-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JJW4uO5D5b9jpDClXQ+BGiY9Haijk0d65Pt4ndpOiR5DtQOxr7hWqsiVD92lluXI QWw7L0ej1h4u9MIAefBhbg== 0000890566-96-000179.txt : 19960401 0000890566-96-000179.hdr.sgml : 19960401 ACCESSION NUMBER: 0000890566-96-000179 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960329 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTRAL LOUISIANA ELECTRIC CO INC CENTRAL INDEX KEY: 0000018672 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 720244480 STATE OF INCORPORATION: LA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05663 FILM NUMBER: 96541739 BUSINESS ADDRESS: STREET 1: 2030 DONAHUE FERRY RD CITY: PINEVILLE STATE: LA ZIP: 71360 BUSINESS PHONE: 3184847400 MAIL ADDRESS: STREET 1: P O BOX 5000 CITY: PINEVILLE STATE: LA ZIP: 71361-5000 10-K 1 FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1995 Commission file number 1-5663 Or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 CENTRAL LOUISIANA ELECTRIC COMPANY, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) LOUISIANA 72-0244480 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2030 DONAHUE FERRY ROAD, PINEVILLE, LOUISIANA 71360-5226 (Address of principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 318/484-7400 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED ------------------- --------------------- COMMON STOCK, $2.00 PAR VALUE New York Stock Exchange Pacific Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: TITLE OF EACH CLASS Cumulative Preferred Stock, $100 Par Value 4.50% 4.50%, Series of 1955 4.65%, Series of 1964 4.75%, Series of 1965 Convertible, Series of 1991 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X], No [ ]. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] As of February 19, 1996, the aggregate value of the Registrant's voting stock held by non-affiliates was $598,490,824. The Registrant's Cumulative Preferred Stock is not listed on any exchange, nor are prices for the Cumulative Preferred Stock quoted on NASDAQ; therefore, its market value is not readily determinable and is not included in the foregoing amount. As of March 15, 1996, there were 22,440,634 shares outstanding of the Registrant's Common Stock, par value $2.00 per share. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's Annual Report to Shareholders for the year ended December 31, 1995, furnished to the Securities and Exchange Commission pursuant to Rule 14a - 3(b) under the Securities Exchange Act of 1934 (1995 Annual Report to Shareholders), are filed as Exhibit 13 to this report and incorporated by reference into Part II herein. Portions of the Registrant's definitive Proxy Statement dated March 5, 1996, for the Annual Meeting of Shareholders to be held on April 19, 1996, are incorporated by reference into Part III herein. TABLE OF CONTENTS PART I Page ---- Item 1. Business General ............................................ 1 Electric Operations ................................ 1 Regulatory and Environmental Matters ............... 6 Item 2. Properties ......................................... 12 Item 3. Legal Proceedings .................................. 13 Item 4. Submission of Matters to a Vote of Security Holders .............................. 13 Executive Officers of the Registrant ............... 14 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters .................. 16 Item 6. Selected Financial Data ............................ 16 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ....................................... 17 Item 8. Financial Statements and Supplementary Data ............................... 17 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ............................. 18 PART III Item 10. Directors and Executive Officers of the Registrant ................................ 18 Item 11. Executive Compensation ............................ 18 Item 12. Security Ownership of Certain Beneficial Owners and Management ............................ 18 Item 13. Certain Relationships and Related Transactions ..................................... 18 PART IV Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K ................ 19 ITEM 1. BUSINESS GENERAL Central Louisiana Electric Company, Inc. (the Company) was incorporated in 1934 under the laws of the State of Louisiana and is engaged principally in the generation, transmission, distribution and sale of electric energy to approximately 221,000 customers in 63 communities and contiguous rural areas in a 14,000 square-mile region in the State of Louisiana. At December 31, 1995 the Company employed 1,192 persons. The Company's mailing address is P. O. Box 5000, Pineville, Louisiana 71361-5000, and its telephone number is (318) 484-7400. ELECTRIC OPERATIONS CERTAIN FACTORS AFFECTING THE COMPANY'S ELECTRIC OPERATIONS As an electric utility, the Company has been affected, to varying degrees, by a number of factors affecting the electric utility industry in general. These factors include increasingly competitive business conditions, the cost of compliance with environmental regulations, and changes in the federal regulation of the generation and transmission of electricity. For a discussion of various regulatory changes and competitive forces affecting the Company and other electric utilities, see "Regulatory and Environmental Matters - Energy Policy Act of 1992" - "Competition", and" - Regulatory matters" below. POWER GENERATION The Company operates and either owns or has an ownership interest in four steam electric generating stations and a gas turbine. The Company is the sole owner of Coughlin Power Station, Teche Power Station and Rodemacher Power Station Unit 1. The Company owns a 50% interest in Dolet Hills Power Station Unit 1 (Dolet Hills Unit 1), and a 30% interest in Rodemacher Power Station Unit 2 (Rodemacher Unit 2). In December 1995, the Company assumed formal ownership of the city of Franklin's electrical system, including a 7 MW gas turbine. At December 31, 1995 the Company's aggregate electric generating capacity was 1,693,000 kilowatts (excluding the Company's 20,000 kilowatts of firm purchases from Sabine River Authority). The following table sets forth certain information with respect to the Company's generating facilities. 1
YEAR CAPACITY TYPE OF OF AT FUEL GENERATING INITIAL 12/31/95 USED FOR GENERATING STATION UNIT # OPERATION (KILOWATTS) GENERATION (1) - ------------------------- --------- -------- ---------- -------------- Franklin Gas Turbine ............... 1973 7,000 gas Coughlin Power Station ............. 6 1961 110,000 gas/oil(standby) 7 1966 224,000 gas/oil(standby) Teche Power Station ................ 1 1953 23,000 gas 2 1956 48,000 gas 3 1971 359,000 gas/oil(standby) Rodemacher Power Station ........... 1 1975 440,000 gas/oil 2 1982 157,000(2) coal/gas Dolet Hills Power Station .......... 1 1986 325,000(3) lignite --------- Total Generating Capability 1,693,000 =========
- ------------ (1) Where oil is used on a standby basis, capacity may be reduced. (2) Represents the Company's 30% interest in the capacity of Rodemacher Unit 2, a 523,000-kilowatt generating unit. (3) Represents the Company's 50% interest in the capacity of Dolet Hills Unit 1, a 650,000-kilowatt generating unit. FUEL The following table sets forth, for the periods indicated, the percentages of power generated from various fuels at the Company's electric generating plants, the cost of fuel used per kilowatt hour (KWH) attributable to each such fuel and the weighted average fuel cost per KWH.
LIGNITE COAL GAS FUEL OIL WEIGHTED -------------------- -------------------- -------------------- -------------------- AVERAGE COST COST COST COST COST PER PERCENT PER PERCENT PER PERCENT PER PERCENT PER KWH OF KWH OF KWH OF KWH OF KWH YEAR (MILLS) GENERATION (MILLS) GENERATION (MILLS) GENERATION (MILLS) GENERATION (MILLS) - ---- ------- ---------- ------- ---------- ------- ---------- ------- ---------- ------- 1995 14.86 35.9 18.88 14.3 19.48 49.8 24.77 0.0 17.74 1994 15.09 36.5 19.53 16.0 22.28 47.4 21.00 0.1 19.22 1993 15.50 32.7 20.28 19.5 25.11 47.8 -- -- 21.02 1992 14.96 37.0 20.07 16.7 21.48 46.3 -- -- 18.83 1991 14.96 37.2 21.07 15.2 19.94 47.6 -- -- 18.26
For information with respect to the Company's ability to pass through changes in costs of fuel to its customers, see "Regulatory and Environmental Matters - Rates" below. Natural Gas Supply During 1995, the Company purchased a total of 33,034 billion British thermal units (MMMBtu) of natural gas for the generation of electricity. The annual and average per-day quantities of gas purchased by the Company from each supplier are shown in the table below. 2 AVERAGE AMOUNT 1995 PURCHASED PERCENT PURCHASES PER DAY OF TOTAL NATURAL GAS SUPPLIER (MMMBTU) (MMMBTU GAS USED - -------------------- ------ ----- ----- NorAm Energy Services, Inc. ............... 15,078 41.3 45.6 Louisiana Intrastate Gas Corporation ...... 13,893 38.1 42.1 Louisiana Land and Exploration Company . 1,824 5.0 5.5 Other .................................. 2,239 6.1 6.8 ------ ----- ----- 33,034 90.5 100.0 ====== ===== ===== The Company has contracted with NorAm Energy Services, Inc. (NES), a subsidiary of NorAm Energy Corp., for the purchase of natural gas to be delivered to the Company's four power stations. The contract provides for a firm gas supply through the year 2000 in quantities sufficient to meet the Company's internal system requirements and contains options designed to enable the Company to manage the natural gas component of its total fuel costs. The contract may be terminated earlier under price reopener provisions which may be initiated by either party in early 1996; and the Company has exercised its option to renegotiate the price at this time. If the parties do not come to an agreement the contract terminates effective January 1, 1997. The contract with NES contains pricing mechanisms for gas purchased thereunder which are intended to approximate current market prices at the time of purchase and are designed to be competitive with prices paid by other Louisiana electric utilities. The Company plans to construct or have constructed lateral pipelines to connect its generating station(s) to other interstate natural gas pipelines in order to provide additional sources of supply and transportation prior to the termination or expiration of the NES contract. The NES contract also contains minimum and maximum supply obligations which are based upon the Company's seasonal generation requirements. The Company is obligated to purchase certain quantities of gas from NES on an annual basis. A minimum or base quantity of 20,000 MMMBtu of gas must be purchased during a year, adjusted by plus or minus 10% at the option of the Company each year, if all gas is purchased from NES. The Company exercised its option to reduce the 20,000 MMMBtu by 10% for 1995, in effect reducing the 1995 minimum gas purchase to 18,000 MMMBtu. A minimum of 25,000 MMMBtu must be purchased during a year if any gas is purchased from third party suppliers, unless a lesser amount is permitted under the contract. In 1995, the Company met its minimum purchase obligations under the contract. The contract also allows for the purchase of natural gas from suppliers other than Louisiana Intrastate Gas Corporation (LIG) or Louisiana Land and Exploration Company (LL&E), if the gas is purchased for sales to other utilities. The Company has a contract with LIG for the sale and transportation of natural gas to the Company's power stations. A total of 13,893 MMMBtu of "spot" and surplus gas was purchased from LIG during 1995 under sale and transportation agreements. The month-to-month contract with LIG provides for the purchase of spot gas for the Company's internal system requirements when the price of such gas is less than that of energy purchases from other utilities and provides for the purchase of surplus gas, if and when it is available, for energy sales to other utilities. The Company has a separate contract with LIG which provides for the transportation of gas purchased by the Company from third party suppliers or under certain circumstances if NES were to fail to meet its contract obligations. 3 The Company has contracted with LL&E for the purchase of up to 5 MMMBtu of gas per day on a month-to-month basis, subject to termination by either party. The purchase price of the gas is based on a monthly index plus a markup and transportation fee. Purchased gas is transported via the intrastate pipeline system owned and operated by LIG. The Company has never incurred a liability for any gas not taken under the take-or-pay provisions of its gas supply agreements. The Company believes that it will be able either to renew its gas supply contracts as they terminate or expire or enter into substitute contractual arrangements with other natural gas suppliers. Although natural gas has been relatively plentiful in recent years, supplies available to the Company and other consumers are vulnerable to disruption due to weather conditions, transportation disruption, price changes and other events. Large boiler-fuel users of natural gas, including electric utilities, generally have the lowest priority among gas users in the event pipeline suppliers are forced to curtail deliveries due to inadequate supplies. Thus, supplies of natural gas may become unavailable from time to time, or prices may increase rapidly in response to temporary supply disruptions. Such events may require the Company to shift its gas-fired generation to alternative fuel sources, such as fuel oil, to the extent it has the capability to burn those alternative fuels. Currently, the Company anticipates that its alternative fuel capability, combined with its solid-fuel generating resources, is adequate to meet fuel needs during any temporary interruption of gas supplies. Coal and Lignite Supply Substantially all of the coal for Rodemacher Unit 2 is purchased under a long-term contract with Kerr-McGee Coal Corporation from mines in Wyoming. The price of coal under the contract is a base price per ton plus a "total escalation charge" to reflect changes in certain indices specified in the contract. After purchasing a given annual quantity of base coal (504,000 tons in 1995), the Company has the right to purchase coal from third parties in the spot market, and Kerr-McGee has the right to meet the terms of the proposed purchase if it chooses to do so. The coal is transported to the Rodemacher Unit 2 site under terms of a long-term rail transportation contract in unit trains which are leased by the Company pursuant to various long-term leases. Substantially all of the lignite used to fuel Dolet Hills Unit 1 is obtained under two long-term agreements. The Company and Southwestern Electric Power Company (SWEPCO), each a 50% owner of Dolet Hills Unit 1, have entered into agreements pursuant to which each acquired an undivided 50% interest in the other's leased and owned lignite reserves in northwestern Louisiana. The Company and SWEPCO have also entered into a long-term agreement with the Dolet Hills Mining Venture for the mining and delivery of such lignite reserves, which reserves are expected to provide a substantial portion of the fuel requirements for the projected operating life of Dolet Hills Unit 1. The price of lignite delivered pursuant to the agreement is a base price per ton, subject to escalation based on certain inflation indices, plus specified "pass-through" costs. Additional spot lignite may be obtained through competitive bidding. Additionally, the Company and SWEPCO, have entered into a long-term agreement with Red River Mining Co., a joint venture of the North American Coal Corporation and Phillips Coal Company, which provides for base contract purchases and spot purchases of lignite. The Company's minimum annual purchase requirement is 275,000 tons. The base lignite price under the contract is a base price per MMMBtu, subject to escalation, plus certain pass-through costs, while the spot lignite price is determined through competitive bidding. 4 The continuous supply of coal and lignite from the mining sources may be subject to interruption due to adverse weather conditions or other factors which may disrupt mining operations or transportation. At December 31, 1995, the Company's coal inventory at Rodemacher Unit 2 was approximately 72,000 tons (about a 33-day supply) and the Company's lignite inventory at Dolet Hills Unit 1 was approximately 210,000 tons (about a 37-day supply). OIL SUPPLY The Company stores fuel oil as an alternative fuel source. Rodemacher Power Station has storage capacity for an approximate 75-day supply, and other generating stations have storage capacity totaling about a 20-day supply. However, in accordance with the Company's current fuel oil inventory practices, at December 31, 1995, the Company had between 5 to 10 days supply of fuel oil stored at its generating stations. During 1995, 1,147 barrels of fuel oil were burned. The Company has been able to obtain fuel oil by spot purchases as needed. POWER PURCHASES The Company purchases electric energy from neighboring utilities when the price of the energy purchased is less than the cost to the Company of generating such energy from its own facilities. Additionally, the Company has a long-term contract under which it purchases a small percentage of its total energy requirements from a hydroelectric generating plant. During 1995, the Company purchased 1,430 million KWH of electricity, or approximately 19% of its total energy requirements. SALES The Company is a "public utility" engaged principally in the generation, transmission, distribution and sale of electricity within Louisiana. For further information regarding the Company's generating stations and its transmission and distribution facilities, see "Power Generation" above and "Properties" in Item 2 of this report. The following table sets forth information concerning sales by the Company to various classes of customers for each of the last three years. SALES (MILLION KWH) ------------------------------- 1995 1994 1993 ----- ----- ----- Residential ............................. 2,763 2,532 2,470 Commercial .............................. 1,265 1,180 1,109 Industrial .............................. 2,227 2,030 2,005 Other retail ............................ 502 487 463 Sales for resale ........................ 360 210 175 ----- ----- ----- Total sales to regular customers ..... 7,117 6,439 6,222 Short-term sales to other utilities ..... 68 174 266 ----- ----- ----- Total kilowatt-hour sales ............ 7,185 6,613 6,488 ===== ===== ===== The Company's 1995 system peak demand occurred in August and was 1,473,000 kilowatts. Sales and peak demand are affected by seasonal demand influenced by weather and are generally highest during the summer air-conditioning and winter heating seasons. The financial effects of seasonal demand on the Company's quarterly operating results are listed in Note L to the Consolidated Financial Statements on page 32 of the 1995 Annual Report to Shareholders, which is filed as Exhibit 13 to this report and incorporated herein by reference. 5 The Company expects the peak demand on the system to grow at a compound annual rate of approximately 1.9% over the next ten years. The Company's capacity reserve margin for 1995 was 14.0%. The Company believes it can economically meet the anticipated growth in customer demand by such measures as refurbishing, by the year 2000, two existing gas-fired units not currently being used or by purchasing the needed capacity on the wholesale market. No customer accounted for 10% or more of the Company's revenues in 1995. Additional information regarding the Company's sales and revenues is set forth "Results of Operations" in "Management's Discussion and Analysis" on pages 15 and 16 of the 1995 Annual Report to Shareholders, which is filed as Exhibit 13 to this report and incorporated herein by reference. CONSTRUCTION AND FINANCING For information on the Company's construction program, financing and related matters, see "Financial Condition" under "Management's Discussion and Analysis" on pages 17 through 19 of the 1995 Annual Report to Shareholders, which is filed as Exhibit 13 to this report and incorporated herein by reference. REGULATORY AND ENVIRONMENTAL MATTERS RATES Retail electric operations of the Company are subject to the jurisdiction of the Louisiana Public Service Commission (LPSC) with respect to rates, standards of service, accounting and other matters. The LPSC establishes base rates based upon nonfuel costs, including the cost of capital, and sales. The Company is also subject to the jurisdiction of the Federal Energy Regulatory Commission (FERC) with respect to certain aspects of its electric business, including rates for wholesale service and interconnections with, and the transmission of power for, other utilities. Periodically, the Company has sought and received increases in base rates from both the LPSC and the FERC to cover increases in operating costs and costs associated with additions to generation, transmission and distribution facilities. The Company's electric rates include a fuel and purchased power cost adjustment clause which enables the Company to reflect monthly fluctuations in the cost of fuel and short-term purchased power. Additionally, pretax income from certain off-system sales to other utilities is passed on to customers through the fuel cost adjustment clause. Fuel costs and fuel adjustment billing factors are approved by the LPSC and the FERC. These cost adjustments are based on costs from earlier periods which result in over or under-recovery for the period in which the adjustment is made. Any over or under-recovery is corrected by adjustment in later periods. As of December 31, 1995, the net accumulated balance of over-recovery on sales subject to the LPSC's jurisdiction was approximately $3.7 million. For information concerning an ongoing LPSC earnings review of the Company, see "Regulatory Matters" below. 6 FRANCHISES The Company operates under nonexclusive franchise rights granted by governmental units and enforced by state regulation. These franchises are for fixed terms, which vary from 10 years to 50 years. In the past, the Company has been successful in the timely renewal of franchises as each reaches the end of its term and expires. The citizens of Leesville (approximately 5,000 customers) voted to approve a 20-year franchise with the Company in 1995. ENERGY POLICY ACT OF 1992 The Energy Policy Act, adopted in October 1992, significantly changed U.S. energy policy, including that governing the electric utility industry. The Energy Policy Act allows the FERC, on a case-by-case basis and with certain restrictions, to order wholesale transmission access and to order electric utilities to enlarge their transmission systems. The Energy Policy Act does, however, prohibit FERC-ordered retail wheeling (I.E., opening up the electric utility systems to allow customer choice of energy suppliers at the retail level), including "sham" wholesale transactions. Further, under the Energy Policy Act an FERC transmission order requiring a transmitting utility to provide wholesale transmission services must include provisions generally that permit the utility to recover from the FERC applicant all of the costs incurred in connection with the transmission services, any enlargement of the transmission system and associated services. In addition, the Energy Policy Act revised the Public Utility Holding Company Act of 1935 (the Holding Company Act) to permit utilities, including registered holding companies, and non-utilities to form "exempt wholesale generators" without the principal restrictions of the Holding Company Act. Under prior law, independent power producers were generally required to adopt inefficient and complex ownership structures to avoid pervasive regulation under the Holding Company Act. Management believes that the Energy Policy Act will make wholesale markets more competitive. REGULATORY MATTERS The LPSC has elected to review the earnings of all electric, gas, water and telecommunication utilities regulated by it to determine if the returns on equity of these companies may be higher than returns that might be awarded in the current economic environment. The LPSC began its review of the Company in August 1995. Resolution of the earnings review, which is not subject to any statutory or procedural deadlines, is expected in 1996. Although the Company's rates are among the lowest in the state, the Company cannot predict the outcome of the LPSC review or the effect on the Company's financial position, results of operations, or cash flows. For more information on regulatory matters, including proposed rulemakings by the FERC on open transmission access, recovery of stranded cost, and regulatory accounting, affecting the Company, see "Regulatory Matters" in "Management's Discussion and Analysis" on page 19 of the 1995 Annual Report to Shareholders, which is filed as Exhibit 13 to this report and incorporated herein by reference. 