which could cause one or more members of the ERISA Group
to incur a current payment obligation in excess of
$25,000,000;
(i) judgments or orders for the payment of money in
excess of $25,000,000 shall be rendered against the
Borrower or any Subsidiary and such judgments or orders
shall continue unsatisfied and unstayed for a period of
30 days; or
(j) any person or group of persons (within the
meaning of Section 13 or 14 of the Securities Exchange
Act of 1934, as amended) shall have acquired beneficial
ownership (within the meaning of Rule 13d-3 promulgated
by the Commission under said Act) of 30% or more of the
outstanding shares of common stock of the Borrower; or,
during any period of 12 consecutive calendar months,
individuals (i) who were directors of the Borrower on the
first day of such period, (ii) whose election or
nomination to the board of directors of the Borrower was
approved by individuals referred to in clause (i) above
constituting at the time of such election or nomination
at least a majority of said board or (iii) whose election
or nomination to said board was approved by individuals
referred to in clauses (i) and (ii) above constituting at
the time of such election or nomination at least a
majority of said board, shall cease to constitute a
majority of said board;
then, and in every such event, the Agent shall (i) if
requested by Banks having more than 50% in aggregate amount
of the Commitments, by notice to the Borrower terminate the
Commitments and they shall thereupon terminate, and (ii) if
requested by Banks holding more than 50% of the aggregate
unpaid principal amount of the Loans, by notice to the
Borrower declare the Loans (together with accrued interest
thereon) to be, and the Loans (together with accrued
interest thereon) shall thereupon become, immediately due
and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the
Borrower; provided that in the case of any of the Events of
Default specified in clause 6.1(f) or 6.1(g) above with
respect to the Borrower, without any notice to the Borrower
or any other act by the Agent or the Banks, the Commitments
shall thereupon terminate and the Loans (together with
accrued interest thereon) shall become immediately due and
payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Borrower.
SECTION 6.2. Notice of Default. The Agent shall
give notice to the Borrower under Section 6.1(c) promptly
upon being requested to do so by any Bank and shall
thereupon notify all the Banks thereof.
ARTICLE 7
THE AGENT
SECTION 7.1. Appointment and Authorization. Each
Bank irrevocably appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such
powers under this Agreement and the Notes as are delegated
to the Agent by the terms hereof or thereof, together with
all such powers as are reasonably incidental thereto.
SECTION 7.2. Agent and Affiliates. Union Bank of
Switzerland shall have the same rights and powers under this
Agreement as any other Bank and may exercise or refrain from
exercising the same as though it were not the Agent, and
Union Bank of Switzerland and its affiliates may accept
deposits from, lend money to, and generally engage in any
kind of business with the Borrower or any Subsidiary or
affiliate of the Borrower as if it were not the Agent.
SECTION 7.3. Action by Agent. The obligations of
the Agent hereunder are only those expressly set forth
herein. Without limiting the generality of the foregoing,
the Agent shall not be required to take any action with
respect to any Default, except as expressly provided in
Article 6.
SECTION 7.4. Consultation with Experts. The Agent
may consult with legal counsel (who may be counsel for the
Borrower), independent public accountants and other experts
selected by it and shall not be liable for any action taken
or omitted to be taken by it in good faith in accordance
with the advice of such counsel, accountants or experts.
SECTION 7.5. Liability of Agent. Neither the
Agent nor any of its affiliates nor any of their respective
directors, officers, agents or employees shall be liable for
any action taken or not taken by it in connection herewith
(i) with the consent or at the request of the Required Banks
or (ii) in the absence of its own gross negligence or
willful misconduct. Neither the Agent nor any of its
affiliates nor any of their respective directors, officers,
agents or employees shall be responsible for or have any
duty to ascertain, inquire into or verify (i) any statement,
warranty or representation made in connection with this
Agreement or any borrowing hereunder; (ii) the performance
or observance of any of the covenants or agreements of the
Borrower; (iii) the satisfaction of any condition specified
in Article 3, except receipt of items required to be
delivered to the Agent; or (iv) the validity, effectiveness
or genuineness of this Agreement, the Notes or any other
instrument or writing furnished in connection herewith. The
Agent shall not incur any liability by acting in reliance
upon any notice, consent, certificate, statement, or other
writing (which may be a bank wire, telex, facsimile
transmission or similar writing) believed by it to be
genuine or to be signed by the proper party or parties.
SECTION 7.6. Indemnification. Each Bank shall,
ratably in accordance with its Commitment or, if the
Commitments have terminated as a result of the making of
Loans, the outstanding principal amount of its Loans,
indemnify the Agent, its affiliates and their respective
directors, officers, agents and employees (to the extent not
reimbursed by the Borrower) against any cost, expense
(including counsel fees and disbursements), claim, demand,
action, loss or liability (except such as result from such
indemnitees' gross negligence or willful misconduct) that
such indemnitees may suffer or incur in connection with this
Agreement or any action taken or omitted by such indemnitees
hereunder.
SECTION 7.7. Credit Decision. Each Bank
acknowledges that it has, independently and without reliance
upon the Agent, any Co-Agent or any other Bank, and based on
such documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this
Agreement. Each Bank also acknowledges that it will,
independently and without reliance upon the Agent, any Co-
Agent or any other Bank, and based on such documents and
information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not
taking any action under this Agreement.
SECTION 7.8. Successor Agent. The Agent may
resign at any time by giving notice thereof to the Banks and
the Borrower. Upon any such resignation, the Required Banks
shall have the right to appoint a successor Agent subject to
the approval of the Borrower. If no successor Agent shall
have been so appointed and approved, and shall have accepted
such appointment, within 30 days after the retiring Agent
gives notice of resignation, then the retiring Agent may, on
behalf of the Banks, appoint a successor Agent, which shall
be a commercial bank organized or licensed under the laws of
the United States and having a combined capital and surplus
of at least $500,000,000. Upon the acceptance of its
appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested
with all the rights and duties of the retiring Agent, and
the retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's
resignation hereunder as Agent, the provisions of this
Article shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Agent. Any
retiring Agent shall refund any unearned portion of its
administrative agency fee.
SECTION 7.9. Agent's Fee. The Borrower shall pay
to the Agent for its own account fees in the amounts and at
the times previously agreed upon between the Borrower and
the Agent.
SECTION 7.10. Co-Arrangers, etc. Nothing in this
Agreement shall impose on any Co-Arranger, any Syndication
Co-Agent or the Documentation Agent, in its capacity as
such, any duties or obligations whatsoever.
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.1. Basis for Determining Interest Rate
Inadequate or Unfair. If on or prior to the first day of
any Interest Period for any CD Loan or Euro-Dollar Loan:
(a) the Agent is advised by the Reference Banks
that deposits in dollars (in the applicable amounts) are
not being offered to the Reference Banks in the relevant
market for such Interest Period, or
(b) in the case of CD Loans or Euro-Dollar Loans,
Banks having 50% or more of the aggregate principal
amount of the affected Loans advise the Agent that the
Adjusted CD Rate or the London Interbank Offered Rate, as
the case may be, as determined by the Agent will not,
together with any increased costs reimbursable by the
Borrower hereunder, adequately and fairly reflect the
cost to such Banks of funding their CD Loans or Euro-
Dollar Loans, as the case may be, for such Interest
Period,
the Agent shall forthwith give notice thereof to the
Borrower and the Banks, whereupon until the Agent notifies
the Borrower that the circumstances giving rise to such
suspension no longer exist, (i) the obligations of the Banks
to make CD Loans or Euro-Dollar Loans, as the case may be,
or to continue or convert outstanding Loans as or into
CD Loans or Euro-Dollar Loans, as the case may be, shall be
suspended and (ii) each outstanding CD Loan or Euro-Dollar
Loan, as the case may be, shall be converted into a Base
Rate Loan on the last day of the then current Interest
Period applicable thereto. Unless the Borrower notifies the
Agent at least two Domestic Business Days before the date of
any Fixed Rate Borrowing for which a Notice of Borrowing has
previously been given that it elects not to borrow on such
date, such Borrowing shall instead be made as a Base Rate
Borrowing.
