As filed with the Securities and Exchange Commission on June 17, 1997.
Registration No. 333-_____
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM S-3
REGISTRATION STATEMENT
under
The Securities Act of 1933
-----------------------
IES UTILITIES INC.
(Exact Name of Registrant as Specified in Its Charter)
IOWA 42-0331370
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
IES Tower
200 First Street S.E.
Cedar Rapids, Iowa 52401
(319) 398-4411
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
-----------------------
Stephen W. Southwick
Vice President, General Counsel & Secretary
IES Utilities Inc.
200 First Street S.E.
Cedar Rapids, Iowa 52401
(319) 398-8147
(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Agent For Service)
It is respectfully requested that the Commission send copies of all
notices, orders and communications to:
Richard L. Harden
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, NY 10004-1490
(212) 858-1228
-----------------------
Approximate date of commencement of proposed sale of securities to the
public: From time to time after this Registration Statement becomes effective.
-----------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
- ----------------------- -------------------- ------------------------- ------------------------ ---------------------
Proposed Maximum Proposed Maximum
Title of Securities Amount to Aggregate Price Aggregate Offering Amount of
to be Registered Be Registered Per Unit <F1> Price <F1> Registration Fee <F1>
- ----------------------- -------------------- ------------------------- ------------------------ ---------------------
- ----------------------- -------------------- ------------------------- ------------------------ =====================
Debt Securities $50,000,000 100% $50,000,000 $15,152
- ----------------------- -------------------- ------------------------- ------------------------ =====================
<FN>
<F1> Estimated solely for the purpose of calculating the amount of the
registration fee.
</FN>
Pursuant to Rule 429 under the Securities Act of 1933, the Prospectus herein
also relates to $85,000,000 principal amount of Debt Securities registered in
Registration Statement No. 33-62259, for which a $29,310 filing fee was paid
upon the filing of such Registration Statement.
The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there by any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
================================================================================
PROSPECTUS
Subject to Completion, Dated June 17, 1997
$135,000,000
IES UTILITIES INC.
DEBT SECURITIES
IES Utilities Inc. (the "Company") may from time to time issue up to
$135,000,000 aggregate principal amount of its various debt securities,
including Collateral Trust Bonds and Junior Subordinated Debentures
(collectively referred to as "Securities"), in one or more series, at prices and
on terms to be determined at the time of sale. The terms of the Securities in
respect of which this Prospectus is being delivered, including, where
applicable, the series designation, the principal amount of the series, the
maturity, the rate and time of payment of interest, the initial public offering
price, the provisions for redemption and other provisions, will be set forth in
one or more Prospectus Supplements (each a "Prospectus Supplement"), together
with the terms of offering of the Securities.
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------------
The Securities may be sold by the Company through underwriters, dealers
or agents, or directly to one or more purchasers pursuant to terms fixed at the
time of sale. The Prospectus Supplement will set forth the names of the
underwriters, dealers or agents, if any, any applicable commissions or
discounts, and the net proceeds to the Company from any such sale. See "Plan of
Distribution" for possible indemnification arrangements for underwriters,
dealers or agents.
The date of this Prospectus is ___________, 1997.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Securities and
Exchange Commission (the "SEC"). Such reports and other information can be
inspected and copied at the public reference facilities maintained by the SEC at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; and
at the SEC's regional offices located at 1400 Citicorp Center, 500 West Madison
Street, Chicago, Illinois 60601 and Seven World Trade Center, Suite 1300, New
York, New York 10048. Copies of such materials can be obtained at prescribed
rates from the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The SEC maintains a Web site (http://www.sec.gov) that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC. In addition, such
reports and other information concerning the Company can be inspected at the
principal office of the Company, 200 First Street S.E., Cedar Rapids, Iowa
52401.
The Company has filed with the SEC a registration statement on Form S-3
(herein together with all amendments and exhibits referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Securities offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the SEC. For further information, reference is made to the
Registration Statement and to the exhibits and schedules filed therewith, which
may be inspected without charge at the office of the SEC at 450 Fifth Street,
N.W., Washington, D.C. 20549. Copies of such documents may also be obtained from
the SEC at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the SEC pursuant to
the Exchange Act are incorporated in this Prospectus by reference:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1996;
2. The Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1997; and
3. The Company's Current Report on Form 8-K dated April 28, 1997.
All reports and other documents subsequently filed by the Company
pursuant to Sections 13, 14 or 15(d) of the Exchange Act prior to the
termination of the offering of the Securities shall be deemed to be incorporated
by reference in this Prospectus and to be a part hereof from the date of filing
such documents; provided, however, that documents filed by the Company pursuant
to Sections 13, 14 or 15(d) of the Exchange Act prior to the end of the fiscal
year covered by the most recent Annual Report on Form 10-K of the Company shall
not be deemed to be incorporated herein by reference or to be a part hereof from
and after the date of the filing of such Annual Reports on Form 10-K. The
documents incorporated herein by reference are sometimes hereinafter called the
"Incorporated Documents." Any statement contained herein or in an Incorporated
Document shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in a Prospectus
Supplement or in any subsequently filed Incorporated Document modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The information relating to the Company contained in this Prospectus
summarizes, is based upon, or refers to, information and financial statements
contained in one or more Incorporated Documents; accordingly, such information
contained herein is qualified in its entirety by reference to Incorporated
Documents and should be read in conjunction therewith.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus has been delivered, upon the
written or oral request of such person, a copy of any or all of the Incorporated
Documents (not including exhibits to such documents unless such exhibits are
specifically incorporated by reference into such documents). Requests for such
copies should be directed to William Jurgensen, Director of Shareholder
Services, IES Industries Inc., 200 First Street S.E., Cedar Rapids, Iowa 52401,
telephone (319) 398-7755.
2
No person has been authorized to give any information or make any
representation not contained in this Prospectus or, with respect to any
Security, the Prospectus Supplement relating thereto, and, if given or made,
such information or representation must not be relied upon as having been
authorized by the Company or any underwriter. This Prospectus and any Prospectus
Supplement do not constitute an offer to sell or a solicitation of an offer to
buy any of the securities offered hereby in any jurisdiction to any person to
whom it is unlawful to make such offer in such jurisdiction. Neither the
delivery of this Prospectus and a Prospectus Supplement nor any sale made
thereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the Company since the date of that Prospectus
Supplement.
TABLE OF CONTENTS
AVAILABLE INFORMATION 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 2
THE COMPANY 3
THE MERGER 4
USE OF PROCEEDS 4
SELECTED CONSOLIDATED FINANCIAL INFORMATION 5
PLAN OF DISTRIBUTION 6
DESCRIPTION OF THE COLLATERAL TRUST BONDS 6
DESCRIPTION OF THE 1940 INDENTURE 17
DESCRIPTION OF THE ISU 1923 INDENTURE 23
DESCRIPTION OF THE SUBORDINATED INDENTURE 27
GLOBAL SECURITIES 39
EXPERTS 39
LEGAL MATTERS 39
THE COMPANY
The Company was incorporated under the laws of the State of Iowa on May
25, 1925. The Company is a public utility operating company with all of its
operations in the State of Iowa and is a wholly-owned subsidiary of IES
Industries Inc. ("Industries"), a public utility holding company. The Company is
the surviving corporation following the merger on December 31, 1993 of Iowa
Southern Utilities Company ("Iowa Southern" or "ISU") with and into Iowa
Electric Light and Power Company ("IE"). The surviving corporation was
subsequently renamed IES Utilities Inc.
3
The Company supplies electric energy and natural gas to a service area
with an estimated population of approximately one million. For the twelve months
ended March 31, 1997, the Company derived approximately 75% of its revenues from
the sale of electric energy, approximately 22% from the sale of natural gas and
approximately 3% from the sale of steam gas. At March 31, 1997, the Company
provided service to approximately 336,000 electric, 176,000 natural gas and 226
steam retail customers as well as 30 resale customers in more than 550 Iowa
communities. The Company's principal executive offices are located at 200 First
Street S.E., Cedar Rapids, Iowa 52401, telephone (319) 398-4411.
Additional information concerning the Company and its operations is
contained in the Incorporated Documents, to which reference is hereby made.
THE MERGER
On November 10, 1995, Industries, WPL Holdings, Inc. ("WPLH") and
Interstate Power Company ("IPC") entered into an Agreement and Plan of Merger,
as amended ("Merger Agreement"), providing for: (a) IPC becoming a wholly-owned
subsidiary of WPLH, and (b) the merger of Industries with and into WPLH, which
merger will result in the combination of Industries and WPLH as a single holding
company (collectively, the "Proposed Merger"). The new holding company will be
named Interstate Energy Corporation ("Interstate Energy") and Industries will
cease to exist. The Proposed Merger, which will be accounted for as a pooling of
interests and is intended to be tax-free for federal income tax purposes, has
been approved by the respective Boards of Directors and shareholders. It is
still subject to approval by several federal and state regulatory agencies. The
companies expect to receive such regulatory approvals by the third or fourth
quarter of 1997.
WPLH is a holding company headquartered in Madison, Wisconsin, and is
the parent company of Wisconsin Power and Light Company ("WP&L") and Heartland
Development Corporation ("HDC"). WP&L supplies electric and gas service to
approximately 385,000 and 150,000 customers, respectively, in south and central
Wisconsin. HDC and its principal subsidiaries are engaged in businesses in three
major areas: environmental engineering and consulting, affordable housing and
energy services. IPC, an operating public utility headquartered in Dubuque,
Iowa, supplies electric and gas service to approximately 165,000 and 49,000
customers, respectively, in northeast Iowa, northwest Illinois and southern
Minnesota.
Interstate Energy will be the parent company of Utilities, WP&L and IPC
and will be registered under the Public Utility Holding Company Act of 1935, as
amended. The Merger Agreement provides that these operating utility companies
will continue to operate as separate entities for a minimum of three years
beyond the effective date of the merger. In addition, the non-utility operations
of the Company and WPLH will be combined shortly after the effective date of the
merger under one entity to manage the diversified operations of Interstate
Energy. The corporate headquarters of Interstate Energy will be in Madison,
Wisconsin.
The Securities and Exchange Commission historically has interpreted the
1935 Act to preclude registered holding companies, with limited exceptions, from
owning both electric and gas utility systems. Although the Securities and
Exchange Commission has recommended that registered holding companies be allowed
to hold both gas and electric utility operations if the affected states agree,
it remains possible that the Securities and Exchange Commission may require as a
condition to its approval of the Proposed Merger that the Company, WPLH and IPC
divest their gas utility properties, and possibly certain non-utility ventures
of the Company and WPLH, within a reasonable time after the effective date of
the Proposed Merger.
Additional information concerning the Proposed Merger is contained in
the Incorporated Documents, to which reference is hereby made.
USE OF PROCEEDS
Except as otherwise provided in the applicable Prospectus Supplement or
a supplement thereto, the Company intends to use the net proceeds to be received
from the issuance and sale of the Securities offered hereby (i) to reduce
short-term debt and (ii) for general corporate purposes.
4
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except percentages and ratios)
The financial data presented below should be read in conjunction with the
Company's consolidated financial statements and notes thereto which are
incorporated by reference in this Prospectus.
Twelve
Months Ended Year Ended December 31,
March 31, 1997 ----------------------------------------------------------
(unaudited) 1996 1995 1994 1993 1992
--------- ----- ---- ---- ---- ----
Income Summary:
Operating revenues............. $782,609 $754,979 $709,826 $685,366 $713,750 $610,262
Operating income............... 152,110 153,725 142,265 135,591 143,329 100,361
Net income..................... 61,452 63,729 59,278 61,210 67,970 45,291
Dividend requirements on
preferred stock.............. 914 914 914 914 914 1,729
Net income available for
common stock<F1>............. 60,538 62,815 58,364 60,296 67,056 43,562
Cash dividends declared
on common stock........... 48,000 44,000 43,000 52,000 31,300 24,721
Ratio of earnings to fixed
charges<F2>.................... 3.09 3.23 3.04 3.18 3.41 2.49
March 31, 1997 (unaudited) <F3>
-------------------------------------------------
Percent of
Actual Capitalization
------ --------------
Capitalization Summary:
Long-term debt<F4>........... $525,529 48.4%
Preferred stock.............. 18,320 1.7%
Common equity................ 541,428 49.9%
-------- -----
Total.......................... $1,085,277 100.0%
========== ======
- --------------------------------
<FN>
<F1> All of the Company's common stock is owned by IES Industries Inc.
<F2> For purposes of computation of these ratios, (a) earnings have been
calculated by adding fixed charges and federal and state income taxes
to net income; (b) fixed charges consist of interest (including
amortization of debt expense, premium and discount) on long-term and
other debt, and the estimated interest component of rents.
<F3> Does not reflect the issuance of the Securities or the use of the
proceeds thereof.
<F4> Includes $63,140,000 of current maturities.
</FN>
5
PLAN OF DISTRIBUTION
The Company may sell the Securities in any of three ways: (i) through
underwriters or dealers, (ii) directly to one or more purchasers, or (iii)
through agents. The applicable Prospectus Supplement will set forth the terms of
any offering of the Securities, including the names of any underwriters or
agents, the purchase price of such Securities, the proceeds to the Company from
such sale, any underwriting discounts and other items constituting underwriters'
compensation, the initial public offering price, and any discounts or
concessions allowed or reallowed or paid to dealers.
If underwriters are used in the sale, the Securities will be acquired
by the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. Such
Securities may be offered to the public either through underwriting syndicates
represented by managing underwriters or by underwriters without a syndicate.
Unless otherwise set forth in the applicable Prospectus Supplement, the
obligations of the underwriters to purchase such Securities will be subject to
certain conditions precedent, and the underwriters will be obligated to purchase
all of such Securities if any of such Securities are purchased. The initial
public offering prices and any discounts or concessions allowed or reallowed or
paid to dealers may be changed from time to time.
The Securities may also be sold directly by the Company or through
agents designated by the Company from time to time. Any agent involved in the
offer or sale of the Securities will be named, and any commissions payable by
the Company to such agent will be set forth, in the applicable Prospectus
Supplement. Unless otherwise indicated in the applicable Prospectus Supplement,
any such agent will act on a reasonable efforts basis for the period of its
appointment.
If so indicated in the applicable Prospectus Supplement, the Company
will authorize agents, underwriters, or dealers to solicit offers by certain
specified institutions to purchase the Securities at the public offering price
set forth in such Prospectus Supplement pursuant to delayed delivery contracts
providing for payment and delivery on a future date specified in such Prospectus
Supplement or a supplement thereto. Such contracts will be subject only to those
conditions set forth in the applicable Prospectus Supplement, and such
Prospectus Supplement will set forth the commissions payable for solicitation of
such contracts.
Any underwriters, dealers, or agents participating in the distribution
of the Securities may be deemed to be underwriters, and any discounts or
commissions received by them on the sale or resale of the Securities may be
deemed to be underwriting discounts and commissions, under the Securities Act.
Agents and underwriters may be entitled under agreements entered into with the
Company to indemnification by the Company against certain liabilities, including
liabilities under the Securities Act. Agents and underwriters may be customers
of, engage in transactions with, or perform services for the Company or its
affiliates in the ordinary course of business.
DESCRIPTION OF THE COLLATERAL TRUST BONDS
General
If the Securities are issued as Collateral Trust Bonds, those
Collateral Trust Bonds will be issued in one or more series as fully registered
bonds, without coupons, under an Indenture of Mortgage and Deed of Trust, dated
as of September 1, 1993 (the "Original Mortgage"), between the Company and The
First National Bank of Chicago, as Trustee (the "Trustee"), as amended and
supplemented. As used herein, the term "Bonds" refers to any series of
Collateral Trust Bonds in respect of which this Prospectus is being delivered.
The Original Mortgage as amended and supplemented by various supplemental
indentures including one or more supplemental indentures relating to any
issuance of Collateral Trust Bonds, is hereinafter referred to as the
"Mortgage." The summaries herein concerning the Collateral Trust Bonds do not
purport to be complete and are subject to the detailed provisions of the
Mortgage, a copy of which was previously filed with the Commission, is listed as
an exhibit to the Registration Statement of which this Prospectus is a part, and
is incorporated herein by reference. Capitalized terms used herein which are not
otherwise defined in this Prospectus have the meanings ascribed thereto in the
Mortgage. Wherever particular provisions of the Mortgage or terms defined
therein are referred to, such provisions or definitions are incorporated by
reference as a part of the statements made herein and such statements are
qualified in their entirety by such reference. References to article and section
numbers herein, unless otherwise indicated, are references to article and
section numbers of the Mortgage.
6
The Mortgage provides that, in addition to Collateral Trust Bonds,
additional debt securities may be issued thereunder, without limitation as to
the aggregate principal amount. (See "Issuance of Additional Securities" below.)
The Bonds will be secured equally and ratably with all other securities issued
under the Mortgage.