7 COMPETITION The LPSC does not provide exclusive service territories for electric utilities under its jurisdiction. Instead, retail service is obtained through long-term, nonexclusive franchises. The LPSC has used a "300 foot rule" for determining the supplier for new customers. The application of this rule has led to competition with neighboring utilities for retail customers at the borders of the Company's service areas. The Company also competes in its service area with suppliers of alternative forms of energy, some of which may be less costly for certain applications than electricity. The Company could experience some competition for electric sales to industrial customers in the form of cogeneration or independent power producers. However, the Company believes that its rates, and the quality and reliability of its service, places it in a favorable competitive position in current retail markets. Wholesale energy markets, including the market for wholesale electric power, have been competitive, and are becoming even more so as the number of competitors in these markets increases as a result of enactment of the Energy Policy Act. The Company competes with other public utilities, cogenerators and qualified facilities in other forms for sales of electric power at wholesale. Under the Energy Policy Act, any participant in the wholesale market can obtain a FERC order requiring transmission services be provided by the Company under certain conditions. Various federal and state legislative and regulatory bodies are considering a number of issues in addition to those discussed above that will shape the future of the electric utility industry. Such issues include the extent of any deregulation of retail electricity sales, the ability of electric utilities to recover stranded costs, the repeal or modification of the Public Utility Holding Company Act of 1935, the unbundling of vertically integrated electric utility companies into separate business segments or companies (i.e., transmission, distribution and generation), the role of electric utilities, independent power producers and competitive bidding in the construction and operation of new generating capacity, and the pricing of transmission service on an electric utility's transmission system. Currently, there are no formal actions relating to these issues pending before either the Louisiana legislature or the LPSC. While the Company is unable to predict the outcome of such issues or their effect on the Company's financial position, results of operations or cash flows at this time, the Company plans to meet the challenges fostered by this developing environment by continuing its planned course of action. First, the Company intends to retain its low-cost supplier status by continuing to enhance customer service while reducing costs. In 1993 the Company conducted an organizational effectiveness study which resulted in a plan to improve operations and provide better customer service at lower costs. As a result of this study, the Company's organizational structure was streamlined in 1993. The second phase of the Company's reorganization plan commenced in May 1995, when the Company began operating a statewide customer call center to handle customer calls 24 hours a day, seven days a week. Furthermore, the Company consolidated 25 customer service offices located throughout the service territory into 10 regional offices. These regional offices only handle walk-in business while the call center now handles customer business by telephone. For those customers who prefer to pay their bills in person, the Company implemented a payment network of about 60 local businesses in the communities where customer service offices were closed. This arrangement offers customers more locations and extended business hours for paying their bills. Second, the Company has adopted a strategy of adding retail customers near its present retail markets. The Company's efforts to acquire Teche Electric Cooperative, Inc. (Teche) are part of this strategy. The Company's purchase and sale aggrement with Teche expires March 31, 1996, and the Company is currently negotiating to extend the agreement. For more information on acquisition efforts, see "Results of Operations - Co-op Developments" in "Management's Discussion and Analysis" on page 16 of the 1995 Annual Report to Shareholders, which information is filed as Exhibit 13 to this report and incorporated into Part II herein by reference. Additionally, in recent years, the Company has been successful in competing for wholesale sales within its service territory, including short-term sales to the city of Alexandria and a full requirements sale to the city of St. Martinville. Sales under the St. Martinville agreement, which is subject to the jurisdiction of the FERC, began in May 1995 and represent an approximate 13 MW load. Sales to St. Martinville are expected to provide additional base revenues, net of facility payments, of about 8 $4 million over the term of the agreement, which extends through December 2000. This contract was challenged in 1993 by the previous supplier, Louisiana Energy and Power Authority (LEPA), as well as the city of Lafayette and the American Public Power Association, with assertions of preferential, discriminatory and predatory pricing. An initial decision of the FERC's presiding administrative law judge (ALJ) in February 1995 rejected LEPA's arguments. Under FERC procedures, LEPA has filed a brief requesting the FERC to revise the initial decision. The Company has opposed LEPA's brief. Management believes that the ALJ's initial decision will be upheld. At this time it is not possible to predict what changes to the electric utility industry will emerge as a result of any federal or state regulatory and legislative initiatives or from specific regulatory decisions of the LPSC or the FERC, or the impact of such changes on the Company. It seems likely that such changes will ultimately increase the competition the Company faces in supplying electric energy to its customers. ENVIRONMENTAL QUALITY The Company is subject to numerous laws and regulations administered by federal, state and local authorities to protect the environment. These statutory and regulatory provisions impose various substantive requirements, the violation of which may result in substantial fines and penalties. Environmental requirements continue to increase as a result of new legislation, administrative actions and judicial interpretations. Therefore, the precise future effects of existing and potential requirements are difficult to determine. During 1995, the Company's capital expenditures related to environmental compliance were about $1.2 million and such expenditures are estimated to total about $1.4 million in 1996. Air Quality The State of Louisiana regulates emissions from each of the Company's generating units through regulations issued by the Air Quality Division (AQD) of the Louisiana Department of Environmental Quality (LDEQ). In addition, the AQD implements certain programs initially established by the federal Environmental Protection Agency (EPA). The AQD requires permits for certain generating units on which construction commenced after the effective date of the applicable regulation. The Company's three generating units which are subject to the AQD permitting rules, Rodemacher Units 1 and 2 and Dolet Hills Unit 1, have received AQD permits. The federal Clean Air Act Amendments of 1990 (the Act) established a regulatory program to address the effects of acid rain and imposed restrictions on sulfur dioxide (SO2) emissions from certain utility units. The Act essentially requires that utilities, like the Company, must hold a regulatory "allowance" for each ton of SO2 emitted beginning in the year 2000. The EPA is required to allocate a set number of allowances to each affected unit based on its historic emissions. After the initial allocation the Company requested an adjustment to the allowance allocation for Rodemacher Unit 2 because of an extended outage of the unit during one of the years used in the EPA's calculation. Because the final allowance allocation did not reflect the requested adjustment, the Company filed a petition for judicial review of the EPA's action on May 21, 1993 in the United States Court of Appeals for the District of Columbia Circuit. In October 1995, the EPA signed a settlement agreement in which it agreed to give Rodemacher Unit 2 the additional allowances requested. The EPA should issue a notice of proposed rulemaking in 1996 describing the terms of the settlement agreement. 9 The Act also requires the EPA to revise nitrogen oxides (NOx) emission limits for existing coal-fired boilers. In March 1994, the EPA lowered the NOx emission rate for certain boilers, including Rodemacher Unit 2 and Dolet Hills Unit 1. Rodemacher Unit 2 and Dolet Hills Unit 1 will have to meet this new emission rate by January 1, 2000. The EPA has recently proposed to lower the NOx emission rate further. The Company is evaluating its options under these NOx rules, including the option of "early election." Early election would require the Company to meet the revised NOx rate by 1997 instead of 2000, but would protect the Company from any future reductions in the NOx permitted emission rate until 2008. Significant reductions in NOx emission limits may require modification of burners or other capital improvements at either or both of the units. The Act also requires the installation of continuous emission monitoring systems (CEMS) on seven of the Company's generating units affected by the acid rain program. Installation of the CEMS has been completed at a cost of approximately $2.9 million. Title V of the Act requires certain utility and industrial facilities to obtain operating permits. States are required to develop operating permit programs as part of their State Implementation Plans. In November 1993 the LDEQ promulgated new regulations to comply with the requirements of Title V of the Act and the EPA approved the state program in 1995. Title V operating permit applications must be submitted to the LDEQ by October 1996. The operating permits will contain acid rain permit requirements, as well as other requirements of existing state and federal air programs. Title V of the Act allows states to collect fees up to $25 per ton of regulated emissions to support their operating permit programs. Fee assessments on the Company's affected units have already increased because of this provision. The LDEQ currently charges $9 per ton and that amount is expected to increase. Water Quality The Company has received from the EPA all National Pollutant Discharge Elimination System (NPDES) permits required under the Clean Water Act for discharges from its four generating stations. NPDES permits have fixed dates of expiration, and the Company has applied for renewal of these permits within the applicable time periods. The Office of Water Resources of the LDEQ requires facilities which discharge wastewater into Louisiana waters to be permitted under the Louisiana Water Discharge Permit System (LWDPS). The Company has applied for and received LWDPS permits for its four generating stations. The most recently issued NPDES permit for Dolet Hills Unit 1 contained an Administrative Order requiring biomonitoring of the discharge from the impoundment associated with the Fly Ash/Scrubber Sludge Landfill. Because the discharge from this impoundment failed all or part of the biomonitoring test at various times during the testing schedule specified in the permit, the Company has had discussions with the EPA regarding the results. The Company does not expect administrative action on the part of the EPA until the NPDES permit is renewed in 1997. At that time, the EPA may set 10 a biomonitoring limit in the NPDES permit. Violation of that limit may then require submittal of a plan describing options for reducing certain constituents in the discharge to the EPA. None of the options, if implemented, would affect the operation of the unit, or involve a significant increase in the Company's five-year construction plan. Solid Waste Disposal The Solid Waste Division of the LDEQ has adopted regulations and a permitting system for the management and disposal of solid waste generated by electric utilities. The Company has received all required permits from the Solid Waste Division for the on-site disposal of solid waste generated at its generating stations. The Company has requested approval of an alternate liner system for the Dolet Hills landfill facility and has received conditional approval from the LDEQ. The Company is in the process of obtaining additional information to submit to the LDEQ, which will make the approval permanent. The exemption, if granted, is expected to save $360,000 to $900,000 per year in operating costs at the landfill. Hazardous Waste Generation The Company produces certain wastes at its four generating stations and at other locations which are classified as hazardous. The Hazardous Waste Division of the LDEQ regulates these wastes and has issued identification numbers to the sites where such wastes are produced. The Company does not treat, store or dispose of these wastes on-site; therefore, no permits are required. All hazardous wastes produced by the Company are disposed of at federally permitted hazardous waste disposal sites. PCB Disposal In 1986 the Company was named a Potentially Responsible Party (PRP) by the EPA under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) for its involvement at the Rose Chemicals (Rose) polychlorinated biphenyl (PCP) disposal site in Holden, Missouri. The Company, along with other PRPs, has entered into two Administrative Orders on Consent with Region VII of the EPA for the removal of certain PCB materials from the site. These materials have now been removed and disposed of at federally permitted PCB disposal facilities. All clean-up activities at the site were completed in 1995. The removal and disposal were funded by contributions from the parties involved into a trust fund established for the clean-up. The site will now be monitored over the next eight to ten years. To date, the Company has contributed $142,000, net, to the trust fund. The Company has complied with the requirements established by the EPA for the general removal from service and disposal of certain equipment containing PCBs. The EPA has authorized the continued use of such equipment in locations where its use does not pose an exposure risk, and the Company uses such equipment only in restricted or remote areas. In 1995, the Company spent $262,000 on the disposal of PCB materials used in its system. 11 ELECTROMAGNETIC FIELDS The possibility that exposure to electromagnetic fields (EMF) emanating from power lines, household appliances and other electric devices may result in adverse health effects or damage to the environment has been a subject of current public attention. The scientific research conducted to date concerning the effects of EMFs has not led to any definitive results, however, such research is continuing. Lawsuits have arisen in several states against electric utilities and others alleging that the presence or use of electric power transmission and distribution lines has an adverse effect on health and/or property values. OTHER EVENTS Cajun Electric Power Cooperative (Cajun) Cajun, which provides power to the state's 12 electric distribution cooperatives, is in Chapter 11 bankruptcy. Cajun's energy is supplied from its share of a nuclear generating unit and several coal and gas-fired units it owns. With Cajun in bankruptcy proceedings, the disposition of its assets is under consideration, and the bankruptcy court trustee has asked for bids from interested parties. In an effort to grow the Company's power supply business, the Company, along with a non-utility company, submitted a joint bid on March 8, for Cajun's nonnuclear generation assets and wholesale contracts. If the Company's bid were to be accepted, closing of the transaction is subject to approval of the bankruptcy trustee, Cajun's creditors, and various governmental and regulatory agencies including the LPSC, the Rural Utilities Service, and the FERC. An estimated 1,683 megawatts of generating capacity is involved as well as 91 megawatts of firm hydroelectric purchases. The wholesale contracts include 1,362 megawatts of wholesale co-op load and 300 megawatts of firm sales. The Company has no nuclear generation and is not proposing to acquire Cajun's share of a nuclear generating unit. ITEM 2. PROPERTIES All of the Company's electric generating stations and all other operating properties are located in the State of Louisiana. The Company considers all of its properties to be well maintained, in good operating condition and suitable for their intended purposes. ELECTRIC GENERATING STATIONS As of December 31, 1995, the Company either owned or had an ownership interest in four steam electric generating stations and a gas turbine with a combined electric generating capacity of 1,693,000 kilowatts. For additional information regarding the Company's generating facilities, see "Electric Operations - Power Generation" in Item 1 of this report. SUBSTATIONS As of December 31, 1995, the Company owned 80 transmission substations and 308 distribution substations. 12 ELECTRIC LINES As of December 31, 1995, the Company's transmission system consisted of approximately 67 circuit miles of 500 kilovolt (KV) lines; 454 circuit miles of 230 KV lines; 648 circuit miles of 138 KV lines; and 21 circuit miles of 69 KV lines. The Company's distribution system consisted of approximately 2,057 circuit miles of 34.5 KV lines and 10,524 circuit miles of other lines. GENERAL PROPERTIES The Company owns various properties which include a seven-story headquarters office building, regional offices, a central warehouse, service centers, telecommunications equipment and other facilities owned for general purposes. TITLE The Company's electric generating plants and certain other principal properties are owned in fee. Electric transmission and distribution lines are located either on private rights-of-way or along streets or highways by public consent. Substantially all of the Company's property, plant and equipment is subject to liens securing obligations of the Company under an Indenture of Mortgage, none of which impairs the use of such properties in the operation of its business. ITEM 3. LEGAL PROCEEDINGS The Company is not aware of any legal proceeding to which it is a party which would have a material adverse effect on its financial condition, results of operations, cash flows, or competitive position. For a discussion of certain legal proceedings and regulatory matters involving the Company, see (i) "Regulatory and Environmental Matters - Competition" "- Regulatory Matters", and "- Environmental Quality" in Item 1 of this report and (ii) "Results of Operations-Nonfuel Operating Expenses and Income Taxes" in "Management's Discussion and Analysis" on pages 16 and 17 of the 1995 Annual Report to Shareholders, which sections are incorporated herein by reference. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of security holders of the Company during the fourth quarter of 1995. 13 EXECUTIVE OFFICERS OF THE REGISTRANT The names of the executive officers of the Company, their positions held, five-year employment history, ages and years of service as of December 31, 1995, are presented below. Executive officers are appointed annually to serve for the ensuing year or until their successors have been appointed. POSITION AND FIVE-YEAR NAME OF EXECUTIVE OFFICER EMPLOYMENT HISTORY - ------------------------- ------------------ Gregory L. Nesbitt....... President and Chief Executive Officer since April 1993; President and Chief Operating Officer from April 1992 to April 1993; Executive Vice President and Chief Operating Officer from July 1991 to April 1992; Executive Vice President from January 1988 to July 1991. (Age 57; 15 years of service) Robert L. Duncan......... Vice President-Customer Operations since July 1984. (Age 53; 30 years of service) David M. Eppler.......... Vice President-Power Supply and Energy Transmission since July 1995; Vice President-Finance from October 1993 to July 1995; Vice President and Treasurer from July 1987 to October 1993. (Age 45; 14 years of service) Leonard G. Fontenot...... Vice President from July 1995 to date of retirement January 1,1996; Vice President-Power Supply and Energy Transmission from April 1986 to July 1995. (Age 58; 33 years of service) Catherine C. Scheffler... Vice President-Employee and Support Services since July 1995;Vice President-Human Resources from October 1993 to July 1995; General Manager-Human Resources from August 1993 to October 1993; Administrator- Compensation from May 1991 to August 1993; Vice President at Rapides Bank And Trust Company from December 1987 to April 1991 (Age 40; 4 years of service) David K. Warner.......... Vice President-Finance and Chief Financial Officer since July 1995;Vice President-Administrative Services from April 1988 to July 1995. (Age 45; 15 years of service) John L. Baltes, Jr....... Controller since April 1989. (Age 49; 14 years of service) 14 POSITION AND FIVE-YEAR NAME OF EXECUTIVE OFFICER EMPLOYMENT HISTORY - ------------------------- ---------------------- Michael P. Prudhomme..... Secretary-Treasurer since January 1994; Secretary from October 1993 to January 1994; Vice President-Customer Services from May 1985 to October 1993. (Age 52; 26 years of service) Judy P. Miller........... Assistant Corporate Secretary since April 1995; Acting Assistant Corporate Secretary from February 1995 to April 1995; Supervisor-Plant Accounting from October 1993 to February 1995; Supervisor-Income and Other Taxes from June 1990 to October 1993. (Age 38; 11 years of service) 15 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's common stock is listed for trading on the New York Stock Exchange (NYSE) and the Pacific Stock Exchange. The following table sets forth high and low sales prices for the Company's common stock as reported on the NYSE Composite Tape and dividends paid per share during each calendar quarter of 1995 and 1994.