SECTION 8.2. Illegality. If, on or after the date
of this Agreement, the adoption of any applicable law, rule
or regulation, or any change in any applicable law, rule or
regulation, or any change in the interpretation or
administration thereof by any governmental authority,
central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by
any Bank (or its Euro-Dollar Lending Office) with any
request or directive (whether or not having the force of
law) of any such authority, central bank or comparable
agency shall make it unlawful or impossible for any Bank (or
its Euro-Dollar Lending Office) to make, maintain or fund
its Euro-Dollar Loans and such Bank shall so notify the
Agent, the Agent shall forthwith give notice thereof to the
other Banks and the Borrower, whereupon until such Bank
notifies the Borrower and the Agent that the circumstances
giving rise to such suspension no longer exist, the
obligation of such Bank to make Euro-Dollar Loans, or to
convert outstanding Loans into Euro-Dollar Loans, shall be
suspended. Before giving any notice to the Agent pursuant
to this Section, such Bank shall designate a different
Euro-Dollar Lending Office if such designation will avoid
the need for giving such notice and will not, in the
judgment of such Bank, be otherwise disadvantageous to such
Bank. If such notice is given, each Euro-Dollar Loan of
such Bank then outstanding shall be converted to a Base Rate
Loan either (a) on the last day of the then current Interest
Period applicable to such Euro-Dollar Loan if such Bank may
lawfully continue to maintain and fund such Loan to such day
or (b) immediately if such Bank shall determine that it may
not lawfully continue to maintain and fund such Loan to such
day.
SECTION 8.3. Increased Cost and Reduced Return.
(a) If on or after the date hereof, any Loan or any
obligation to make Loans, the adoption of any applicable
law, rule or regulation, or any change in any applicable
law, rule or regulation, or any change in the interpretation
or administration thereof by any governmental authority,
central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by
any Bank (or its Applicable Lending Office) with any request
or directive (whether or not having the force of law) of any
such authority, central bank or comparable agency shall
impose, modify or deem applicable any reserve (including,
without limitation, any such requirement imposed by the
Board of Governors of the Federal Reserve System, but
excluding (i) with respect to any CD Loan any such
requirement included in an applicable Domestic Reserve
Percentage and (ii) with respect to any Euro-Dollar Loan any
such requirement for which such Bank is entitled to
compensation for the relevant Interest Period under
Section 2.13), special deposit, insurance assessment
(excluding, with respect to any CD Loan, any such
requirement reflected in an applicable Assessment Rate) or
similar requirement against assets of, deposits with or for
the account of, or credit extended by, any Bank (or its
Applicable Lending Office) or shall impose on any Bank (or
its Applicable Lending Office) or on the United States
market for certificates of deposit or the London interbank
market any other condition affecting its Fixed Rate Loans,
its Note or its obligation to make Fixed Rate Loans and the
result of any of the foregoing is to increase the cost to
such Bank (or its Applicable Lending Office) of making or
maintaining any Fixed Rate Loan, or to reduce the amount of
any sum received or receivable by such Bank (or its
Applicable Lending Office) under this Agreement or under its
Note with respect thereto, by an amount deemed by such Bank
to be material, then, within 15 days after demand by such
Bank (with a copy to the Agent), the Borrower shall pay to
such Bank such additional amount or amounts as will
compensate such Bank for such increased cost or reduction.
(b) If any Bank shall have determined that, after
the date hereof, the adoption of any applicable law, rule or
regulation regarding capital adequacy, or any change in any
such law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with
the interpretation or administration thereof, or any request
or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank
or comparable agency has or would have the effect of
reducing the rate of return on capital of such Bank (or its
Parent) as a consequence of such Bank's obligations
hereunder to a level below that which such Bank (or its
Parent) could have achieved but for such adoption, change,
request or directive (taking into consideration its policies
with respect to capital adequacy) by an amount deemed by
such Bank to be material, then from time to time, within
15 days after demand by such Bank (with a copy to the
Agent), the Borrower shall pay to such Bank such additional
amount or amounts as will compensate such Bank (or its
Parent) for such reduction.
(c) Each Bank will promptly notify the Borrower and
the Agent of any event of which it has knowledge, occurring
after the date hereof, which will entitle such Bank to
compensation pursuant to this Section and will designate a
different Lending Office if such designation will avoid the
need for, or reduce the amount of, such compensation and
will not, in the sole judgment of such Bank, be otherwise
disadvantageous to such Bank. A certificate of any Bank
claiming compensation under this Section and setting forth
the additional amount or amounts to be paid to it hereunder
shall be conclusive in the absence of manifest error. In
determining such amount, such Bank may use any reasonable
averaging and attribution methods. Notwithstanding the
foregoing subsections (a) and (b) of this Section 8.3, the
Borrower shall only be obligated to compensate any Bank for
any amount arising or accruing during (i) any time or period
commencing not more than 90 days prior to the date on which
such Bank notifies the Agent and the Borrower that it
proposes to demand such compensation and identifies to the
Agent and the Borrower the statute, regulation or other
basis upon which the claimed compensation is or will be
based and (ii) any time or period during which, because of
the retroactive application of such statute, regulation or
other such basis, such Bank did not know that such amount
would arise or accrue.
SECTION 8.4. Taxes. (a) For the purposes of this
Section 8.4, the following terms have the following
meanings:
"Taxes" means any and all present or future taxes,
duties, levies, imposts, deductions, charges or withholdings
with respect to any payment by the Borrower pursuant to this
Agreement or under any Note, and all penalties and interest
with respect thereto, excluding (i) in the case of each Bank
and the Agent, taxes imposed on its income, and franchise or
similar taxes imposed on it, by a jurisdiction under the
laws of which such Bank or the Agent (as the case may be) is
organized or in which its principal executive office is
located, in which its Applicable Lending Office is located
or in which it would be subject to tax due to some
connection other than that created by this Agreement and
(ii) in the case of each Bank, any United States withholding
tax imposed on such payments but only to the extent that
such Bank is subject to United States withholding tax at the
time such Bank first becomes a party to this Agreement.
"Other Taxes" means any present or future stamp or
documentary taxes and any other excise or property taxes, or
similar charges or levies and all penalties and interest
with respect thereto, which arise from the making of any
payment pursuant to this Agreement or under any Note or from
the execution or delivery of this Agreement or any Note.
(b) Any and all payments by the Borrower to or for
the account of any Bank or the Agent hereunder or under any
Note shall be made without deduction for any Taxes or Other
Taxes; provided that, if the Borrower shall be required by
law to deduct any Taxes or Other Taxes from any such
payments, (i) the sum payable shall be increased as
necessary so that after making all required deductions
(including deductions applicable to additional sums payable
under this Section) such Bank or the Agent (as the case may
be) receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower
shall make such deductions, (iii) the Borrower shall pay the
full amount deducted to the relevant taxation authority or
other authority in accordance with applicable law and
(iv) the Borrower shall furnish to the Agent, at its address
referred to in Section 9.1, the original or a certified copy
of a receipt evidencing payment thereof.
(c) The Borrower agrees to indemnify each Bank and
the Agent for the full amount of Taxes or Other Taxes
(including, without limitation, any Taxes or Other Taxes on
amounts payable under this Section) paid by such Bank or the
Agent (as the case may be). This indemnification shall be
paid within 15 days after such Bank or the Agent (as the
case may be) makes appropriate demand therefor.
(d) Each Bank organized under the laws of a
jurisdiction outside the United States, on or prior to the
date of its execution and delivery of this Agreement in the
case of each Bank listed on the signature pages hereof and
on or prior to the date on which it becomes a Bank in the
case of each other Bank, and from time to time thereafter if
requested in writing by the Borrower (but only so long as
such Bank remains lawfully able to do so), shall provide the
Borrower and the Agent with Internal Revenue Service form
1001 or 4224, as appropriate, or any successor form
prescribed by the Internal Revenue Service, certifying that
such Bank is entitled to benefits under an income tax treaty
to which the United States is a party which exempts the Bank
from United States withholding tax or reduces the rate of
withholding tax on payments of interest for the account of
such Bank or certifying that the income receivable pursuant
to this Agreement is effectively connected with the conduct
of a trade or business in the United States.
(e) For any period with respect to which a Bank has
failed to provide the Borrower or the Agent with the
appropriate form pursuant to Section 8.4(d) (unless such
failure is due to a change in treaty, law or regulation
occurring subsequent to the date on which such form
originally was required to be provided), such Bank shall not
be entitled to indemnification under Section 8.4(b) or (c)
with respect to Taxes imposed by the United States; provided
that if a Bank, which is otherwise exempt from or subject to
a reduced rate of withholding tax, becomes subject to Taxes
because of its failure to deliver a form required hereunder,
the Borrower shall take such steps (at the expense of such
Bank) as such Bank shall reasonably request to assist such
Bank to recover such Taxes.