Terms of Specific Series of the Bonds
Reference is made to the applicable Prospectus Supplement, or a
supplement thereto, for a description of the following terms of the Bonds: (i)
the title of such Bonds; (ii) the limit, if any, upon the aggregate principal
amount of such Bonds; (iii) the date or dates on which the principal of such
Bonds is payable; (iv) the rate or rates at which such Bonds will bear interest,
if any; the date or dates from which such interest will accrue; the dates on
which such interest will be payable ("Interest Payment Dates"); and the regular
record dates for the interest payable on such Interest Payment Dates; (v) the
option, if any, of the Company to redeem such Bonds and the periods within which
or the dates on which, the prices at which and the terms and conditions upon
which, such Bonds may be redeemed, in whole or in part, upon the exercise of
such option; (vi) the obligation, if any, of the Company to redeem or purchase
Bonds pursuant to any sinking fund or analogous provisions or at the option of
the Holder (as hereinafter defined) and the periods within which or the dates on
which, the prices at which and the terms and conditions upon which, such Bonds
will be redeemed, in whole or in part, pursuant to such obligation; (vii) the
denominations in which such Bonds will be issuable; (viii) whether such Bonds
are to be issued in whole or in part in the form of one or more global Bonds
and, if so, the identity of the depositary for such global Bonds; and (ix) any
other terms of such Bonds not inconsistent with the provisions of the Mortgage.
Payment of Bonds; Transfers; Exchanges
Except as may be provided in the applicable Prospectus Supplement, or a
supplement thereto, interest, if any, on each Bond payable on each Interest
Payment Date will be paid to the person in whose name such Bond is registered
(the registered holder of any Bond being hereinafter called a "Holder") as of
the close of business on the regular record date relating to such Interest
Payment Date; provided, however, that interest payable at maturity (whether at
stated maturity, upon redemption or acceleration of maturity or otherwise,
hereinafter "Maturity") will be paid to the person to whom principal is paid.
However, if there has been a default in the payment of interest on any Bond,
such defaulted interest may be payable to the Holder of such Bond as of the
close of business on a date selected by the Trustee which is not more than 15
days and not less than 10 days prior to the date proposed by the Company for
payment of such defaulted interest or in any other lawful manner not
inconsistent with the requirements of any securities exchange on which such Bond
may be listed, if the Trustee deems such manner of payment practicable. (Section
307)
Principal of and premium, if any, and interest on the Bonds at Maturity
will be payable upon presentation of the Bonds at the office of the Trustee in
Chicago, Illinois or, at the option of the Holder, at the principal corporate
trust office of The First National Bank of Chicago in New York, New York. The
transfer of Bonds may be registered, and the Bonds may be exchanged for other
Bonds of the same series and tranche, of authorized denominations of like tenor
and aggregate principal amount, at the office of The First National Bank of
Chicago in New York, New York as Bond Registrar for the Bonds. The Company will
not be required to issue, and no Bond Registrar will be required to register the
transfer of or to exchange (a) Collateral Trust Bonds of any series (including
the Bonds offered hereby) during a period of 15 days prior to giving any notice
of redemption thereof or (b) any Bond selected for redemption in whole or in
part, except the unredeemed portion of any Bond being redeemed in part. (Section
305)
The Company may change the place for payment or registration of
transfer or exchange of the Bonds, may appoint one or more additional Paying
Agents or Bond Registrars (including, without limitation, the Company) and may
remove any Paying Agent or Bond Registrar, all at its discretion. The applicable
Prospectus Supplement or a supplement thereto, will identify any such changes
prior to the date of such Prospectus Supplement or supplement thereto. (Section
602)
7
Redemption
Any terms for the optional or mandatory redemption of the Bonds will be
set forth in a Prospectus Supplement or a supplement thereto. Except as will
otherwise be provided with respect to Bonds redeemable at the option of the
Holder, redeemable Bonds will be redeemed only upon notice by mail not less than
30 nor more than 60 days prior to the date fixed for redemption and, if less
than all the Bonds of a series, or any tranche thereof, are to be redeemed, the
particular Bonds to be redeemed will be selected by such method as will be
provided for any particular series, or in the absence of any such provision, by
such method as the Bond Registrar deems fair and appropriate. (Sections 503 and
504)
Any notice of redemption of Bonds, at the option of the Company, may
state that such redemption will be conditional upon receipt by the Trustee, on
or prior to the date fixed for such redemption, of money sufficient to pay the
principal of and premium, if any, and interest, if any, on such Bonds and that
if such money has not been so received, such notice will be of no force and
effect and the Company will not be required to redeem such Bonds. (Section 504)
No Maintenance, Replacement or Sinking Funds
While the Mortgage contains provisions for the maintenance of the
Mortgage Property (Section 601), it does not contain any provisions for any
maintenance, replacement, sinking or analogous fund and, except as may be
provided in the applicable Prospectus Supplement, or a supplement thereto, there
will be no provisions for any such funds for the Bonds.
Security
General. Except as discussed below, securities (including the Bonds)
now or hereafter issued under the Mortgage will be secured primarily by:
(a) first mortgage bonds issued under the Company's Indenture
of Mortgage and Deed of Trust, dated as of August 1, 1940 (as amended
and supplemented, the "1940 Indenture"), to The First National Bank of
Chicago, as trustee (the "1940 Indenture Trustee"), and delivered to
the Trustee under the Mortgage. As discussed under "DESCRIPTION OF THE
1940 INDENTURE - Security," the 1940 Indenture constitutes, subject to
certain exceptions, a first mortgage lien on substantially all of the
properties of the Company except properties of Iowa Southern at the
time of the IE-ISU merger;
(b) first mortgage bonds issued under Iowa Southern's
Indenture or Deed of Trust, dated as of February 1, 1923 (as amended
and supplemented, the "ISU 1923 Indenture"), with The Northern Trust
Company (The First National Bank of Chicago, successor) (the "ISU
Corporate Trustee") and Harold H. Rockwell (Richard D. Manella,
successor) as trustees (the "ISU Indenture Trustees"), and delivered to
the Trustee under the Mortgage; as discussed under "DESCRIPTION OF THE
ISU 1923 INDENTURE - Security," the ISU 1923 Indenture constitutes,
subject to certain exceptions, a first mortgage lien on substantially
all of the properties owned by Iowa Southern at the time of the IE-ISU
merger (which are now, subsequent to such merger, properties of the
Company); and
(c) the Lien of the Mortgage on the Company's properties used
in the generation, purchase, transmission, distribution or sale of
electric energy by the Company, or in the manufacture of manufactured
gas, or in the purchase, transportation, distribution or sale of
manufactured gas or natural gas, or in the generation, manufacture,
distribution or sale of steam and hot water, which Lien is junior to
the liens of the 1940 Indenture and the ISU 1923 Indenture.
(Granting Clause First)
As discussed below under "Class "A" Bonds," following a merger or
8
consolidation of another corporation into the Company, or the transfer by
another corporation of property to the Company, the Company could issue and
deliver to the Trustee bonds issued under an existing mortgage on the properties
of such other corporation in lieu of or in addition to bonds issued under the
1940 Indenture or the ISU 1923 Indenture. In such event, the securities
(including the Bonds) issued under the Mortgage would be secured, additionally,
by such bonds and by the Lien of the Mortgage on the properties of such other
corporation, which would be junior to the liens of the existing mortgage of such
corporation, the 1940 Indenture and the ISU 1923 Indenture. The 1940 Indenture
and the ISU 1923 Indenture and all such other mortgages are hereinafter,
collectively, called the "Class "A" Mortgages," and all bonds outstanding under
the Class "A" Mortgages are hereinafter collectively called the "Class "A"
Bonds." If and when no Class "A" Mortgages are in effect, the Mortgage will
constitute a first mortgage lien on all property of the Company subject thereto.
(Sections 101 and 706)
Class "A" Bonds. Any Class "A" Bonds issued after the date of the
Mortgage (other than in substitution or exchange for previously outstanding
Class "A" Bonds) will be issued and delivered to, and registered in the name of,
the Trustee or its nominee and will be owned and held by the Trustee, subject to
the provisions of the Mortgage, for the benefit of the Holders of all securities
issued under the Mortgage and Outstanding from time to time. Class "A" Bonds
issued as the basis of authentication and delivery of securities under the
Mortgage (a) will mature on the same dates, and in the same principal amounts,
as such securities and (b) will contain, in addition to any mandatory redemption
provisions applicable to all Class "A" Bonds Outstanding under the related Class
"A" Mortgage, mandatory redemption provisions correlative to provisions for
mandatory redemption, or for redemption at the option of the Holder, of such
securities. Class "A" Bonds issued as the basis for authentication and delivery
of a series or tranche of securities under the Mortgage (x) may, but need not,
bear interest, any such interest to be payable at the same times as interest on
the securities of such series or tranche and (y) may, but need not, contain
provisions for the redemption thereof at the option of the Company, any such
redemption to be made at a redemption price or prices not less than the
principal amount of such Class "A" Bonds.
(Sections 402 and 701)
Any payment by the Company of principal of or premium or interest on
the Class "A" Bonds held by the Trustee will be applied by the Trustee to the
payment of any principal, premium or interest, as the case may be, in respect of
any Mortgage securities which is then due and, to the extent of such
application, the obligation of the Company under the Mortgage to make such
payment in respect of such securities will be deemed satisfied and discharged.
If, at the time of any such payment of principal of Class "A" Bonds, such
payment shall exceed the amount of principal then due in respect of the
securities, the excess of such payment will be deemed to constitute Funded Cash
and will be held by the Trustee as part of the Mortgaged Property, to be
withdrawn, used or applied as provided in the Mortgage. If, at the time of any
such payment of premium or interest on Class "A" Bonds held by the Trustee, such
payment shall exceed the amount of premium or interest then due in respect of
such securities, the excess of such payments will be remitted to the Company at
its request. Any payment by the Company of principal of or premium or interest
on any Mortgage securities authenticated and delivered on the basis of the
deposit with the Trustee of Class "A" Bonds (other than by application of the
proceeds of a payment in respect of such Class "A" Bonds) will, to the extent
thereof, be deemed to satisfy and discharge the obligation of the Company, if
any, to make a payment of principal, premium or interest, as the case may be, in
respect of such Class "A" Bonds which is then due. (Section 702; see "Withdrawal
of Cash" below.)
The Trustee may not sell, assign or otherwise transfer any Class "A"
Bonds held by the Trustee except to a successor trustee under the Mortgage.
(Section 704) At the time any Mortgage securities of any series or tranche which
have been authenticated and delivered upon the basis of Class "A" Bonds cease to
be Outstanding (other than a result of the application of the proceeds of the
payment or redemption of such Class "A" Bonds), the Trustee shall surrender to,
or upon the order of, the Company an equal principal amount of such Class "A"
Bonds having the same Stated Maturity and mandatory redemption provisions as
such securities. (Section 703)
At the date of this Prospectus, the only Class "A" Mortgages are the
1940 Indenture and the ISU 1923 Indenture and the only Class "A" Bonds issuable
are first mortgage bonds issuable thereunder. The Mortgage provides that in the
event of the merger or consolidation of another company with or into the
Company, an existing mortgage constituting a lien on properties of such other
company prior to the Lien of the Mortgage may be designated by the Company as an
additional Class "A" Mortgage. Any bonds thereafter issued under such additional
mortgage would be Class "A" Bonds and (other than in substitution or exchange
for previously Outstanding Class "A" Bonds) could be issued only to provide the
basis for the authentication and delivery of securities under the Mortgage.
(Section 706)
9
When no bonds are Outstanding under a Class "A" Mortgage except for
Class "A" Bonds held by the Trustee, then, at the request of the Company and
subject to satisfaction of certain conditions, the Trustee will surrender such
Class "A" Bonds for cancellation and the related Class "A" Mortgage will be
satisfied and discharged; whereupon, the lien of such Class "A" Mortgage on the
property owned by the Company will cease to exist and the Lien of the Mortgage
will become a first mortgage lien on such property, subject to Permitted Liens.
(Section 707)
So long as any securities are Outstanding under the Mortgage, the
Company will not (a) issue any additional Class "A" Bonds except (i) to replace
any mutilated, destroyed, lost or stolen securities of the same series or to
effect exchanges and transfers of such securities or (ii) to the Trustee as the
basis for the authentication and delivery of securities or (b) subject to the
lien of any Class "A" Mortgage any property which is excepted and excluded from,
or not included in or subject to, the lien of such Class "A" Mortgage. (Section
610) First mortgage bonds may be issued under the 1940 Indenture on the basis of
property additions, retirements of bonds previously issued under the 1940
Indenture and cash deposited with the 1940 Indenture Trustee. (See "DESCRIPTION
OF THE 1940 INDENTURE - Issuance of Additional Bonds.") First mortgage bonds may
be issued under the ISU 1923 Indenture on the basis of property additions,
retirements of bonds previously issued under the ISU 1923 Indenture and cash
deposited with the ISU Corporate Trustee. (See "DESCRIPTION OF THE ISU 1923
INDENTURE - Issuance of Additional Bonds.")
Lien of the Mortgage. At the date of this Prospectus, substantially all
of the Company's property subject to the Lien of the Mortgage is also subject to
the prior lien of the 1940 Indenture or the ISU 1923 Indenture. Any Bonds
offered hereby will have the benefit of the first mortgage lien of the 1940
Indenture and the ISU 1923 Indenture on such property, and the benefit of the
prior lien of any additional Class "A" Mortgage on any property subject thereto,
to the extent of the aggregate principal amount of Class "A" Bonds issued under
the respective Class "A" Mortgage and held by the Trustee.
The Lien of the Mortgage is subject to Permitted Liens which include
tax liens and other governmental charges which are not delinquent or which can
thereafter be paid without penalty or which are being contested, construction
and materialmen's liens, certain judgment liens, easements, reservations and
rights of others (including governmental entities) in, and defects of title in,
certain property of the Company, certain leasehold interests, liens on the
Company's pollution control and sewage and solid waste disposal facilities which
were previously financed with industrial development revenue bonds and certain
other liens and encumbrances. (Granting Clauses and Section 101)
There are excepted from the Lien of the Mortgage, among other things,
cash and securities not paid, deposited or held under the Mortgage; contracts,
leases and other agreements of all kinds, contract rights, bills, notes and
other instruments, accounts receivable, claims, judgments, certain intellectual
property rights and other general intangibles; automobiles, aircraft and
vessels; all goods, wares, merchandise, equipment, spare parts, tools,
materials, supplies and fuel held for sale or lease in the ordinary course of
business or for use or consumption in, or in the operation of, any properties of
or for the benefit of the Company; nuclear fuel; computers, machinery and
equipment used exclusively for corporate administrative or clerical purposes;
all gas, oil, minerals and timber, and rights thereto; electric energy, gas,
steam, water and other products generated, produced or purchased; property
installed on the premises of customers of the Company and designed to aid in
conservation or efficient use of energy; leasehold interests and leasehold
improvements of the Company; and all property which is located outside of the
State of Iowa and is neither specifically described in the Granting Clauses of
the Mortgage nor specifically subjected or required to be subjected to the Lien
of the Mortgage by any provision thereof. (Granting Clauses)
Without the consent of the Holders, the Company and the Trustee may
enter into supplemental indentures to subject to the Lien of the Mortgage
additional property (including property which would otherwise be excepted from
such Lien). (Section 1401) Such property, so long as the same would otherwise
constitute Property Additions, would thereupon constitute Property Additions and
be available as a basis for the issuance of securities under the Mortgage. (See
"Issuance of Additional Securities" below.) Property Additions generally include
any unit or element of property which is owned by the Company and is subject to
the Lien of the Mortgage except (i) any property, the cost of acquisition or
construction of which is property chargeable to an operating expense account of
the Company and (ii) goodwill, going concern value rights and intangible
property, unless the cost thereof is included in the cost of such unit or
element of property and no separate consideration was paid or apportioned
therefor, in which case Property Additions may include such goodwill, going
concern rights and intangible property. (Section 103)
10
The Mortgage contains provisions subjecting after-acquired property
(other than Excepted Property) to the Lien thereof. These provisions are limited
in the case of consolidation or merger or sale of substantially all of the
Company's assets. In the event of consolidation or merger or the transfer of all
of the Mortgaged Property as or substantially as an entirety, the Mortgage will
not be required to be a lien upon any of the properties then owned or thereafter
acquired by the successor corporation except properties acquired from the
Company in or as a result of such transaction and properties which are an
integral part of, or essential to the use or operation of, any Mortgaged
Property, and renewals, replacements and substitutions of or for any part
thereof. (Article Thirteen; see "Consolidation, Merger, Conveyance, Transfer or
Lease" below.) In addition, after-acquired property may be subject to vendors'
liens, purchase money mortgages and other liens thereon at the time of
acquisition thereof, including the lien of any Class "A" Mortgage.
The Mortgage provides that the Trustee will have a lien, prior to the
lien on behalf of the holders of securities issued under the Mortgage, upon
Mortgaged Property, for the payment of its reasonable compensation and expenses
and for indemnity against certain liabilities. (Section 1107)
Issuance of Additional Securities
The maximum principal amount of securities which may be issued under
the Mortgage is unlimited. (Section 301) Under the Mortgage, securities of any
series may be issued from time to time on the basis of, and in an aggregate
principal amount not exceeding:
(1) the aggregate principal amount of Class "A" Bonds issued and
delivered to the Trustee for such purpose;
(2) 75% of the Cost or fair value (whichever is less) of Property
Additions (as described below) which do not constitute Funded Property
(generally, Funded Property includes Property Additions which have been made, or
deemed to have been made, the basis of the authentication and delivery of
securities, the release of Mortgaged Property from the Lien of the Mortgage or
cash withdrawals, or which have been substituted for retired property), after
certain deductions and additions, primarily including adjustments to offset
property retirements;
(3) the aggregate principal amount of Retired Securities (which
consist of securities no longer outstanding under the Mortgage which have not
been used for certain other purposes under the Mortgage and which are not to be
paid, redeemed, purchased or otherwise retired by the application thereto of
Funded Cash) or Retired Prior Lien Bonds; and
(4) the amount of cash deposited with the Trustee.