1995 1994 ---------------------------------- ---------------------------------- HIGH LOW DIVIDEND HIGH LOW DIVIDEND ------- ------- ------ ------- ------- ------ First Quarter $24-1/2 $22 $0.365 $24-7/8 $21-1/4 $0.355 Second Quarter $24-1/2 $22-1/8 $0.375 $25-5/8 $22-1/4 $0.365 Third Quarter $25-5/8 $22-1/4 $0.375 $24-3/8 $21-1/4 $0.365 Fourth Quarter $28-1/8 $25-1/4 $0.375 $23-5/8 $20-7/8 $0.365
Subject to the prior rights of the holders of the respective series of the Company's preferred stock, such dividends as determined by the Board of Directors of the Company may be declared and paid on the common stock from time to time out of funds legally available therefor. The provisions of the Company's charter applicable to preferred stock and certain provisions contained in the debt instruments of the Company under certain circumstances restrict the amount of retained earnings available for the payment of dividends by the Company. The most restrictive covenant requires that common shareholders' equity be not less than 30% of total capitalization, including short-term debt. At December 31, 1995, approximately $144,000,000 of retained earnings was not restricted. On January 26, 1996 the Board of Directors of the Company declared a quarterly dividend of $0.375 per share, which dividend was paid on February 15, 1996, to common shareholders of record on February 5, 1996. As of March 15, 1996, there were 12,081 holders of record of the Company's common stock, and the closing price of the Company's common stock as reported on the NYSE Composite Tape was $25.875 per share. ITEM 6. SELECTED FINANCIAL DATA The following table sets forth certain selected financial data for the respective periods presented and should be read in conjunction with the Consolidated Financial Statements and the related Notes thereto set forth on pages 20 through 33 in the 1995 Annual Report to Shareholders, which is filed as Exhibit 13 to this report and incorporated herein by reference. 16
FOR THE YEARS ENDED DECEMBER 31, -------------------------------------------------------------------------- 1995 1994 1993 1992 1991 ---------- ---------- ---------- -------- -------- FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIOS) Statement of Income Data Operating revenues ............................. $ 394,426 $ 379,603 $ 382,433 $351,613 $343,350 Net income ..................................... $ 48,703 $ 45,043 $ 41,812 $ 45,239 $ 44,929 Net income applicable to common stock .............................. $ 46,651 $ 43,017 $ 39,827 $ 43,010 $ 42,957 Primary net income per common share (1) ......................... $ 2.08 $ 1.92 $ 1.78 $ 1.93 $ 1.92 Fully diluted net income per common share (1) ......................... $ 2.01 $ 1.86 $ 1.73 $ 1.89 $ 1.87 Cash dividends paid per common share (1) ............................. $ 1.490 $ 1.450 $ 1.410 $ 1.370 $ 1.325 Ratio of earnings to fixed charges ................................ 3.49x 3.35x 3.30x 3.16x 2.99x Ratio of earnings to combined fixed charges and preferred stock dividends .................... 3.17x 3.02x 2.96x 2.83x 2.73x Balance Sheet Data (at end of period) Total assets ................................... $1,226,034 $1,178,191 $1,161,635 $978,220 $973,472 Long-term obligations and redeemable preferred stock ................... $ 367,432 $ 343,509 $ 358,329 $318,214 $400,605 OPERATING STATISTICS Electric sales - regular system customers (million KWH) Residential ................................... 2,763 2,532 2,470 2,353 2,313 Commercial .................................... 1,265 1,180 1,109 1,062 1,043 Industrial .................................... 2,227 2,030 2,005 1,972 1,928 Other retail .................................. 502 487 463 477 464 Sales for resale .............................. 360 210 175 146 141 ---------- ---------- ---------- -------- -------- Total sales to regular customers ................ 7,117 6,439 6,222 6,010 5,889 Short-term energy sales to other utilities (million KWH) ......................... 68 174 266 88 121 ---------- ---------- ---------- -------- -------- Total electric sales .......................... 7,185 6,613 6,488 6,098 6,010 ========== ========== ========== ======== ======== System peak (thousand kilowatts) .................. 1,473 1,310 1,346 1,308 1,233 Electric customers ................................ 220,923 217,568 212,559 213,941 211,332
- -------------- (1) All prior-period per share amounts have been restated to reflect a two-for-one stock split effective in May 1992. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information set forth in "Management's Discussion and Analysis" on pages 15 through 19 of the Company's 1995 Annual Report to Shareholders is incorporated herein by reference; such information is filed as Exhibit 13 to this report. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information set forth on pages 20 through 33 in the 1995 Annual Report to Shareholders is incorporated herein by reference; such information is filed as Exhibit 13 to this report. 17 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information set forth (i) under the subcaption "Directors" under the caption "Election of Directors" and (ii) in the last paragraph under the caption "Security Ownership of Directors and Management" in the Company's definitive Proxy Statement dated March 5, 1996, filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934 (1996 Proxy Statement), is incorporated herein by reference. See also "Executive Officers of the Registrant" on pages 14 and 15 of this report. ITEM 11. EXECUTIVE COMPENSATION The information set forth under the subcaption "Organization and Compensation of the Board of Directors" under the caption "Election of Directors" and under the caption "Executive Compensation" in the 1996 Proxy Statement (excluding the information required by paragraphs (k) and (l) of Item 402 of Regulation S-K) is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information set forth under the caption "Security Ownership of Directors and Management" and under the caption "Security Ownership of Certain Beneficial Owners" in the 1996 Proxy Statement is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information set forth under the subcaption "Directors" under the caption "Election of Directors" in the 1996 Proxy Statement is incorporated herein by reference. 18 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
REFERENCE (PAGE) --------------------------------- 1995 ANNUAL FORM 10-K REPORT TO ANNUAL REPORT SHAREHOLDERS ------------- ------------ 14(a)(1) Consolidated Financial Statements and Supplementary Data on pages 20 through 33 in the Company's 1995 Annual Report to Shareholders are filed as Exhibit 13 to this report and are incorporated herein by reference. Consolidated Statements of Income for the years ended December 31, 1995, 1994 and 1993 20 Consolidated Balance Sheets at December 31, 1995 and 1994 21 Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993 22 Consolidated Statements of Changes in Common Shareholders' Equity for the years ended December 31, 1995, 1994 and 1993 23 Notes to Consolidated Financial Statements 24 Report of Independent Accountants 33 14(a)(2) Financial Statement Schedules Report of Independent Accountants 26 Schedule II - Valuation and Qualifying Accounts 27 Financial Statement Schedules other than those shown in the above index are omitted because they are either not required or are not applicable or the required information is shown in the Consolidated Financial Statements and Notes thereto.
19 14(a)(3) List of Exhibits The Exhibits designated by an asterisk are filed herewith. The Exhibits not so designated have been previously filed with the Securities and Exchange Commission, and are incorporated herein by reference. The Exhibits designated by two asterisks are management contracts and compensatory plans and arrangements required to be filed as Exhibits to this report.
SEC FILE OR REGISTRATION REGISTRATION STATEMENT EXHIBIT EXHIBITS NUMBER OR REPORT NUMBER - ----------------------------------------------------------- ------------ ----------- ------- 3(a) Restated Articles of Incorporation of the 1-5663 10-Q(3/92) 3 Company dated as of July 24, 1989, as amended through April 24, 1992 * 3(b) Amended and Restated Bylaws of the Company, as amended to March 5, 1996 4(a)(1) Indenture of Mortgage dated as of July 1, 2-27284 S-1(10/17/67) 4(b)(1) 1950, between the Company and First National Bank of New Orleans, as Trustee 4(a)(2) First Supplemental Indenture dated as 2-27284 S-1(10/17/67) 4(b)(2) of October 1, 1951, to Exhibit 4(a)(1) 4(a)(3) Second Supplemental Indenture dated as 2-27284 S-1(10/17/67) 4(b)(3) of June 1, 1952, to Exhibit 4(a)(1) 4(a)(4) Third Supplemental Indenture dated as 2-27284 S-1(10/17/67) 4(b)(4) of January 1, 1954, to Exhibit 4(a)(1) 4(a)(5) Fourth Supplemental Indenture dated as 2-27284 S-1(10/17/67) 4(b)(5) of November 1, 1954, to Exhibit 4(a)(1) 4(a)(6) Tenth Supplemental Indenture dated as 1-5663 10-K(1986) 4(a)(11) of September 1, 1965, to Exhibit 4(a)(1) 4(a)(7) Eleventh Supplemental Indenture dated 2-32069 S-9(4/7/69) 2(m) as of April 1, 1969, to Exhibit 4(a)(1) 4(a)(8) Eighteenth Supplemental Indenture dated as 1-5663 10-K(1993) 4(a)(8) of December 1, 1982, to Exhibit 4(a)(1) 4(a)(9) Nineteenth Supplemental Indenture dated as 1-5663 10-K(1993) 4(a)(9) of January 1, 1983, to Exhibit 4(a)(1) 4(a)(10) Twenty-Sixth Supplemental Indenture dated as 1-5663 8-K(3/90) 4(a)(27) of March 15, 1990, to Exhibit 4(a)(1) 4(a)(11) Twenty-Seventh Supplemental Indenture dated as 2-27284 S-1(10/17/67) 4(f)(1) of July 15, 1991, to Exhibit 4(a)(1) 4(b) Indenture between the Company and Bankers 33-24896 S-3(10/11/88) 4(b) Trust Company, as Trustee, dated as of October 1, 1988 4(c) Trust Indenture (The Industrial Development 1-5663 10-K(1991) 4(i) Board of the Parish of Rapides, Inc. (Louisiana) Adjustable Tender Pollution Control Revenue Refunding Bonds, Series 1991) dated as of May 1, 1991, between The Industrial Development Board of the Parish of Rapides, Inc. and First National Bank of Commerce 20 4(c)(1) First Supplemental Trust Indenture (The Industrial 1-5663 10-K(1994) 4(e)(1) Development Board of the Parish of Rapides, Inc. (Louisiana) Adjustable Tender Pollution Control Revenue Refunding Bonds, Series 1991) dated as of May 1, 1993, between The Industrial Development Board of the Parish of Rapides, Inc. and First National Bank of Commerce, relating to Exhibit 4(c) 4(d) Refunding Agreement (The Industrial 1-5663 10-Q(6/91) 10(a) Development Board of the Parish of Rapides, Inc. (Louisiana) Adjustable Tender Pollution Control Revenue Refunding Bonds, Series 1991) dated as of May 1, 1991, between the Company and The Industrial Development Board of the Parish of Rapides, Inc. 4(e) Trust Indenture (Parish of DeSoto, State of 1-5663 10-K(1991) 4(k) Louisiana Adjustable Tender Pollution Control Revenue Refunding Bonds, Series 1991A) dated as of May 1, 1991, between Parish of Desoto, State of Louisiana and First National Bank of Commerce 4(e)(1) First Supplemental Trust Indenture ( Parish 1-5663 10-K(1994) 4(g)(l) of DeSoto, State of Louisiana Adjustable Tender Pollution Control Revenue Refunding Bonds, Series 1991A) dated as of May 1, 1993, between the Parish of DeSoto, State of Louisiana and First National Bank of Commerce, relating to Exhibit 4(e) 4(f) Refunding Agreement (Parish of DeSoto, 1-5663 10-Q(6/91) 10(b) State of Louisiana Adjustable Tender Pollution Control Revenue Refunding Bonds, Series 1991A) dated as of May 1, 1991, between the Parish of DeSoto, State of Louisiana and the Company 4(g) Trust Indenture (Parish of DeSoto, State of 1-5663 10-K(1991) 4(m) Louisiana Adjustable Tender Pollution Control Revenue Refunding Bonds, Series 1991B) dated as of May 1, 1991, between Parish of DeSoto, State of Louisiana and First National Bank of Commerce 4(g)(1) First Supplemental Trust Indenture (Parish 1-5663 10-K(1994) 4(i)(1) of DeSoto, State of Louisiana Adjustable Tender Pollution Control Revenue Refunding Bonds, Series 1991B) dated as of May 1, 1993, between the Parish of DeSoto, State of Louisiana and First National Bank of Commerce, relating to Exhibit 4(g) 21 4(h) Refunding Agreement (Parish of DeSoto, 1-5663 10-Q(6/91) 10(c) State of Louisiana Adjustable Tender Pollution Control Revenue Refunding Bonds, Series 1991B) dated as of May 1, 1991, between the Parish of DeSoto, State of Louisiana and the Company 4(i) $100,000,000 Credit Agreement dated as of June 1-5663 10-Q(6/95) 4 15, 1995, among the Company, certain Banks parties thereto, and The Bank of New York as Agent **10(a) 1990 Long-Term Incentive Compensation Plan 1-5663 1990 Proxy A Statement (4/90) **10(b) 1981 Incentive Stock Option Plan 1-5663 10-K(1992) 10(i) ***10(c) Annual Incentive Compensation Plan **10(d) Deferred Compensation Plan for Directors 1-5663 10-K(1992) 10(n) **10(e)(1) Supplemental Executive Retirement Plan 1-5663 10-K(1992) 10(o)(1) **10(e)(2) Form of Supplemental Executive Retirement 1-5663 10-K(1992) 10(o)(2) Plan Participation Agreement between the Company and the following officers: Gregory L. Nesbitt, Robert L. Duncan David M. Eppler, Leonard G. Fontenot and David K. Warner ***10(f) Form of Executive Severance Agreement between the Company and the following officers: Gregory L. Nesbitt, Robert L. Duncan, David M. Eppler, and David K. Warner 10(g)(1) Receivables Purchase Agreement, dated 1-5663 10-K(1994) 10(n)(l) as of April 9, 1990, as Amended and Restated as of March 1, 1995, among the Company, Corporate Asset Funding Company, Inc. and Citicorp North America, Inc. 10(g)(2) Receivables Purchase Agreement, dated 1-5663 10-K(1994) 10(n)(2) as of April 9, 1990, as Amended and Restated as of March 1, 1995, among the Company, Citicorp, N.A. and Citicorp North America, Inc. 10(h)(1) Term Loan Agreement dated as of April 2, 1991, 1-5663 10-Q(3/91) 4(b) among the 401(k) Savings and Investment Plan ESOP Trust, the Company, as Guarantor, the 22 Banks listed therein and The Bank of New York, as Agent, relating to Exhibit 10(m) 10(h)(2) Assignment and Assumption Agreement, effective 1-5663 10-Q(3/91) 4(c) as of May 6, 1991, between The Bank of New York and the Canadian Imperial Bank of Commerce, relating to Exhibit 10(h)(1) 10(h)(3) Assignment and Assumption Agreement dated as of 1-5663 10-K(1991) 10(y)(3) July 3, 1991, between The Bank of New York and Rapides Bank and Trust Company in Alexandria, relating to Exhibit 10(h)(1) 10(h)(4) Assignment and Assumption Agreement dated as of 1-5663 10-K(1992) 10(bb)(4) July 6, 1992, among The Bank of New York, CIBC, Inc. and Rapides Bank and Trust Company in Alexandria, as Assignors, the 401(k) Savings and Investment Plan ESOP Trust, as Borrower, and the Company, as Guarantor, relating to Exhibit 10(h)(1) 10(i) Reimbursement Agreement (The Industrial 1-5663 10-Q(6/91) 4(a) Development Board of the Parish of Rapides, Inc. (Louisiana) Adjustable Tender Pollution Control Revenue Refunding Bonds, Series 1991) dated as of May 29, 1991, among the Company, various financial institutions, Swiss Bank Corporation and The First National Bank of Chicago 10(i)(1) Remarketing Agreement (The Industrial Development 1-5663 10-Q(9/94) 10(a) Board of the Parish of Rapides, Inc. (Louisiana) Adjustable Tender Pollution Control Revenue Refunding Bonds, Series 1991) dated as of July 19,1994, between the Company and PaineWebber Incorporated 10(i)(2) Tender Agreement (The Industrial Development Board 1-5663 10-K(1991) 10(z)(2) of the Parish of Rapides, Inc. (Louisiana) Adjustable Tender Pollution Control Revenue Refunding Bonds, Series 1991) dated as of May 1, 1991, among First National Bank of Commerce, as Trustee, the Company, The First National Bank of Chicago, as Tender Agent and Registrar, Smith Barney, Harris Upham & Co. Incorporated, as Remarketing Agent, and Swiss Bank Corporation, as Bank 10 (i)(3) Amendment No. 1 to Reimbursement Agreements (The 1-5663 10-K(1994) 10(p)(3) Industrial Development Board of the Parish of Rapides, Inc. (Louisiana) Adjustable Tender Pollution Control 23 Revenue Refunding Bonds, Series 1991, 1991A and 1991B) dated as of December 9, 1994, among the Company, various financial institutions, Swiss Bank Corporation, New York Branch, as Issuer of the Letters of Credit, and Swiss Bank Corporation, New York Branch, as Agent, relating to Exhibits 10(i), 10(j) and 10(k). 10(j) Reimbursement Agreement (Parish of DeSoto, 1-5663 10-Q(6/91) 4(b) State of Louisiana Adjustable Tender Pollution Control Revenue Refunding Bonds, Series 1991A) dated as of May 29, 1991, among the Company, various financial institutions, Swiss Bank Corporation and The First National Bank of Chicago 10(j)(1) Remarketing Agreement (Parish of DeSoto, State of 1-5663 10-Q(9/94) 10(b) Louisiana Adjustable Tender Pollution Control Revenue Refunding Bonds, Series 1991A) dated as of July 19, 1994, between the Company and PaineWebber Incorporated 10(j)(2) Tender Agreement (Parish of DeSoto, State of 1-5663 10-K(1991) 10(aa)(2) Louisiana Adjustable Tender Pollution Control Revenue Refunding Bonds, Series 1991A) dated as of May 1, 1991, among First National Bank of Commerce, as Trustee, the Company, The First National Bank of Chicago, as Tender Agent and Registrar, Smith Barney, Harris Upham & Co. Incorporated, as Remarketing Agent, and Swiss Bank Corporation, as Bank 10(k) Reimbursement Agreement (Parish of DeSoto, 1-5663 10-Q(6/91) 4(c) State of Louisiana Adjustable Tender Pollution Control Revenue Refunding Bonds, Series 1991B) dated as of May 29, 1991, among the Company, various financial institutions, Swiss Bank Corporation and The First National Bank of Chicago 10(k)(1) Remarketing Agreement (Parish of DeSoto, State of 1-5663 10-Q(9/94) 10(c) Louisiana Adjustable Tender Pollution Control Revenue Refunding Bonds, Series 1991B) dated as of July 19, 1994, between the Company and PaineWebber Incorporated 10(k)(2) Tender Agreement (Parish of DeSoto, State of 1-5663 10-K(1991) 10(bb)(2) Louisiana Adjustable Tender Pollution Control Revenue Refunding Bonds, Series 1991B) dated as of May 1, 1991, among First National Bank of Commerce, 24 as Trustee, the Company, The First National Bank of Chicago, as Tender Agent and Registrar, Smith Barney, Harris Upham & Co. Incorporated, as Remarketing Agent, and Swiss Bank Corporation, as Bank 10(l) Selling Agency Agreement between the Company 1-5663 8-K(2/92) 1 and Salomon Brothers Inc, The First Boston Corporation and Smith Barney, Harris Upham & Co. Incorporated dated as of February 27, 1992 10(m) 401(k) Savings and Investment Plan ESOP 1-5663 10-Q(3/91) 4(a) Trust Agreement dated as of April 2, 1991, between State Street Bank and Trust Company and the Company *10(m)(1) First Amendment to 401(k) Savings and Investment Plan ESOP Trust Agreement dated as of July 30, 1993, between State Street Bank and Trust Company and the Company *11 Computation of Net Income Per Common Share *12 Computation of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and Preferred Stock Dividends *13 Management's Discussion and Analysis of Financial Condition and Results of Operations, Consolidated Financial Statements and Notes and Report of Independent Accountants *23 Consent of Independent Accountants *24 Power of Attorney from each Director of the Company whose signature is affixed to this Form 10-K for the year ended December 31, 1995 *27 Financial Data Schedule UT
14(b) Reports on Form 8-K During the three-month period ended December 31, 1995, the Company filed no current Reports on Form 8-K. 25 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Central Louisiana Electric Company, Inc.: Our report on the consolidated financial statements of Central Louisiana Electric Company, Inc. has been incorporated by reference in this Form 10-K from page 33 of the 1995 Annual Report to Shareholders of Central Louisiana Electric Company, Inc. In connection with our audits of such financial statements, we have also audited the related financial statement schedule listed in Item 14(a)(2) on page 19 of this Form 10-K. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based upon our audit. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. COOPERS & LYBRAND L.L.P. New Orleans, Louisiana January 26, 1996 26 CENTRAL LOUISIANA ELECTRIC COMPANY, INC. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS Years ended December 31, 1995, 1994 and 1993 (In thousands)
COL. A COL. B COL. C COL. D COL. E - ----------------------------------------------------------------------------------------------------------------------- ADDITIONS UNCOLLECTIBLE BALANCE AT CHARGED TO ACCOUNTS BALANCE AT BEGINNING COST AND WRITE-OFFS, END ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS OF PERIOD EXPENSES LESS RECOVERIES OF PERIOD (1) - ----------------------------------------------------------------------------------------------------------------------- Year Ended December 31, 1995 ............ $444 $817 $723 $538 Year Ended December 31, 1994 ............ $537 $442 $535 $444 Year Ended December 31, 1993 ............ $779 $ 92 $334 $537
- ------------ (1) Deducted in the balance sheet 27 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CENTRAL LOUISIANA ELECTRIC COMPANY, INC. (REGISTRANT) BY: GREGORY L. NESBITT (Gregory L. Nesbitt, President and Chief Executive Officer) Date: March , 29 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- GREGORY L. NESBITT President, Chief Executive Officer and Director March 29, 1996 (Gregory L. Nesbitt) (Principal Executive Officer) DAVID K. WARNER Vice President, Finance and Chief Financial Officer March 29, 1996 (David K. Warner) (Principal Financial Officer) JOHN L. BALTES, JR. Controller March 29, 1996 (John L. Baltes, Jr.) (Principal Accounting Officer) SHERIAN G. CADORIA DIRECTOR* J. PATRICK GARRETT DIRECTOR* F. BEN JAMES, JR. DIRECTOR* HUGH J. KELLY DIRECTOR* A. DELOACH MARTIN, JR. DIRECTOR* ROBERT T. RATCLIFF DIRECTOR* EDWARD D. SIMMONS DIRECTOR* ERNEST L. WILLIAMSON DIRECTOR* *BY: DAVID K. WARNER (David K. Warner, as March 29, 1996 Attorney-in-Fact)