(f) If the Borrower is required to pay additional
amounts to or for the account of any Bank pursuant to this
Section, then such Bank will change the jurisdiction of its
Applicable Lending Office if, in the judgment of such Bank,
such change (i) will eliminate or reduce any such additional
payment which may thereafter accrue and (ii) is not
otherwise disadvantageous to such Bank in its sole judgment.
SECTION 8.5. Base Rate Loans Substituted for
Affected Fixed Rate Loans. If (i) the obligation of any
Bank to make, or convert outstanding Loans to, Euro-Dollar
Loans has been suspended pursuant to Section 8.2 or (ii) any
Bank has demanded compensation under Section 8.3 or 8.4 with
respect to its CD Loans or Euro-Dollar Loans and the
Borrower shall, by at least five Euro-Dollar Business Days'
prior notice to such Bank through the Agent, have elected
that the provisions of this Section shall apply to such
Bank, then, unless and until such Bank notifies the Borrower
that the circumstances giving rise to such suspension or
demand for compensation no longer exist:
(a) all Loans which would otherwise be made by such
Bank as (or continued as or converted into) CD Loans or
Euro-Dollar Loans, as the case may be, shall instead be
Base Rate Loans (on which interest and principal shall be
payable contemporaneously with the related Fixed Rate
Loans of the other Banks); and
(b) after each of its CD Loans or Euro-Dollar
Loans, as the case may be, has been repaid (or converted
to a Base Rate Loan), all payments of principal which
would otherwise be applied to repay such Fixed Rate Loans
shall be applied to repay its Base Rate Loans instead.
If such Bank notifies the Borrower that the circumstances
giving rise to such notice no longer apply, the principal
amount of each such Base Rate Loan shall be converted into a
CD Loan or Euro-Dollar Loan, as the case may be, on the
first day of the next succeeding Interest Period applicable
to the related CD Loans or Euro-Dollar Loans of the other
Banks.
SECTION 8.6. Replacement of Bank.
(a) In the event that:
(i) any Bank requests compensation pursuant to
Section 8.3 or 8.4 hereof;
(ii) the obligation of any Bank to make Euro-
Dollar Loans or to continue, or to convert Base
Rate Loans into, Euro-Dollar Loans shall be
suspended pursuant to Section 8.2 hereof;
(iii) any Bank becomes insolvent or fails to
make any Loan in response to a timely Notice of
Borrowing where the Required Banks have made
the respective Loans to be made by them in
response to such notice; or
(iv) any Bank fails or refuses to agree to a
request by the Borrower to amend or waive, or
to grant any consent under, any provision of
the Agreement under circumstances when such
amendment, waiver or consent has been approved
by the Required Banks, such amendment, waiver
or consent requires the approval of all of the
Banks to be effective and such failure or
refusal is evidenced by (x) written objection
by such Bank to any such request made to it by
the Agent in writing describing such amendment,
waiver or requested consent in principle,
(y) failure by such Bank to respond in writing
to any such request so made to it on or before
the 15th Domestic Business Day after it
receives such request, or (z) failure by such
Bank to execute and deliver definitive
documentation furnished to it by the Agent to
effectuate any such amendment, waiver or
consent on or before the 15th Domestic Business
Day after it receives such documentation;
then, so long as such condition exists, the Borrower
may either:
(1) designate another financial institution
(such financial institution being herein called
a "Replacement Bank") acceptable to the Agent
(which acceptance will not be unreasonably
withheld) and which is not an Affiliate of the
Borrower, to assume such Bank's Commitment
hereunder and to purchase the Loans of such
Bank and such Bank's rights under this
Agreement and the Note held by such Bank, all
without recourse to or representation or
warranty by, or expense to such Bank, for a
purchase price equal to the outstanding
principal amount of the Loans payable to such
Bank plus any accrued but unpaid interest on
such Loans and accrued but unpaid fees owing to
such Bank plus any amounts payable to such Bank
under Section 2.13 hereof calculated as if such
purchase constituted a prepayment of Loans plus
any other amounts payable to such Bank under
this Agreement, and upon such assumption,
purchase and substitution, and subject to the
execution and delivery to the Agent by the
Replacement Bank of documentation satisfactory
to the Agent (pursuant to which such
Replacement Bank shall assume the obligations
of such original Bank under this Agreement),
the Replacement Bank shall succeed to the
rights and obligations of such Bank hereunder;
or
(2) with the prior written consent of the
Required Banks, pay to such Bank the
outstanding principal amount of the Loans
payable to such Bank plus any accrued but
unpaid interest on such Loans and accrued but
unpaid fees owing to such Bank plus any amounts
payable to such Bank under Section 2.13 hereof
calculated as if such purchase constituted a
prepayment of Loans. In the event that the
Borrower exercises its rights under the
preceding sentence, the Bank against which such
rights are exercised shall no longer be a party
hereto or have any rights or obligations
hereunder;
provided that the obligations of the Borrower
to such Bank under Article 8 and Section 9.3
hereof with respect to events occurring or
obligations arising before or as a result of
such replacement shall survive such exercise.
(b) If the Borrower exercises its rights under
clause (2) of Section 8.6(a) hereof, the Borrower
may, not later than 180 days after such exercise,
designate a Replacement Bank acceptable to the Agent
(which acceptance will not be unreasonably withheld)
and which is not an Affiliate of the Borrower, to
assume a Commitment or, if the Commitments have
terminated, to make a Loan or Loans hereunder in an
amount not greater than the Commitment or Loans, as
the case may be, of the Bank against which such
rights were exercised and, subject to the execution
and delivery to the Agent by the Replacement Bank of
documentation satisfactory to the Agent the
Replacement Bank shall become party to this
Agreement as a Bank.
ARTICLE 9
MISCELLANEOUS
SECTION 9.1. Notices. All notices, requests and
other communications to any party hereunder shall be in
writing (including bank wire, telex, facsimile transmission
or similar writing) and shall be given to such party:
(a) in the case of the Borrower or the Agent, at its
address, facsimile number or telex number set forth on the
signature pages hereof, (b) in the case of any Bank, at its
address, facsimile number or telex number set forth in its
Administrative Questionnaire or (c) in the case of any
party, such other address, facsimile number or telex number
as such party may hereafter specify for the purpose by
notice to the Agent and the Borrower. Each such notice,
request or other communication shall be effective (i) if
given by telex, when such telex is transmitted to the telex
number specified in this Section and the appropriate
answerback is received, (ii) if given by facsimile
transmission, when transmitted to the facsimile number
specified in this Section and confirmation of receipt is
received, (iii) if given by mail, 72 hours after such
communication is deposited in the mails with first-class
postage prepaid, addressed as aforesaid or (iv) if given by
any other means, when delivered at the address specified in
this Section; provided that notices to the Agent under
Article 2 or Article 8 shall not be effective until
received.
SECTION 9.2. No Waivers. No failure or delay by
the Agent or any Bank in exercising any right, power or
privilege hereunder or under any Note shall operate as a
waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and
not exclusive of any rights or remedies provided by law.
SECTION 9.3. Expenses; Indemnification. (a) The
Borrower shall pay (i) all reasonable out-of-pocket expenses
of the Agent and each Co-Arranger, including reasonable fees
and disbursements of Cravath, Swaine & Moore, special
counsel for the Agent and the Co-Arrangers, in connection
with the preparation of this Agreement, the syndication
contemplated by Section 5.13, any waiver or consent
hereunder or any amendment hereof or any Default hereunder
and (ii) if an Event of Default occurs, all reasonable
out-of-pocket expenses incurred by the Agent and each Bank,
including (without duplication) the reasonable fees and
disbursements of outside counsel and the allocated cost of
inside counsel, in connection with such Event of Default and
collection, bankruptcy, insolvency and other enforcement
proceedings resulting therefrom.
(b) The Borrower agrees to indemnify the Agent and
each Bank, their respective affiliates and the respective
directors, officers, agents and employees of the foregoing
(each an "Indemnitee") and hold each Indemnitee harmless
from and against any and all liabilities, losses, damages,
costs and expenses of any kind, including, without
limitation, the reasonable fees and disbursements of
counsel, which may be incurred by such Indemnitee in
connection with any investigative, administrative or
judicial proceeding (whether or not such Indemnitee shall be
designated a party thereto) brought or threatened relating
to the Commitments, the Loans or any actual or proposed use
of proceeds of Loans hereunder; provided that no Indemnitee
shall have the right to be indemnified hereunder for such
Indemnitee's own gross negligence or willful misconduct.