(Article Four)
The Company is not required to satisfy a net earnings requirement prior
to the issuance of securities under the Mortgage.
Unless otherwise provided in the applicable Prospectus Supplement, or
supplement thereto, the Company will issue the Bonds on the basis of Class "A"
Bonds issued under the 1940 Indenture. (See "DESCRIPTION OF THE 1940 INDENTURE -
Issuance of Additional Bonds" for a description of the requirements for the
issuance of bonds under the 1940 Indenture, which requirements are generally
more restrictive than those for the issuance of securities under the Mortgage.)
Release of Property
Unless an Event of Default (hereinafter defined) shall have occurred
and be continuing, the Company may obtain the release from the Lien of the
11
Mortgage of any Funded Property, except for cash held by the Trustee, upon
delivery to the Trustee of cash equal in amount to the amount, if any, that the
Cost of the property to be released (or, if less, the fair value of such
property at the time it became Funded Property) exceeds the aggregate of:
(1) the principal amount, subject to certain
limitations, of obligations secured by purchase money mortgages upon
the property to be released delivered to the Trustee;
(2) the Cost or fair value (whichever is less) of
certified Property Additions not constituting Funded Property after
certain deductions and additions, primarily including adjustments to
offset property retirements (except that such adjustments need not be
made if such Property Additions were acquired or made within the 90-day
period preceding the request for such release);
(3) an amount equal to 133-1/3% of the aggregate
principal amount of securities the Company would be entitled to issue
on the basis of Retired Securities or Retired Prior Lien Bonds (with
such entitlement being waived by operation of such release);
(4) the amount of cash deposited with, or the principal
amount of obligations secured by purchase money mortgages upon the
property released and delivered to, the Trustee or other holder of a
lien prior to the Lien of the Mortgage;
(5) an amount equal to 133-1/3% of the aggregate
principal amount of securities Outstanding under the Mortgage and
delivered to the Trustee (with such Securities to be canceled by the
Trustee); and
(6) any taxes and expenses incidental to any sale,
exchange, dedication or other disposition of the property to be
released.
(Section 803)
Unless an Event of Default shall have occurred and be continuing,
property which is not Funded Property may generally be released from the Lien of
the Mortgage without depositing any cash or property with the Trustee as long as
(a) the aggregate amount of Cost or fair value (whichever is less) of all
Property Additions which do not constitute Funded Property (excluding the
property to be released) after certain deductions and additions, primarily
including adjustments to offset property retirements, is not less than zero or
(b) the Cost or fair value (whichever is less) of property to be released does
not exceed the aggregate amount of the Cost or fair value (whichever is less) of
Property Additions acquired or made within the 90-day period preceding the
release. (Section 804)
The Mortgage provides simplified procedures for the release of property
which has been released from the lien of Class "A" Mortgages, minor properties
and property taken by eminent domain, and provides for dispositions of certain
obsolete property and grants or surrender of certain rights without any release
or consent by the Trustee.
If any property released from the Lien of Mortgage continues to be
owned by the Company after such release, the Mortgage will not become a lien on
any improvement, extension or addition to such property or renewals,
replacements or substitutions of or for any part or parts of such property.
(Article Eight)
Withdrawal of Cash
Subject to certain limitations, unless an Event of Default shall have
occurred and be continuing, cash held by the Trustee may (1) be withdrawn by the
Company (a) to the extent of the Cost or fair value (whichever is less) of
Property Additions not constituting Funded Property, after certain deductions
and additions, primarily including adjustments to offset retirements or (b) in
an amount equal to 133-1/3% of the aggregate principal amount of securities that
the Company would be entitled to issue under the Mortgage on the basis of
Retired Securities or Retired Prior Lien Bonds (with the entitlement to such
issuance being waived by operation of such withdrawal) or (c) in an amount equal
to 133-1/3% of the aggregate principal amount of any securities Outstanding
under the Mortgage and issued under the Mortgage and delivered to the Trustee,
or (2) upon the request of the Company, be applied to (a) the purchase of
12
securities issued under the Mortgage (at prices not exceeding 133-1/3% of the
principal amount thereof) or (b) the redemption or payment at Stated Maturity of
securities issued under the Mortgage (with any securities received by the
Trustee pursuant to these provisions being canceled by the Trustee) (Section
806); provided, however, that cash deposited with the Trustee as the basis for
the authentication and delivery of securities, as well as cash representing a
payment of principal of Class "A" Bonds, may only be withdrawn in an amount
equal to the aggregate principal amount of securities the Company would be
entitled to issue under the Mortgage on any basis (with the entitlement to such
issuance being waived by operation of such withdrawal), or may, upon the request
of the Company, be applied to the purchase redemption or payment of securities
issued under the Mortgage at prices not exceeding, in the aggregate, the
principal amount thereof. (Sections 405 and 702)
Consolidation, Merger, Conveyance, Transfer or Lease
The Company may not consolidate with or merge into any other
corporation or convey, transfer or lease the Mortgaged Property as or
substantially as an entirety to any Person unless (a) such transaction is on
such terms as will fully preserve in all material respects the Lien and security
of the Mortgage and the rights and powers of the Trustee and the Holders and (b)
the corporation formed by such consolidation or into which the Company is merged
or the Person which acquires by conveyance or other transfer, or which leases,
the Mortgaged Property as or substantially as an entirety is a corporation
organized and existing under the laws of the United States of America, any State
or Territory thereof or the District of Columbia, and such corporation executes
and delivers to the Trustee a supplemental indenture, which contains an
assumption by such corporation of the Company's obligations under the Mortgage
and which contains a grant, conveyance, transfer and mortgage by such
corporation confirming the Lien of the Mortgage on the Mortgaged Property and
subjecting to such Lien all property thereafter acquired by such corporation
which shall constitute an integral part, or be essential to the use or operation
of, any Mortgage Property or a renewal, replacement or substitution of or for
any part thereof. (Section 1301)
Modification of the Mortgage
Without the consent of any Holders, the Company and the Trustee may
enter into one or more supplemental indentures for certain purposes, including
any of the following:
(a) to evidence the succession of another Person to the
Company and the assumption by any such successor of the covenants of
the Company in the Mortgage and in the securities; or
(b) to add one or more covenants of the Company or other
provisions for the benefit of all Holders or for the benefit of the
Holders of, or to remain in effect only so long as there shall be
outstanding, securities issued under the Mortgage of one or more
specified series, or one or more tranches thereof, or to surrender any
right or power conferred upon the Company by the Mortgage; or
(c) to correct or amplify the description of any
property at any time subject to the Lien of the Mortgage, or to subject
to the Lien of the Mortgage additional property; or
(d) to change or eliminate any provision of the Mortgage
or to add any new provision to the Mortgage, provided that, if such
change, elimination or addition adversely affects the interests of the
Holders of the securities of any series or tranche in any material
respect, such change, elimination or addition will become effective
with respect to such series or tranche only when no security of such
series or tranche remains Outstanding under the Mortgage; or
(e) to establish the form or terms of the securities of
any series or tranche as permitted by the Mortgage; or
(f) to cure any ambiguity, to correct or supplement any
provision therein which may be defective or inconsistent with any other
provision therein, or to comply with the rules or regulations of any
national securities exchange on which any of the securities issued
under the Mortgage may be listed, or to change, alter, modify, vary or
eliminate any of the provisions thereof or to add other provisions to
the Mortgage, so long as such other changes, alterations,
modifications, variations, eliminations or additions do not adversely
affect the interests of the Holders of securities of any series or
tranche in any material respect, unless they are expressly stated to
become effective only as to securities which are not then Outstanding.
13
Without limiting the generality of the foregoing, if the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), is amended after
the date of the Mortgage in such a way as to require changes to the Mortgage or
the incorporation therein of additional provisions or so as to permit changes
to, or the elimination of, provisions which, at the date of the Mortgage or at
any time thereafter, were required by the Trust Indenture Act to be contained in
the Mortgage, the Company and the Trustee may, without the consent of any
Holders, enter into one or more supplemental indentures to evidence or effect
such amendments. (Section 1401)
For most purposes not described above, the consent of the Holders of
not less than a majority in aggregate principal amount of the securities of all
affected series then Outstanding under the Mortgage is required for the purpose
of amending or modifying the Mortgage pursuant to one or more supplemental
indentures; provided, however, that no such amendment or modification may,
without the consent of each Holder of the Outstanding securities of each series
or tranche directly affected thereby, (a) change the Stated Maturity of the
principal of, or any installment of principal of or interest on, any security
issued under the Mortgage, or reduce the principal amount thereof or the rate of
interest thereon (or the amount of any installment of interest thereon) or
change the method of calculating such rate or reduce any premium payable upon
the redemption thereof, or impair the right to institute suit for the
enforcement of any such payment on or after the maturity thereof, (b) permit the
creation of any lien ranking prior to the Lien of the Mortgage with respect to
all or substantially all of the Mortgaged Property or terminate the Lien of the
Mortgage, or (c) reduce the percentage in principal amount of the Outstanding
securities of such series or tranche, the consent of the Holders of which is
required for any such supplemental indenture, or the consent of the Holders of
which is required for any waiver of compliance with any provision of the
Mortgage or of any default thereunder and its consequences, or reduce the
requirements for quorum or voting. A supplemental indenture which changes or
eliminates any covenant or other provision of the Mortgage which has expressly
been included solely for the benefit of the Holders of, or which is to remain in
effect only so long as there shall be Outstanding securities of one or more
specified series, or one or more tranches thereof, or modifies the rights of the
Holders of securities such series or tranches with respect to such covenants or
other provision, will not be deemed to affect the rights under the Mortgage of
Holders of the securities of any other series or tranche. (Section 1402)
Waiver
The Holders of at least a majority in aggregate principal amount of all
affected Outstanding securities issued under the Mortgage may waive the
Company's obligations to comply with certain covenants of the Mortgage, provided
that such waiver occurs before the time such compliance is required. (Section
609)
Events of Default
Each of the following events constitutes an Event of Default under the
Mortgage:
(1) failure to pay interest on any security issued under
the Mortgage within 90 days after the same becomes due;
(2) failure to pay principal or premium, if any, on any
security issued under the Mortgage within three business days after its
due date;
(3) failure to perform or breach of any covenant or
warranty of the Company in the Mortgage (other than as referred to in
(1) or (2) above) for a period of 90 days after there has been given to
the Company by the Trustee, or to the Company and the Trustee by the
Holders of at least 30% in principal amount of Outstanding securities
issued under the Mortgage, a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice is
a "Notice of Default," unless the Trustee, or the Trustee and the
Holders of a principal amount of securities not less than the principal
amount of securities the Holders of which gave such notice, as the case
may be, agree in writing to an extension of such period prior to its
expiration; provided, however, that the Trustee, or the Trustee and
such Holders, as the case may be, will be deemed to have agreed to an
extension of such period if corrective action has been initiated by the
Company within such period and is being diligently pursued;
14
(4) certain events relating to reorganization,
bankruptcy and insolvency of the Company and appointment of a receiver
or trustee for its property; and
(5) the occurrence of a matured event of default under
any Class "A" Mortgage; provided that the waiver or cure of any such
event of default and the rescission and annulment of the consequences
thereof shall constitute a waiver of the corresponding Event of Default
under the Mortgage and a rescission and annulment of the consequences
thereof.
(Section 1001)
The Trust Indenture Act currently requires that the Company give the
Trustee, not less often than annually, a brief statement as to the Company's
compliance with the conditions and covenants under the Mortgage.
Remedies
If an Event of Default occurs and is continuing, then the Trustee or
the Holders of not less than a majority in principal amount of securities then
Outstanding under the Mortgage may declare the principal amount (or if the
securities are Discount Securities, such portion of the principal amount as may
be provided for such Discount Securities pursuant to the terms of the Mortgage)
of all of the securities Outstanding under the Mortgage together with premium,
if any, and interest accrued, if any, thereon to be immediately due and payable.
At any time after such declaration of the maturity of the securities then
Outstanding, but before the sale of any of the Mortgaged Property and before a
judgment or decree for payment of money shall have been obtained by the Trustee
as provided in the Mortgage, the Event or Events of Default giving rise to such
declaration of maturity will, without further act, be deemed to have been
waived, and such declaration and its consequences will, without further act, be
deemed to have been rescinded and annulled, if
(a) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(1) all overdue interest, if any, on all securities then
Outstanding under the Mortgage;
(2) the principal of and premium, if any, on any
securities then Outstanding under the Mortgage which have become due
otherwise than by such declaration of acceleration and interest thereon
at the rate or rates prescribed therefor in such securities; and
(3) all amounts due to the Trustee as compensation and
reimbursement as provided in the Mortgage; and
(b) any other Event or Events of Default other than the
non-payment of the principal of securities which shall have become due solely by
such declaration of acceleration, shall have been cured or waived as provided in
the Mortgage.
(Sections 1002 and 1017)
The Mortgage provides that, under certain circumstances and to the
extent permitted by law, if an Event of Default occurs and is continuing, the
Trustee has the power to take possession of, and to hold, operate and manage,
the Mortgaged Property, or with or without entry, sell the Mortgaged Property.
If the Mortgaged Property is sold, whether by the Trustee or pursuant to
judicial proceedings, the principal of the securities Outstanding under the
Mortgage, if not previously due, will become immediately due, together with
premium, if any, and any accrued interest (including interest upon overdue
installments of interest at the same rates respectively as were born by the
respective securities on which installments of interest were overdue). (Sections
1003, 1004 and 1005)
If an Event of Default occurs and is continuing, the Holders of a
majority in principal amount of the securities then Outstanding under the
15
Mortgage will have the right to direct the time, method and place of conducting
any proceedings for any remedy available to the Trustee or exercising any trust
or power conferred on the Trustee, provided that (a) such direction does not
conflict with any rule of law or with the Mortgage, and could not involve the
Trustee in personal liability in circumstances where indemnity would not, in the
Trustee's sole discretion, be adequate and (b) the Trustee may take any other
action deemed proper by the Trustee which is not inconsistent with such
discretion. (Section 1016)
The Mortgage provides that no Holder of any security will have any
right to institute any proceeding, judicial or otherwise, with respect to the
Mortgage for the appointment of a receiver or for any other remedy thereunder
unless (a) such Holder has previously given to the Trustee written notice of a
continuing Event of Default; (b) the Holders of not less than a majority in
aggregate principal amount of the securities then Outstanding under the Mortgage
have made written request to the Trustee to institute proceedings in respect of
such Event of Default and have offered the Trustee reasonable indemnity against
costs and liabilities incurred in complying with such request; and (c) the
Trustee has refused, or for sixty days after receipt of such Notice, the Trustee
has failed, to institute any such proceeding and no direction inconsistent with
such request has been given to the Trustee by the Holders of a majority in
aggregate principal amount of securities then Outstanding under the Mortgage.
Furthermore, no Holder will be entitled to institute any such action if and to
the extent that such action would disturb or prejudice the rights of the other
Holders. (Section 1011)
Notwithstanding that the right of a Holder to institute a proceeding
with respect to the Mortgage is subject to certain conditions precedent, each
Holder of a security has the right, which is absolute and unconditional, to
receive payment of the principal of and premium, if any, and interest (including
interest upon overdue interest), if any, on such security when due and to
institute suit for the enforcement of any such payment, and such rights may not
be impaired without the consent of such Holder. (Section 1012)
The Mortgage obligates the Trustee to give the Holders notice of any
default under the Mortgage to the extent required by the Trust Indenture Act,
unless such default shall have been cured or waived, except that no such notice
to Holders of a default of the character described in paragraph (3) under "Event
of Default" shall be given until at least 60 days after the occurrence thereof.
(Section 1102) The Trust Indenture Act currently permits the Trustee to withhold
notices of default (except for certain payment defaults) if the Trustee in good
faith determines the withholding of such notice to be in the interests of the
Holders.
As a condition precedent to certain actions by the Trustee in the
enforcement of the Lien of Mortgage and institution of action on the securities
Outstanding under the Mortgage, the Trustee may require adequate indemnity
against costs, expenses and liabilities to be incurred in connection therewith.
(Sections 1011 and 1101)
In addition to every other right and remedy provided in the Mortgage,
the Trustee may exercise any right or remedy available to the Trustee in its
capacity as owner and Holder of Class "A" Bonds which arises as a result of a
default or matured event of default under any Class "A" Mortgage, whether or not
an Event of Default under the Mortgage has occurred and is continuing. (Section
1020)
Defeasance
Upon request of the Company, any securities Outstanding under the
Mortgage, or any portion of the principal amount thereof, will be deemed to have
been paid for purposes of the Mortgage, and the entire indebtedness of the
Company in respect thereof will be deemed to have been satisfied and discharged,
if there has been irrevocably deposited with the Trustee or any Paying Agent
(other than the Company), in trust: (a) money in the amount which will be
sufficient, or (b) Eligible Obligations (as described below), which do not
contain provisions permitting the redemption or other prepayment thereof at the
option of the issuer thereof, the principal of and the interest on which when
due, without any regard to reinvestment thereof, will provide monies which,
together with the money, if any, deposited with or held by the Trustee, will be
sufficient, or (c) a combination of (a) and (b) which will be sufficient, to pay
when due the principal of and premium, if any, and interest, if any, due and to
become due on such securities or portions thereof. (Section 901) For this
purpose, Eligible Obligations include direct obligations of, or obligations
unconditionally guaranteed by, the United States of America, entitled to the
benefit of the full faith and credit thereof, and certificates, depositary
receipts or other instruments which evidence a direct ownership interest in such
obligations or in any specific interest or principal payments due in respect
thereof.