28 EX-3.B 2 AMENDED AND RESTATED BYLAWS EXHIBIT 3(b) AMENDED AND RESTATED BYLAWS OF CENTRAL LOUISIANA ELECTRIC COMPANY, INC. (as amended to March 5, 1996) TABLE OF CONTENTS ARTICLE I - REGISTERED OFFICE; REGISTERED AGENTS; CORPORATE SEAL............................................... 1 Section 1 Registered Office and Registered Agents......................... 1 Section 2 Corporate Seal.................................................. 1 ARTICLE II - SHAREHOLDERS..................................................... 1 Section 1 Place of Holding Meetings....................................... 1 Section 2 Quorum; Adjournment of Meetings................................. 1 (a) General Rule............................................... 1 (b) Special Rule............................................... 2 (c) Adjournments............................................... 2 Section 3 Annual Meeting.................................................. 2 Section 4 Special Meetings................................................ 3 Section 5 Conduct of Meetings............................................. 3 Section 6 Voting.......................................................... 5 Section 7 Notice.......................................................... 5 Section 8 Amendment of Articles of Incorporation ......................... 7 (a) Shareholder Proposals...................................... 7 (b) Effectiveness.............................................. 7 Section 9 Effectiveness of Other Amendments to Articles of Incorporation............................................ 8 ARTICLE III - DIRECTORS....................................................... 9 Section 1 Certain General Provisions...................................... 9 (a) Number..................................................... 9 (b) Classification............................................. 9 (c) Nominations ............................................... 9 (d) Qualifications; Declaration of Vacancy.................... 10 (e) Removal................................................... 12 (f) Powers.................................................... 13 (g) Change in Number of Directors............................. 14 (h) Rights of Preferred Shareholders, etc..................... 14 Section 2 Filling of Vacancies........................................... 14 Section 3 Annual and Regular Meetings.................................... 14 Section 4 Special Meetings............................................... 15 Section 5 Place of Meetings; Telephone Meetings.......................... 15 Section 6 Quorum......................................................... 15 -i- Section 7 Compensation................................................... 15 Section 8 Committees..................................................... 15 ARTICLE IV - INDEMNIFICATION................................................. 16 Section 1 Right to Indemnification - General....................... 16 Section 2 Certain Provisions Respecting Indemnification for and Advancement of Expenses..................... 16 Section 3 Procedure for Determination of Entitlement to Indemnification.................................. 17 Section 4 Presumptions and Effect of Certain Proceedings........... 18 Section 5 Right of Claimant to Bring Suit.......................... 19 Section 6 Non-Exclusivity and Survival of Rights................... 19 Section 7 Definitions.............................................. 20 ARTICLE V - EXECUTIVE COMMITTEE.............................................. 21 Section l Election and Tenure...................................... 21 Section 2 Powers................................................... 22 Section 3 Meetings................................................. 22 Section 4 Compensation............................................. 22 ARTICLE VI - AUDIT COMMITTEE................................................. 22 Section 1 Election and Tenure...................................... 22 Section 2 Audit Committee.......................................... 22 Section 3 Meetings................................................. 23 Section 4 Compensation............................................. 23 ARTICLE VII - COMPENSATION COMMITTEE......................................... 23 Section l Election and Tenure...................................... 23 Section 2 Compensation Committee................................... 23 Section 3 Meetings................................................. 23 Section 4 Compensation............................................. 23 ARTICLE VIII - OFFICERS...................................................... 24 Section 1 Election, Tenure, and Compensation......................... 24 Section 2 Powers and Duties of Chairman of Board of Directors........ 24 -ii- Section 3 Powers and Duties of President............................. 24 Section 4 Powers and Duties of Vice President........................ 24 Section 5 Powers and Duties of Secretary............................. 25 Section 6 Powers and Duties of Treasurer............................. 25 Section 7 Delegation of Duties....................................... 25 ARTICLE IX - CAPITAL STOCK................................................... 26 Section l Stock Certificates......................................... 26 Section 2 Lost or Destroyed Certificates............................. 26 Section 3 Transfer of Shares......................................... 26 Section 4 Dividends.................................................. 26 Section 5 Closing Transfer Books; Fixing Record Date................. 27 ARTICLE X - FAIR-PRICE PROVISIONS............................................ 27 Section 1 Definitions.............................................. 27 Section 2 Vote Required in Business Combinations................... 30 Section 3 When Voting Requirements Not Applicable.................. 31 (a) Definitions......................................... 31 (b) Conditions.......................................... 31 (c) Other Provisions.................................... 34 ARTICLE XI - NOTICES......................................................... 34 Section 1 Manner of Giving Notice.................................. 34 Section 2 Waiver of Notice......................................... 35 ARTICLE XII - MISCELLANEOUS.................................................. 35 Section 1 Fiscal Year.............................................. 35 Section 2 Checks and Drafts........................................ 35 Section 3 Books and Records........................................ 35 Section 4 Separability............................................. 35 ARTICLE XIII - AMENDMENT OF BYLAWS........................................... 35 Section 1 Voting..................................................... 35 Section 2 Shareholder Proposals...................................... 36 Section 3 Effective Date............................................. 36 -iii- ARTICLE XIV - OTHER AMENDMENTS TO BYLAWS..................................... 36 Section 1 Effective Date............................................. 36 ARTICLE XV - CONTROL SHARE ACQUISITION STATUTE............................... 37 Section 1.................................................................... 37 -iv- AMENDED AND RESTATED BYLAWS OF CENTRAL LOUISIANA ELECTRIC COMPANY, INC. [as amended to March 5, 1996] ARTICLE I Registered Office; Registered Agents; Corporate Seal Section 1. REGISTERED OFFICE AND REGISTERED AGENTS. The registered office of the Corporation is 2030 Donahue Ferry Road, Pineville, Louisiana 71360-5226, and its registered agents are Gregory L. Nesbitt, post office address 2030 Donahue Ferry Road, Pineville, Louisiana 71360-5226, and David M. Eppler, post office address 2030 Donahue Ferry Road, Pineville, Louisiana 71360-5226. The Corporation may also have offices at such other places as the board of directors or the president may from time to time designate. Section 2. CORPORATE SEAL. The corporate seal of the Corporation shall be circular in form and have inscribed on its periphery the words "Central Louisiana Electric Company, Inc. 1934" and in its center the words "Incorporated," "Seal," and "Louisiana." ARTICLE II Shareholders Section 1. PLACE OF HOLDING MEETINGS. All meetings of the shareholders shall be held at the principal office of the Corporation in the City of Pineville, State of Louisiana, except in cases in which the notices thereof designate some other place, which may be within or without the State of Louisiana. Section 2. QUORUM; ADJOURNMENT OF MEETINGS. (a) GENERAL RULE. Except as otherwise provided in these bylaws, the presence in person or by proxy at a meeting of shareholders of the holders of record of a number of the shares of the capital stock of the Corporation issued and outstanding and entitled to vote thereat that represents a majority of the votes entitled to be cast thereat shall constitute a quorum at such meeting. -1- (b) SPECIAL RULE. At a meeting of shareholders at least one purpose of which is to amend or repeal a provision of or to supplement these bylaws or the articles of incorporation of the Corporation or to act on a merger, consolidation, reclassification, repurchase, or exchange of securities, transfer of all or substantially all of the assets of the Corporation, dissolution, "business combination" as defined in article X of these bylaws, or similar transaction, a quorum shall for all purposes consist of the presence in person or by proxy at such meeting of the holders of the number of the shares of the capital stock of the Corporation issued and outstanding and entitled to vote thereat that represents 80% of the votes entitled to be cast thereat. At a meeting described in the preceding sentence, the quorum for any class of shares entitled to vote as a class shall be the holders of the number of shares of such class that represents 80% of the votes entitled to be cast by all holders of all shares of such class. Notwithstanding the foregoing, if the change in the articles of incorporation or bylaws, merger, consolidation, reclassification, repurchase, or exchange of securities, transfer of all or substantially all of the assets of the Corporation, dissolution, "business combination" as defined in article X of these bylaws, or similar transaction in question shall have been approved, before submission of a proposal relating thereto to a vote of shareholders, by at least 80% of the "continuing directors" (hereinafter defined) of the Corporation, then, instead of subsection (b), subsection (a) of this section 2 shall determine the quorum at the meeting of shareholders at which such proposal is considered by shareholders. For purposes of the preceding, a "continuing director" shall mean a director elected pursuant to a solicitation of proxies by the board of directors of the Corporation at an annual meeting of shareholders held at least 90 days before the date of determination and who has served continuously since such election, or a director elected by continuing directors to fill a vacancy. (c) ADJOURNMENTS. If less than a quorum shall be in attendance at the time for which a meeting shall have been called, such meeting may, without any notice other than by announcement at such meeting, be adjourned from time to time by the vote of the shareholders present in person or by proxy representing a majority of the votes so present, for a period not exceeding one month at any one time, without notice other than by announcement at the meeting, until a quorum shall attend; provided, however, that a meeting at which a director or directors are to be elected shall be adjourned only from day to day until such director or directors have been elected. A meeting at which a quorum is present may also be adjourned in like manner. At an adjourned meeting at which a quorum shall attend, any business may be transacted which might have been transacted if such meeting had been held as originally called. Section 3. ANNUAL MEETING. Except as otherwise provided by resolution of the board of directors, the annual meeting of shareholders for the election of directors shall be held on the third Friday after the first Monday in April of each year. At each annual meeting, the shareholders shall elect directors to succeed those whose terms have expired as of the date of such annual meeting. Such other matters as may properly come before a meeting may be acted upon at an annual meeting. -2- Section 4. SPECIAL MEETINGS. (a) Special meetings of the shareholders for any purpose or purposes may be called by the president, by a majority of the board of directors, or by a majority of the executive committee, if any, of the board of directors; provided, however, that if and whenever dividends payable on any series of the Corporation's preferred stock shall be in default in an amount equal to the aggregate dividends payable in any period of 12 consecutive calendar months, a special meeting shall be called on the demand in writing of the holders of record of a majority of the outstanding shares of preferred stock; and, provided further, that a special meeting of shareholders may be called by a shareholder or shareholders as provided in the Corporation's articles of incorporation, these bylaws, or otherwise by law. (b) Any shareholder requesting that a special meeting of shareholders be called (the "Requesting Person") shall, at the time of making the request, submit written evidence, reasonably satisfactory to the secretary of the Corporation, that the Requesting Person is a shareholder of the Corporation and shall identify in writing (i) the reason or reasons for which the special meeting is to be called, (ii) the number of shares of each class of capital stock of the Corporation owned beneficially by the Requesting Person, (iii) all other persons with whom the Requesting Person is acting in concert, and (iv) the number of shares of capital stock beneficially owned by each such person with whom the Requesting Person is acting in concert. Within 15 days after the Requesting Person has submitted the aforesaid items to the secretary of the Corporation, the secretary of the Corporation shall determine whether the evidence of the Requesting Person's status as a shareholder submitted by the Requesting Person is reasonably satisfactory and shall notify the Requesting Person in writing of his determination. If the Requesting Person fails to submit the requisite information in the form or at the time indicated, or if the secretary of the Corporation fails to find such evidence of shareholder status reasonably satisfactory, then the request to call a special meeting of shareholders shall be deemed invalid (by reason of failure to comply with these bylaws) and no special meeting of shareholders shall be held pursuant to such request. Beneficial ownership shall be determined in accordance with section 1 of article X of these bylaws. Nothing in this subsection (b) shall affect the rights of the Corporation's shareholders as provided in section 3(b) of article 6 of the Corporation's articles of incorporation or as provided in subsection (a) immediately preceding with respect to the rights of the Corporation's preferred shareholders. Section 5. CONDUCT OF MEETINGS. Meetings of shareholders shall be presided over by the president of the Corporation or, if he is not present at a meeting, by such other person as the board of directors shall designate or, if no such person is designated by the board of directors, the most senior officer of the Corporation present at the meeting. The secretary of the Corporation, if present, shall act as secretary of each meeting of shareholders; if he is not present at a meeting, then such person as may be designated by the presiding officer shall act as secretary of the meeting. Meetings of shareholders shall follow reasonable and fair procedure. Subject to the foregoing, the -3- conduct of any meeting of shareholders and the determination of procedure and rules shall be within the absolute discretion of the presiding officer (the "Chairman of the Meeting"), and there shall be no appeal from any ruling of the Chairman of the Meeting with respect to procedure or rules. Accordingly, in any meeting of shareholders or part thereof, the Chairman of the Meeting shall have the sole power to determine appropriate rules or to dispense with theretofore prevailing rules. Without limiting the foregoing, the following rules shall apply: (a) The Chairman of the Meeting may ask or require that anyone not a bona fide shareholder or proxy leave the meeting. (b) A resolution or motion shall be considered for vote only if proposed by a shareholder or duly authorized proxy, and seconded by an individual, who is a shareholder or a duly authorized proxy, other than the individual who proposed the resolution or motion, subject to compliance with any other requirements concerning such a proposed resolution or motion contained in these bylaws. The Chairman of the Meeting may propose any motion for vote. The order of business at all meetings of shareholders shall be determined by the Chairman of the Meeting. (c) The Chairman of the Meeting may impose any reasonable limits with respect to participation in the meeting by shareholders, including, but not limited to, limits on the amount of time at the meeting taken up by the remarks or questions of any shareholder, limits on the numbers of questions per shareholder, and limits as to the subject matter and timing of questions and remarks by shareholders. (d) Before any meeting of shareholders, the board of directors may appoint any persons other than nominees for office to act as inspectors of election at the meeting or its adjournment. If no inspectors of election are so appointed, the Chairman of the Meeting may, and on the request of any shareholder or a shareholder's proxy shall, appoint inspectors of election at the meeting of shareholders. The number of inspectors shall be three. If any person appointed as inspector fails to appear or fails or refuses to act, the Chairman of the Meeting may, and upon the request of any shareholder or a shareholder's proxy shall, appoint a person to fill such vacancy. The duties of these inspectors shall be as follows: (1) Determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity and effect of proxies; (2) Receive votes or ballots; (3) Hear and determine all challenges and questions in any way arising in connection with the right to vote; -4- (4) Count and tabulate all votes; (5) Report to the board of directors the results based on the information assembled by the inspectors; and (6) Do any other acts that may be proper to conduct the election or vote with fairness to all shareholders. Notwithstanding the foregoing, the final certification of the results of any election or other matter acted upon at a meeting of shareholders shall be made by the board of directors. Section 6. VOTING. Except as otherwise provided by the articles of incorporation, each holder of shares of capital stock of the Corporation shall be entitled, at each meeting of shareholders, to one vote for each share of such stock standing in his name on the books of the Corporation on the date of such meeting or, if the board of directors, pursuant to section 5 of article IX of these bylaws, shall have fixed a record date for the purpose of such meeting or shall have fixed a date as of which the books of the Corporation shall be temporarily closed against transfers of shares, then as of such date; except that in the election of directors of the Corporation, each holder of shares of common stock of the Corporation shall have the right to multiply the number of votes to which he may be entitled by the number of directors to be elected, and he may cast all such votes for one candidate or he may distribute them among any two or more candidates. A shareholder may vote either in person or by proxy appointed by an instrument in writing, subscribed by such shareholder or by his duly authorized attorney. Except as otherwise provided by law, the articles of incorporation, or these bylaws, all elections shall be had and all questions shall be decided by a majority of the votes cast at a duly constituted meeting at which a quorum is present. Section 7. NOTICE. (a) Unless otherwise provided by the articles of incorporation, written or printed notice, stating the place, day, and hour of each meeting of shareholders, and, in the case of a special meeting, the business proposed to be transacted thereat, shall be given in the manner provided in article XI of these bylaws to each shareholder entitled to vote at such meeting, at least 15 days before an annual meeting and at least five days before a special meeting. (b) Except as provided in subsection (c) of this section, to be properly brought before any meeting of the shareholders, business must be either (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the board of directors pursuant to subsection (a) of this section 7, (ii) otherwise properly brought before the meeting by or at the direction of the board of directors, or (iii) otherwise properly brought before the meeting by a shareholder. In addition to any other applicable requirements, including (without limitation) requirements imposed by federal securities -5- laws pertaining to proxies, for business to be properly brought before any meeting by a shareholder, the shareholder must have given timely notice thereof in writing to the secretary of the Corporation. To be timely, a shareholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation at least 120 days prior to the meeting; provided, however, that in the event that less than 135 days' notice or prior public disclosure of the date of any meeting of shareholders is given or made to shareholders by the Corporation, notice by the shareholder to be timely must be so received not later than the close of business on the 15th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made, whichever first occurs. A shareholder's notice to the secretary of the Corporation shall set forth in writing as to each matter the shareholder proposes to bring before any meeting of the shareholders (i) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (ii) the name and record address of the shareholder proposing such business, (iii) the name of all other persons with whom the shareholder is acting in concert, (iv) the class and number of shares of the Corporation which are beneficially owned by the shareholder, (v) the class and number of shares of the Corporation which are beneficially owned by each such person with whom the shareholder is acting in concert, and (vi) any material interest of the shareholder, or any such person with whom the shareholder is acting in concert, in such business. Beneficial ownership shall be determined in accordance with section 1 of article X of these bylaws. Except as provided in subsection (c) of this section 7, notwithstanding anything in these bylaws to the contrary, no business shall be conducted at any meeting of the shareholders except in accordance with the procedures set forth in this section 7 of article II, provided, however, that nothing in this section 7 of article II shall be deemed to preclude discussion by any shareholder as to any business properly brought before any meeting of the shareholders. The Chairman of the Meeting shall, if the facts warrant, determine and declare at any meeting of the shareholders that business was not properly brought before the meeting of shareholders in accordance with the provisions of this section 7 of article II, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. A determination whether a matter is or is not properly before the meeting shall not depend on whether such proposal has been or will be included in any proxy statement delivered or to be delivered to the Corporation's shareholders. Nothing in this subsection (b) shall affect the rights of the Corporation's shareholders as provided in section 3(b) of article 6 of the Corporation's articles of incorporation or as provided in subsection (a) of section 4 of article II of these bylaws with respect to the rights of the Corporation's preferred shareholders. -6- (c) Nothing in subsection (b) of this section 7 shall apply to the following provisions of these bylaws or any proposal by a shareholder or shareholders with respect to any matter governed by any of the following provisions: Article II, section 8(a); Article III, section 1(c); Article III, section 1(e); and Article XIII, section 2. Section 8. AMENDMENT OF ARTICLES OF INCORPORATION. (a) SHAREHOLDER PROPOSALS. No proposal by a shareholder to amend or supplement the articles of incorporation of the Corporation shall be voted upon at a meeting of shareholders unless, at least 180 days before such meeting of shareholders, such shareholder shall have delivered in writing to the secretary of the Corporation (i) notice of such proposal and the text of such amendment or supplement, (ii) evidence, reasonably satisfactory to the secretary of the Corporation, of such shareholder's status as such and of the number of shares of each class of the capital stock of the Corporation beneficially owned by such shareholder, (iii) a list of the names of other beneficial owners of shares of the capital stock of the Corporation, if any, with whom such shareholder is acting in concert, and of the number of shares of each class of the capital stock of the Corporation beneficially owned by each such beneficial owner, and (iv) an opinion of counsel, which counsel and the form and substance of which opinion shall be reasonably satisfactory to the board of directors of the Corporation, to the effect that the articles of incorporation of the Corporation, as proposed to be so amended or supplemented, would not be in conflict with the laws of the State of Louisiana. Within 30 days after such shareholder shall have delivered the aforesaid items to the secretary of the Corporation, the secretary and the board of directors of the Corporation shall respectively determine whether the items to be ruled upon by them are reasonably satisfactory and shall notify such shareholder in writing of their respective determinations. If such shareholder fails to submit a required item in the form or within the time indicated, or if the secretary or the board of directors of the Corporation determines that the items to be ruled upon by them are not reasonably satisfactory, then such proposal by such shareholder may not be voted upon by the shareholders of the Corporation at such meeting of shareholders. Beneficial ownership shall be determined in accordance with section 1 of article X of these bylaws. (b) EFFECTIVENESS. No provision amending or supplementing, or purporting to amend or supplement, the articles of incorporation of the Corporation that would have an effect, direct or indirect, on any of the following items may be included in articles of amendment signed by any officer, agent or representative of the Corporation on behalf of the Corporation or delivered to the Secretary of State of Louisiana for filing of record until the later of (i) one year following the adoption by the shareholders of such amendment or supplement or (ii) 10 days after the adjournment sine die of the annual -7- meeting of shareholders next succeeding the adoption by the shareholders of the Corporation of such amendment or supplement: (1) quorum at a regular or special meeting of shareholders; (2) procedures for amendment of the articles of incorporation or bylaws of the Corporation upon a proposal by a shareholder of the Corporation; (3) the effective date of an amendment to the articles of incorporation or bylaws of the Corporation, or the time at which steps may be taken to effect an amendment to the articles of incorporation or bylaws of the Corporation; or (4) votes of shareholders of the Corporation required to approve (i) an amendment or supplement to or repeal of the bylaws of the Corporation, (ii) an amendment or supplement to the articles of incorporation of the Corporation, or (iii) a merger, consolidation, share exchange, reclassification of securities, repurchase of shares, transfer of all or substantially all of the assets of the Corporation, dissolution, "business combination" as defined in article X of these bylaws, or similar transaction. Section 9. EFFECTIVENESS OF OTHER AMENDMENTS TO ARTICLES OF INCORPORATION. No provision amending or supplementing, or purporting to amend or supplement, the articles of incorporation of the Corporation that would have an effect, direct or indirect, on any of the following items may be included in articles of amendment signed by any officer, agent or representative of the Corporation on behalf of the Corporation or delivered to the Secretary of State of Louisiana for filing of record until the later of (i) one year following the adoption by the shareholders of such amendment or supplement or (ii) 10 days after the adjournment sine die of the annual meeting of shareholders next succeeding the adoption by the shareholders of the Corporation of such amendment or supplement: (1) the number of directors of the Corporation; (2) the classification of the board of directors of the Corporation into three classes of as nearly as possible equal size; (3) the procedures for nomination by a shareholder of persons to