SECTION 9.4. Sharing of Set-Offs. Each Bank agrees
that if it shall, by exercising any right of set-off or
counterclaim or otherwise, receive payment of a proportion
of the aggregate amount of principal and interest due with
respect to any Note held by it which is greater than the
proportion received by any other Bank in respect of the
aggregate amount of principal and interest due with respect
to any Note held by such other Bank, the Bank receiving such
proportionately greater payment shall purchase such
participations in the Notes held by the other Banks, and
such other adjustments shall be made, as may be required so
that all such payments of principal and interest with
respect to the Notes held by the Banks shall be shared by
the Banks pro rata; provided that nothing in this
Section shall impair the right of any Bank to exercise any
right of set-off or counterclaim it may have and to apply
the amount subject to such exercise to the payment of
indebtedness of the Borrower other than its indebtedness
hereunder. The Borrower agrees, to the fullest extent it
may effectively do so under applicable law, that any holder
of a participation in a Note, whether or not acquired
pursuant to the foregoing arrangements, may exercise rights
of set-off or counterclaim and other rights with respect to
such participation as fully as if such holder of a
participation were a direct creditor of the Borrower in the
amount of such participation.
SECTION 9.5. Amendments and Waivers. Any provision
of this Agreement or the Notes may be amended or waived if,
but only if, such amendment or waiver is in writing and is
signed by the Borrower and the Required Banks (and, if the
rights or duties of the Agent are affected thereby, by the
Agent); provided that no such amendment or waiver shall,
unless signed by all the Banks, (i) increase or decrease the
Commitment of any Bank (except for a ratable decrease in the
Commitments of all Banks) or subject any Bank to any
additional obligation, (ii) reduce the principal of or rate
of interest on any Loan, or any fees hereunder,
(iii) postpone the date fixed for any payment of principal
of or interest on any Loan, or any fees hereunder or for the
scheduled termination of any Commitment or (iv) change the
percentage of the Commitments or of the aggregate unpaid
principal amount of the Notes, or the number of Banks, which
shall be required for the Banks or any of them to take any
action under this Section or any other provision of this
Agreement.
SECTION 9.6. Successors and Assigns. (a) The
provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective
successors and assigns, except that the Borrower may not
assign or otherwise transfer any of its rights under this
Agreement without the prior written consent of all Banks.
(b) Any Bank may at any time grant to one or more
banks or other institutions (each a "Participant")
participating interests in its Commitment or any or all of
its Loans. In the event of any such grant by a Bank of a
participating interest to a Participant, whether or not upon
notice to the Borrower and the Agent, such Bank shall remain
responsible for the performance of its obligations
hereunder, and the Borrower and the Agent shall continue to
deal solely and directly with such Bank in connection with
such Bank's rights and obligations under this Agreement.
Any agreement pursuant to which any Bank may grant such a
participating interest shall provide that such Bank shall
retain the sole right and responsibility to enforce the
obligations of the Borrower hereunder including, without
limitation, the right to approve any amendment, modification
or waiver of any provision of this Agreement; provided that
such participation agreement may provide that such Bank will
not agree to any modification, amendment or waiver of this
Agreement described in clause (i), (ii), (iii), or (iv) of
Section 9.5 without the consent of the Participant. The
Borrower agrees that each Participant shall, to the extent
provided in its participation agreement, be entitled to the
benefits of Article 8 with respect to its participating
interest. An assignment or other transfer which is not
permitted by subsection (c) or (d) below shall be given
effect for purposes of this Agreement only to the extent of
a participating interest granted in accordance with this
subsection (b).
(c) Any Bank may at any time assign to one or more
banks or other institutions (each an "Assignee") all, or a
proportionate part (equivalent to an initial Commitment of
not less than $15,000,000) of all, of its rights and
obligations under this Agreement and the Notes, and such
Assignee shall assume such rights and obligations, pursuant
to an Assignment and Assumption Agreement in substantially
the form of Exhibit C hereto executed by such Assignee and
such transferor Bank, with (and subject to) the subscribed
consent of the Borrower and the Agent, which shall not be
unreasonably withheld; provided that if an Assignee is an
affiliate of such transferor Bank or was a Bank immediately
prior to such assignment, no such consent shall be required.
Upon execution and delivery of such instrument and payment
by such Assignee to such transferor Bank of an amount equal
to the purchase price agreed between such transferor Bank
and such Assignee, such Assignee shall be a Bank party to
this Agreement and shall have all the rights and obligations
of a Bank with a Commitment as set forth in such instrument
of assumption, and the transferor Bank shall be released
from its obligations hereunder to a corresponding extent,
and no further consent or action by any party shall be
required. Upon the consummation of any assignment pursuant
to this subsection (c), the transferor Bank, the Agent and
the Borrower shall make appropriate arrangements so that, if
required, a new Note is issued to the Assignee. In
connection with any such assignment, the transferor Bank
shall pay to the Agent an administrative fee for processing
such assignment in the amount of $2,500. If the Assignee is
not incorporated under the laws of the United States, it
shall deliver to the Borrower and the Agent certification as
to exemption from deduction or withholding of any United
States federal income taxes in accordance with Section 8.4.
(d) Any Bank may at any time assign all or any
portion of its rights under this Agreement and its Note to a
Federal Reserve Bank. No such assignment shall release the
transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of
any Bank's rights shall be entitled to receive any greater
payment under Section 8.3 or 8.4 than such Bank would have
been entitled to receive with respect to the rights
transferred, unless such transfer is made with the
Borrower's prior written consent or by reason of the
provisions of Section 8.2, 8.3 or 8.4 requiring such Bank to
designate a different Applicable Lending Office under
certain circumstances or at a time when the circumstances
giving rise to such greater payment did not exist.
SECTION 9.7. Collateral. Each of the Banks
represents to the Agent and each of the other Banks that it
in good faith is not relying upon any "margin stock" (as
defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.
SECTION 9.8. Governing Law; Submission to
Jurisdiction. This Agreement and each Note shall be
governed by and construed in accordance with the laws of the
State of New York. The Borrower hereby submits to the
nonexclusive jurisdiction of the United States District
Court for the Southern District of New York and of any New
York State court sitting in New York City for purposes of
all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. The
Borrower irrevocably waives, to the fullest extent permitted
by law, any objection which it may now or hereafter have to
the laying of the venue of any such proceeding brought in
such a court and any claim that any such proceeding brought
in such a court has been brought in an inconvenient forum.
SECTION 9.9. Counterparts; Integration;
Effectiveness. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were
upon the same instrument. This Agreement constitutes the
entire agreement and understanding among the parties hereto
and supersedes any and all prior agreements and
understandings, oral or written, relating to the subject
matter hereof. This Agreement shall become effective upon
receipt by the Agent of counterparts hereof signed by each
of the parties hereto (or, in the case of any party as to
which an executed counterpart shall not have been received,
receipt by the Agent in form satisfactory to it constituting
delivery of telegraphic, telex, facsimile or other written
confirmation from such party of execution of a counterpart
hereof by such party).
SECTION 9.10. WAIVER OF JURY TRIAL. EACH OF THE
BORROWER, THE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed by their respective
authorized officers as of the day and year first above
written.
CENTRAL AND SOUTH WEST
CORPORATION,
By /s/ Stephen J. McDonnell
Name: Stephen J. McDonnell
Title: Treasurer
Address:
1616 Woodall Rodgers Freeway
Dallas, TX 65202
Telex:
Facsimile: (214) 777-3067
Commitments
$283,333,333 CITIBANK, N.A.,
By /s/ Sandip Sen
Name: Sandip Sen
Title: Attorney-in-fact
Address:
399 Park Avenue
New York, NY 10043
Telex:
Facsimile: (212) 793-6130
$283,333,333 CREDIT SUISSE,
By /s/ David J. Worthington
Name: David J. Worthington
Title: Member of Senior
Management
Address:
633 West Fifth Street
64th Floor
Los Angeles, CA 90071
Telex: 67227
Facsimile: (213) 955-8245
By /s/ Marilou Palenzuela
Name: Marilou Palenzuela
Title: Member of Senior
Management
$283,333,334 UNION BANK OF SWITZERLAND,
By /s/ Michael F. Donohue, Jr.
Name: Michael F. Donohue, Jr.