16
While the Company knows of no legal precedent on point, it is possible
that, for federal income tax purposes, any deposit contemplated in the preceding
paragraph could be treated as a taxable exchange of the related securities for
an issue of obligations of the trust or a direct interest in the cash and
securities held in the trust. In that case, Holders of such securities would
recognize gain or loss as if the trust obligations or the cash or securities
deposited, as the case may be, had actually been received by them in exchange
for their securities. In addition, such Holders thereafter would be required to
recognize for federal income tax purposes a share of the income, gain or loss of
the trust. The amount so required to be recognized could be different from the
amount that would be recognized in the absence of such deposit. Prospective
investors are urged to consult their own tax advisors as to the specific
consequences to them of any such deposit.
Resignation of the Trustee
The Trustee may resign at any time by giving written notice thereof to
the Company or may be removed at any time by act of the Holders of a majority in
principal amount of securities then Outstanding delivered to the Trustee and the
Company. No resignation or removal of the Trustee and no appointment of a
successor trustee will become effective until the acceptance of appointment by a
successor trustee in accordance with the requirements of the Mortgage. So long
as no Event of Default or event which, after notice or lapse of time, or both,
would become an Event of Default has occurred and is continuing, if the Company
has delivered to the Trustee a resolution of its Board of Directors appointing a
successor trustee and such successor has accepted such appointment in accordance
with the terms of the Mortgage, the Trustee will be deemed to have resigned and
the successor will be deemed to have been appointed as trustee in accordance
with the Mortgage. (Section 1110)
More Restrictive Provisions of Class "A" Mortgages
The Mortgage is less restrictive upon the Company in certain respects
than is either the 1940 Indenture or the ISU 1923 Indenture, but the Class "A"
Bonds issued under either of those indentures and delivered to the Trustee will
be entitled to the benefits of more restrictive provisions of those indentures
(see "DESCRIPTION OF THE 1940 INDENTURE" and "DESCRIPTION OF THE ISU 1923
INDENTURE" below). However, pursuant to the Mortgage, the Trustee, as holder of
the Class "A" Bonds, will vote such Class "A" Bonds in favor of certain
amendments to the 1940 Indenture and ISU 1923 Indenture. (Section 705; see
"Voting of Class "A" Bonds" under each of "DESCRIPTION OF THE 1940 INDENTURE"
and "DESCRIPTION OF THE ISU 1923 INDENTURE" below).
Relationship with the Trustee
The Trustee or an affiliate provides general banking services to the
Company including (i) acting as a depositary for certain Company funds and (ii)
issuing a $15,000,000 line of credit to the Company. As of March 31, 1997, the
line of credit was being used to support commercial paper. Additionally, the
Trustee has a $45,000,000 credit agreement with the lessor of the Company's
nuclear fuel supporting the Company's nuclear fuel lease.
The Trustee is also the 1940 Indenture Trustee, the ISU 1923 Corporate
Trustee and the Subordinated Indenture Trustee (each as defined below). As such,
the Trustee would have a conflicting interest for purposes of the Trust
Indenture Act if an Event of Default were to occur under the 1940 Indenture, the
ISU 1923 Indenture or the Subordinated Indenture. In any such case, the Trustee
may be required to eliminate such conflicting interest by resigning as the
Trustee, the 1940 Indenture Trustee, the ISU 1923 Corporate Trustee or the
Subordinated Indenture Trustee. There are other instances under the Trust
Indenture Act which would require the resignation of the Trustee, such as an
affiliate of the Trustee acting as underwriter with respect to any of the
Securities.
DESCRIPTION OF THE 1940 INDENTURE
General
17
The summaries of the 1940 Indenture set forth below do not purport to
be complete and are subject to the detailed provisions of the 1940 Indenture, a
copy of which was previously filed with the Commission, is listed as an exhibit
to the Registration Statement of which this Prospectus is a part, and is
incorporated herein by reference. Capitalized terms used in this section which
are not otherwise defined in this Prospectus shall have the meanings ascribed to
them in the 1940 Indenture. Wherever particular provisions or terms defined in
the 1940 Indenture are referred to herein, such provisions or definitions are
incorporated by reference as part of the statements made herein, and such
statements are qualified in their entirety by such reference. References to
article and section numbers in this section, unless otherwise indicated, are
references to article and section numbers of the 1940 Indenture.
Security
The 1940 Indenture constitutes a direct first mortgage lien on
substantially all of the property and franchises of the Company (other than
expressly excepted property and other than properties owned by Iowa Southern at
the time of the IE-ISU merger on December 31, 1993), subject only to permitted
encumbrances and liens. Substantially all property and franchises (other than
expressly excepted property) hereafter acquired by the Company will become
subject to the lien of the 1940 Indenture, subject only to permitted liens and
encumbrances and liens and encumbrances, if any, existing or placed on such
after-acquired property at the time of acquisition thereof. The lien of the 1940
Indenture on the property owned by Iowa Southern at the time of the IE-ISU
merger, and extensions and additions appurtenant to such property, are junior to
the lien of the ISU 1923 Indenture.
The 1940 Indenture excepts from the lien thereof all cash, securities,
contracts, and bills, notes and accounts receivable acquired in the ordinary
course of business which are not specifically pledged under the 1940 Indenture
and all tangible personal property purchased or held for sale in the ordinary
course of business or consumable in the operation of the plants or system of the
Company, automobiles, buses, trucks and similar vehicles. (Granting Clauses)
Any bonds issued under the 1940 Indenture as the basis for the issuance
of Bonds under the Mortgage will be secured equally and ratably with the bonds
of all other series then outstanding under the 1940 Indenture.
Effect of the IE-ISU Merger on the 1940 Indenture
The merger of IE and ISU did not impair the lien of the 1940 Indenture
or any of the rights or powers of the 1940 Indenture Trustee or the bondholders
under the 1940 Indenture. (Section 133) Subsequent to that merger, the Company
became the successor to IE under the 1940 Indenture.
Issuance of Additional Bonds
The 1940 Indenture does not fix an overall limitation on the aggregate
principal amount of the bonds of all series that may be issued or outstanding
thereunder. (Section 3) Generally, additional bonds of any series may be issued,
subject to the provisions of the 1940 Indenture, in a principal amount equal to:
(a) 60% of Net Bondable Additions not previously utilized
under the 1940 Indenture resulting from the acquisition by purchase,
construction or otherwise of Property Additions (Article IV);
(b) the principal amount of bonds, previously
authenticated under the 1940 Indenture, which have been retired or for
the retirement of which the 1940 Indenture Trustee holds the necessary
funds, other than bonds redeemed through the operation of cash sinking
funds and other than retired bonds used to satisfy the maintenance and
renewal provisions of the 1940 Indenture (Article VI); or
(c) the amount of cash deposited with the 1940 Indenture
Trustee as the basis for the issuance of such bonds, which cash may be
applied to the retirement of bonds or may be withdrawn in lieu of the
authentication of an equal principal amount of bonds to whose
authentication and delivery the Company would be entitled under the
provisions referred to in clauses (a) and (b). (Article V)
18
No such bonds in any event may be issued under (a) or (c), or under (b)
if the bonds to be issued bear a higher rate of interest than that borne by the
bonds retired or being retired (except in case such bonds mature within 2
years), unless (i) the Net Earnings of the Company for a 12 months' period
within the immediately preceding 15 months' period shall have been at least
equal to two times the aggregate amount of annual interest charges on all bonds
then outstanding under the 1940 Indenture, including the bonds then applied for,
and (ii) at least 85% of such required minimum amount of Net Earnings consists
of Net Operating Revenues from the Public Utility Property of the Company.
(Articles IV, V, and VI)
Bonds issuable under the 1940 Indenture are available as the basis for
the issuance of securities under the Mortgage. As of March 31, 1997, on the
basis of the most restrictive provisions described above, the Company would have
been entitled to issue an aggregate of at least $241 million of additional bonds
under the 1940 Indenture.
Acquisition of Property Subject to Prior Liens
The 1940 Indenture prohibits the Company from acquiring any property
subject to a prior lien, or placing any prior lien on property at the time of
acquisition thereof, if either the principal amount of indebtedness secured by
prior liens on such property exceeds 60% of the cost or the fair value of such
property, whichever shall be less, or the Net Earnings of the Company for a
period of 12 months within the 15 months immediately preceding the month in
which the property is to be acquired shall not have been at least equal to two
times the aggregate amount of the annual interest charges on the Secured Bonded
Debt of the Company; provided, however, that if the Net Earnings of the Company
for the above-stated period shall have been at least equal to three times the
aggregate amount of the annual interest charges on the Secured Bonded Debt of
the Company, then the 60% limitation shall not apply. In the case of each of the
foregoing Net Earnings requirements, such Net Earnings must consist of Net
Operating Revenues from Public Utility Property to an extent at least equal to
85% of two or three times, as the case may be, the said aggregate amount of
annual interest charges. (Section 83)
Maintenance and Renewal
The 1940 Indenture provides that the Company will, for each year, pay
or cause to be paid to the Trustee, an amount in cash, as and for a renewal
fund, equal to 2-1/2% (or such different percentage as may be fixed upon
certification by an independent engineer that such change in percentage rate is
desirable and justified) of the average gross book value during such year of all
of the depreciable tangible Public Utility Property of the Company (with certain
specified exceptions). The percentage is currently set at 2-1/2%. The Company's
obligation to pay such amount to the Trustee in cash may at the option of the
Company be satisfied in whole or in part by the certification of unused Gross
Bondable Additions or the certification of unused bond retirements, or both.
(Section 74)
19
The 1940 Indenture also provides (i) that the Company shall maintain
the mortgaged properties in good repair and working order; (ii) that the
Company, upon written request served upon it and the Trustee by the holders of
at least 25% in principal amount of the bonds outstanding, shall cause such
properties to be inspected by an independent engineer (not more often than at
five-year intervals) to determine whether they have been so maintained and
whether any property, not retired on the books, should be so classified for the
purpose (among others) of computing Net Bondable Additions; and (iii) that the
Company shall make good any deficiency in maintenance disclosed by such
engineer's report as rendered or as modified by arbitration. (Section 73)
Limitations on Dividends on Common Stock
The 1940 Indenture prohibits the Company from declaring or paying any
dividends (except stock dividends or dividends paid out of the proceeds of sale
of stock), or making other distributions on, or acquisitions of, stock unless
immediately after such dividend, distribution or acquisition the net income of
the Company available for dividends (as defined), for the period from December
31, 1945, to and including the date of such dividend, distribution or
acquisition, plus the sum of $250,000 shall at least equal all payments made in
respect of all such dividends, distributions or acquisitions during said period;
provided that such restriction shall not apply to the acquisition of stock out
of the proceeds from the sale of, or in exchange for, any other shares of stock
or securities representing an equity interest subordinate to all debts, secured
or unsecured. (Section 85) Giving effect to the use of the proceeds of the
Securities offered hereby, retained earnings are not restricted under this
provision.
20
Modification of the 1940 Indenture
In general, modifications or alterations of the 1940 Indenture and
indentures supplemental thereto and of the rights and obligations of the Company
and of the holders of the bonds may, with the approval of the Company, be made
at a meeting of bondholders upon the affirmative vote of the holders of 75% or
more of the aggregate principal amount of the bonds entitled to vote with
respect to the matter involved, but no such modifications or alterations are
permitted with respect to certain basic matters, such as terms of payment of
principal or interest on the bonds or the creation of liens ranking prior to, or
on a parity with, the lien of the 1940 Indenture. (Section 167) (See "Voting of
Class "A" Bonds" below.)
Defaults and Notice Thereof
Defaults under the 1940 Indenture are defined in substance as being (a)
failure to pay principal or any installment of interest on any bond on the due
date; (b) failure to observe any covenant or condition prescribed by the
provisions of any sinking fund created for the benefit of bonds of any series;
(c) failure to perform any other covenant or agreement of the 1940 Indenture,
which failure shall continue for a period of 60 days after a written demand that
such failure be cured has been mailed to the Company by the Trustee or to the
Company by the holders of 15% in principal amount of the bonds; (d) certain
events relating to reorganization, bankruptcy and insolvency of the Company or
the appointment of a receiver or trustee of the Company's property; (e) final
judgment in excess of $100,000 against the Company which is not discharged or
stayed within 30 days; or (f) the assumption by any governmental agency or any
court at the instance of any governmental agency of custody of the whole or any
substantial part of the Trust Estate or of control over the Company's affairs or
operations to the exclusion of management by the Company. (Section 105)
Upon the occurrence of a Default, the 1940 Indenture Trustee may, and
upon request of the holders of a majority in principal amount of the bonds shall
(and the holders of at least 25% in principal amount of the bonds may, by notice
in writing to the Company), declare the principal of and interest on all the
bonds to be immediately due and payable. (Section 107)
The 1940 Indenture Trustee is required to give notice of any Default to
holders of bonds whose names are on file with it within 90 days after the
occurrence of a Default known to it, unless such Default has been cured prior to
the giving of such notice and except that such notice may be withheld, other
than as to a Default in payment of principal or interest or of any installment
of any sinking fund, if the 1940 Indenture Trustee determines in good faith that
such withholding is in the interest of the holders of bonds. (Section 106)
The holders of not less than a majority in principal amount of bonds
then outstanding may direct the time, method and place of conducting any
proceeding for any remedy available to the 1940 Indenture Trustee, or exercise
any trust or power conferred upon the 1940 Indenture Trustee. (Section 110)
The Company must file an annual Certificate with the 1940 Indenture
Trustee as to compliance with the conditions and covenants of the 1940 Indenture
and as to the absence of default with respect to any of the covenants contained
in the 1940 Indenture. (Section 103)
Voting of Class "A" Bonds
The Trustee will, as holder of any Class "A" Bonds issued under the
1940 Indenture, attend such meetings of bondholders under the 1940 Indenture, or
deliver its proxy in connection therewith, as relate to matters with respect to
which it is entitled to vote or consent. The Mortgage provides that, so long as
no Event of Default as defined in the Mortgage has occurred or is continuing,
the Trustee will, as holder of such Class "A" Bonds, vote or consent:
(a) in favor of amendments or modifications to the 1940 Indenture
of substantially the same tenor and effect as the following, together with all
amendments and modifications required to effectuate the following:
(i) to provide that, whenever the 1940 Indenture requires
21
authorization by, or a resolution of, the Board of
Directors for the issuance of a series of bonds or
the determination of the terms thereof, the
requirement shall be satisfied if the action taken
would be sufficient for the issuance of a series of
bonds, or the determination of the terms thereof,
under the Mortgage;
(ii) to eliminate the renewal fund and to provide that, to
the extent Property Additions have been taken as a
credit, or cash held by the Trustee has been
deposited, to satisfy the renewal fund requirements
(or to satisfy any sinking fund requirement which is
no longer in effect), such Property Additions and
cash may be used for any purpose under the 1940
Indenture (including as a basis for the issuance of
bonds) as if they had never been so credited or
deposited;
(iii) to permit bonds to be issued in a principal amount
equal to 75%, instead of 60%, of Net Bondable
Additions;
(iv) to eliminate the Net Earnings requirements for all
purposes, including in connection with the issuance
of bonds;
(v) to broaden the definition of "Property Additions" to
include all tangible property owned by the Company
and subject to the lien of the 1940 Indenture;
(vi) to eliminate the restrictions on the payment of
dividends on, or the making of other distributions
on, or acquisitions of, stock;
(vii) to eliminate most restrictions on purchase money
obligations which may be received as consideration
for the release of property from the lien of the 1940
Indenture;
(viii) to permit the release, without compliance with other
provisions of the 1940 Indenture, of any property
provided that (1) the release will not impair the
electric business of the Company in contravention of
the provisions of the 1940 Indenture and (2) the fair
value of property released pursuant to this
provision, together with the fair value of all other
property so released in the then current calendar
year, shall not exceed the greater of $5,000,000 and
3% of the aggregate principal amount of bonds then
outstanding under the 1940 Indenture;
(ix) to modify release provisions to delete the
requirement that the property to be released shall
"no longer be useful, necessary, profitable or
advantageous in the judicious management and
maintenance of the Trust Estate or in the conduct of
the business of the Company" and substituting
therefor the requirement that the release of the
property would not adversely affect the Company's
electric business;
(x) to permit the withdrawal by the Company, without
compliance with other provisions of the 1940
Indenture, of cash in an amount, together with other
amounts paid over to the Company pursuant to this
provision in the then current calendar year, up to
the greater of $5,000,000 and 3% of the aggregate
principal amount of the bonds then outstanding under
the 1940 Indenture; provided that such cash must be
expended for Property Additions;
(xi) to increase the amount of cash withdrawable by the
Company on the basis of retired bonds from 100% of
the principal amount of such bonds to 133-1/3% of
such principal amount;
(xii) to eliminate most restrictions on the acquisition of
property subject to a prior lien;
22
(xiii) to limit the insurance coverage that must be
maintained by the Company to fire insurance only and
to raise the minimum dollar amount of any one fire
loss which must be payable to the 1940 Indenture
Trustee from $10,000 to an amount equal to the
greater of $5,000,000 and 3% of the aggregate
principal amount of bonds then outstanding under the
1940 Indenture;
(xiv) to modify the definition of "Defaults" under the 1940
Indenture to be substantially the same as "Events of
Default" under the Mortgage;
(xv) to modify the provisions of the 1940 Indenture for
the acceleration of the maturity of bonds to provide
that (1) action by the holders of a majority (rather
than the current 25%) in principal amount of the then
outstanding bonds is required to accelerate the
maturity of all outstanding bonds upon Default and
(2) any such acceleration and its consequences are
automatically rescinded (rather than at the option of
the holders as is currently provided) upon the curing
of all Defaults;
(xvi) to reduce the quorum requirements for bondholder
meetings from 75% to a majority; and
(xvii) to modify the remedies provisions to increase to a
majority from 25% the percentage of the principal
amount of outstanding bonds, the holders of which
must have requested that the 1940 Indenture Trustee
take action before individual holders may institute
suits against the Company.