be elected as directors of the Corporation; (4) qualifications of directors of the Corporation or the declaration by the board of directors of a vacancy in the office of director; (5) removal of directors or officers of the Corporation; (6) powers of directors of the Corporation; -8- (7) the filling of vacancies on the board of directors of the Corporation and the election of directors to fill newly created directorships; (8) powers of committees of the board of directors of the Corporation; (9) the calling of special meetings of shareholders; (10) determinations of the presiding person at a meeting of shareholders; or (11) votes of shareholders of the Corporation required to approve the removal of a director; provided, however, that the foregoing shall apply to item (9) above only with respect to a provision adopted by the shareholders subsequent to the annual meeting of shareholders in April 1991 or an adjournment thereof. ARTICLE III Directors Section 1. CERTAIN GENERAL PROVISIONS. (a) NUMBER. The corporate powers of the Corporation shall be vested in and exercised, and the business and affairs of the Corporation shall be managed, by a board of directors which shall consist of nine directors. (b) CLASSIFICATION. The board of directors of the Corporation shall be divided into three classes of as nearly as possible equal size, with the term of office of directors of one class expiring each year. At the annual meeting of shareholders in 1991, (i) directors of the first class shall be elected to hold office for a term expiring at the first succeeding annual meeting, (ii) directors of the second class shall be elected to hold office for a term expiring at the second succeeding annual meeting, and (iii) directors of the third class shall be elected to hold office for a term expiring at the third succeeding annual meeting. At each annual meeting of shareholders beginning with the annual meeting in 1992, the successors to the class of directors whose terms shall have expired at such meeting shall be elected to hold office for a term expiring at the third annual meeting succeeding such meeting. (c) NOMINATIONS. Nominations for election of members of the board of directors may be made by the board of directors or by a shareholder. The name of a person to be nominated by a shareholder (a "Nominator") as a member of the board of directors of the Corporation must be submitted in writing to the secretary of the Corporation not fewer than 180 days before the date of the meeting of shareholders at which such person is proposed to be nominated. The Nominator shall also submit written -9- evidence, reasonably satisfactory to the secretary of the Corporation, that the Nominator is a shareholder of the Corporation and shall identify in writing (i) the number of shares of each class of capital stock of the Corporation beneficially owned by the Nominator, (ii) all other persons with whom the Nominator is acting in concert, and (iii) the number of shares of capital stock of the corporation beneficially owned by each such person with whom the Nominator is acting in concert. At such time, the Nominator shall also submit in writing (1) the information with respect to each such proposed nominee which would be required to be provided in a proxy statement prepared in accordance with regulation 14A under the Securities Exchange Act of 1934, as amended, (2) to the extent not provided in the information submitted pursuant to (1) immediately preceding or otherwise provided pursuant to this subsection (c), (w) a description of all arrangements or understandings between the Nominator and each such proposed nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the Nominator, (x) the name, age, business address and residence address, business experience or other qualifications of each such proposed nominee, (y) the principal occupation or employment of each such proposed nominee, and (z) the number of shares of capital stock beneficially owned by each such proposed nominee, and (3) a notarized affidavit executed by each such proposed nominee to the effect (x) that, if elected as a member of the board of directors, he will serve, (y) that he has reviewed the provisions of section 1 of this article III of these bylaws, and (z) that he is eligible for election as a member of the board of directors. Within 30 days after the Nominator has submitted the aforesaid items to the secretary of the Corporation, the secretary of the Corporation shall determine whether the evidence of the Nominator's status as a shareholder submitted by the Nominator is reasonably satisfactory and shall notify the Nominator in writing of his determination with respect thereto. The failure of the secretary of the Corporation to find such evidence reasonably satisfactory, or the failure of the Nominator to submit the requisite information in the form or within the time indicated, shall make the person to be nominated ineligible for nomination at the meeting of shareholders at which such person is proposed to be nominated. Beneficial ownership shall be determined in accordance with section 1 of article X of these bylaws. (d) QUALIFICATIONS; DECLARATION OF VACANCY. (1) No person shall be eligible for election or reelection as a director after attaining age 72, and no person who is or shall have been a full-time officer or employee of the Corporation or any subsidiary thereof shall be eligible for election or reelection as a director after attaining age 65 or (even if under 65) after such director's employment by the Corporation has terminated. (2) Upon attaining the age of 72 or 65, as specified in paragraph (1) immediately preceding, a director may continue to serve as a director of the Corporation until no later than the next succeeding annual meeting of shareholders, at which time, unless he has previously ceased to be a member of the board of directors of the Corporation, his position as a director shall cease. Notwithstanding the foregoing, with regard to a director of the Corporation who is -10- also an officer or employee of the Corporation or any subsidiary thereof, such director's position as a director shall cease immediately upon termination of such director's employment by the Corporation. (3) No person shall be eligible for election or reelection or to continue to serve as a member of the board of directors who is an officer, director, agent, representative, partner, employee, or nominee of, or otherwise acting at the direction of, or acting in concert with, (y) a "public utility company" (except the Corporation) or "holding company" as such terms are defined in the Public Utility Holding Company Act of 1935, as amended, or "public utility" (except the Corporation) as such term is defined in Section 201(e) of the Federal Power Act of 1920, as amended, or (z) an "affiliate" (as defined in rule 405 (17 C.F.R. ss. 230.405) under the Securities Act of 1933, as amended) of any of the persons or entities specified in clause (y) immediately preceding. (4) Upon the occurrence of any of the events described in paragraph (2) of this subsection (d), the affected director shall cease to be a director of the Corporation at the time specified in such paragraph. Determination of the eligibility of a person for election, reelection, or continued service on the board of directors under other provisions of this subsection (d) or otherwise as provided by applicable law including, but not limited to, occurrence of an event specified in section 81.C(2) of the Louisiana Business Corporation Law, shall, subject to the provisions of paragraph (7) below, be made by vote of a majority of the members of the board of directors. If the board of directors, pursuant to such a determination, determines that a person is ineligible for election, reelection, or continued service on the board of directors, such ineligibility shall be effective immediately upon such determination, and, if the affected person is a director of the Corporation at the time of such determination, his position as a director shall cease at such time. Within 30 days after a Nominator has submitted the name of a person to be nominated as a member of the board of directors, the board of directors shall determine whether the proposed nominee is eligible for election under this subsection (d) and shall notify the Nominator in writing of its determination. If the board of directors shall determine that such proposed nominee is not eligible for election, such person shall be ineligible to be nominated at the meeting of shareholders for which his nomination was proposed. (5) If a director of the Corporation ceases to be a director at the annual meeting of shareholders next succeeding the day upon which he attained the age of 72 or 65, as specified in paragraphs (1), (2), and (4) of this subsection (d), and if there is time remaining in the regularly scheduled term of office of such director, then the vacancy created by the cessation of such person as a director shall be filled by the shareholders of the Corporation at such meeting of shareholders as provided in section 2 of this article III of these bylaws. -11- (6) If a director of the Corporation ceases to be a director because of termination of employment, as provided in paragraphs (1), (2), and (4) of this subsection (d), or upon the determination of the board of directors of the Corporation pursuant to paragraph (4) of this subsection (d) that a director of the Corporation is no longer qualified to continue serving as a director of the Corporation, the board of directors shall declare the office held by such director vacant and may fill such vacancy as provided in section 2 of this article III of these bylaws. (7) Without limiting the ability of the board of directors as provided by applicable law to declare vacant the position of a director on the board of directors, if a member of the board of directors has been adjudged by a court of competent jurisdiction to be guilty of fraud, criminal conduct (other than minor traffic violations), gross abuse of office amounting to a breach of trust, or similar misconduct, and no appeal (or further appeal) therefrom is permitted under applicable law, the other directors then in office, by unanimous vote, may declare the position occupied by such director vacant, and such other directors may fill such vacancy as provided in section 2 of this article III of these bylaws. (e) REMOVAL. In this subsection (e), the terms "remove" and "removal" and their related grammatical forms shall refer only to the process of dismissal provided for in this subsection, and shall not be deemed to refer to disqualification of a director, cessation of a director to be such, or declaration of a vacancy in the office of director as provided for in subsection (d) of this section 1 or otherwise as permitted by law. A member of the board of directors may be removed by the shareholders of the Corporation only for cause. Any such removal for cause shall be at a special meeting of shareholders called for such purpose. The vote of the holders of shares conferring 80% of the total votes of all shares of capital stock of the Corporation voting as a single class shall be necessary to remove a director; provided, however, that if a director has been elected by the exercise of the privilege of cumulative voting, such director may not be removed if the votes cast against his removal would be sufficient to elect him if then cumulatively voted at an election of the class of directors of which he is a part. For purposes of this subsection (e), cause for removal shall exist only if a director shall have been adjudged by a court of competent jurisdiction to be guilty of fraud, criminal conduct (other than minor traffic violations), gross abuse of office amounting to a breach of trust, or similar misconduct, and no appeal (or further appeal) therefrom shall be permitted under applicable law. No proposal by a shareholder to remove a director of the Corporation shall be voted upon at a meeting of shareholders unless, at least 180 days before such meeting, such shareholder shall have delivered in writing to the secretary of the Corporation (1) notice of such proposal, (2) a statement of the grounds on which such director is proposed to be removed, (3) evidence, reasonably satisfactory to the secretary of the Corporation, of such shareholder's status as such and of the number of shares of each class of the -12- capital stock of the Corporation beneficially owned by such shareholder, (4) a list of the names of other beneficial owners of shares of the capital stock of the Corporation, if any, with whom such shareholder is acting in concert, and of the number of shares of each class of the capital stock of the Corporation beneficially owned by each such beneficial owner, and (5) an opinion of counsel, which counsel and the form and substance of which opinion shall be reasonably satisfactory to the board of directors of the Corporation (excluding the director proposed to be removed), to the effect that, if adopted at a duly called special meeting of the shareholders of the Corporation by the vote of the holders of shares conferring 80% of the total votes of all shares of the capital stock of the Corporation voting as single class, such removal would not be in conflict with the laws of the State of Louisiana, the articles of incorporation of the Corporation, or these bylaws. Within 30 days after such shareholder shall have delivered the aforesaid items to the secretary of the Corporation, the secretary and the board of directors of the Corporation shall respectively determine whether the items to be ruled upon by them are reasonably satisfactory and shall notify such shareholder in writing of their respective determinations. If such shareholder fails to submit a required item in the form or within the time indicated, or if the secretary or the board of directors of the Corporation determines that the items to be ruled upon by them, respectively, as provided above are not reasonably satisfactory, then such proposal by such shareholder may not be voted upon by the shareholders of the Corporation at such meeting of shareholders. Beneficial ownership shall be determined as specified in section 1 of article X of these bylaws. (f) POWERS. Subject to the provisions of the laws of the State of Louisiana, the articles of incorporation of the Corporation, and these bylaws, the board of directors shall have and exercise, in addition to such powers as are set forth in the articles of incorporation, all of the powers which may be exercised by the Corporation, including, but without thereby limiting the generality of the above, the power to create and to delegate, with power to subdelegate, any of its powers to any committee, officer, or agent; provided, however, that the board of directors shall not have the power to delegate its authority to: (1) amend, repeal, or supplement the bylaws of the Corporation; (2) take definitive action on a merger, consolidation, reclassification or exchange of securities, repurchase by the Corporation of any of its equity securities, transfer of all or substantially all of the assets of the Corporation, dissolution, "business combination" as defined in article X of these bylaws, or similar action; (3) elect or remove a director or officer of the Corporation; (4) submit a proposal to shareholders for action by shareholders; (5) appoint a director to or remove a director from a committee of the board of directors; or -13- (6) declare a dividend on the capital stock of the Corporation. (g) CHANGE IN NUMBER OF DIRECTORS. No amendment or supplement to or repeal of subsection (a) of section 1 of article III of these bylaws that would have the effect of increasing the number of authorized directors of the Corporation by more than two during any 12-month period shall be permitted unless at least 80% of the "continuing directors" then in office (as defined in subsection (b) of section 2 of article II of these bylaws) shall authorize such action. If the number of directorships is changed for any reason, any increase or decrease in the number of directorships shall be apportioned among the classes so as to make all classes as nearly equal in number as possible. (h) RIGHTS OF PREFERRED SHAREHOLDERS, ETC. Nothing in this section 1 of this article III of these bylaws shall affect the rights of the Corporation's shareholders as provided in section 3(b) of article 6 of the Corporation's articles of incorporation. Section 2. FILLING OF VACANCIES. In the case of a vacancy in the board of directors caused by the attainment by a director of the age of 72 or 65, as specified in paragraphs (1), (2), (4), and (5) of subsection (d) of section 1 of this article III, in which case such director shall have continued to serve as a director until the annual meeting of shareholders next succeeding his attainment of such age, and in which case there shall be time remaining in the regularly scheduled term of office of such director, such vacancy shall be filled for the remaining regularly scheduled term of office of such director by the shareholders of the Corporation at such meeting of shareholders. Except to the extent required by law or section 3(b) of article 6 of the articles of incorporation of the Corporation, in any other case in which a vacancy shall occur in the board of directors (including without limitation a vacancy resulting from an increase in the authorized number of directors, disqualification or removal of a director, or from failure of the shareholders to elect the full number of authorized directors), the remaining director or directors, although less than a quorum of the whole board, may fill such vacancy in the board for the scheduled term of the directorship thus filled. Except to the extent required by law or section 3(b) of article 6 of the articles of incorporation of the Corporation, and except as provided in these bylaws, the shareholders shall have no right to fill vacancies (including without limitation vacancies resulting from an increase in the authorized number of directors, disqualification or removal of a director, or from failure of the shareholders to elect the full number of authorized directors) on the board of directors. Section 3. ANNUAL AND REGULAR MEETINGS. Within 45 days after each annual meeting of shareholders, and if possible on the date of each annual meeting of shareholders immediately following each such meeting, the board of directors shall hold an annual meeting for the purpose of electing officers and transacting other corporate business. Such meeting shall be called in the manner for calling regular or special meetings of the board of directors. -14- Other regular meetings of the board of directors shall be held on the fourth Friday in January and on the third Friday after the first Monday in the months of July and October at such places as the president may direct in the notices of such meetings. At least five days' notice by mail or written telecommunication shall be given to each director of the time and place of holding each regular meeting of the board of directors. Section 4. SPECIAL MEETINGS. A special meeting of the board of directors may be called by the president, to be held at such place as he may direct in the notice of such meeting, on four days' notice by mail or three days' notice by written telecommunication, to each director. A special meeting shall be called by the president in like manner on the written request of at least 50% of the members of the board. Section 5. PLACE OF MEETINGS; TELEPHONE MEETINGS. A meeting of the board of directors may be held either within or without the State of Louisiana. The time and place of holding a regular or special meeting of the board of directors may be changed and another place and time fixed for such regular or special meeting by a majority of the members of the board. The members of the board of directors, and a committee thereof, may participate in and hold a meeting of the board or of such committee by means of conference telephone or similar communications equipment provided that all persons participating in such meeting can hear and communicate with one another. Participation in a meeting pursuant to this provision shall constitute presence in person at such meeting, except where a person participates in such meeting for the express purpose of objecting to the transaction of any business on the grounds that such meeting was not lawfully called or convened. Section 6. QUORUM. A majority of the directors shall constitute a quorum, but a smaller number may adjourn a meeting from time to time without further notice until a quorum is secured. If a quorum is present, the directors present can continue to do business until adjournment notwithstanding the subsequent withdrawal of enough directors to leave less than a quorum or the refusal of any director present to vote. Section 7. COMPENSATION. Each director shall be entitled to receive from the Corporation reimbursement of his expenses incurred in attending any regular or special meeting of the board and, by resolution of the board, such other compensation as it may approve. Such reimbursement and compensation shall be payable whether or not an adjournment be had because of the absence of a quorum. Nothing herein contained shall be construed to preclude any director from serving the Corporation in another capacity and receiving compensation therefor. Section 8. COMMITTEES. From time to time, the board of directors may appoint, from its own number, in addition to the committees provided for in these bylaws, such other committee or committees for such purpose or purposes as it shall determine. Subject to the limitations imposed by these bylaws, the articles of incorporation, and the -15- laws of the State of Louisiana, each committee of the board of directors shall have such powers as shall be specified in the resolution of appointment. ARTICLE IV Indemnification Section 1. RIGHT TO INDEMNIFICATION - GENERAL. The Corporation shall indemnify any person who was or is, or is threatened to be made, a party to or otherwise involved in any pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing or other proceeding, whether civil, criminal, administrative or investigative (any such threatened, pending or completed proceeding being hereinafter called a "Proceeding") by reason of the fact that he is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another business, foreign or nonprofit corporation, partnership, joint venture, trust, employee benefit plan or other enterprise (whether the basis of his involvement in such Proceeding is alleged action in an official capacity or in any other capacity while serving as such), to the fullest extent permitted by applicable law in effect on October 1, 1986, and to such greater extent as applicable law may thereafter from time to time permit, from and against expenses, including attorney's fees, judgments, fines, amounts paid or to be paid in settlement, liability and loss, ERISA excise taxes, actually and reasonably incurred by him or on his behalf or suffered in connection with such Proceeding or any claim, issue or matter therein; provided, however, that, except as provided in section 5 of this article, the Corporation shall indemnify any such person claiming indemnity in connection with a Proceeding initiated by such person only if such Proceeding was authorized by the board of directors. Section 2. CERTAIN PROVISIONS RESPECTING INDEMNIFICATION FOR AND ADVANCEMENT OF EXPENSES. (a) To the extent that a person referred to in section 1 of this article is required to serve as a witness in any Proceeding referred to therein, he shall be indemnified against all Expenses (as hereinafter defined) actually and reasonably incurred by him or on his behalf in connection with serving as a witness. (b) The Corporation shall from time to time pay, in advance of final disposition, all Expenses incurred by or on behalf of any person referred to in section 1 of this article claiming indemnity thereunder in respect of any Proceeding referred to therein. Each such advance shall be made within ten days after the receipt by the Corporation of a statement from the claimant requesting the advance, which statement shall reasonably evidence the relevant Expenses and be accompanied or preceded by any such undertaking as may be required by applicable law respecting the contingent repayment of such Expenses. Whenever and to the extent applicable law requires the board of directors to act in the specific case with respect to the payment of Expenses in -16- advance of the final disposition of any Proceeding, the board of directors shall act with respect thereto within the period specified in the preceding sentence and shall withhold the payment of Expenses in advance only if there is a reasonable and prompt determination by the board of directors by a majority vote of a quorum of Disinterested Directors (as hereinafter defined), or (if such quorum is not obtainable or, even if obtainable, a quorum of Disinterested Directors so directs) by Independent Counsel (as hereinafter defined) in a written opinion, that advancement of Expenses is inappropriate, even taking into account any undertaking given with respect to the repayment of such Expenses, because based on the facts then known there is no reasonable likelihood that the claimant would be able ultimately to demonstrate that he met the standard of conduct necessary for indemnification with respect to such Expenses. Section 3. PROCEDURE FOR DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION. (a) To obtain indemnification under this article, a claimant shall submit to the Corporation a