Title: Managing Director
Address:
299 Park Avenue
New York, NY 10022
Telex:
Facsimile: (212) 821-3383
By /s/ Bruce T. Richards
Name: Bruce T. Richards
Title: Managing Director
_________________________
Total Commitments
$850,000,000
UNION BANK OF SWITZERLAND, as
Agent,
By /s/ Michael F. Donohue, Jr.
Name: Michael F. Donohue, Jr.
Title: Managing Director
Address:
299 Park Avenue
New York, NY 10022
Telex:
Facsimile: (212) 821-3383
By /s/ Bruce T. Richards
Name: Bruce T. Richards
Title: Managing Director
<PAGE>
PRICING SCHEDULE
Each of "Euro-Dollar Margin" and "CD Margin"
means, for any date, the rates set forth below in the row
opposite such term and in the column corresponding to the
"Pricing Level" that applies at such date:
Level I Level II Level III
CD Margin 0.425% 0.475% 0.625%
Euro-Dollar 0.300% 0.350% 0.500%
For purposes of this Schedule, the following terms have
the following meanings:
"D&P" means Duff & Phelps Credit Rating Co. or any
successor thereto.
"Level I Pricing" applies at any date if, at such date,
the Borrower's commercial paper ratings achieve at least two of
the following three ratings thresholds: (x) A-1 or higher by S&P,
(y) P-1 or higher by Moody's or (z) D-1 or higher by D&P.
"Level II Pricing" applies at any date if, at such
date, (i) the Borrower's commercial paper ratings achieve at
least two of the following three ratings thresholds: (x) A-2 or
higher by S&P, (y) P-2 or higher by Moody's or (z) D-2 or higher
by D&P and (ii) Level I Pricing does not apply.
"Level III Pricing" applies at any date if, at such
date, no other Pricing Level applies.
"Moody's" means Moody's Investors Service, Inc. or any
successor thereto.
"Pricing Level" refers to the determination of which of
Level I, Level II or Level III Pricing applies at any date.
"S&P" means Standard & Poor's Ratings Service or any
successor thereto.
The credit ratings to be utilized for purposes of this Schedule
are those assigned to the unsecured commercial paper of the
Borrower without third-party credit enhancement, and any rating
assigned to any other debt security of the Borrower shall be
disregarded. The rating in effect at any date is that in effect
at the close of business on such date.
<PAGE>
Exhibits
<PAGE>
EXHIBIT A - Note
NOTE
$[ ] New York, New York
___________ __, 199_
For value received, Central and South West
Corporation, a Delaware corporation (the "Borrower"),
promises to pay to the order of ______________________ (the
"Bank"), for the account of its Applicable Lending Office,
the lesser of (i) $[ ] and (ii) the unpaid principal
amount of each Loan made by the Bank to the Borrower
pursuant to the Credit Agreement referred to below on the
maturity date provided for in the Credit Agreement. The
Borrower promises to pay interest on the unpaid principal
amount of each such Loan on the dates and at the rate or
rates provided for in the Credit Agreement. All such
payments of principal and interest shall be made in lawful
money of the United States in Federal or other immediately
available funds at the office of Union Bank of Switzerland,
New York, New York.
All Loans made by the Bank, the respective types
thereof and all prepayments and repayments of the principal
thereof shall be recorded by the Bank and, if the Bank so
elects in connection with any transfer or enforcement
hereof, appropriate notations to evidence the foregoing
information with respect to each such Loan then outstanding
may be endorsed by the Bank on the schedule attached hereto,
or on a continuation of such schedule attached to and made a
part hereof; provided that the failure of the Bank to make
any such recordation or endorsement shall not affect the
obligations of the Borrower hereunder or under the Credit
Agreement.
This note is one of the Notes referred to in the
Credit Agreement dated as of November 6, 1995 among Central
and South West Corporation, the banks listed on the
signature pages thereof and Union Bank of Switzerland, as
Agent (as the same may be amended from time to time, the
"Credit Agreement"). Terms defined in the Credit Agreement
are used herein with the same meanings. Reference is made
to the Credit Agreement for provisions for the prepayment
hereof and the acceleration of the maturity hereof.
Central and South West
Corporation
By____________________
Name:
Title:
<PAGE>
LOANS AND PAYMENTS OF PRINCIPAL
__________________________________________________________________________
Amount Type Amount of
of of Principal Notation
Date Loan Loan Repaid Made By
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
<PAGE>
EXHIBIT B - Opinion of Special Counsel for the Borrower
OPINION OF
VINSON & ELKINS L.L.P.
________________, 199_
To the Banks and the Agent
Referred to Below
c/o Union Bank of Switzerland
as Agent
299 Park Avenue
New York, New York 10017
Dear Sirs:
We have acted as special counsel to Central and
South West Corporation (the "Borrower") in connection with
the Credit Agreement (the "Credit Agreement") dated as of
November 6, 1995 between the Borrower, the banks listed on
the signature pages thereof and Union Bank of Switzerland,
as Agent. Except as otherwise provided herein, terms
defined in the Credit Agreement are used herein as defined
therein. This opinion is being delivered pursuant to
Section 3.1(b) of the Credit Agreement.
In rendering the opinions expressed below, we have
examined the following agreements, instruments and other
documents:
(a) the Credit Agreement;
(b) the promissory notes executed and delivered by
the Borrower under the Credit Agreement on the
date hereof (the "Notes"); and
(c) such records of the Borrower and such other
documents as we have deemed necessary as a
basis for the opinions expressed below.
In our examination, we have assumed the genuineness
of all signatures, the authenticity of all documents
submitted to us as originals and the conformity with
authentic original documents of all documents submitted to
us as copies. When relevant facts were not independently
established, we have relied upon statements of governmental
officials and upon representations made in or pursuant to
the Credit Agreement and certificates of appropriate
representatives of the Borrower.
In rendering the opinions expressed below, we have
assumed, with respect to all of the documents referred to in
this opinion letter, that (except, to the extent set forth
in the opinions expressed below, as to the Borrower):
(i) such documents have been duly authorized
by, have been duly executed and delivered
by, and constitute legal, valid and
binding and enforceable obligations of,
all of the parties to such documents;
(ii) all signatories to such documents have
been duly authorized; and
(iii) all of the parties to such documents are
duly organized and validly existing and
have the power and authority (corporate or
other) to execute, deliver and perform
such documents.
Based upon and subject to the foregoing and subject
also to the comments and qualifications set forth below, and
having considered such questions of law as we have deemed
necessary as a basis for the opinions expressed below, we
are of the opinion that:
1. The Borrower is a corporation validly existing
and in good standing under the laws of the State of Delaware
and has all corporate powers required to carry on its
business described in its Annual Report on Form 10-K for the
year ended December 31, 1994 (the "10-K").
2. The execution, delivery and performance by the
Borrower of the Credit Agreement and the Notes, and the
borrowings by the Borrower under the Credit Agreement, are
within the corporate powers of the Borrower, have been duly
authorized by all necessary corporate action on the part of
the Borrower and require no action by or in respect of, or
filing with, any governmental or regulatory authority or
agency of the United States of America or the State of New
York, except for the order of the Commission adopted
pursuant to the Public Utility Holding Company Act of 1935,
as amended (the "Act") (Release No. 35-26156; International
Series Release No. 743; 70-8423) as amended by order of the
Commission (Release No. 35-26383) (jointly called the
"Order") which has been obtained and is in full force and
effect, and do not contravene, or constitute a default
under, any provision of applicable law or regulation or of
the certificate of incorporation or by-laws of the Borrower
or of any agreement or instrument governing Material Debt of
the Borrower or of any material agreement, judgment,
injunction, order, decree or other material instrument
binding upon the Borrower or result in the creation or
imposition of any Lien on any asset of the Borrower.
3. The Credit Agreement and the Notes constitute
the legal, valid and binding obligations of the Borrower,
enforceable against it in accordance with their respective
terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to
or affecting the rights of creditors generally and except as
the enforceability of the Credit Agreement and the Notes is
subject to the application of general principles of equity
(regardless of whether considered in a proceeding in equity
or at law), including, without limitation, (a) the possible
unavailability of specific performance, injunctive relief or
any other equitable remedy and (b) concepts of materiality,
reasonableness, good faith and fair dealing.