(b) with respect to any other amendments or modifications to the
1940 Indenture as follows:
the Trustee will vote all Class "A" Bonds issued under the 1940
Indenture then held by it, or consent with respect thereto,
proportionately with what is reasonably believed to be the vote or
consent of the holders of all other bonds Outstanding under the 1940
Indenture, the holders of which are eligible to vote or consent;
provided, however, that (i) at any time the Class "A" Bonds under the
1940 Indenture held by the Trustee constitute a majority of the
principal amount of the Outstanding bonds under the 1940 Indenture or
(ii) at any time such Class "A" Bonds held by the Trustee constitute
less than such a majority but there is a proposed amendment or
modification of the 1940 Indenture which, if it were an amendment or
modification of the Mortgage (See "DESCRIPTION OF THE COLLATERAL TRUST
BONDS - Modification of the Mortgage"), would require the consent of
Holders, then, in either case, the Trustee may only vote such Class "A"
Bonds in accordance with the vote of the Holders of at least a majority
of the principal amount of the bonds casting a vote and shall seek that
vote in accordance with the provisions of the Mortgage applicable to
required votes of Holders in respect of amendments or modifications to
the Mortgage.
DESCRIPTION OF THE ISU 1923 INDENTURE
General
The summaries of the ISU 1923 Indenture set forth below do not purport
to be complete and are subject to the detailed provisions of the ISU 1923
Indenture, a copy of which was previously filed with the Commission, is listed
as an exhibit to the Registration Statement of which this Prospectus is a part,
and is incorporated herein by reference. Capitalized terms used in this section
which are not otherwise defined in this Prospectus shall have the meanings
ascribed to them in the ISU 1923 Indenture. Wherever particular provisions or
terms defined in the ISU 1923 Indenture are referred to in this section, such
provisions or definitions are incorporated by reference as part of the
statements made in this section, and such statements are qualified in their
entirety by such reference. References to article and section numbers herein,
unless otherwise indicated, are references to article and section numbers of the
ISU 1923 Indenture.
23
Security
The ISU 1923 Indenture constitutes a direct first mortgage lien upon
substantially all of the property and rights of Iowa Southern existing at the
time of the IE-ISU merger on December 31, 1993 and upon extensions and additions
appurtenant to such property, with certain exceptions for certain types of
property (including accounts receivable) as provided in the ISU 1923 Indenture,
and subject only to permitted liens. (Granting Clauses)
Any bonds issued under the ISU 1923 Indenture as the basis for the
issuance of Bonds under the Mortgage will be secured equally and ratably with
the bonds of all other series then outstanding under the ISU 1923 Indenture.
Effect of the IE-ISU Merger on the ISU 1923 Indenture
The merger of IE and ISU did not impair the lien of the ISU 1923
Indenture or any of the rights or powers of the ISU Indenture Trustees or the
bondholders under the ISU 1923 Indenture. (Article XVI) Subsequent to that
merger, the Company became the successor to ISU under the ISU 1923 Indenture.
Issuance of Additional Bonds
The ISU 1923 Indenture does not fix an overall limitation on the
aggregate principal amount of the bonds of all series that may be issued or
outstanding thereunder. (Section 2.01)
Provided that the Earnings Applicable to Bond Interest for a period of
twelve consecutive calendar months within the fifteen months immediately
preceding issuance are at least twice the annual interest requirements of the
bonds applied for and all bonds and Prior Lien Bonds outstanding, additional
bonds of any series may be issued:
(a) in an aggregate principal amount not exceeding 60% of
the Cost or Fair Value, whichever is less, of Property Additions after
adjustments to offset retirements and amounts removed from the utility
plant or fixed capital accounts of the former Iowa Southern (Article
V);
(b) in an aggregate principal amount not exceeding the
aggregate principal amount of bonds which shall have been retired
(other than bonds retired through the use of certain funds) (Article
VI);
(c) upon deposit of cash with the ISU Corporate Trustee,
in an amount equal to the principal amount of the bonds to be so issued
(and such cash may be withdrawn by the Company in a sum equal to the
aggregate principal amount of the bonds which could be issued under
clause (a) or (b) above). (Article VII)
Bonds issuable under the ISU 1923 Indenture are available as the basis
for the issuance of securities under the Mortgage. As of March 31, 1997, on the
basis of the most restrictive provisions described above, the Company would have
been entitled to issue at least $167 million of additional bonds under the ISU
1923 Indenture.
Maintenance Fund
The ISU 1923 Indenture provides that so long as bonds shall be
outstanding, the Company will pay to the ISU Corporate Trustee annually, as a
maintenance fund, a sum of money equal to 15% of the gross operating revenue of
the Company derived during the calendar year preceding such payment from the
operation of the physical properties subject to the lien of the ISU 1923
Indenture after deducting (1) all gross operating revenue derived during such
period from the operation of property subject to a prior lien and (2) an amount
equal to the total cost to the Company of electric energy and natural gas
purchased by it (and allocable to operations of property subject to the lien of
the ISU 1923 Indenture) during such period with certain deductions. The Company
is entitled to credits against such annual payment for certain amounts expended
for maintenance and repairs and Unapplied Balance of Property Additions, retired
bonds, and other matters. Any moneys deposited by the Company with the ISU
Corporate Trustee in the maintenance fund will, upon the request of the Company,
be applied by the ISU Corporate Trustee to the purchase or redemption of bonds
or may be withdrawn by the Company in certain circumstances. (Article XII)
24
Substitutions and Releases
Generally, property subject to the lien of the ISU 1923 Indenture may
be released only upon the deposit or pledge with the ISU Corporate Trustee of
cash, purchase money obligations, securities, or the certification of property
additions or, in certain instances, upon the substitution of other property of
equivalent value. The Company may also, under certain conditions, without
release, terminate, change, or assent to the modification of leases, easements,
franchises, and governmental permits. (Article XI)
Satisfaction and Discharge of Indenture
If the Company shall pay the principal of, premium (if any), and
interest on all outstanding bonds issued under the ISU 1923 Indenture (bonds for
the payment or redemption of which necessary funds have been deposited with the
ISU Corporate Trustee being deemed paid), then the ISU Indenture Trustees may,
and upon the request of the Company shall, cancel and discharge the lien of the
ISU 1923 Indenture and reconvey to the Company the mortgaged and pledged
property. (Article XIX)
Modification of the ISU 1923 Indenture
To the extent permitted by the terms of the ISU 1923 Indenture,
modification or alteration of the ISU 1923 Indenture or any indenture
supplemental thereto, and of the rights and obligations of the Company and of
ISU bondholders, may be made with the consent of the Company by an affirmative
vote of the holders of not less than 80% in principal amount of the outstanding
bonds issued under the ISU 1923 Indenture and entitled to vote at a meeting of
bondholders and by an affirmative vote of the holders of not less than 80% of
the principal amount of such bonds of the series affected by the change;
provided, however, that no such modification or alteration intended to effect or
permit the extension of the maturity of the principal of any bond, the reduction
in the rate of interest thereon, or any other modification in the terms of
payment of such principal or interest, or the taking of certain other actions,
such as creating liens ranking prior to, or on parity with, the lien of the ISU
1923 Indenture, shall be effective as to any bond the holder of which has not
assented to such modification or alteration. (Article XX) (See "Voting of Class
"A" Bonds" below.)
The Company may fail or omit to comply with certain covenants or
conditions of the ISU 1923 Indenture with the written consent of the holders of
at least 66 2/3% of the principal amount of all outstanding bonds issued under
the ISU 1923 Indenture. (Section 15.19)
Defaults and Notice Thereof
Defaults under the ISU 1923 Indenture are defined in substance as being
(a) failure to pay principal of, or premium (if any) on, any bond issued under
the ISU 1923 Indenture; (b) failure to pay any installment of interest on any
such bond, and such failure continues for 30 days; (c) failure to observe any
covenant or condition prescribed by the provisions of any sinking fund created
for the benefit of such bonds of any series; (d) failure by the Company to
perform any other covenant or agreement in such bonds or in the ISU 1923
Indenture, and such failure continues for 60 days after written notice is given;
and (e) certain events relating to reorganization, bankruptcy and insolvency of
the Company, and the appointment of a receiver. (Section 15.01)
The ISU 1923 Indenture Trustees are required to give notice of any
default to bondholders within 90 days after the occurrence thereof, unless such
default is cured before the giving of such notice (except in the case of certain
defaults, notice of which is not to be given by such Trustees until at least 60
days after the occurrence thereof). The ISU Indenture Trustees may withhold
notice of default (except in the payment of principal of, or interest or premium
(if any) on, any of the bonds or in the payment of any sinking fund or purchase
fund installment) if the ISU Corporate Trustee determines that such withholding
is in the interest of the bondholders. (Section 17.11)
25
Holders of a majority of the principal amount of outstanding bonds may
direct the method, time, and place of conducting any proceedings for any remedy
available to the ISU Indenture Trustees for any sale of the property subject to
the lien of the ISU 1923 Indenture, or for the foreclosure of the ISU 1923
Indenture, or for the appointment of a receiver, or for the taking of any other
action authorized by the ISU 1923 Indenture in respect of a default or
refraining therefrom. (Section 15.05)
No holder of any bond or coupon shall have any right to any remedy
under the ISU 1923 Indenture, unless such holder has given prior written notice
to the ISU 1923 Indenture Trustees of the default, 25% in aggregate principal
amount of the bonds outstanding have made prior written request to the ISU
Corporate Trustee and have afforded reasonable opportunity to the 1923 ISU
Indenture Trustees to pursue the remedy in the trustees' own names, and the ISU
1923 Indenture Trustees have been offered adequate indemnity for costs, expenses
and liabilities which may be incurred thereby. (Section 15.15)
The Company must file an annual Certificate with the ISU Corporate
Trustee as to compliance with the conditions and covenants of the ISU 1923
Indenture and as to the absence of default with respect to any of the covenants
contained in the ISU 1923 Indenture. (Section 14.03)
Voting of Class "A" Bonds
The Trustee will, as holder of any Class "A" Bonds issued under the ISU
1923 Indenture, attend such meetings of bondholders under the ISU 1923
Indenture, or deliver its proxy in connection therewith, as relate to matters
with respect to which it is entitled to vote or consent. The Mortgage provides
that, so long as no Event of Default as defined in the Mortgage has occurred or
is continuing, the Trustee will, as holder of such Class "A" Bonds, vote or
consent:
(a) in favor of amendments or modifications to the ISU 1923
Indenture of substantially the same tenor and effect as the following, together
with all amendments and modifications required to effectuate the following:
(i) to provide that, whenever the ISU 1923 Indenture
requires authorization by, or a resolution of, the
Board of Directors or an Executive Committee thereof
for the issuance of a series of bonds or the
determination of the terms thereof, the requirement
shall be satisfied if the action taken would be
sufficient for the issuance of a series of bonds, or
the determination of the terms thereof, under the
Mortgage;
(ii) to eliminate the maintenance fund and to provide
that, to the extent Property Additions or bonds
previously outstanding have been taken as a credit,
or cash held by the ISU Corporate Trustee has been
deposited, in each case to satisfy the Maintenance
Fund Requirements, such Property Additions,
previously outstanding bonds and cash may be used for
any purpose under the ISU 1923 Indenture (including
as a basis for the issuance of bonds) as if they had
never been so credited or deposited;
(iii) to permit bonds to be issued in a principal amount
equal to 75%, instead of 60%, of Property Additions;
(iv) to eliminate the Net Earnings requirements for all
purposes, including in connection with the issuance
of bonds;
(v) to broaden the definition of "Property Additions" to
include property not used by the Company in its
electric, gas or steam business;
(vi) to permit the release, without compliance with other
provisions of the ISU 1923 Indenture, of any
property, provided that (1) the fair value of
property released pursuant to this provision,
together with the fair value of all other property so
released in the then current calendar year, shall not
exceed an amount equal to the greater of $5,000,000
and 3% of the aggregate principal amount of bonds
then outstanding under the ISU 1923 Indenture;
26
(vii) to permit the withdrawal by the Company, without
compliance with other provisions of the ISU 1923
Indenture, of cash in an amount, together with other
amounts paid over to the Company pursuant to this
provision in the then current calendar year, up to
the greater of $5,000,000 and 3% of the aggregate
principal amount of the bonds then outstanding under
the ISU 1923 Indenture; provided that such cash must
be expended for Property Additions;
(viii) to increase the amount of cash withdrawable by the
Company on the basis of retired property from 100% of
the cost or fair value of such property to 133-1/3%
of such cost or fair value;
(ix) to raise the minimum dollar amount of any one fire
loss which must be payable to the ISU Indenture
Trustees from $10,000 to an amount equal to the
greater of $5,000,000 and 3% of the aggregate
principal amount of bonds then outstanding under the
ISU 1923 Indenture;
(x) to modify the definition of "defaults" under the ISU
1923 Indenture to be substantially the same as
"Events of Default" under the Mortgage;
(xi) to modify the provisions of the ISU 1923 Indenture
for the acceleration of the maturity of bonds to
provide that (1) action by the holders of a majority
(rather than the current 25%) in principal amount of
the then outstanding bonds is required to accelerate
the maturity of all outstanding bonds upon default
and (2) any such acceleration and its consequences
are automatically rescinded (rather than at the
option of the holders as is currently provided) upon
the curing of all defaults;
(xii) to reduce the quorum requirements for bondholder
meetings from 80% to a majority; and
(xiii) to modify the remedies provisions to increase to a
majority from 25% the percentage of the principal
amount of bonds, the holders of which must have
requested the ISU Corporate Trustee to take action
before individual holders may institute suits against
the Company.
(b) with respect to any other amendments or modifications to the
ISU 1923 Indenture, as follows:
the Trustee will vote all Class "A" Bonds issued under the ISU 1923
Indenture then held by it, or consent with respect thereto,
proportionately with what is reasonably believed to be the vote or
consent of the holders of all other bonds outstanding under the ISU
1923 Indenture, the holders of which are eligible to vote or consent;
provided, however, that (i) at any time such Class "A" Bonds under the
ISU 1923 Indenture held by the Trustee constitute a majority of the
principal amount of the Outstanding bonds under the ISU 1923 Indenture
or (ii) at any time such Class "A" Bonds held by the Trustee constitute
less than such a majority but there is a proposed amendment or
modification of the ISU 1923 Indenture which, if it were an amendment
or modification of the Mortgage (See "DESCRIPTION OF THE COLLATERAL
TRUST BONDS - Modification of the Mortgage"), would require the consent
of Holders, then, in either case, the Trustee may only vote such Class
"A" Bonds in accordance with the vote of the Holders of at least a
majority of the principal amount of the securities casting a vote and
shall seek that vote in accordance with the provisions of the Mortgage
applicable to required votes of Holders in respect of amendments or
modifications to the Mortgage.
DESCRIPTION OF THE SUBORDINATED INDENTURE
General
27
The Securities may be issued in one or more series under the Indenture
(For Unsecured Subordinated Debt Securities) (the "Subordinated Indenture")
between the Company and The First National Bank of Chicago, as trustee (the
"Subordinated Indenture Trustee"). The summaries of the Subordinated Indenture
set forth below do not purport to be complete and are subject to the detailed
provisions of the Subordinated Indenture, a copy of which was previously filed
with the Commission, is listed as an exhibit to the Registration Statement of
which this Prospectus is a part, and is incorporated herein by reference.
Capitalized terms used in this section which are not otherwise defined in this
Prospectus shall have the meanings ascribed to them in the Subordinated
Indenture. Wherever particular provisions or terms defined in the Subordinated
Indenture are referred to in this section, such provisions or definitions are
incorporated by reference as part of the statements made in this section, and
such statements are qualified in their entirety by such reference. References to
article and section numbers herein, unless otherwise indicated, are references
to article and section numbers of the Subordinated Indenture.