written application. The secretary of the Corporation shall, promptly upon receipt of such an application for indemnification, advise the board of directors in writing of the application. In connection with any such application, the claimant shall provide such documentation and information as is reasonably requested by the Corporation and reasonably available to him and relevant to a determination of entitlement to indemnification. (b) A person's entitlement to indemnification under this article, unless ordered by a court, shall be determined, as required or permitted by applicable law: (i) by the board of directors by a majority vote of a quorum consisting of Disinterested Directors, (ii) if a quorum of the board of directors consisting of Disinterested Directors is not obtainable or, even if obtainable, a quorum of Disinterested Directors so directs, by Independent Counsel in a written opinion, or (iii) by the shareholders of the Corporation; provided, however, that if a Change of Control (as hereafter defined) shall have occurred, no determination of entitlement to indemnification adverse to the claimant shall be made other than one made or concurred in by Independent Counsel, selected as provided in paragraph (d) of this section, in a written opinion. (c) If the determination of entitlement to indemnification is to be made by Independent Counsel in the absence of a Change of Control, the Corporation shall furnish notice to the claimant within ten days after receipt of the application for indemnification specifying the identity and address of Independent Counsel. The claimant may, within fourteen days after receipt of such written notice of selection, deliver to the Corporation a written objection to such selection, subject to paragraph (e) of this section. If such an objection is made, either the Corporation or the claimant may petition any court of competent jurisdiction for a determination that the objection has no reasonable basis or for the appointment as Independent Counsel of counsel selected by the court. -17- (d) If there has been a Change of Control, Independent Counsel to act as and to the extent required by paragraph (b) of this section or paragraph (b) of section 2 shall be selected by the claimant, who shall give the Corporation written notice advising of the identity and address of the Independent Counsel so selected. The Corporation may, within seven days after receipt of such written notice of selection, deliver to the claimant a written objection to such selection, subject to paragraph (e) of this section. The claimant may, within five days after the receipt of such objection, select other counsel to act as Independent Counsel, and the Corporation may, within seven days after receipt of such written notice of selection, deliver to the claimant a written objection, as aforesaid, to such second selection. In the case of any such objection the claimant may petition any court of competent jurisdiction for a determination that the objection has no reasonable basis or for the appointment as Independent Counsel of counsel selected by the court. (e) Any objection to the selection of Independent Counsel may be asserted only on the ground that the counsel so selected does not qualify as Independent Counsel under the definition contained in section 7 of this article, and the objection shall set forth with particularity the basis of such assertion. No counsel selected by the Corporation or by the claimant may serve as Independent Counsel if a timely objection has been made to his selection unless a court has determined that such objection has no reasonable basis. (f) The Corporation shall pay any and all reasonable fees and expenses of Independent Counsel acting pursuant to this article and in any proceeding in which such counsel is a party or a witness in respect of its investigation and report. The Corporation shall pay all reasonable fees and expenses incident to the procedures of this section regardless of the manner in which Independent Counsel is selected or appointed. Section 4. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS. (a) A person referred to in section 1 of this article claiming a right to indemnification under this article shall be presumed (except as may be otherwise expressly provided in this article or required by applicable law) to be entitled to such indemnification upon submission of an application for indemnification in accordance with section 3, and the Corporation shall have the burden of proof to overcome the presumption in any determination contrary to the presumption. (b) Unless the determination is to be made by Independent Counsel, if the person or persons empowered under section 3 of this article to determine entitlement to indemnification shall not have made and furnished the determination in writing to the claimant within 60 days after receipt by the Corporation of the application for indemnification, the determination of entitlement to indemnification shall be deemed to have been made in favor of the claimant unless the claimant knowingly misrepresented a material fact in connection with the application or such indemnification is prohibited by law. The termination of any Proceeding, or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contender or its -18- equivalent, shall not of itself adversely affect the right of a claimant to indemnification or create a presumption that a claimant did not act in a manner which would deny him the right to indemnification. Section 5. RIGHT OF CLAIMANT TO BRING SUIT. (a) If (i) a determination is made pursuant to the procedures contemplated by section 3 of this article that a claimant is not entitled to indemnification under this article, (ii) advancement of Expenses is not timely made pursuant to paragraph (b) of section 2 of this article, (iii) Independent Counsel has not made and delivered a written opinion as to entitlement to indemnification within 90 days after the selection or appointment of counsel has become final by virtue of the lapse of time for objection or the overruling of objections or appointment of counsel by a court, or (iv) payment of a claim for indemnification is not made within five days after a favorable determination of entitlement to indemnification has been made or deemed to have been made pursuant to section 3 or 4 of this article, the claimant shall be entitled to bring suit against the Corporation to establish his entitlement to such indemnification or advancement of Expenses and to recover the unpaid amount of his claim. It shall be a defense to any such action (other than an action brought to enforce a claim for Expenses incurred in defending any Proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant did not meet the applicable standard of conduct which makes it permissible for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be upon the Corporation. Neither the failure of the Corporation (including its board of directors, Independent Counsel or its shareholders) to have made a determination before the commencement of such action that indemnification of the claimant is proper under the circumstances because he has met such applicable standard of conduct, nor an actual determination by the Corporation (including its board of directors, Independent Counsel or its shareholders) that the claimant has not met the applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct, and the claimant shall be entitled to a de novo trial on the merits as to any such matter as to which no determination or an adverse determination has been made. (b) If a claimant is successful in whole or in part in prosecuting any claim referred to in paragraph (a) of this section, the claimant shall also be entitled to recover from the Corporation, and shall be indemnified by the Corporation against, any and all Expenses actually and reasonably incurred by him in prosecuting such claim. Section 6. NON-EXCLUSIVITY AND SURVIVAL OF RIGHTS. The rights of indemnification and to receive advancement of Expenses contemplated by this article shall not be deemed exclusive of any other rights to which any person may at any time be entitled under any bylaw, agreement, authorization of shareholders or directors (regardless of whether directors authorizing such indemnification are beneficiaries thereof), or otherwise, both as to action in his official capacity and as to action in another -19- capacity; provided that no other indemnification measure shall permit indemnification of any person for the results of such person's willful or intentional misconduct. The Corporation may procure or maintain insurance or other similar arrangement, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or other corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss asserted against or incurred by such person, whether or not the Corporation would have the power to indemnify such person against such expense or liability. In considering the cost and availability of such insurance, the Corporation, in the exercise of its business judgment, may purchase insurance which provides for any and all of (i) deductibles, (ii) limits on payments required to be made by the insurer, or (iii) coverage which may not be as comprehensive as that previously included in insurance purchased by the Corporation. The purchase of insurance with deductibles, limits on payments and coverage exclusions will be deemed to be in the best interest of the Corporation but may not be in the best interest of certain of the persons covered thereby. As to the Corporation, purchasing insurance with deductibles, limits on payments, and coverage exclusions is similar to the Corporation's practice of self-insurance in other areas. In order to protect the officers and directors of the Corporation, the Corporation shall indemnify and hold each of them harmless as provided in section 1 of this article IV, without regard to whether the Corporation would otherwise be entitled to indemnify such officer or director under the other provisions of this article IV, to the extent (i) of such deductibles, (ii) of amounts exceeding payments required to be made by an insurer or (iii) that prior policies of officers and directors liability insurance held by the Corporation would have provided for payment to such officer or director. Notwithstanding the foregoing provisions of this section 6, no person shall be entitled to indemnification for the results of such person's willful or intentional misconduct. This section 6 is authorized by section 83(E) of the Louisiana Business Corporation Law as in effect on October 1, 1986, and further is intended to establish an arrangement of self-insurance pursuant to section 83(F) of the Louisiana Business Corporation Law as in effect on October 1, 1986. The right to indemnification conferred in this article shall be a contract right, and no amendment, alteration or repeal of this article or any provision thereof shall restrict the indemnification rights granted by this article as to any person claiming indemnification with respect to acts, events and circumstances that occurred, in whole or in part, before such amendment, alteration or repeal. The provisions of this article shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his heirs, executors and legal representatives. Section 7. DEFINITIONS. For purposes of this article: (a) "Change of Control" means the occurrence after October l, 1986 of any of the following events or circumstances: (1) there shall have occurred an event -20- required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar schedule or form) promulgated under the Securities Exchange Act of 1934, as amended (the "Act"), whether or not the Corporation is then subject to such reporting requirement; (2) (i) any "person" (as such term is used in Section 13(d) and 14(d) of the Act) shall have become the "beneficial owner" (as defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Corporation representing 30% or more of the combined voting power of the Corporation's then outstanding voting securities without the prior approval of at least two-thirds of the members of the board of directors in office immediately before such person's attaining such percentage interest; (3) the Corporation is a party to a merger, consolidation, sale of assets or other reorganization, or the subject of a proxy contest, as a consequence of which members of the board of directors in office immediately before such transaction or event constitute less than a majority of the board of directors thereafter; (4) during any period of two consecutive years, individuals who at the beginning of such period constituted the board of directors (including for this purpose any new director whose election or nomination for election by the Corporation's shareholders was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the board of directors. (b) "Disinterested Director" means a director of the Corporation who is not and was not a party to the Proceeding in respect of which indemnification is sought as provided in this article. (c) "Expenses" shall include all reasonable attorneys' fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, or being or preparing to be a witness in a Proceeding. (d) "Independent Counsel" means a law firm, or a member of a law firm, with substantial experience in matters of corporation law that neither presently is, nor in the five years before his selection or appointment has been, retained to represent: (i) the Corporation or person claiming indemnification in any matter material to either, or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder, and is not otherwise precluded under applicable professional standards from acting in the capacity herein contemplated. ARTICLE V Executive Committee Section 1. ELECTION AND TENURE. The board of directors may appoint an executive committee consisting of such number of directors as it may appoint, to serve at -21- the pleasure of the board of directors, but in any event not beyond the next annual meeting of the board of directors. The board may at any time, without notice, remove and replace any member of the executive committee. Section 2. POWERS. Subject to the provisions of subsection (f) of section 1 of article III of these bylaws, the executive committee shall have and may exercise all powers of the board of directors between meetings of the board. Section 3. MEETINGS. The executive committee shall meet at stated times or on notice to all by one of its number, in which notice the time and place of the meeting shall be set forth. The executive committee shall fix its own rules of procedure, and a majority shall constitute a quorum; but the affirmative vote of a majority of the whole committee shall be necessary in every case. The executive committee shall keep regular minutes of its proceedings and report the same to the board of directors. Section 4. COMPENSATION. Members of the executive committee, other than officers of the Corporation, shall receive such compensation for their services as shall be prescribed by the board of directors. Each member of the executive committee shall be entitled to receive from the Corporation reimbursement of his expenses incurred in attending a meeting of such committee. ARTICLE VI Audit Committee Section 1. ELECTION AND TENURE. The board of directors may appoint an audit committee, consisting of such number of directors as it may appoint, to serve at the pleasure of the board of directors, but in any event not beyond the next annual meeting of the board of directors. The board may at any time, without notice, remove and replace any member of the audit committee. Section 2. AUDIT COMMITTEE. The audit committee shall recommend to the board of directors the accounting firm to be selected by the board or to be recommended by it for shareholder approval, as independent auditors of the Corporation and its subsidiaries, and to act on behalf of the board in meeting and reviewing with the independent auditors, the chief internal auditor, and the appropriate corporate officers matters relating to corporate financial reporting and accounting procedures and policies, adequacy of financial, accounting, and operating controls, and the scope of the respective audits of the independent auditors and the internal auditor. The audit committee shall review the results of each audit with the respective auditing agency and shall promptly report thereon to the board of directors. The audit committee shall additionally submit to the board of directors any recommendations it may have from time to time with respect to financial reporting and accounting practices and policies and financial, accounting, and operational controls and safeguards including establishment and implementation of standards of proper employee and corporate conduct. Subject to the provisions of -22- subsection (f) of section 1 of article III of these bylaws, the audit committee shall have such other functions as may be authorized or directed from time to time by the board of directors. Section 3. MEETINGS. The audit committee shall meet at stated times or on notice to all by one of its number, in which notice the time and place of the meeting shall be set forth. The audit committee shall fix its own rules of procedure, and a majority shall constitute a quorum; but the affirmative vote of a majority of the whole committee shall be necessary in every case. The audit committee shall keep regular minutes of its proceedings and report the same to the board of directors. Section 4. COMPENSATION. Members of the audit committee, other than officers of the Corporation, shall receive such compensation for their services as shall be prescribed by the board of directors. Each member of the audit committee shall be entitled to receive from the Corporation reimbursement of his expenses incurred in attending a meeting of the audit committee. ARTICLE VII Compensation Committee Section 1. ELECTION AND TENURE. The board of directors may appoint a compensation committee, consisting of such number of directors as it may appoint, to serve at the pleasure of the board of directors, but in any event not beyond the next annual meeting of the board of directors. The board may at any time, without notice, remove and replace any member of the compensation committee. Section 2. COMPENSATION COMMITTEE. The compensation committee shall make recommendations to the board of directors concerning the compensation of the executives and other employees of the Corporation and matters related to benefits for employees. Subject to the provisions of subsection (f) of section 1 of article III of these bylaws, the compensation committee shall have such other functions as may be authorized or directed from time to time by the board of directors. Section 3. MEETINGS. The compensation committee shall meet at stated times or on notice to all by one of its number, in which notice the time and place of the meeting shall be set forth. The compensation committee shall fix its own rules of procedure, and a majority shall constitute a quorum; but the affirmative vote of the majority of the whole committee shall be necessary in every case. The compensation committee shall keep regular minutes of its proceedings and report the same to the board of directors. Section 4. COMPENSATION. Members of the compensation committee, other than officers of the Corporation, shall receive such compensation for their services as shall be prescribed by the board of directors. Each member of the compensation -23- committee shall be entitled to receive from the Corporation reimbursement of his expenses incurred in attending a meeting of the compensation committee. ARTICLE VIII Officers Section 1. ELECTION, TENURE, AND COMPENSATION. The officers of the Corporation shall consist of a president, one or more vice presidents, a secretary, a treasurer, and such other officers, including a chairman of the board of directors, as may from time to time be elected or appointed by the board of directors. Officers of the Corporation shall be elected annually by the board of directors as provided in section 3 of article III of these bylaws. If such annual election is not held, the officers then in office shall remain as such until their respective successors shall be elected and qualify. No officer, except the chairman of the board of directors, need be a director, and any two or more offices, except the offices of president and vice president, may be held by one person. The powers of all officers of the Corporation shall be subject to the provisions of subsection (f) of section 1 of article III of these bylaws. Section 2. POWERS AND DUTIES OF CHAIRMAN OF BOARD OF DIRECTORS. The chairman of the board of directors, if any, shall, when present, preside at all meetings of the board of directors. He shall be chief executive officer of the Corporation and, as such, he shall (a) have general and active management of the business of the Corporation, (b) have the general supervision and direction of the other officers of the Corporation and shall see that their duties are properly performed, (c) see that all orders and resolutions of the board of directors are carried into effect, (d) have the power to execute contracts and conveyances on behalf of the Corporation, and (e) perform such other functions normally performed by a chief executive officer. The chairman of the board of directors shall perform such other duties as from time to time may be delegated to him by the board of directors. Section 3. POWERS AND DUTIES OF PRESIDENT. The president shall be the chief executive officer of the Corporation when no chairman of the board has been elected and, as such, shall perform the duties specified for the chief executive officer in section 2 of this article VIII. The president shall be chief operating officer of the Corporation and, subject to the direction of the chairman of the board of directors, if any, shall be responsible for the administration and operation of the Corporation's business. He shall have the power to execute and deliver contracts and conveyances (including without limitation conveyances of real and personal property to and by the Corporation) for and on behalf of the Corporation. Section 4. POWERS AND DUTIES OF VICE PRESIDENT. The board of directors may appoint one more vice presidents. Each vice president shall have the power to execute contracts and conveyances on behalf of the Corporation, and shall have such -24- other powers and shall perform such other duties as may be assigned to him by the board of directors or by the president. Section 5. POWERS AND DUTIES OF SECRETARY. The secretary shall attend and record, in a book kept for such purpose, the proceedings of all meetings of the shareholders of the Corporation and of the board of directors. He shall keep an account of stock registered and transferred in such manner as the board of directors may prescribe. He shall keep the seal of the Corporation and, when authorized by the board of directors or the executive committee, he shall affix the seal of the Corporation to any instrument requiring the same, and attest the same by his signature, or cause the same to be attested by the signature of an assistant secretary. He shall give proper notice of meetings of shareholders and directors and shall perform such other duties as shall be assigned to him. Assistant secretaries shall have such duties as the board of directors may from time to time prescribe. Section 6. POWERS AND DUTIES OF TREASURER. The treasurer shall have custody of the funds and securities of the Corporation, shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation, and shall deposit or cause to be deposited all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the board of directors. He shall disburse or cause to be disbursed the funds of the Corporation as may be ordered by the board of directors, executive committee, or president, taking proper vouchers for such disbursements, and shall render to the president, and the directors at the regular meetings of the board of directors, or whenever they require it, an account of all his transactions as treasurer and of the financial condition of the Corporation, and at the regular meeting of the board of directors next preceding the annual shareholders' meeting, a like report for the preceding fiscal year. He shall give the Corporation a bond, if required by the board of directors, in such sum and in form and with security satisfactory to the board of directors, for the faithful performance of the duties of his office and the restoration to the Corporation, in case of his death, resignation, or removal from office, of all books, papers, vouchers, moneys, and other property of whatever kind in his possession belonging to the Corporation. He shall perform such other duties as the board of directors or executive committee may from time to time prescribe. Assistant treasurers shall have such duties as the board of directors may from time to time prescribe. Section 7. DELEGATION OF DUTIES. In case of the absence or disability of any officer of the Corporation, or for any other reason deemed sufficient by the board of directors, the board of directors may delegate such officer's powers or duties for the time being to any other officer, to any employee with management responsibility, or to any director. -25- ARTICLE IX Capital Stock Section 1. STOCK CERTIFICATES. Certificates representing shares of the capital stock of the Corporation shall be signed by either the president or one of the vice presidents of the Corporation and also by the secretary or an assistant secretary, or the treasurer or an assistant treasurer. Such certificates shall have