The foregoing opinions are subject to the following
comments and qualifications:
(A) The enforceability of Section 9.3 of the Credit
Agreement may be limited by laws limiting the
enforceability of provisions exculpating or exempting a
party, or requiring indemnification of a party for,
liability for its own action or inaction to the extent
the action or inaction involves gross negligence,
recklessness, willful misconduct or unlawful conduct.
(B) The enforceability of provisions in the Credit
Documents to the effect that terms may not be waived or
modified except in writing may be limited under certain
circumstances.
(C) We express no opinion as to (i) the effect of
the laws of any jurisdiction in which any Bank is located
(other than the State of New York) that limit the
interest, fees or other charges such Bank may impose
and (ii) the second sentence of Section 9.8 of the Credit
Agreement, insofar as such sentence relates to the
subject matter jurisdiction of the United States District
Court for the Southern District of New York to adjudicate
any controversy related to any of the Credit Documents.
(D) We express no opinion as to the enforceability
of the following provisions set forth in the Credit
Agreement:
(i) provisions purporting to waive rights to
notice, jury trial, or other rights or
benefits that cannot be waived under
applicable law;
(ii) provisions providing that remedies are
cumulative; and
(iii) provisions that decisions by a party are
conclusive.
(E) With respect to our opinions expressed in
paragraph 2 above, we have not undertaken any special
examination of the files of the Borrower or any public
records of judgments, injunctions, orders or decrees
applicable to the Borrower. We have, with your
permission, limited our review of (i) material agreements
and material instruments to those agreements and
instruments listed as material in the exhibit index in
the 10-K and (ii) any Material Debt of the Borrower,
judgments, injunctions, orders and decrees binding on the
Borrower to those identified as such in the Certificate
of an officer of the Borrower attached hereto. We
express no opinion as to compliance with accounting or
financial covenants or requirements contained in any of
the aforesaid orders, decrees, Material Debt, material
agreements or instruments.
(F) In connection with the opinions expressed in
paragraph 2 above, we note that the authority under the
Order for recourse borrowings and investment by the
Borrower and its subsidiaries in exempt wholesale
generators (as defined in Section 32(e) of the Act) and
foreign utility companies (as defined in Section 33(a) of
the Act) is limited to 50% of the Borrower's
"consolidated retained earnings" as determined in
accordance with Rule 53(a)(1)(ii).
The foregoing opinions are limited to matters
involving the federal laws of the United States, the
Delaware General Corporation Law and the law of the State of
New York, and we do not express any opinion as to the laws
of any other jurisdiction.
At the request of our client, this opinion letter
is, pursuant to Section 3.1(b) of the Credit Agreement,
provided to you by us in our capacity as counsel to the
Borrower and may not be relied upon by any other Person
(except that any Person that becomes a party to the Credit
Agreement as a Bank after the date hereof may rely upon this
opinion as if it were addressed to such Person as of the
date hereof) or for any purpose other than in connection
with the transactions contemplated by the Credit Agreement
without, in each instance, our prior written consent.
Very truly yours,
<PAGE>
EXHIBIT C - Opinion of Special Counsel for the Agent and the
Co-Arrangers
OPINION OF
CRAVATH, SWAINE & MOORE
______________, 1995
Central and South West Corporation
$850,000,000 Credit Agreement
dated as of November 6, 1995
Ladies and Gentlemen:
We have acted as special counsel to Union Bank of
Switzerland, in its capacity as administrative agent (the
"Agent"), and Citibank, N.A., Credit Suisse and Union Bank
of Switzerland, in their respective capacities as Co-
Arrangers, in connection with the preparation, execution and
delivery of the Credit Agreement dated as of November 6,
1995 (the "Credit Agreement"), among Central and South West
Corporation (the "Borrower"), the Banks named therein (the
"Banks") and the Agent. In that connection, we have
examined executed counterpart copies of the Credit Agreement
and executed copies of the Notes.
In rendering our opinion, we have with your
consent assumed (i) the due authorization, execution and
delivery of the Credit Agreement by each party thereto and
(ii) the authenticity of all documents submitted to us as
originals and the conformity to original documents of all
documents submitted to us as copies.
Based upon the foregoing, we are of opinion that
the Credit Agreement and the Notes constitute the legal,
valid and binding obligations of the Borrower, enforceable
against the Borrower in accordance with their respective
terms, subject to applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and other
laws affecting creditors' rights generally from time to time
in effect and to general equitable principles (including,
without limitation, concepts of materiality, reasonableness,
good faith and fair dealing), regardless of whether such
enforceability is considered in a proceeding in equity or at
law. In addition, (i) we note that insofar as provisions
contained in the Credit Agreement provide for
indemnification, the enforcement thereof may be limited by
public policy considerations, (ii) we express no opinion as
to the last sentence of Section 9.4 of the Credit Agreement
and (iii) we express no opinion as to the effect of the law
of any jurisdiction other than the State of New York wherein
any Bank may be located or wherein enforcement of the Credit
Agreement or any Note may be sought that limits rates of
interest legally chargeable or collectable.
We are admitted to practice only in the State of
New York and express no opinion as to matters governed by
any laws other than the laws of the State of New York and
the Federal laws of the United States of America. This
opinion is being delivered to you pursuant to Section 3.1(c)
of the Credit Agreement, and may not be relied upon by any
other person without our prior written consent, except that
any person that becomes a party to the Credit Agreement as a
Bank after the date hereof may rely upon this opinion as if
it were addressed to such person as of the date hereof.
Very truly yours,
The Agent and the Banks
Referred to Above
In care of Union Bank of Switzerland
as Agent
299 Park Avenue
New York, New York 10017
120A
EXHIBIT D - Assignment and Assumption Agreement
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of _________, 19__ among <NAME OF
ASSIGNOR> (the "Assignor"), <NAME OF ASSIGNEE> (the
"Assignee"), CENTRAL AND SOUTH WEST CORPORATION (the
"Borrower") and UNION BANK OF SWITZERLAND, as Agent (the
"Agent").
WHEREAS, this Assignment and Assumption Agreement (the
"Agreement") relates to the Credit Agreement dated as of
November 6, 1995 among the Borrower, the Assignor and the
other Banks party thereto, as Banks, and the Agent (the
"Credit Agreement");
[WHEREAS, as provided under the Credit Agreement, the
Assignor has a Commitment to make Loans to the Borrower in
an aggregate principal amount at any time outstanding not to
exceed $__________;]
WHEREAS, Loans made to the Borrower by the Assignor
under the Credit Agreement in the aggregate principal amount
of $__________ are outstanding at the date hereof; and
WHEREAS, the Assignor proposes to assign to the
Assignee all of the rights of the Assignor under the Credit
Agreement in respect of a portion of its [Commitment]
[Loans] thereunder in an amount equal to $__________ (the
"Assigned Amount"), and the Assignee proposes to accept
assignment of such rights and assume the corresponding
obligations from the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing and
the mutual agreements contained herein, the parties hereto
agree as follows:
Section 1. Definitions. All capitalized terms not
otherwise defined herein shall have the respective meanings
set forth in the Credit Agreement.
Section 2. Assignment. The Assignor hereby assigns
and sells to the Assignee all of the rights of the Assignor
under the Credit Agreement to the extent of the Assigned
Amount, and the Assignee hereby accepts such assignment from
the Assignor and assumes all of the obligations of the
Assignor under the Credit Agreement to the extent of the
Assigned Amount, including the purchase from the Assignor of
the corresponding portion of the principal amount of the
Loans made by the Assignor outstanding at the date hereof.
Upon the execution and delivery hereof by the Assignor, the
Assignee, [the Borrower and the Agent] and the payment of
the amounts specified in Section 3 required to be paid on
the date hereof (i) the Assignee shall, as of the date
hereof, succeed to the rights and be obligated to perform
the obligations of a Bank under the Credit Agreement [with a
Commitment in an amount equal to the Assigned Amount],
and (ii) [the Commitment of the Assignor shall, as of the
date hereof, be reduced by a like amount] and the Assignor
released from its obligations under the Credit Agreement to
the extent such obligations have been assumed by the
Assignee. The assignment provided for herein shall be
without recourse to the Assignor.
Section 3. Payments. As consideration for the
assignment and sale contemplated in Section 2 hereof, the
Assignee shall pay to the Assignor on the date hereof in
Federal funds the amount heretofore agreed between them. It
is understood that commitment and/or facility fees accrued
to the date hereof are for the account of the Assignor and
such fees accruing from and including the date hereof are
for the account of the Assignee. Each of the Assignor and
the Assignee hereby agrees that if it receives any amount
under the Credit Agreement which is for the account of the
other party hereto, it shall receive the same for the
account of such other party to the extent of such other
party's interest therein and shall promptly pay the same to
such other party.