The Securities issued under the Subordinated Indenture (the
"Subordinated Debentures") will be unsecured, subordinated obligations of the
Company and shall not be afforded any protection under the Mortgage, pursuant to
which various series of Collateral Trust Bonds may be issued. Reference is made
to the Prospectus Supplement, or a supplement thereto, for a description of the
following terms of the series of Subordinated Debentures in respect of which
this Prospectus is being delivered: (1) the title of such series of Subordinated
Debentures; (2) any limit on the aggregate principal amount of such Subordinated
Debentures or the series of which they are a part; (3) the Person or Persons to
whom interest on the Subordinated Debentures of such series shall be payable if
other than the Persons in whose names such Subordinated Debentures are
registered; (4) the date or dates on which the principal of any of such
Subordinated Debentures will be payable; (5) the rate or rates (which may be
fixed or variable) and/or the method of determination of such rate or rates at
which any of such Subordinated Debentures will bear interest, if any, the date
or dates from which any such interest will accrue, the Interest Payment Dates on
which any such interest will be payable and the Regular Record Date for any such
interest payable on any Interest Payment Date; (6) the place or places where (i)
the principal of, premium, if any, and interest on any of such Subordinated
Debentures will be payable, (ii) registration of transfer of such Subordinated
Debentures may be effected, (iii) exchanges of such Subordinated Debentures may
be effected and (iv) notices and demands to or upon the Company in respect of
such Subordinated Debentures may be served; the Security Registrar for such
Subordinated Debentures and, if such is the case, that the principal of such
Subordinated Debentures shall be payable without presentment or surrender
thereof; (7) the period or periods within which, or the date or dates on which,
the price or prices at which and the terms and conditions upon which any of such
Subordinated Debentures may be redeemed, in whole or in part, at the option of
the Company; (8) the obligation or obligations, if any, of the Company to redeem
or purchase any of such Subordinated Debentures pursuant to any sinking fund or
other mandatory redemption provisions or at the option of the Holder thereof,
and the period or periods within which, or the date or dates on which, the price
or prices at which and the terms and conditions upon which any of such
Subordinated Debentures shall be redeemed or purchased, in whole or in part,
pursuant to such obligation, and applicable exceptions to the requirements of a
notice of redemption in the case of mandatory redemption or redemption at the
option of the Holder; (9) the denominations in which any of such Subordinated
Debentures will be issuable, if other than denominations of $1,000 and any
integral multiple thereof; (10) if other than the currency of the United States,
the currency or currencies, including composite currencies, in which payment of
the principal of and any premium and interest on any of such Subordinated
Debentures will be payable; (11) if the principal of or any premium or interest
on any of such Subordinated Debentures is to be payable, at the election of the
Company or the Holder thereof, in a coin or currency other than in which such
Subordinated Debentures are stated to be payable, the period or periods within
which and the terms and conditions upon which, such election is to be made; (12)
if the principal of or premium, if any, or interest on such Subordinated
Debentures are to be payable, or are to be payable at the election of the
Company or a Holder thereof, in securities or other property, the type and
amount of such securities or other property, or the formulary or other method or
other means by which such amount shall be determined, and the period or periods
within which, and the terms and conditions upon which, any such election may be
made; (13) if the amount payable in respect of principal of or any premium or
interest on any of such Subordinated Debentures may be determined with reference
to an index or other fact or event ascertainable outside the Subordinated
Indenture, the manner in which such amounts will be determined; (14) if other
than the principal amount thereof, the portion of the principal amount of any of
such Subordinated Debentures which shall be payable upon declaration of
acceleration of the Maturity thereof; (15) any addition to the Events of Default
applicable to any of such Subordinated Debentures and any addition to the
covenants of the Company for the benefit of the Holders of such Subordinated
Debentures; (16) the terms, if any, pursuant to which such Subordinated
Debentures may be converted into or exchanged for shares of capital stock or
28
other securities of the Company or any other Person; (17) the obligations or
instruments, if any, which shall be considered to be Eligible Obligations in
respect of such Subordinated Debentures denominated in a currency other than
Dollars or in a composite currency, and any additional or alternative provisions
for the reinstatement of the Company's indebtedness in respect of such
Subordinated Debentures after the satisfaction and discharge thereof; (18) if
such Subordinated Debentures are to be issued in global form, (i) any
limitations on the rights of the Holder or Holders of such Subordinated
Debentures to transfer or exchange the same or to obtain the registration of
transfer thereof, (ii) any limitations on the rights of the Holder or Holders
thereof to obtain certificates therefor in definitive form in lieu of temporary
form and (iii) any and all other matters incidental to such Subordinated
Debentures; (19) if such Subordinated Debentures are to be issuable as bearer
securities; (20) any limitations on the rights of the Holders of such
Subordinated Debentures to transfer or exchange such Subordinated Debentures or
to obtain the registration of transfer thereof, and if a service charge will be
made for the registration of transfer or exchange of such Subordinated
Debentures, the amount or terms thereof; (21) any exceptions to the provisions
governing payments due on legal holidays or any variations in the definition of
Business Day with respect to such Subordinated Debentures; and (22) any other
terms of such Subordinated Debentures of such series, or any Tranche thereof,
not inconsistent with the provisions of the Subordinated Indenture. (Section
301)
Subordinated Debentures may be sold at a substantial discount below
their principal amount. Certain special United States federal income tax
considerations applicable to Subordinated Debentures sold at an original issue
discount may be described in the applicable Prospectus Supplement. In addition,
certain special United States federal income tax or other considerations
applicable to any Subordinated Debentures which are denominated in a currency or
currency unit other than Dollars may be described in the applicable Prospectus
Supplement.
Except as may otherwise be described in the Prospectus Supplement, the
covenants contained in the Subordinated Indenture would not afford Holders of
Subordinated Debentures protection in the event of a highly-leveraged
transaction or change of control involving the Company.
29
Subordination
The Subordinated Indenture provides that payment of the principal of,
premium, if any, and interest on Subordinated Debentures is subordinated and
subject in right of payment to the prior payment in full of all Senior
Indebtedness (as defined below) of the Company, all as provided in the
Subordinated Indenture. No payment of principal of (including redemption of and
sinking fund payments), premium, if any, or interest on, Subordinated Debentures
may be made if payment of principal, premium, interest or any other payment on
any Senior Indebtedness is not made when due, any applicable grace period with
respect to such default has ended and such default has not been cured or waived
or ceased to exist, or if the maturity on any Senior Indebtedness has been
accelerated because of default. Upon any distribution of assets of the Company
to creditors upon any dissolution, winding up, liquidation or reorganization,
whether voluntary or involuntary or in bankruptcy, insolvency, receivership or
other proceedings, all principal of, premium, if any, and interest due or to
become due on, all Senior Indebtedness must be paid in full before any payment
on the Subordinated Debentures. Subject to the payment in full of all Senior
Indebtedness, the rights of the holders of Subordinated Debentures will be
subrogated to the rights of the holders of Senior Indebtedness to receive
payments or distributions applicable to Senior Indebtedness until all amounts
owing on Subordinated Debentures are paid in full. (Sections 1501 - 1504)
The term "Senior Indebtedness" means all obligations (other than
non-recourse obligations and the indebtedness issued under the Subordinated
Indenture) of, or guaranteed or assumed by, the Company for borrowed money,
including both senior and subordinated indebtedness for borrowed money (other
than the Subordinated Debentures), or for the payment of money relating to any
lease which is capitalized on the consolidated balance sheet of the Company and
its subsidiaries in accordance with generally accepted accounting principles, or
evidenced by bonds, debentures, notes or other similar instruments, and in each
case, amendments, renewals, extensions, modifications and refundings of any such
indebtedness or obligations, whether existing as of the date of the Subordinated
Indenture or subsequently incurred by the Company. (Section 101) Such Senior
Indebtedness shall continue to be Senior Indebtedness and entitled to the
benefits of the subordination provisions irrespective of any amendment,
modification or waiver of any terms of such Senior Indebtedness. (Section 1509)
The Subordinated Indenture does not limit the aggregate amount of
Senior Indebtedness that may be issued. As of March 31, 1997, Senior
Indebtedness of the Company aggregated approximately $708 million.
30
Form, Exchange, and Transfer
Unless otherwise specified in the applicable Prospectus Supplement,
Subordinated Debentures of each series will be issuable only in fully registered
form without coupons and in denominations of $1,000 and any integral multiple
thereof. (Sections 201 and 302)
At the option of the Holder, subject to the terms of the Subordinated
Indenture and the limitations applicable to global securities, Subordinated
Debentures of any series will be exchangeable for other Subordinated Debentures
of the same series, of any authorized denomination and of like tenor and
aggregate principal amount. (Section 305)
Subject to the terms of the Subordinated Indenture and the limitations
applicable to global securities, Subordinated Debentures may be presented for
exchange as provided above for registration of transfer (duly endorsed or
accompanied by a duly executed instrument of transfer) at the office of the
Security Registrar or at the office of any transfer agent designated by the
Company for such purpose. Unless otherwise indicated, no service charge will be
made for any registration of transfer or exchange of Subordinated Debentures,
but the Company may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith. Every Subordinated
Debenture presented or surrendered for registration of transfer or exchange
shall (if so required by the Company, the Subordinated Indenture Trustee or the
Security Registrar) be duly endorsed or accompanied by an executed written
instrument of transfer in form satisfactory to the Company, the Subordinated
Indenture Trustee or the Security Registrar. (Section 305) Any transfer agent
(in addition to the Security Registrar) initially designated by the Company for
any Subordinated Debenture will be named in the applicable Prospectus
Supplement. The Company may at any time designate additional transfer agents or
rescind the designation of any transfer agent or approve a change in the office
through which any transfer agent acts, except that the Company will be required
to maintain a transfer agent in each Place of Payment for the Subordinated
Debentures of each series. The Company may perform all functions of any office
or agency. (Section 602)
The Company shall not be required to execute or register the transfer
of or the exchange of any Subordinated Debenture, or any Tranche thereof, during
a period of 15 days preceding the notice to be given identifying the
Subordinated Debenture called for redemption, or any Subordinated Debentures so
selected for redemption, in whole or in part, except the unredeemed portion of
any such Subordinated Debenture being redeemed in part. (Section 305)
Payment and Paying Agent
Unless otherwise indicated in the applicable Prospectus Supplement,
payment of interest on a Subordinated Debenture on any Interest Payment Date
will be made to the person in whose name such Subordinated Debenture (or one or
more Predecessor Securities) is registered at the close of business on the
Regular Record Date for such interest. (Section 307)
Unless otherwise indicated in the applicable Prospectus Supplement,
principal of and any interest on the Subordinated Debentures of a particular
series will be payable at the office of such Paying Agent or Paying Agents as
the Company may designate for such purpose from time to time. Unless otherwise
indicated in the applicable Prospectus Supplement, the corporate trust office of
the Subordinated Indenture Trustee in New York, New York will be designated as
the Company's sole Paying Agent for payment with respect to Subordinated
Debentures of each series. Any other Paying Agents initially designated by the
Company for the Subordinated Debentures of a particular series will be named in
the applicable Prospectus Supplement. The Company may at any time designate
additional Paying Agents or rescind the designation of any Paying Agent or
approve a change in the office through which any Paying Agent acts, except that
the Company will be required to maintain a Paying Agent in each Place of Payment
for the Subordinated Debentures of a particular series. (Section 602)
Any moneys deposited by the Company with the Trustee or any Paying
Agent for the payment of the principal of or any premium or interest on any
Subordinated Debenture which remains unclaimed at the end of two years after
such principal, premium or interest has become due and payable will be paid to
the Company, and the Holder of such Subordinated Debenture, as an unsecured
general creditor and not as a Holder, thereafter may look only to the Company
for payment thereof. (Section 603)
31
Redemption
Any terms for the optional or mandatory redemption of Subordinated
Debentures will be set forth in the applicable Prospectus Supplement or a
supplement thereto. Except as shall otherwise be provided in the applicable
Prospectus Supplement with respect to Subordinated Debentures that are
redeemable at the option of the Holder, Subordinated Debentures will be
redeemable only upon notice by mail not less than 30 days nor more than 60 days
prior to the date fixed for redemption, and, if less than all the Subordinated
Debentures of a series, or any Tranche thereof, are to be redeemed, the
particular Subordinated Debentures to be redeemed will be selected by the
Securities Registrar by such method as shall be provided for any particular
series, or in the absence of any such provision, by such method of random
selection as the Security Registrar deems fair and appropriate. (Sections 403
and 404)
Any notice of redemption at the option of the Company may state that
such redemption will be conditional upon receipt by the Paying Agent or Agents,
on or prior to the date fixed for such redemption, of money sufficient to pay
the principal of and premium, if any, and interest, if any, on such Subordinated
Debentures and that if such money has not been so received, such notice will be
of no force and effect and the Company will not be required to redeem such
Subordinated Debentures. (Section 404)
Consolidation, Merger, Conveyance, or other Transfer
Under the terms of the Subordinated Indenture, the Company may not
consolidate with or merge into any other corporation or convey, transfer or
lease its properties and assets substantially as an entirety to any Person,
unless (i) the corporation formed by such consolidation or into which the
Company is merged or the Person which acquires by conveyance or transfer, or
which leases, the properties and assets of the Company substantially as an
entirety shall be a Person organized and existing under the laws of any domestic
jurisdiction and shall expressly assume the Company's obligations on the
Subordinated Debentures and under the Subordinated Indenture, (ii) immediately
after giving effect to the transaction, no Event of Default shall have occurred
and be continuing, and (iii) the Company will have delivered to the Subordinated
Indenture Trustee an Officer's Certificate and an Opinion of Counsel as provided
in the Subordinated Indenture. (Section 1101)
Events of Default
Each of the following will constitute an Event of Default under the
Subordinated Indenture with respect to Subordinated Debentures of any series:
(a) failure to pay any interest on any Subordinated Debentures of such series
within 60 days after the same becomes due and payable; provided, that an
extension of an interest payment period by the Company permitted by the terms of
the series shall not constitute a failure to pay interest for this purpose; (b)
failure to pay principal of or premium, if any, on any Subordinated Debenture of
such series within three business days after the same becomes due and payable;
(c) failure to perform or breach of any other covenant or warranty of the
Company in the Subordinated Indenture (other than a covenant or warranty of the
Company in the Subordinated Indenture solely for the benefit of one or more
series of Subordinated Debentures other than such series) for 60 days after
written notice to the Company by the Subordinated Indenture Trustee, or to the
Company and the Subordinated Indenture Trustee by the Holders of at least 33% in
principal amount of the Subordinated Debentures of such series Outstanding under
the Subordinated Indenture as provided in the Subordinated Indenture; (d)
certain events of bankruptcy, insolvency or reorganization; and (e) any other
Event of Default specified in the applicable Prospectus Supplement with respect
to Subordinated Debentures of a particular series. (Section 801)
An Event of Default with respect to the Subordinated Debentures may not
necessarily constitute an Event of Default with respect to the Subordinated
Debentures of any other series issued under the Subordinated Indenture.
If an Event of Default with respect to any series of Subordinated
Debentures occurs and is continuing, then either the Subordinated Indenture
Trustee or the Holders of not less than 33% in principal amount of the
Outstanding Subordinated Debentures of such series may declare the principal
amount (or if the Subordinated Debentures of such series are Discount
Securities, such portion of the principal amount hereof as may be specified in
the applicable Prospectus Supplement) of all of the Subordinated Debentures of
such series to be due and payable immediately; provided, however, that if an
Event of Default occurs and is continuing with respect to more than one series
of Subordinated Debentures, the Subordinated Indenture Trustee or the Holders of
not less than 33% in aggregate principal amount of the Outstanding Securities of
all such series, considered as one class, may make such declaration of
acceleration and not the Holders of the Subordinated Debentures of any one of
such series.