affixed an impression of the seal of the Corporation. Where such certificates are countersigned by a transfer agent and by a registrar, both of which may be the same institution, the signatures of such officers and the seal of the Corporation thereon may be facsimiles, engraved or printed. If an officer of the Corporation who shall have signed a certificate of capital stock, or whose facsimile signature has been affixed for such purpose, shall cease to be such officer of the Corporation before the stock certificate so signed shall have been issued by the Corporation, such stock certificate may nevertheless be issued and delivered with the same force and effect as though the person who signed such certificate or whose facsimile signature has been affixed for such purpose had not ceased to be such officer of the Corporation. Section 2. LOST OR DESTROYED CERTIFICATES. The board of directors may determine the conditions upon which a new certificate for capital stock of the Corporation may be issued in place of a certificate which is alleged to have been lost, stolen, or destroyed and may, in its discretion, require the owner of such certificate or his legal representative to give bond with sufficient surety to the Corporation to indemnify it against any loss or claim which may arise by reason of the issue of a new certificate in the place of the one so alleged to have been lost, stolen, or destroyed. Section 3. TRANSFER OF SHARES. The shares of capital stock of the Corporation shall be transferable only upon its books by the holders thereof in person or by their duly authorized attorneys or legal representatives, and upon such transfer the old certificates shall be surrendered to the Corporation by the delivery thereof to the person in charge of the stock or transfer books and ledgers, or to such other person as the board of directors may designate, by whom they shall be cancelled. New certificates shall thereupon be issued, representing the shares so transferred. A record shall be made of each transfer. Section 4. DIVIDENDS. Dividends upon the capital stock may be declared by the board of directors at a regular or special meeting out of the net profits or surplus of the Corporation. Before paying a dividend or making a distribution of profits, there may be set aside out of the accumulated profits of the Corporation such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve fund for meeting contingencies or for equalizing dividends or for repairing or maintaining property of the Corporation or for such other purpose as the directors shall think conducive to the interests of the Corporation. -26- Section 5. CLOSING TRANSFER BOOKS; FIXING RECORD DATE. The board of directors may fix the time, not exceeding 60 days preceding the date of a meeting of shareholders, a dividend payment date, or a date for the allotment of rights, during which the books of the Corporation shall be temporarily closed against transfers of stock; or, in lieu thereof, the board of directors may fix a date, not exceeding 60 days preceding the date of a meeting of shareholders, a dividend payment date, or a date for the allotment of rights, as a date for the taking of a record of the shareholders entitled to notice of and to vote at such meeting, or entitled to receive such dividends or such rights, as the case may be; and only shareholders of record on such date shall be entitled to notice of and to vote at such meeting, or to receive such dividends or rights, as the case may be. ARTICLE X Fair-Price Provisions Section 1. DEFINITIONS. As used in article X of these bylaws, the following terms shall have the indicated meanings: (a) "Affiliate," including the term "affiliated person," means a person that directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with, a specified person. (b) "Associate," when used to indicate a relationship with any person, means any of the following: (1) A corporation or organization, other than the Corporation or a subsidiary of the Corporation, of which such person is an officer, director, or partner or is, directly or indirectly, the beneficial owner of 10% or more of any class of equity securities. (2) A trust or other estate in which such person has a substantial beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity. (3) A relative or spouse of such person, or any relative of such spouse, who has the same home as such person or who is a director or officer of the Corporation or any of its affiliates. (c) "Beneficial owner," when used with respect to voting stock, means any of the following: (1) A person who individually or with any of his affiliates or associates beneficially owns voting stock, directly or indirectly. -27- (2) A person who individually or with any of his affiliates or associates has either of the following rights: (A) To acquire voting stock, whether such right is exercisable immediately or only after the passage of time, pursuant to any agreement, arrangement, or understanding or upon the exercise of conversion rights, exchange rights, warrants, or options, or otherwise. (B) To vote voting stock pursuant to any agreement, arrangement, or understanding. (3) A person who has any agreement, arrangement, or understanding for the purpose of acquiring, holding, voting, or disposing voting stock with any other person who beneficially owns or whose affiliates beneficially own, directly or indirectly, such shares of voting stock. (d) "Business combination" means any of the following: (1) Except for a merger, consolidation, or share exchange that does not alter the contract rights of the stock as expressly set forth in the articles of incorporation of the Corporation or change or convert in whole or in part the outstanding shares of the Corporation, any merger, consolidation, or share exchange of the Corporation or any subsidiary with: (A) An interested shareholder; or (B) Another corporation, whether or not itself an interested shareholder, which is, or after the merger, consolidation, or share exchange would be, an affiliate of an interested shareholder that was an interested shareholder before the transaction. (2) A sale, lease, transfer, or other disposition, other than in the ordinary course of business, in one transaction or a series of transactions in any twelve-month period, to an interested shareholder or any affiliate of an interested shareholder, other than the Corporation or any of its subsidiaries, of any assets of the Corporation or any subsidiary having, measured at the time the transaction or transactions are approved by the board of directors of the Corporation, an aggregate book value as of the end of the Corporation's most recently ended fiscal quarter of 10% or more of the total market value of the outstanding stock of the Corporation or of its net worth as of the end of its most recently ended fiscal quarter. (3) The issuance or transfer by the Corporation or any subsidiary, in one transaction or a series of transactions, of any equity securities of the Corporation or any subsidiary which has an aggregate market value of five percent or more of -28- the total market value of the outstanding stock of the Corporation, to any interested shareholder or any affiliate of any interested shareholder, other than the Corporation or any of its subsidiaries, except pursuant to the exercise of warrants or rights to purchase securities offered pro rata to all holders of the Corporation's voting stock or any other method affording substantially proportionate treatment of the holders of voting stock. (4) The adoption of a plan or proposal for the liquidation or dissolution of the Corporation in which anything other than cash will be received by an interested shareholder or an affiliate of an interested shareholder. (5) A reclassification of securities, including a reverse stock split or recapitalization of the Corporation, or any merger, consolidation, or share exchange of the Corporation with any of its subsidiaries which has the effect, directly or indirectly, in one transaction or a series of transactions, of increasing by five percent or more of the total number of outstanding shares the proportionate amount of the outstanding shares of any class of equity securities of the Corporation or any subsidiary which is directly or indirectly owned by an interested shareholder or an affiliate of an interested shareholder. (e) "Common stock" means stock other than preferred or preference stock. (f) "Control," including the terms "controlling," "controlled by," and "under common control with," means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise. The beneficial ownership of 10% or more of the votes entitled to be cast of a corporation's voting stock creates a presumption of control. (g) "Equity security" means any of the following: (1) Stock or a similar security, certificate of interest, or participation in any profit sharing agreement, voting trust certificate, or certificate of deposit for an equity security. (2) A security convertible, with or without consideration, into an equity security, or any warrant or other security carrying any right to subscribe to or purchase an equity security. (3) Any put, call, straddle, or other option or privilege of buying an equity security from or selling an equity security to another without being bound to do so. -29- (h)(1) "Interested shareholder" means any person other than the Corporation or any subsidiary that is either of the following: (A) The beneficial owner, directly or indirectly, of 10% or more of the voting power of the outstanding voting stock of the Corporation. (B) An affiliate of the Corporation who at any time within the two-year period immediately before the date in question was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then outstanding voting stock of the Corporation. (2) For the purpose of determining whether a person is an interested shareholder, the number of shares of voting stock deemed to be outstanding shall include shares deemed owned by the person through application of subsection (c) of this section, but may not include any other shares of voting stock which may be issuable pursuant to any agreement, arrangement, or understanding, or upon exercise of conversion rights, warrants, or options, or otherwise. (i) "Market value" means the following: (A) In the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc., Automated Quotations System or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by the board of directors of the Corporation in good faith. (B) In the case of property other than cash or stock, the fair market value of such property on the date in question as determined by the board of directors of the Corporation in good faith. (j) "Subsidiary" means any corporation of which voting stock having a majority of the votes entitled to be cast is owned, directly or indirectly, by the Corporation. (k) "Voting stock" means shares of capital stock of a corporation entitled to vote generally in the election of directors. Section 2. VOTE REQUIRED IN BUSINESS COMBINATIONS. In addition to any vote otherwise required by law or the articles of incorporation of the Corporation, a -30- business combination shall be recommended by the board of directors and approved by the affirmative vote of at least each of the following: (a) 80% of the votes entitled to be cast by outstanding shares of voting stock of the Corporation voting together as a single voting group. (b) Two-thirds of the votes entitled to be cast by holders of voting stock other than voting stock held by the interested shareholder who is or whose affiliate is a party to the business combination or an affiliate or associate of the interested shareholder, voting together as a single voting group. Section 3. WHEN VOTING REQUIREMENTS NOT APPLICABLE. (a) DEFINITIONS. For purposes of subsection (b) of this section, the following terms shall have the indicated meanings: (1) "Announcement date" means the first general public announcement of a proposal or intention to make a proposal of a business combination or its first communication generally to shareholders of the Corporation, whichever is earlier. (2) "Determination date" means the date on which an interested shareholder first became an interested shareholder. (3) "Valuation date" means the following: (A) For a business combination voted upon by shareholders, the later of (i) the day before the day of the shareholders' vote or (ii) the day 20 days before the consummation of the business combination. (B) For a business combination not voted upon by shareholders, the date of the consummation of the business combination. (b) CONDITIONS. The vote required by section 2 of this article X shall not apply to a business combination, as defined in section 1 of this article X, if each of the following conditions is met: (1) The aggregate amount of the cash and the market value as of the valuation date of consideration other than cash to be received per share by holders of common stock in such business combination is at least equal to the highest of the following: (A) The highest per share price, including any brokerage commissions, transfer taxes, and soliciting dealers' fees, paid by the interested shareholder for any shares of common stock of the same class or series that he acquired: -31- (i) within the two-year period immediately before the announcement date of the proposal of the business combination; or (ii) in the transaction in which he became an interested shareholder, whichever is higher; or (B) The market value per share of common stock of the same class or series on the announcement date or on the determination date, whichever is higher; or (C) The price per share equal to the market value per share of common stock of the same class or series determined pursuant to subparagraph (B) immediately preceding, multiplied by the fraction of: (i) The highest per share price, including any brokerage commissions, transfer taxes, and soliciting dealers' fees, paid by the interested shareholder for shares of common stock of the same class or series that he acquired within the two-year period immediately before the announcement date, over (ii) The market value per share of common stock of the same class or series on the first day in such two-year period on which the interested shareholder acquired shares of common stock. (2) The aggregate amount of the cash and the market value as of the valuation date of consideration other than cash to be received per share by holders of shares of any class or series of outstanding stock other than common stock is at least equal to the highest of the following, whether or not the interested shareholder has previously acquired shares of a particular class or series of stock: (A) The highest per share price, including any brokerage commissions, transfer taxes, and soliciting dealers' fees, paid by the interested shareholder for any shares of such class of stock that he acquired: (i) within the two-year period immediately before the announcement date of the proposal of the business combination; or (ii) in the transaction in which he became an interested shareholder, whichever is higher; or (B) The highest preferential amount per share to which the holders of shares of such class of stock are entitled in the event of voluntary or involuntary liquidation, dissolution, or winding up of the Corporation; or -32- (C) The market value per share of such class of stock on the announcement date or on the determination date, whichever is higher; or (D) The price per share equal to the market value per share of such class of stock determined pursuant to subparagraph (C) immediately preceding, multiplied by the fraction of: (i) The highest per share price, including any brokerage commissions, transfer taxes, and soliciting dealers' fees, paid by the interested shareholder for such shares of voting stock acquired by him within the two-year period immediately before the announcement date, over (ii) The market value per share of the same class of voting stock on the first day in such two-year period on which the interested shareholder acquired shares of the same class of voting stock. (3) The consideration to be received by holders of any class or series of outstanding stock is to be in cash or in the same form as the interested shareholder previously paid for shares of the same class or series of stock. If the interested shareholder has paid for shares of any class of stock with varying forms of consideration, the form of consideration for such class of stock shall be either cash or the form used to acquire the largest number of shares of such class or series of stock that he previously acquired. (4) (A) After the interested shareholder has become an interested shareholder and before the consummation of such business combination: (i) There shall have been no failure to declare and pay at the regular date therefor any full periodic dividends, cumulative or not, on any outstanding preferred stock of the Corporation; (ii) There shall have been: (aa) No reduction in the annual rate of dividends paid on any class or series of stock of the Corporation that is not preferred stock except as necessary to reflect any subdivision of such stock; and (bb) An increase in such annual rate of dividends as shall have been necessary to reflect reclassification, including reverse stock split, recapitalization, reorganization, or similar transaction, which shall have the effect of reducing the number of outstanding shares of such stock; and -33- (iii) The interested shareholder did not become the beneficial owner of additional shares of stock of the Corporation except as part of the transaction which resulted in such interested shareholder's becoming an interested shareholder or by virtue of proportionate stock splits or stock dividends. (B) The provisions of (i) and (ii) of subparagraph (A) shall not apply if neither an interested shareholder nor an affiliate or associate of an interested shareholder voted as a director of the Corporation in a manner inconsistent with (i) and (ii), and the interested shareholder, within 10 days after an act or failure to act inconsistent with such subparagraphs, shall have notified the board of directors of the Corporation in writing that the interested shareholder disapproves thereof and requests in good faith that the board of directors rectify such act or failure to act. (5) After the interested shareholder has become an interested shareholder, the interested shareholder may not have received the benefit, directly or indirectly, except proportionately as a shareholder, of loans, advances, guarantees, pledges, or other financial assistance, or tax credits or other tax advantages, provided by the Corporation or any of its subsidiaries, whether in anticipation of or in connection with such business combination or otherwise. (c) OTHER PROVISIONS. (1) Section 2 of this article X shall not apply to a business combination with a particular interested shareholder or his existing or future affiliates that has been approved or exempted therefrom by resolution of the board of directors of the Corporation; provided, however, that any such resolution shall have been adopted before the time that such interested shareholder first became an interested shareholder. (2) Unless by its terms a resolution adopted under this subsection is made irrevocable, it may be altered or repealed by the board of directors, but this shall not affect a business combination that has been consummated or is the subject of an existing agreement entered into before the alteration or repeal. ARTICLE XI Notices Section 1. MANNER OF GIVING NOTICE. Notice required to be given under the provisions of these bylaws to a director, officer, or shareholder shall not be construed to mean personal notice, but may be given by depositing written or printed notice in a post office or letter box in a postpaid wrapper addressed to such director, officer, or shareholder at such address as appears on the books of the Corporation, such notice to be deemed to have been given at the time when the same shall have been thus mailed; or, if -34- such person has provided a telecommunications address to the Corporation, such notice may be given by prepaid written telecommunication sent to such address and in such event shall be deemed to have been given at the time when the same shall have been transmitted. Section 2. WAIVER OF NOTICE. Any shareholder, officer, or director may waive, in writing or by written telecommunication, whether before or after the time stated, any notice required to be given under these bylaws. ARTICLE XII Miscellaneous Section 1. FISCAL YEAR. The fiscal year of the Corporation shall begin on the first day of January and end on the last day of December in each year. Section 2. CHECKS AND DRAFTS. All checks, drafts, and orders for the payment of money shall be signed by the treasurer or by such other officer or officers or agents as the board of directors may from time to time designate. No check shall be signed in blank. Section 3. BOOKS AND RECORDS. The books, accounts, and records of the Corporation shall, subject to the limitations fixed by law, be open to inspection by the shareholders at such times and subject to such regulations as the board of directors may prescribe. Section 4. SEPARABILITY. If one or more of the provisions of these bylaws shall be held to be invalid, illegal, or unenforceable, such invalidity, illegality, or unenforceability shall not affect any other provision hereof and these bylaws shall be construed as if such invalid, illegal, or unenforceable provision or provisions had never been contained herein. ARTICLE XIII Amendment of Bylaws Section 1. VOTING. These bylaws may be amended, repealed, or supplemented at any regular meeting of the board of directors, or at any special meeting called for such purpose, by the affirmative vote of a majority of the board of directors; provided, however, that in each instance an amendment, repeal, or supplement shall not be inconsistent with the law or the articles of incorporation of the Corporation and shall be subject to the power of the shareholders to amend, repeal, or supplement the bylaws so made but only upon the affirmative vote of at least 80% of all shares of capital stock entitled to vote thereon. -35- Section 2. SHAREHOLDER PROPOSALS. No proposal by a shareholder to amend, repeal, or supplement the bylaws of the Corporation may be voted upon at a meeting of shareholders unless, at least 180 days before such meeting of shareholders, such shareholder shall have delivered in writing to the secretary of the Corporation (a) notice of such proposal and the text of the proposed amendment, repeal, or supplement, (b) evidence, reasonably satisfactory to the secretary of the Corporation, of such shareholder's status as such and of the number of shares of each class of capital stock of the Corporation of which such shareholder is the beneficial owner, (c) a list of the names of other beneficial owners of shares of the capital stock of the Corporation, if any, with whom such shareholder is acting in concert, and the number of shares of each class of capital stock of the Corporation beneficially owned by each such beneficial owner, and (d) an opinion of counsel, which counsel and the form and substance of which opinion shall be reasonably satisfactory to the board of directors of the Corporation, to the effect that the bylaws (if any) resulting from the adoption of such proposal would not be in conflict with the articles of incorporation of the Corporation or the laws of the State of Louisiana. Within 30 days after such shareholder shall have submitted the aforesaid items, the secretary and the board of directors of the Corporation shall respectively determine whether the items to be ruled upon by them are reasonably satisfactory and shall notify such shareholder in writing of their respective determinations. If such shareholder fails to submit a required item in the form or within the time indicated, or if the secretary or the board of directors of the Corporation determine that the items to be ruled upon by them are not reasonably satisfactory, then such proposal by such shareholder may not be voted upon by the shareholders of the Corporation at such meeting of shareholders. Beneficial ownership shall be determined in accordance with section 1 of article X of these bylaws. Section 3. EFFECTIVE DATE. No amendment or supplement to or repeal of any of the following provisions of these bylaws, whether resulting from action of the directors or the shareholders, shall take effect until the later of (i) one year following the adoption of such amendment, supplement, or repeal, or (ii) 10 days after the adjournment sine die of the annual meeting of shareholders next succeeding the adoption of such amendment, supplement, or repeal: Article II, section 2; Article II, section 8; Article X; and Article XIII. ARTICLE XIV Other Amendments to Bylaws Section 1. EFFECTIVE DATE. No amendment or supplement to or repeal of any of the following provisions of these bylaws, whether resulting from action of the directors or the shareholders, shall take effect until the later of (i) one year following the -36- adoption of such amendment, supplement, or repeal, or (ii) 10 days after the adjournment sine die of the annual meeting of shareholders next succeeding the adoption of such amendment, supplement, or repeal: Article II, section 4; Article II, section 5; Article II, section 7; Article II, section 9; Article III, section 1; Article III, section 2; and Article XIV; provided, however, that the board of directors shall have the power at any time, free from the foregoing restrictions, but subject to the provisions of subsection (g) of section 1 of article III of these bylaws, to amend or otherwise change subsections (a) and (d)(1) of section 1 of article III of these bylaws, and, with respect to any amendments to or changes in such subsection (d)(1), to make appropriate conforming changes in such section 1. ARTICLE XV Control Share Acquisition Statute Section 1. Pursuant to section 136 of the Louisiana Business Corporation Law as in effect on January 25, 1991, the provisions of sections 135 through 140.2 of the Louisiana Business Corporation Law, enacted as part of Title 12 of the Louisiana Revised Statutes, shall not apply to "control share acquisitions" (as defined therein) of this Corporation. -37- EX-10.C 3 ANNUAL INCENTIVE COMPENSATION PLAN EXHIBIT 10(c) ANNUAL INCENTIVE COMPENSATION PLAN CENTRAL LOUISIANA ELECTRIC COMPANY, INC. 1. PURPOSE OF THE PLAN The purpose of the Annual Incentive Compensation Plan (hereinafter the "Plan") for Central Louisiana Electric Company, Inc. (Company) is to provide incentive compensation to those officers and key employees who contribute significantly to the growth and success of the Company; to attract and retrain individuals of outstanding ability; and to align the interests of those who hold positions of major responsibility in the Company with the interests of Company shareholders. 