- --------
1 Amounts should combine prinicpal together with accrued
interest and breakage compensation, if any, to be paid by the
Assignee, net of any portion of any upfront fee to be paid by the
Assignor to the Assignee. It may be preferable in an appropriate
case to specify these amounts generically or by formula rather
than as a fixed sum.
[Section 4. Consent of the Borrower and the Agent.
This Agreement is conditioned upon the consent of the
Borrower and the Agent pursuant to Section 9.6(c) of the
Credit Agreement. The execution of this Agreement by the
Borrower and the Agent is evidence of this consent.
Pursuant to Section 9.6(c), the Borrower agrees to execute
and deliver a Note payable to the order of the Assignee to
evidence the assignment and assumption provided for herein.]
Section 5. Non-Reliance on Assignor. The Assignor
makes no representation or warranty in connection with, and
shall have no responsibility with respect to, the solvency,
financial condition, or statements of the Borrower, or the
validity and enforceability of the obligations of the
Borrower in respect of the Credit Agreement or any Note.
The Assignee acknowledges that it has, independently and
without reliance on the Assignor, and based on such
documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this
Agreement and will continue to be responsible for making its
own independent appraisal of the business, affairs and
financial condition of the Borrower.
Section 6. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of New York.
Section 7. Counterparts. This Agreement may be
signed in any number of counterparts, each of which shall be
an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed and delivered by their duly
authorized officers as of the date first above written.
<NAME OF ASSIGNOR>
By_________________________
Name:
Title:
<NAME OF ASSIGNEE>
By__________________________
Name:
Title:
CENTRAL AND SOUTH WEST CORPORATION
By__________________________
Name:
Title:
UNION BANK OF SWITZERLAND
By__________________________
Name:
Title:
EXHIBIT 12.1
CENTRAL POWER AND LIGHT COMPANY
RATIO OF EARNINGS TO FIXED CHARGES
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1995
(Thousands Except Ratio)
(Unaudited)
Operating Income $279,332
Adjustments:
Federal income taxes 60,792
Provision for deferred Federal income taxes (42,955)
Deferred investment tax credits (5,789)
Other income and deductions 12,695
Allowance for borrowed and equity funds
used during construction 5,447
Mirror CWIP amortization 47,750
Earnings $357,272
Fixed Charges:
Interest on long-term debt $117,385
Interest on short-term debt and other 18,487
Fixed Charges $135,872
Ratio of Earnings to Fixed Charges 2.63
EXHIBIT 12.2
CENTRAL POWER AND LIGHT COMPANY
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1995
(Thousands Except Ratio)
(Unaudited)
Operating Income $279,332
Adjustments:
Federal income taxes 60,792
Provision for deferred Federal income taxes (42,955)
Deferred investment tax credits (5,789)
Other income and deductions 12,695
Allowance for borrowed and equity funds
used during construction 5,447
Mirror CWIP amortization 47,750
Earnings $357,272
Fixed Charges:
Interest on long-term debt $117,385
Interest on short-term debt and other 18,487
Preferred stock dividend requirements 15,038
Fixed Charges and Preferred Requirements $150,910
Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends 2.37
EXHIBIT 12.3
PUBLIC SERVICE COMPANY OF OKLAHOMA (CONSOLIDATED)
RATIO OF EARNINGS TO FIXED CHARGES
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1995
(Thousands Except Ratio)
(Unaudited)
Operating Income $114,568
Adjustments:
Federal and state income taxes 39,061
Provision for deferred Federal
and state income taxes 3,558
Deferred investment tax credits (2,789)
Other income and deductions 2,777
Allowance for borrowed and equity funds
used during construction 4,682
Earnings $161,857
Fixed Charges:
Interest on long-term debt $ 29,594
Amortization of debt issuance cost 1,568
Other interest 4,192
Fixed Charges $ 35,354
Ratio of Earnings to Fixed Charges 4.58
EXHIBIT 12.4
SOUTHWESTERN ELECTRIC POWER COMPANY
RATIO OF EARNINGS TO FIXED CHARGES
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1995
(Thousands except Ratio)
(Unaudited)
Operating Income $166,324
Adjustments:
Federal and state income taxes 29,233
Provision for deferred Federal and
state income taxes 17,561
Deferred investment tax credits (4,717)
Other income and deductions 3,175
Allowance for borrowed and equity funds
used during construction 10,285
Interest portion of financing leases 1,978
Earnings $223,839
Fixed Charges:
Interest on long-term debt $ 44,127
Amortization of debt issuance cost 3,558
Other interest 6,560
Interest portion of financing leases 1,978
Fixed Charges $ 56,223
Ratio of Earnings to Fixed Charges 3.98
<PAGE> 70
EXHIBIT 12.5
WEST TEXAS UTILITIES COMPANY
RATIO OF EARNINGS TO FIXED CHARGES
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1995
(Thousands Except Ratio)
(Unaudited)
Operating Income $58,829
Adjustments:
Federal income taxes 3,602
Provision for deferred Federal income taxes 4,344
Deferred investment tax credits (1,321)
Other income and deductions 2,834
Allowance for borrowed and equity funds
used during construction 973
Earnings $69,261
Fixed Charges:
Interest on long-term debt $20,110
Interest on short-term debt and other 3,989
Fixed Charges $24,099
Ratio of Earnings to Fixed Charges 2.87
<TABLE> <S> <C>
<ARTICLE> UT
<SUBSIDIARY>
<NUMBER> 001
<NAME> CENTRAL AND SOUTH WEST CORPORATION
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-END> SEP-30-1995 SEP-30-1995
<BOOK-VALUE> PER-BOOK PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 7,433 7,433
<OTHER-PROPERTY-AND-INVEST> 624 624
<TOTAL-CURRENT-ASSETS> 1,483 1,483
<TOTAL-DEFERRED-CHARGES> 515 515
<OTHER-ASSETS> 1,241 1,241
<TOTAL-ASSETS> 11,296 11,296
<COMMON> 673 673
<CAPITAL-SURPLUS-PAID-IN> 597 597
<RETAINED-EARNINGS> 1,914 1,914
<TOTAL-COMMON-STOCKHOLDERS-EQ> 3,184 3,184
34 34
292 292
<LONG-TERM-DEBT-NET> 2,940 2,940
<SHORT-TERM-NOTES> 0 0
<LONG-TERM-NOTES-PAYABLE> 50 50
<COMMERCIAL-PAPER-OBLIGATIONS> 1,544 1,544
<LONG-TERM-DEBT-CURRENT-PORT> 26 26
2 2
<CAPITAL-LEASE-OBLIGATIONS> 11 11
<LEASES-CURRENT> 4 4
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3,209 3,209
<TOT-CAPITALIZATION-AND-LIAB> 11,296 11,296
<GROSS-OPERATING-REVENUE> 1,087 2,666
<INCOME-TAX-EXPENSE> 87 64
<OTHER-OPERATING-EXPENSES> 733 2,075
<TOTAL-OPERATING-EXPENSES> 820 2,139