32
Subject to the provisions of the Subordinated Indenture relating to the
duties of the Subordinated Indenture Trustee in case an Event of Default shall
occur and be continuing, the Subordinated Indenture Trustee will be under no
obligation to exercise any of its rights or powers under the Subordinated
Indenture at the request or direction of any Holder, unless such Holder shall
have offered to the Subordinated Indenture Trustee reasonable security or
indemnity. (Section 903) Subject to such provisions of the indemnification of
the Subordinated Indenture Trustee, the Holders of a majority in principal
amount of the Outstanding Subordinated Debentures of any series will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Subordinated Indenture Trustee, or exercising any trust
or power conferred on the Subordinated Indenture Trustee, with respect to the
Subordinated Debentures of that series. (Section 812)
No Holder of a Subordinated Debenture of any series will have any right
to institute any proceeding with respect to the Subordinated Indenture, or for
the appointment of a receiver or a trustee, of for any other remedy thereunder,
unless (i) such Holder has previously given written notice to the Trustee of a
continuing Event of Default with respect to the Subordinated Debentures of such
series, (ii) the Holders of not less than a majority in aggregate principal
amount of the Outstanding Subordinated Debentures of such series have made
written request to the Subordinated Indenture Trustee, and such Holder or
Holders have offered reasonable indemnity to the Subordinated Indenture Trustee,
to institute such proceeding as trustee and (iii) the Subordinated Indenture
Trustee has failed to institute such proceeding, and has not received from the
Holders of a majority in aggregate principal amount of the Outstanding
Subordinated Debentures of that series a direction inconsistent with such
request, within 60 days after such notice, request and offer. (Section 807)
However, such limitations do not apply to a suit instituted by a Holder of a
Subordinated Debenture for the enforcement of payment of the principal of or any
premium or interest on such Subordinated Debenture on or after the applicable
due date specified in such Subordinated Debenture. (Section 808)
The Company will be required to furnish to the Subordinated Indenture
Trustee annually, not later than October 1 in each year, a statement by an
appropriate officer as to such officer's knowledge of the Company's compliance
with all conditions and covenants under the Subordinated Indenture, such
compliance to be determined without regard to any period of grace or requirement
of notice under the Subordinated Indenture. (Section 606)
Right to Cure
At any time after the declaration of acceleration with respect to the
Subordinated Debentures of any series has been made and before a judgment or
decree for payment of the money due has been obtained, the Event or Events of
Default giving rise to such declaration of acceleration will, without further
act, be deemed to have been waived, and such declaration and its consequences
will, without further act, be deemed to have been rescinded and annulled, if
(a) the Company has paid or deposited with the Subordinated
Indenture Trustee a sum sufficient to pay
(1) all overdue interest on all Subordinated Debentures
of such series;
(2) the principal of and premium, if any, on any
Subordinated Debentures of such series which have become due otherwise
than by such declaration of acceleration and interest thereon at the
rate or rates prescribed therefor in such Subordinated Debentures;
(3) interest upon overdue interest at the rate or rates
prescribed therefor in such Subordinated Debentures, to the extent that
payment of such interest is lawful; and
33
(4) all amounts due to the Subordinated Indenture Trustee
under the Subordinated Indenture; and
(b) any other Event or Events of Default with respect to the
Subordinated Debentures of such series, other than the non-payment of the
principal of the Subordinated Debentures of such series which has become due
solely by such declaration of acceleration, have been cured or waived as
provided in the Subordinated Indenture. (Section 802)
Modification and Waiver
Without the consent of any Holder of Subordinated Debentures, the
Company and the Subordinated Indenture Trustee may enter into one or more
supplemental indentures to the Subordinated Indenture for any of the following
purposes: (a) to evidence the assumption by any permitted successor to the
Company of the covenants of the Company in the Subordinated Indenture and the
Subordinated Debentures; or (b) to add one or more covenants of the Company or
other provisions for the benefit of the Holders of all or any series of
Outstanding Subordinated Debentures or to surrender any right or power conferred
upon the Company by the Subordinated Indenture; or (c) to add any additional
Events of Default with respect to all or any series of Outstanding Subordinated
Debentures; or (d) to change or eliminate any provision of the Subordinated
Indenture or to add any new provision to the Subordinated Indenture, provided
that if such change, elimination or addition will adversely affect the interests
of the Holders of Subordinated Debentures of any series in any material respect,
such change, elimination or addition will become effective with respect to such
series only when the consent of the Holders of such series so affected has been
obtained or when there is no Subordinated Debenture of such series remaining
Outstanding under the Subordinated Indenture; or (e) to provide collateral
security for the Subordinated Debentures; or (f) to establish the form or terms
of Subordinated Debentures of any series as permitted by the Subordinated
Indenture; or (g) to provide for the authentication and delivery of bearer
securities and coupons appertaining thereto representing interest, if any,
thereon and for the procedures for the registration, exchange and replacement
thereof and for giving of notice to, and the solicitation of the vote or consent
of, the Holders thereof, and for any and all other matters incidental thereto;
or (h) to evidence and provide for the acceptance of appointment of a separate
or successor Subordinated Indenture Trustee under the Subordinated Indenture
with respect to the Subordinated Debentures of one or more series and to add or
to change any of the provisions of the Subordinated Indenture as shall be
necessary to provide for or to facilitate the administration of the trusts under
the Subordinated Indenture by more than one trustee; or (i) to provide for the
procedures required to permit the utilization of a noncertificated system of
registration for any series of Subordinated Debentures; or (j) to change any
place where (1) the principal of and premium, if any, and interest, if any, on
any Subordinated Debentures shall be payable, (2) any Subordinated Debentures
may be surrendered for registration of transfer or exchange and (3) notices and
demands to or upon the Company in respect of Subordinated Debentures and the
Subordinated Indenture may be served; or (k) to cure any ambiguity, to correct
or supplement any defective or inconsistent provision or to make or change any
other provisions with respect to matters and questions arising under the
Subordinated Indenture, provided such changes or additions shall not adversely
affect the interests of the Holders of Subordinated Debentures of any series in
any material respect. (Section 1201)
The Holders of not less than a majority in aggregate principal amount
of the Outstanding Subordinated Debentures of any series may waive compliance by
the Company with certain restrictive provisions of the Subordinated Indenture.
(Section 607) The Holders of not less than a majority in principal amount of the
Outstanding Subordinated Debentures of any series may waive any past default
under the Subordinated Indenture, except a default in the payment of principal,
premium or interest and certain covenants and provisions of the Subordinated
Indenture that cannot be modified or be amended without the consent of the
Holder of each Outstanding Subordinated Debenture of such series affected.
(Section 813)
Without limiting the generality of the foregoing, if the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), is amended after
the date of the Subordinated Indenture in such a way as to require changes to
the Subordinated Indenture or the incorporation therein of additional provisions
or so as to permit changes to, or the elimination of, provisions which, at the
date of the Subordinated Indenture or at any time thereafter, were required by
the Trust Indenture Act to be contained in the Subordinated Indenture, the
Subordinated Indenture will be deemed to have been amended so as to conform to
such amendment or to effect such changes or elimination, and the Company and the
Subordinated Indenture Trustee may, without the consent of any Holders, enter
into one or more supplemental indentures to evidence or effect such amendment.
(Section 1201)
34
Except as provided above, the consent of the Holders of not less than a
majority in aggregate principal amount of the Subordinated Debentures of all
series then Outstanding, considered as one class, is required for the purpose of
adding any provisions to, or changing in any manner, or eliminating any of the
provisions of, the Subordinated Indenture pursuant to one or more supplemental
indentures; provided, however, that if less than all of the series of
Subordinated Debentures Outstanding are directly affected by a proposed
supplemental indenture, then the consent only of the Holders of a majority in
aggregate principal amount of Outstanding Subordinated Debentures of all series
so directly affected, considered as one class, will be required; and provided,
further, that if the Subordinated Debentures of any series have been issued in
more than one Tranche and if the proposed supplemental indenture directly
affects the rights of the Holders of one or more, but less than all, such
Tranches, then the consent only of the Holders of a majority in aggregate
principal amount of the Outstanding Subordinated Debentures of all Tranches so
directly affected, considered as one class, will be required; and provided
further, that no such supplemental indenture may (a) change the Stated Maturity
of the principal of, or any installment of principal of or interest on, any
Subordinated Debenture, or reduce the principal amount thereof or the rate of
interest thereon (or the amount of any installment of interest thereon) or
change the method of calculating such rate or reduce any premium payable upon
the redemption thereof, or reduce the amount of the principal of any Discount
Security that would be due and payable upon a declaration of acceleration of
Maturity or change the coin or currency (or other property) in which any
Subordinated Debenture or any premium or the interest thereon is payable, or
impair the right to institute suit for the enforcement of any such payment on or
after the Stated Maturity of any Subordinated Debenture (or, in the case of
redemption, on or after the redemption date) without, in any such case, the
consent of the Holder of such Subordinated Debenture, (b) reduce the percentage
in principal amount of the Outstanding Subordinated Debentures of any series, or
any Tranche thereof, the consent of the Holders of which is required for any
such supplemental indenture, or the consent of the Holders of which is required
for any waiver of compliance with any provision of the Subordinated Indenture or
any default thereunder and its consequences, or reduce the requirements for
quorum or voting, without, in any such case, the consent of the Holder of each
Outstanding Subordinated Debenture of such series or Tranche, or (c) modify
certain of the provisions of the Subordinated Indenture relating to supplemental
indentures, waivers of certain covenants and waivers of past defaults with
respect to the Subordinated Debentures of any series, or any Tranche thereof,
without the consent of the Holder of each Outstanding Subordinated Debenture
affected thereby. A supplemental indenture which changes or eliminates any
covenant or other provision of the Subordinated Indenture which has expressly
been included solely for the benefit of one or more particular series of
Subordinated Debentures or one or more Tranches thereof, or modifies the rights
of the Holders of Subordinated Debentures of such series or Tranches with
respect to such covenant or other provision, will be deemed not to affect the
rights under the Indenture of the Holders of the Subordinated Debentures of any
other series or Tranche. (Section 1202)
The Subordinated Indenture provides that in determining whether the
Holders of the requisite principal amount of the Outstanding Subordinated
Debentures have given any request, demand, authorization, direction, notice,
consent, or waiver under the Subordinated Indenture as of any date, or whether
or not a quorum is present at a meeting of Holders, (i) Subordinated Debentures
owned by the Company or any other obligor upon the Subordinated Debentures or
any Affiliate of the Company or of such other obligor (unless the Company, such
Affiliate or such obligor owns all Securities Outstanding under this
Subordinated Indenture, or all Outstanding Subordinated Debentures of each such
series and each such Tranche, as the case may be, determined without regard to
this clause (i)) shall be disregarded and deemed not to be Outstanding; (ii) the
principal amount of a Discount Security that shall be deemed to be Outstanding
for such purposes shall be the amount of the principal thereof that would be due
and payable as of the date of such determination upon a declaration of
acceleration of the Maturity thereof as provided in the Subordinated Indenture;
and (iii) the principal amount of a Subordinated Debenture denominated in one or
more foreign currencies or a composite currency that will be deemed to be
Outstanding will be the Dollar equivalent, determined as of such date in the
manner prescribed for such Subordinated Debenture, of the principal amount of
such Subordinated Debenture (or, in the case of a Subordinated Debenture
described in clause (ii) above, of the amount described in such clause).
(Section 101)
If the Company shall solicit from Holders any request, demand,
authorization, direction, notice, consent, election, waiver or other Act, the
35
Company may, at its option, by Board Resolution, fix in advance a record date
for the determination of Holders entitled to give such request, demand,
authorization, direction, notice, consent, election, waiver or other Act, but
the Company shall have no obligation to do so. If such a record date is fixed,
such request, demand, authorization, direction, notice, consent, election,
waiver or other Act may be given before or after such record date, but only the
Holders of record at the close of business on the record date shall be deemed to
be Holders for the purposes of determining whether Holders of the requisite
proportion of the Outstanding Subordinated Debentures have authorized or agreed
or consented to such request, demand, authorization, direction, notice, consent,
direction, waiver or other Act, and for that purpose the Outstanding
Subordinated Debentures shall be computed as of the record date. Any request,
demand, authorization, direction, notice, consent, election, waiver or other Act
of a Holder shall bind every future Holder of the same Subordinated Debenture
and the Holder of every Subordinated Debenture issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Subordinated Debenture. (Section 104)
Defeasance
Unless otherwise indicated in the applicable Prospectus Supplement, any
Subordinated Debenture, or any portion of the principal amount thereof, will be
deemed to have been paid for purposes of the Subordinated Indenture, and, at the
Company's election, the entire indebtedness of the Company in respect thereof
will be deemed to have been satisfied and discharged, if there has been
irrevocably deposited with the Subordinated Indenture Trustee or any Paying
Agent (other than the Company), in trust: (a) money in an amount which will be
sufficient, or (b) Eligible Obligations (as described below), which do not
contain provisions permitting the redemption or other prepaying thereof at the
option of the issuer thereof, the principal of and the interest on which when
due, without any regard to reinvestment thereof, will provide monies which,
together with money, if any, deposited with or held by the Subordinated
Indenture Trustee or such Paying Agent, will be sufficient, or (c) a combination
of (a) and (b) which will be sufficient, to pay when due the principal of and
premium, if any, and interest, if any, due and to become due on such
Subordinated Debentures or portions thereof. (Section 701) For this purpose,
unless otherwise indicated in the applicable Prospectus Supplement, Eligible
Obligations include direct obligations of, or obligations unconditionally
guaranteed by, the United States, entitled to the benefit of the full faith and
credit thereof, and certificates, depositary receipts or other instruments which
evidence a direct ownership interest in such obligations or in any specific
interest or principal payments due in respect thereof. (Section 101)
36
While the Company knows of no legal precedent on point, it is possible
that, for federal income tax purposes, any deposit contemplated in the preceding
paragraph could be treated as a taxable exchange of the related securities for
an issue of obligations of the trust or a direct interest in the cash and
securities held in the trust. In that case, Holders of such securities would
recognize gain or loss as if the trust obligations or the cash or securities
deposited, as the case may be, had actually been received by them in exchange
for their securities. In addition, such Holders thereafter would be required to
recognize for federal income tax purposes a share of the income, gain or loss of
the trust. The amount so required to be recognized could be different from the
amount that would be recognized in the absence of such deposit. Prospective
investors are urged to consult their own tax advisors as to the specific
consequences to them of any such deposit.
Resignation of Subordinated Indenture Trustee
The Subordinated Indenture Trustee may resign at any time by giving
written notice thereof to the Company or may be removed at any time by Act of
the Holders of a majority in principal amount of Subordinated Debentures then
Outstanding delivered to the Subordinated Indenture Trustee and the Company. No
resignation or removal of the Subordinated Indenture Trustee and no appointment
of a successor trustee will become effective until the acceptance of appointment
by a successor trustee in accordance with the requirements of the Subordinated
Indenture. So long as no Event of Default or event which, after notice or lapse
of time, or both, would become an Event of Default has occurred and is
continuing and except with respect to a Subordinated Indenture Trustee appointed
by Act of the Holders of a majority in principal amount of the Outstanding
Subordinated Debentures, if the Company has delivered to the Trustee a
resolution of its Board of Directors appointing a successor trustee and such
successor has accepted such appointment in accordance with the terms of the
Subordinated Indenture, the Subordinated Indenture Trustee will be deemed to
have resigned and the successor will be deemed to have been appointed as trustee
in accordance with the Subordinated Indenture. (Section 910)
37
Notices
Notices to Holders of Subordinated Debentures will be given by mail to
the addresses of such Holders as they may appear in the Security Register.
(Section 106)
Title
The Company, the Subordinated Indenture Trustee, and any agent of the
Company or the Subordinated Indenture Trustee may treat the Person in whose name
a Subordinated Debenture is registered as the absolute owner thereof (whether or
not such Subordinated Debenture may be overdue) for the purpose of making
payment and for all other purposes. (Section 308)
Governing Law
The Subordinated Indenture and the Subordinated Debentures will be
governed by, construed in accordance with, the laws of the State of New York,
except to the extent the law of any other jurisdiction shall be mandatorily
applicable. (Section 112)
Limitation on Suits
The Subordinated Indenture limits a Holder's right to institute any
proceeding with respect to the Subordinated Indenture, the appointment of a
receiver or trustee, or for any other remedy under the Subordinated Indenture.
(Section 807)
Maintenance of Properties
The Subordinated Indenture provides that the Company shall cause (or,
with respect to property owned in common with others, make reasonable effort to
cause) all its properties used or useful in the conduct of its business to be
maintained and kept in good condition, repair and working order and shall cause
(or, with respect to property owned in common with others, make reasonable
effort to cause) to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as, in the judgment of the Company,
may be necessary so that the business carried on in connection therewith may be
properly conducted; provided, however, that nothing shall prevent the Company
from discontinuing, or causing the discontinuance of, the operation and
maintenance of any of its properties if such discontinuance is, in the judgment
of the Company, desirable in the conduct of its business. (Section 605)
Modification of Senior Indebtedness
In general, the holders of Senior Indebtedness may, without in any
manner affecting the subordination of the payment of principal of and premium,
if any, and interest, if any, on the Subordinated Debentures in their absolute
discretion agree with the Company to change the manner, place or terms of
payment, change or extend the time of payment of, or renew or alter, any Senior
Indebtedness, or amend or supplement any instrument pursuant to which any Senior
Indebtedness is issued, or exercise or refrain from exercising any other of
their rights under the Senior Indebtedness including, without limitation, the
waiver of default thereunder, all without notice to or assent from the Holders
or the Trustee. (Section 1509)
Relationship with the Subordinated Indenture Trustee
See "DESCRIPTION OF THE COLLATERAL TRUST BONDS -- Relationship with the
Trustee" for a description of certain relationships between the Subordinated
Indenture Trustee and the Company.
38
GLOBAL SECURITIES
Some or all of the Securities of any series may be represented, in
whole or in part, by one or more global securities (each, a "Global Security")
which will have an aggregate principal amount equal to that of the Securities
represented thereby. Each Global Security will be registered in the name of a
depositary (the "Depositary") or a nominee thereof identified in the applicable
Prospectus Supplement, will be deposited with such Depositary or nominee or a
custodian therefor and will bear a legend regarding the restrictions on
exchanges and registration of transfer thereof referred to below and any such
other matters as may be provided for pursuant to the Mortgage or Subordinated
Indenture, as the case may be.