<OPERATING-INCOME-LOSS> 267 527
<OTHER-INCOME-NET> 21 76
<INCOME-BEFORE-INTEREST-EXPEN> 288 603
<TOTAL-INTEREST-EXPENSE> 85 249
<NET-INCOME> 203 354
4 14
<EARNINGS-AVAILABLE-FOR-COMM> 199 340
<COMMON-STOCK-DIVIDENDS> 83 248
<TOTAL-INTEREST-ON-BONDS> 60 172
<CASH-FLOW-OPERATIONS> 213 505
<EPS-PRIMARY> 1.04 1.78
<EPS-DILUTED> 1.04 1.78
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<SUBSIDIARY>
<NUMBER> 003
<NAME> CENTRAL POWER AND LIGHT COMPANY
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-END> SEP-30-1995 SEP-30-1995
<BOOK-VALUE> PER-BOOK PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,470,450 3,470,450
<OTHER-PROPERTY-AND-INVEST> 1,538 1,538
<TOTAL-CURRENT-ASSETS> 161,795 161,795
<TOTAL-DEFERRED-CHARGES> 1,151,292 1,151,292
<OTHER-ASSETS> 94,225 94,225
<TOTAL-ASSETS> 4,879,300 4,879,300
<COMMON> 168,888 168,888
<CAPITAL-SURPLUS-PAID-IN> 405,000 405,000
<RETAINED-EARNINGS> 885,811 885,811
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,459,699 1,459,699
0 0
250,351 250,351
<LONG-TERM-DEBT-NET> 1,517,887 1,517,887
<SHORT-TERM-NOTES> 0 0
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 526 526
0 0
<CAPITAL-LEASE-OBLIGATIONS> 183 183
<LEASES-CURRENT> 73 73
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,650,581 1,650,581
<TOT-CAPITALIZATION-AND-LIAB> 4,879,300 4,879,300
<GROSS-OPERATING-REVENUE> 358,790 810,597
<INCOME-TAX-EXPENSE> 39,295 3,677
<OTHER-OPERATING-EXPENSES> 215,413 575,764
<TOTAL-OPERATING-EXPENSES> 254,708 579,441
<OPERATING-INCOME-LOSS> 104,082 231,156
<OTHER-INCOME-NET> 13,079 44,038
<INCOME-BEFORE-INTEREST-EXPEN> 117,161 275,194
<TOTAL-INTEREST-EXPENSE> 34,923 100,950
<NET-INCOME> 82,238 174,244
3,535 10,899
<EARNINGS-AVAILABLE-FOR-COMM> 78,703 163,345
<COMMON-STOCK-DIVIDENDS> 75,000 135,000
<TOTAL-INTEREST-ON-BONDS> 32,082 89,176
<CASH-FLOW-OPERATIONS> 82,263 235,230
<EPS-PRIMARY> 0.41 0.85
<EPS-DILUTED> 0.41 0.85
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 81027
<NAME> PUBLIC SERVICE COMPANY OF OKLAHOMA
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-END> SEP-30-1995 SEP-30-1995
<BOOK-VALUE> PER-BOOK PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,318,934 1,318,934
<OTHER-PROPERTY-AND-INVEST> 3,986 3,986
<TOTAL-CURRENT-ASSETS> 99,128 99,128
<TOTAL-DEFERRED-CHARGES> 17,446 17,446
<OTHER-ASSETS> 36,255 36,255
<TOTAL-ASSETS> 1,475,749 1,475,749
<COMMON> 157,230 157,230
<CAPITAL-SURPLUS-PAID-IN> 180,000 180,000
<RETAINED-EARNINGS> 162,300 162,300
<TOTAL-COMMON-STOCKHOLDERS-EQ> 499,530 499,530
0 0
19,826 19,826
<LONG-TERM-DEBT-NET> 378,876 378,876
<SHORT-TERM-NOTES> 43,308 43,308
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 25,000 25,000
0 0
<CAPITAL-LEASE-OBLIGATIONS> 0 0
<LEASES-CURRENT> 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 509,209 509,209
<TOT-CAPITALIZATION-AND-LIAB> 1,475,749 1,475,749
<GROSS-OPERATING-REVENUE> 232,156 542,215
<INCOME-TAX-EXPENSE> 31,012 37,659
<OTHER-OPERATING-EXPENSES> 142,620 404,814
<TOTAL-OPERATING-EXPENSES> 173,632 442,473
<OPERATING-INCOME-LOSS> 58,524 99,742
<OTHER-INCOME-NET> (212) 3,543
<INCOME-BEFORE-INTEREST-EXPEN> 58,312 103,285
<TOTAL-INTEREST-EXPENSE> 7,630 24,642
<NET-INCOME> 50,682 78,643
204 612
<EARNINGS-AVAILABLE-FOR-COMM> 50,478 78,031
<COMMON-STOCK-DIVIDENDS> 30,000 40,000
<TOTAL-INTEREST-ON-BONDS> 7,398 22,196
<CASH-FLOW-OPERATIONS> 65,633 128,517
<EPS-PRIMARY> 0.26 0.41
<EPS-DILUTED> 0.26 0.41
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<SUBSIDIARY>
<NUMBER> 005
<NAME> SOUTHWESTERN ELECTRIC POWER COMPANY
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-END> SEP-30-1995 SEP-30-1995
<BOOK-VALUE> PER-BOOK PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,877,134 1,877,134
<OTHER-PROPERTY-AND-INVEST> 3,250 3,250
<TOTAL-CURRENT-ASSETS> 162,950 162,950
<TOTAL-DEFERRED-CHARGES> 33,310 33,310
<OTHER-ASSETS> 20,911 20,911
<TOTAL-ASSETS> 2,097,555 2,097,555
<COMMON> 135,660 135,660
<CAPITAL-SURPLUS-PAID-IN> 245,000 245,000
<RETAINED-EARNINGS> 324,059 324,059
<TOTAL-COMMON-STOCKHOLDERS-EQ> 704,719 704,719
33,578 33,578
16,032 16,032
<LONG-TERM-DEBT-NET> 534,214 534,214
<SHORT-TERM-NOTES> 0 0
<LONG-TERM-NOTES-PAYABLE> 50,000 50,000
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 145 145
2,400 2,400
<CAPITAL-LEASE-OBLIGATIONS> 10,436 10,436
<LEASES-CURRENT> 3,755 3,755
<OTHER-ITEMS-CAPITAL-AND-LIAB> 742,276 742,276
<TOT-CAPITALIZATION-AND-LIAB> 2,097,555 2,097,555
<GROSS-OPERATING-REVENUE> 266,268 648,468
<INCOME-TAX-EXPENSE> 23,969 37,744
<OTHER-OPERATING-EXPENSES> 182,419 475,379
<TOTAL-OPERATING-EXPENSES> 206,388 513,123
<OPERATING-INCOME-LOSS> 59,880 135,345
<OTHER-INCOME-NET> 374 3,931
<INCOME-BEFORE-INTEREST-EXPEN> 60,254 139,276
<TOTAL-INTEREST-EXPENSE> 11,781 37,208
<NET-INCOME> 48,473 102,068
854 2,472
<EARNINGS-AVAILABLE-FOR-COMM> 47,619 99,596
<COMMON-STOCK-DIVIDENDS> 51,000 73,000
<TOTAL-INTEREST-ON-BONDS> 10,986 33,423
<CASH-FLOW-OPERATIONS> 84,944 187,164
<EPS-PRIMARY> 0.25 0.52
<EPS-DILUTED> 0.25 0.52
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<SUBSIDIARY>
<NUMBER> 006
<NAME> WEST TEXAS UTILITIES COMPANY
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-END> SEP-30-1995 SEP-30-1995
<BOOK-VALUE> PER-BOOK PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 673,280 673,280
<OTHER-PROPERTY-AND-INVEST> 796 796
<TOTAL-CURRENT-ASSETS> 75,826 75,826
<TOTAL-DEFERRED-CHARGES> 26,298 26,298
<OTHER-ASSETS> 42,427 42,427
<TOTAL-ASSETS> 817,831 817,831
<COMMON> 137,214 137,214
<CAPITAL-SURPLUS-PAID-IN> 2,236 2,236
<RETAINED-EARNINGS> 141,486 141,486
<TOTAL-COMMON-STOCKHOLDERS-EQ> 280,936 280,936
0 0
6,291 6,291
<LONG-TERM-DEBT-NET> 249,518 249,518
<SHORT-TERM-NOTES> 12,232 12,232
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 650 650
0 0
<CAPITAL-LEASE-OBLIGATIONS> 0 0
<LEASES-CURRENT> 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 268,204 268,204
<TOT-CAPITALIZATION-AND-LIAB> 817,831 817,831
<GROSS-OPERATING-REVENUE> 87,178 245,148
<INCOME-TAX-EXPENSE> 2,063 6,183
<OTHER-OPERATING-EXPENSES> 54,683 185,451
<TOTAL-OPERATING-EXPENSES> 56,746 191,634
<OPERATING-INCOME-LOSS> 30,432 53,514
<OTHER-INCOME-NET> (468) 576
<INCOME-BEFORE-INTEREST-EXPEN> 29,964 54,090
<TOTAL-INTEREST-EXPENSE> 5,943 17,910
<NET-INCOME> 24,021 36,180
66 198
<EARNINGS-AVAILABLE-FOR-COMM> 23,955 35,982
<COMMON-STOCK-DIVIDENDS> 16,000 27,000
<TOTAL-INTEREST-ON-BONDS> 5,297 15,435
<CASH-FLOW-OPERATIONS> 32,930 58,978
<EPS-PRIMARY> 0.12 0.19
<EPS-DILUTED> 0.12 0.19
</TABLE>