As long as the Depositary, or its nominee, is the registered holder of
a Global Security, the Depositary or such nominee, as the case may be, will be
considered the sole owner and holder of such Global Security and the Securities
represented thereby for all purposes under the Mortgage or the Subordinated
Indenture, as the case may be. Except in limited circumstances, owners of
beneficial interests in a Global Security will not be entitled to have such
Global Security or any Securities represented thereby registered in their names,
will not receive or be entitled to receive physical delivery of certificated
Securities in exchange therefor and will not be considered to be the owners or
holders of such Global Security or any Securities represented thereby for any
purpose under the Securities or, as the case may be, the Mortgage or the
Subordinated Indenture. All payments of principal of and any premium and
interest on a Global Security will be made to the Depositary or its nominee, as
the case may be, as the Holder thereof. The laws of some jurisdictions require
that certain purchasers of securities take physical delivery of such securities
in definitive form. These laws may impair the ability to transfer beneficial
interests in a Global Security.
Ownership of beneficial interests in a Global Security will be limited
to institutions that have accounts with the Depositary or its nominee
(`participants") and to persons that may hold beneficial interests through
participants. In connection with the issuance of any Global Security, the
Depositary will credit, on its book-entry registration and transfer system, the
respective principal amounts of Securities represented by the Global Security to
the accounts of its participants. Ownership of beneficial interests in a Global
Security will be shown only on, and the transfer of those ownership interests
will be effected only through, records maintained by the Depositary (with
respect to participants' interests) or any such participant (with respect to
interests of persons held by such participants on their behalf). Payments,
transfers, exchanges, and other matters relating to beneficial interests in a
Global Security may be subject to various policies and procedures adopted by the
Depositary from time to time. None of the Company, the Mortgage Trustee or the
Subordinated Indenture Trustee, or any agents of each of the foregoing, will
have any responsibility or liability for any aspect of the Depositary's or any
participant's records relating to, or for payments made on account of,
beneficial interests in a Global Security, or for maintaining, supervising, or
reviewing any records relating to such beneficial interests.
EXPERTS
The financial statements and schedule included in the latest Annual
Report on Form 10-K of the Company have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto and are incorporated by reference herein in reliance upon the authority
of said firm as experts in auditing and accounting in giving said report.
LEGAL MATTERS
The legality of the Securities will be passed upon for the Company by
Stephen W. Southwick, Vice President, General Counsel & Secretary of the
Company, 200 First Street S.E., Cedar Rapids, Iowa 52401, and by Winthrop,
Stimson, Putnam & Roberts, One Battery Park Plaza, New York, New York 10004, and
for any underwriters, dealers, agents or purchasers by Dorsey & Whitney LLP, 220
South Sixth Street, Minneapolis, Minnesota 50402. However, all matters
pertaining to the Lien of the Mortgage, organization of the Company, titles to
property and franchises will be passed upon by Stephen W. Southwick, Vice
President, General Counsel & Secretary.
39
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The estimated expenses in connection with the issuance and
distribution of the Securities, other than underwriting discounts and
commissions are as follows:
Registration Fee--Securities and Exchange Commission (actual). $ 15,152
Printing and Engraving Cost................................... $ 10,000
Trustee's Charges including Authentication.................... $ 7,000
Attorney's Fees and Expenses.................................. $ 75,000
Accountant's Fees and Expenses................................ $ 35,000
Blue Sky Expenses............................................. $ 1,000
Rating Agency Fees............................................ $ 15,000
Recording and Listing Fees.................................... $ 30,000
Miscellaneous................................................. $ 5,000
--------
Total....................................... $193,152
========
Item 15. Indemnification.
Section 490.851 of the Iowa Business Corporations Act ("IBCA") grants
each corporation organized thereunder, such as the Registrant, the power to
indemnify its directors and officers against liabilities for certain of their
acts. Section 6.1 of the Registrant's Bylaws, as amended, provides for
indemnification of directors and officers of the Registrant to the full extent
permitted by Section 490.851 of the IBCA. Section 6.1 further requires the
Registrant to purchase and maintain insurance on behalf of any person who is or
was a director, officer, employee or agent of the Registrant, or is or was
serving at the request of the Registrant as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted and incurred against such person in
any such capacity or arising out of such person's status as such, whether or not
the Registrant would have the power to indemnify such person against such
liability under the provisions of Section 6.1. Section 2 of Article Ninth of the
Registrant's Amended Articles of Incorporation, however, requires that the
Registrant may, but is not required to, maintain such insurance.
Section 490.832 of the IBCA grants corporations organized thereunder,
such as the Registrant, the authority to adopt a provision in their respective
articles of incorporation eliminating or limiting, with certain exceptions, the
personal liability of a director to the corporation or to its shareholders for
monetary damages for certain breaches of fiduciary duty as a director. Section 1
of Article Ninth of the Amended Articles of Incorporation of the Registrant
eliminates the personal liability of each director except for liability (i) for
any breach of the director's duty of loyalty to the Registrant or its
shareholders, (ii) for acts or omissions not in good faith or which involve any
intentional misconduct or knowing violation of the law, (iii) any transaction
from which the director derived an improper personal benefit, or (iv) under
Section 490.833 of the IBCA relating to liability for unlawful distribution.
The foregoing statements are subject to the detailed provisions of
Sections 490.832, 490.833 and 490.851 of the IBCA, Article Ninth of the Amended
Articles of Incorporation of the Registrant and Section 6.1 of the Bylaws, as
amended of the Registrant, as applicable and should be read in conjunction
therewith for a more full understanding of their affect on the Registrant.
The Registrant's directors' and officers' insurance policies are
designed to reimburse the Registrant for any payments made by it pursuant to the
foregoing indemnification provisions.
II - 1
The proposed form of underwriting agreement for each of the Securities
contains provisions under which the underwriters agree to indemnify the
directors and officers of the Registrant against certain liabilities under the
Securities Act of 1933, as amended (the "Act").
Item 16. Exhibits.
See Exhibit Index on Page II - 6.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement (or the
most recent Post-Effective Amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
Registration Statement is on Form S-3, or Form S-8, and the information required
to be included in a Post-Effective Amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Securities and Exchange
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining liability under the Act,
each such Post-Effective Amendment shall be deemed to be a new Registration
Statement relating to the securities offered therein and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a Post-Effective
Amendment any of the securities which remain unsold at the termination of the
offering.
(4) That for purposes of determining any liability under the Act,
each filing of the Registrant's annual report pursuant to Section 13(a) or 15(d)
of the Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new Registration Statement relating to the securities offered therein and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II - 2
Insofar as indemnification for liabilities arising under the Act, as
amended, may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II - 3
POWER OF ATTORNEY
Each person whose signature appears below authorizes Lee Liu, Larry D.
Root, Thomas M. Walker and John E. Ebright, or any one of them, to execute in
the name of each such person who is then an officer or director of the
Registrant, and to file any amendments to, this Registration Statement,
including post-effective amendments, necessary or advisable to enable the
Registrant to comply with the Securities Act of 1933, as amended, and any rules,
regulations and requirements of the Securities and Exchange Commission, in
respect thereof, which amendments may make such changes in such Registration
Statement as the above-named attorneys, or any of them, may deem appropriate.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Cedar Rapids, State of Iowa, on the 9th day of
June, 1997.
IES UTILITIES INC.
By: /s/ Larry D. Root
______________________________
Larry D. Root
President & Chief Operating Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
such Registration Statement has been signed below on the 9th day of June, 1997,
by the following persons in the capacities indicated:
Signature Title
--------- -----
/s/ Lee Liu Chairman of the Board &
- --------------------------------------- Chief Executive Officer and Director
Lee Liu (Principal Executive Officer)
/s/ Thomas M. Walker Executive Vice President &
- --------------------------------------- Chief Financial Officer
Thomas M. Walker (Principal Financial Officer)
/s/ John E. Ebright Controller & Chief Accounting Officer
- --------------------------------------- (Principal Accounting Officer)
John E. Ebright
/s/ C.R.S. Anderson Director
- ---------------------------------------
C.R.S. Anderson
/s/ J. Wayne Bevis Director
- ---------------------------------------
J. Wayne Bevis
II - 4
Signature Title
--------- -----
/s/ Jack R. Newman Director
- ---------------------------------------
Jack R. Newman
/s/ Robert D. Ray Director
- ---------------------------------------
Robert D. Ray
/s/ David Q. Reed Director
- ---------------------------------------
David Q. Reed
/s/ Henry Royer Director
- ---------------------------------------
Henry Royer
/s/ Robert W. Schlutz Director
- ---------------------------------------
Robert W. Schlutz
/s/ Anthony R. Weiler Director
- ---------------------------------------
Anthony R. Weiler
II - 5
EXHIBIT INDEX
Exhibit Number List of Exhibits
- -------------- ----------------
1(a) Proposed form of Underwriting Agreement relating to Collateral
Trust Bonds ("Bonds").
1(b) Proposed form of Underwriting Agreement relating to
Subordinated Debentures to be issued under the Subordinated
Indenture.
*4(a) Indenture of Mortgage and Deed of Trust, dated as of September
1, 1993, between the Company (formerly Iowa Electric Light and
Power Company ("IE")) and The First National Bank of Chicago,
as Trustee ("Mortgage") (Filed as Exhibit 4(c) to IE's Form
10-Q for the quarter ended September 30, 1993).
*4(b) Supplemental Indentures to the Mortgage:
Number Dated as of File Reference Exhibit
------ ----------- -------------- -------
First October 1, 1993 Form 10-Q, 11/12/93 4(d)
Second November 1, 1993 Form 10-Q, 11/12/93 4(e)
Third March 1, 1995 Form 10-Q, 5/12/95 4(b)
Fourth September 1, 1996 Form 8-K, 9/19/96 4(c)(i)
Fifth April 1, 1997 Form 10-Q, 5/14/97 4(a)
4(c) Proposed form of __________ Supplemental Indenture
establishing the series of Bonds (including form of Bonds).
*4(d) Indenture of Mortgage and Deed of Trust, dated as of August 1,
1940, between the Company (formerly IE) and The First National
Bank of Chicago, Trustee (1940 Indenture) (Filed as Exhibit
2(a) to IE's Registration Statement, File No. 2-25347).
*4(e) Supplemental Indentures to the 1940 Indenture:
Number Dated as of IE File Reference Exhibit
------ ----------- ----------------- -------
First March 1, 1941 2-25347 2(a)
Second July 15, 1942 2-25347 2(a)
Third August 2, 1943 2-25347 2(a)
Fourth August 10, 1944 2-25347 2(a)
Fifth November 10, 1944 2-25347 2(a)
Sixth August 8, 1945 2-25347 2(a)
Seventh July 1, 1946 2-25347 2(a)
Eighth July 1, 1947 2-25347 2(a)
Ninth December 15, 1948 2-25347 2(a)
Tenth November 1, 1949 2-25347 2(a)
Eleventh November 10, 1950 2-25347 2(a)
Twelfth October 1, 1951 2-25347 2(a)
Thirteenth March 1, 1952 2-25347 2(a)
Fourteenth November 5, 1952 2-25347 2(a)
Fifteenth February 1, 1953 2-25347 2(a)
Sixteenth May 1, 1953 2-25347 2(a)
Seventeenth November 3, 1953 2-25347 2(a)
Eighteenth November 8, 1954 2-25347 2(a)
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Number Dated as of IE File Reference Exhibit
------ ----------- ----------------- -------
Nineteenth January 1, 1955 2-25347 2(a)
Twentieth November 1, 1955 2-25347 2(a)
Twenty-first November 9, 1956 2-25347 2(a)
Twenty-second November 6, 1957 2-25347 2(a)
Twenty-third November 4, 1959 2-25347 2(a)
Twenty-fourth November 3, 1959 2-25347 2(a)
Twenty-fifth November 1, 1960 2-25347 2(a)
Twenty-sixth January 1, 1961 2-25347 2(a)
Twenty-seventh November 7, 1961 2-25347 2(a)
Twenty-eighth November 6, 1962 2-25347 2(a)
Twenty-ninth November 5, 1963 2-25347 2(a)
Thirtieth November 4, 1964 2-25347 2(a)
Thirty-first November 2, 1965 2-25347 2(a)
Thirty-second September 1, 1966 Form 10-K, 1966 4.10
Thirty-third November 30, 1966 Form 10-K, 1966 4.10
Thirty-fourth November 7, 1967 Form 10-K, 1967 4.10
Thirty-fifth November 5, 1968 Form 10-K, 1968 4.10
Thirty-sixth November 1, 1969 Form 10-K, 1969 4.10
Thirty-seventh December 1, 1970 Form 8-K, 12/70 1
Thirty-eighth November 2, 1971 2-43131 2(g)
Thirty-ninth May 1, 1972 Form 8-K, 5/72 1
Fortieth November 7, 1972 2-56078 2(i)
Forty-first November 7, 1973 2-56078 2(j)
Forty-second September 10, 1974 2-56078 2(k)
Forty-third November 5, 1975 2-56078 2(l)
Forty-fourth July 1, 1976 Form 8-K, 7/76 1
Forty-fifth November 1, 1976 Form 8-K, 12/76 1
Forty-sixth December 1, 1977 2-60040 2(o)
Forty-seventh November 1, 1978 Form 10-Q, 6/30/79 1
Forty-eighth December 1, 1979 Form S-16, 2-65996 2(q)
Forty-ninth November 1, 1981 Form 10-Q, 3/31/82 2
Fiftieth December 1, 1980 Form 10-K, 1981 4(s)
Fifty-first December 1, 1982 Form 10-K, 1982 4(t)
Fifty-second December 1, 1983 Form 10-K, 1983 4(u)
Fifty-third December 1, 1984 Form 10-K, 1984 4(v)
Fifty-fourth March 1, 1985 Form 10-K, 1984 4(w)
Fifty-fifth March 1, 1988 Form 10-Q, 5/12/88 4(b)
Fifty-sixth October 1, 1988 Form 10-Q, 11/10/88 4(c)
Fifty-seventh May 1, 1991 Form 10-Q, 8/13/91 4(d)
Fifty-eighth March 1, 1992 Form 10-K, 1991 4(c)
Fifty-ninth October 1, 1993 Form 10-Q, 11/12/93 4(a)
Sixtieth November 1, 1993 Form 10-Q, 11/12/93 4(b)
Sixty-first March 1, 1995 Form 10-Q, 5/12/95 4(a)
Sixty-second September 1, 1996 Form 8-K, 9/19/96 4(c)(i)
Sixty-third April 1, 1997 Form 10-Q, 5/14/97 4(b)
4(f) Proposed form of __________ Supplemental Indenture providing
for the issuance of Class "A" Bonds under the 1940 Indenture
(including form of Class "A" Bonds).
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*4(g) Indenture or Deed of Trust dated as of February 1, 1923,
between the Company (successor to Iowa Southern Utilities
Company (IS) as a result of merger of IS and IE) and The
Northern Trust Company (The First National Bank of Chicago,
successor) and Harold H. Rockwell (Richard D. Manella,
successor), as Trustees (ISU 1923 Indenture) (Filed as Exhibit
B-1 to File No. 2-1719).
*4(h) Supplemental Indentures to the ISU 1923 Indenture:
Dated as of IS File Reference Exhibit
----------- ----------------- -------
May 1, 1940 2-4921 B-1-k
May 2, 1940 2-4921 B-1-l
October 1, 1945 2-8053 7(m)
October 2, 1945 2-8053 7(n)
January 1, 1948 2-8053 7(o)
September 1, 1950 33-3995 4(e)
February 1, 1953 2-10543 4(b)
October 2, 1953 2-10543 4(q)
August 1, 1957 2-13496 2(b)
September 1, 1962 2-20667 2(b)
June 1, 1967 2-26478 2(b)
February 1, 1973 2-46530 2(b)
February 1, 1975 2-53860 2(aa)
July 1, 1975 2-54285 2(bb)
September 2, 1975 2-57510 2(bb)
March 10, 1976 2-57510 2(cc)
February 1, 1977 2-60276 2(ee)
January 1, 1978 0-849 2
March 1, 1979 0-849 2
March 1, 1980 0-849 2
May 31, 1986 33-3995 4(g)
July 1, 1991 0-849 4(h)
September 1, 1992 0-849 4(m)
December 1, 1994 Form 10-K,1994 4(f)
*4(i) Indenture (For Unsecured Subordinated Debt Securities), dated
as of December 1, 1995, between the Company and The First
National Bank of Chicago, Trustee (Subordinated Indenture)
(Filed as Exhibit 4(i) to the Company's Registration
Statement, File No. 33-62259).
5 Opinion of Stephen W. Southwick, Vice President, General
Counsel & Secretary as to the legality of the Securities
(including consent of counsel).
*12 Ratio of Earnings to Fixed Charges (Filed as Exhibit 12 to the
Company's Form 10-Q for the quarter ended March 31, 1997).
23(a) Consent of Arthur Andersen LLP.
23(b) Consent of Stephen W. Southwick, Vice President, General
Counsel & Secretary (contained in Exhibit 5).
II - 8
24 Powers of Attorney (included on p. II - 4 of the Registration
Statement).
25(a) Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of The First National Bank of
Chicago, as Trustee under the Mortgage.
25(b) Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of The First National Bank of
Chicago, as Trustee under the Subordinated Indenture.
26 Form of Letter to Prospective Purchasers regarding the
Securities.
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* The exhibits listed above and marked with an asterisk were filed as exhibits
to registration statements or reports previously filed with the Commission under
the exhibit number and file reference number shown after each such exhibit, and
they are hereby incorporated herein by reference.
II - 9