2. DEFINITIONS When used in the Plan, the following words and phrases shall have the following meanings: "Base Salary" means the year-end base salary in effect for the Plan Year as shown in the personnel records of the Company. "Board" means the Board of Directors of the Company. "Committee" means the Compensation Committee of the Board or any other committee of the Board designated by resolution of the Board to administer the Plan. "Corporate Threshold" means the predetermined level of annual corporate financial performance that the Committee shall establish each Plan Year. When actual performance falls below the Corporate Threshold, no awards will be paid pursuant to the Plan. "Funding Formula" means the formula established by the Committee each year that determines the maximum amount of payments that may be made from the Plan. This formula may be expressed as a percent of net income or any other relationship determined -1- by the Committee to protect the interests of shareholders. Funds generated by the formula establish a pool of money that may be used for payouts under the Plan. "Participant" means any officer, executive or key employee of the Company selected by the Committee to receive an award under the Plan. Members of the Board who are not employed on a full-time basis by the Company are not eligible to receive awards under the Plan. "Payout Matrix" means a chart that illustrates the relationship between the performance criteria and the payouts that are generated by the actual performance each year. The matrix contains the various levels of performance and the payouts, expressed as a percent of targeted awards, that will be paid for each level of performance. Payouts determined by the payout matrix are subject to availability of funds as computed by the Funding Formula. "Payout Schedule" means the incentive amount expressed as a percent of base salary that will be paid at various levels of actual performance when compared to target performance. "Peer Companies" means a list of electric utility companies selected by the Committee, against which the performance of the Company is compared each year as one element of determining payouts under the Plan. "Performance Criteria" means those financial, operational or individual measures that are selected each Plan Year by the Committee and used to determine awards under the Plan. Performance criteria may be established for corporate, division, individual or other business unit results. "Plan" means the Annual Incentive Compensation Plan for the Company. -2- "Target" means the level of performance that is judged sufficient by the Committee, based on predetermined objectives, to obtain the target award. 3. ADMINISTRATION OF THE PLAN The Plan shall be administered by the Committee of the Board of Directors of the Company. Subject to the provisions of the Plan, the Committee shall have exclusive authority to amend, modify, suspend or terminate the Plan at any time. At the beginning of each Plan Year, the President of the Company will make recommendations to the Committee regarding participants, size of awards, corporate and individual performance criteria, performance targets and corporate thresholds. The Committee will consider and approve or modify the recommendations as appropriate. At the Conclusions of each Plan Year, the President of the Company will present to the Committee a schedule indicating actual performance and the recommended award earned by each participant. The Committee will review the recommendations and approve or modify the recommendations as presented and approve the award to be paid to each participant. 4. WEIGHTING OF PERFORMANCE CRITERIA Until modified by action of the Committee, the following weights will be used for the Plan: o Financial measures 100% o Individual measures may add or subtract 5% of base salary to the award. 5. STEPS IN THE AWARD PROCESS As soon as practicable after the end of each Plan Year, the Committee, upon recommendation of the President of the Company, will determine the actual level of performance for each criteria. This level of performance will be matched to the appropriate range of performance on the payout matrix. When both performance criteria have been matched on the matrix, the indicated payout, expressed as a percent of the target award, will be identified. -3- The Committee may also approve additional awards for outstanding individual performance and/or reduce the indicated awards for performance that is clearly below standards for officers of the Company. The magnitude of such adjustments is limited to 5% of each Participant's base salary and will be added or subtracted from the indicated payout to arrive at a total award. 6. FUNDING FORMULA The Funding Formula for the Plan will be communicated to all participants through the Plan agreement. Any unused portions in the fund so created by the formula cannot be used in future years and must be returned to the general assets of the Company. If the funding formula produces a payout pool that is not adequate for the payment of awards from the payout matrix, all awards will be reduced on a proportional basis so that the pool is not exceeded. 7. CORPORATE THRESHOLD The Committee will establish a Corporate Threshold for each Plan Year. When actual corporate performance is below the Corporate Threshold, no payments will be made under the Plan, regardless of division, individual or other business unit results. This threshold is included in the Plan agreement. 8. REVISED AWARD LEVELS AND PERFORMANCE CRITERIA For Participants who are assigned to different position levels or transferred between Company organizations during the Plan Year, the Committee may, at any time, and upon recommendation of the President of Central Louisiana Electric, establish revised award levels and performance criteria for that Participant. 9. FORM OF PAYMENT All awards under the Plan will be paid in cash, in one lump sum, subject to such payroll taxes and other deductions, if any, as may be in effect at the time of payment. -4- 10. TIMING OF PAYMENT All awards will be paid as soon as practicable following approval by the Committee of actual awards. 11. ADJUSTMENTS The Committee may not retroactively change any performance criteria, targets, payout schedules or participation levels for a Plan Year, except as and to the extent determined by the Committee in the event of changes in accounting practices or extraordinary or unanticipated circumstances. 12. TERMINATION, DEATH OR DISABILITY Awards will be paid only to Participants who are actually employed and on the payroll on the last day of each Plan Year except as indicated below. A Participant whose employment terminates prior to the end of the Plan Year shall forfeit any and all awards and payouts from the Plan, whether terminated by the Company or voluntarily. Those who terminate employment due to death, disability or normal retirement will be paid a pro-rata portion of any award based on their date of termination. Such prorated payments will be made at the time and in the form that all payments are normally made to all other Participants. 13. NEW PARTICIPANTS Participation for new employees will be determined as required by the Committee. 14. MISCELLANEOUS No Participant shall have the right to anticipate, alienate, sell, transfer, assign, pledge or encumber his or her right to receive any award made under the Plan until such an award becomes payable to him or her. -5- No participant shall have any lien on any assets of the Company by reason of any award made under the Plan. The adoption of the Plan or any modification or amendment hereof does not imply any commitment to continue or adopt the same plan, or any modification thereof, or any other plan for incentive compensation for any succeeding year, provided, that no such modification or amendment shall adversely affect rights to receive any amount to which Participants have become entitled prior to such modifications and amendments. Neither the Plan nor any award made under the Plan shall create any employment contract or relationship between the Company and any Participant. This plan supersedes all officer incentive compensation plans of Central Louisiana Electric, its divisions and subsidiaries. Each Participant shall be provided with a Plan description and a Plan Agreement for each Plan Year. The Plan Agreement shall have attached to it the Plan specifics for each year, including the following: o The corporate threshold o The funding formula o The payout matrix o The payout schedule o The list of peer companies This Plan shall be binding on the successors of the Company (including any Successor Company). -6- EX-10.F 4 FORM OF EXECUTIVE SEVERANCE AGRMT. EXHIBIT 10(f) CENTRAL LOUISIANA ELECTRIC COMPANY, INC. EXECUTIVE SEVERANCE AGREEMENT (Effective ________________) This Severance Agreement (the "Agreement") is made as of______________ between CENTRAL LOUISIANA ELECTRIC COMPANY, INC., a Louisiana corporation (the "Company"), and_________________________, an individual ("Employee"). WHEREAS, the Company wishes to employ Employee, and Employee wishes to accept employment by the Company, under the terms and conditions set forth in this Agreement; NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the parties agree as follows: 1. EMPLOYMENT: (a) The Company employs Employee and Employee accepts employment as __________________________________________ ("Executive Employment"). Employee will perform the duties that are customarily incident to such position and such other duties as may from time to time be assigned to him/her by the Chief Executive Officer of the Company. (b) During the Term of Employment (as hereinafter defined), Employee will devote his/her full time, attention and energies to the business of the Company and will not, without the prior written consent of the Chief Executive Officer of the Company, be engaged (whether or not during normal business hours) in any other business or professional activity, whether or not such activities are pursued for gain, profit or other pecuniary advantage. Notwithstanding the foregoing, Employee will not be prevented from (i) engaging in any civic or charitable activity for which Employee receives no compensation or other pecuniary advantage; (ii) investing his/her personal assets in businesses which do not compete with the Company provided that such investment will not require any services on the part of Employee in the operation of the affairs of the businesses in which investments are made and provided further that Employee's participation in such businesses is solely that of an investor; (iii) purchasing securities in any corporation whose securities are regularly traded, provided that such purchases will not result in Employee owning beneficially at any time five percent or more of the equity securities of any corporation engaged in a business competitive with that of the Company; or (iv) participating in any other activity approved in advance in writing by the Chief Executive Officer of the Company. -1- 2. TERM: The Term of Employment will begin on the date set forth above and will continue through July 1, ____ [3 years]; provided, however, that commencing July 1, ____ [in the year following the effective day], and thereafter on each anniversary of this Agreement (the "Extension Date"), the Term of Employment will be extended by one (1) year, unless the Company or Employee gives written notice to the other, at least thirty (30) days before the Extension Date, that the Term of Employment will not be extended. 3. SALARY AND COMPENSATION: (a) Except as otherwise provided in this paragraph 3(a), the Company will pay to Employee during the period of his/her Executive Employment a salary equal to his/her annual base salary as of the date of this Agreement. Employee's annual base salary will be subject to review no less often than annually and may be increased or reduced by the Board of Directors of the Company, in its sole discretion, provided, however, that Employee's annual base salary may not be reduced at any time unless such reduction is part of a reduction in pay uniformly applicable to all officers of the Company. The Company will pay such salary to Employee in accordance with its customary payroll practices applicable to other executive officers. Employee will also be eligible for participation in the Annual Incentive Compensation Plan, the Long-Term Incentive Compensation Plan and other bonus incentive plans which the Company may adopt from time to time for similarly situated executives. (b) Employee will be entitled to all health, disability and life insurance benefits, pension benefits and other employee benefits and perquisites generally provided to similarly situated executive officers of the Company on the same basis as such benefits and perquisites are provided to such executive officers. (c) The Company will reimburse Employee for all reasonable expenses paid or incurred by Employee in performing his/her duties hereunder in accordance with the Company's standard expense reporting and reimbursement policies. 4. TERMINATION OF EMPLOYMENT: (a) Except as specifically provided in this Agreement or under the terms of any employee benefit plan in which Employee participates, Employee will not be entitled to any compensation or benefits from the Company after the date his/her Executive Employment terminates. (b) If Employee's Executive Employment is terminated prior to the expiration of the Term of Employment (i) by the Company for any reason other than a Material Breach of this Agreement by Employee (as hereinafter defined), -2- or (ii) by Employee due to a Constructive Termination (as hereinafter defined), Employee will be entitled to receive, as severance pay, an amount equal to one hundred percent (100%) of his/her annual base salary at time of termination under paragraph 3(a) (determined immediately prior to any reduction in such salary), provided Employee is not in breach of any post-termination obligation imposed on her under the terms of this Agreement. The amount of severance pay provided pursuant to this paragraph 4(b) will be paid to Employee in two equal installments, with the first installment to be paid on termination of Employee's Executive Employment and the second installment to be paid six (6) months thereafter. (c) If Employee's Executive Employment is terminated prior to the expiration of the Term of Employment by the Company because of a Material Breach of this Agreement by Employee, or by Employee for any reason other than the reasons set forth in paragraph 4(b)(ii) and (iii), Employee will be entitled to receive his/her salary pro rated to the date of termination. (d) For purposes of this Agreement, a "Material Breach of this Agreement by Employee" will occur if Employee: (i) commits an intentional act of fraud, embezzlement or theft in the course of his/her Executive Employment or otherwise engages in any intentional misconduct which is materially injurious to the Company's financial condition or business reputation; (ii) commits intentional damage to the property of the Company or any subsidiary or commits intentional wrongful disclosure of Confidential Information (as hereinafter defined) which is materially injurious to the Company's financial condition or business reputation; or (iii) intentionally refuses to perform the material duties of his/her position under this Agreement. For purposes of this Agreement, no act or failure to act on the part of Employee will be deemed "intentional" if it was due primarily to an error in judgment or negligence, but will be deemed "intentional" only if done or omitted to be done by Employee not in good faith and without reasonable belief that his/her action or omission was in the best interest of the Company or any subsidiary. (e) For purposes of this Agreement, a "Constructive Termination" will occur if Employee terminates his/her Executive Employment (i) following a reduction (other than a reduction in pay uniformly applicable to all officers of the Company) of the annual amount of base salary being paid to Employee at any time pursuant to paragraph 3(a), or (ii) following a significant reduction in his/her authority, duties or responsibilities from those contemplated in paragraph 1 of this Agreement; PROVIDED, HOWEVER, that no event or condition described in clauses (i) and (ii) of this paragraph 4(e) shall constitute Constructive Termination unless (X) Employee gives the Company written notice of his/her objection to such event or condition within ninety (90) days after the date Employee learns of such event, (Y) -3- such event or condition is not corrected by the Company within thirty (30) days of its receipt of such notice, and (Z) Employee resigns his/her employment with the Company not more than fifteen (15) days following the expiration of the thirty (30) day period described in the foregoing clause (Y). The failure of Employee to effect a Constructive Termination as to any one event described in clauses (i) and (ii) above shall not affect his/her entitlement to effect a Constructive Termination as to any other such event. 5. ADDITIONAL BENEFITS: Employee will be entitled to the following additional benefits if his/her Executive Employment is terminated under the circumstances described in the first sentence of paragraph 4(b). (a) If Employee's principal office is located in Pineville, Louisiana at the time of such termination of Executive Employment, the Company will (i) at the written request of Employee, purchase his/her principal residence if such residence is located within sixty (60) miles of the Company's Pineville, Louisiana office (the "Principal Residence") for an amount equal to the greater of (A) the purchase price of such Principal Residence plus the documented cost of any capital improvements to the Principal Residence made by Employee or (B) the fair market value of such Principal Residence as determined by the Company's usual relocation practice and (ii) pay or reimburse Employee for the cost of relocating Employee, his/her family and their household goods and other personal property, in accordance with the Company's usual relocation practice, to any location in the continental United States. Notwithstanding the foregoing, the Company will not be obligated to purchase Employee's Principal Residence or to pay or reimburse such relocation expenses unless, within twelve (12) months after the termination of his/her Executive Employment, the Company is requested to purchase such Principal Residence or Employee has relocated from the Pineville, Louisiana area. (b) If Employee elects continuation coverage within the meaning of Section 4980B(f)(2) of the Internal Revenue Code of 1986, as amended (the "Code"), with respect a group health plan sponsored by the Company (other than a health flexible spending account under a self-insured medical reimbursement plan described in Sections 125 and 105(h) of the Code), the Company will pay the continuation coverage premium for the same type and level of group health plan coverage received by the Employee immediately prior to such termination of Executive Employment for the period beginning on the effective date of such continuation coverage and ending on the earlier of the date that is 18 months after such termination of Executive Employment or the date Employee becomes covered under the group health plan of another employer. Notwithstanding the foregoing, the Company will not be obligated to pay the continuation coverage premium with respect to Employee's participation in a group health plan sponsored by the -4- Company if one or more qualified beneficiaries with respect to Employee elect such continuation coverage but Employee does not elect such coverage or during any period that Employee or any qualified beneficiary with respect to Employee continues to receive such continuation coverage under a group health plan sponsored by the Company after Employee becomes covered by the group health plan of another employer. 6. CHANGE IN CONTROL OF THE COMPANY: (a) If a Change in Control of the Company (as hereinafter defined) occurs prior to the expiration of the Term of Employment and within three years after the Change in Control of the Company (i) Employee's Executive Employment is terminated by the Company for reasons other than a Material Breach of this Agreement by Employee or (ii) Employee terminates his/her Executive Employment for Good Reason (as hereinafter defined), the Company, within thirty (30) days of Employee's termination of Executive Employment, will pay to Employee, in lieu of any severance obligation under paragraph 4 and in lieu of the benefits Employee is otherwise entitled to receive under paragraph 5, an amount equal to 3.0 times Employee's "base amount" as such term is defined in Section 280G(d) of the Code minus one dollar. (b) As used in this Agreement, the term "Change in Control of the Company" will have the same meaning as the term "Change in Control" set forth in Section 7.3 of the Central Louisiana Electric Company, Inc. 1990 Long-Term Incentive Compensation Plan. (c) As used in this Agreement, the term "Good Reason" means that, following a Change in Control of the Company and without Employee's written consent, (i) there has been a significant adverse change in the nature or scope of Employee's authority, duties or responsibilities from those contemplated in paragraph 1 of this Agreement, (ii) there has been a reduction in Employee's base salary, or a termination of Employee's rights to any employee benefits, in effect immediately prior to the Change in Control, (iii) Employee has reasonably determined that, as a result of a change in circumstances following the Change in Control of the Company that significantly affect his/her Executive Employment, she is unable to exercise the authority, power, duties and responsibilities contemplated by paragraph 1 of this Agreement or (iv) Employee is required to be away from his/her office in the course of discharging her duties and responsibilities under this Agreement significantly more than was required prior to the Change in Control; PROVIDED, HOWEVER, that no event or condition described in clauses (i) through (iv) of this paragraph 6(c) shall constitute Good Reason unless (X) Employee gives the Company written notice of his/her objection to such event or -5- condition at any time after Employee learns of such event, (Y) such event or condition is not corrected by the Company within thirty (30) days of its receipt of such notice and (Z) Employee resigns his/her employment with the Company not more than fifteen (15) days following the expiration of the thirty (30) day period described in the foregoing clause (Y). The failure of Employee to effect a termination for Good Reason as to any one event described in clauses (i) through (iv) above shall not affect his/her entitlement to effect a termination for Good Reason as to any other such event. 7. PARACHUTE PAYMENT LIMITATION: Notwithstanding any provision of this Agreement to the contrary, the aggregate present value of all parachute payments payable to or for the benefit of Employee, whether payable pursuant to this Agreement or otherwise, shall be one dollar less than three (3) times Employee's base amount and, to the extent necessary, payments under this Agreement ("Severance Benefits") and any parachute payments payable under any other agreement between Employee and the Company shall be reduced in order that this limitation not be exceeded. The terms parachute payment, base amount and present value shall have the meanings assigned thereto under Section 280G of the Code. It is the intention of this paragraph 7 to avoid excise taxes on Employee under Section 4999 of the Code or the disallowance of a deduction to the Company pursuant to Section 280G of the Code. The determination of whether any reduction in the amount of parachute payments is required under this paragraph 7 shall be made by the Company's independent accountants, and Employee shall be entitled to select the parachute payments that will remain payable after the application of this paragraph 7. The fact that Employee has his/her Severance Payment reduced as a result of the limitations set forth in this paragraph 7 will not of itself limit or otherwise affect any rights of Employee arising other than pursuant to this Agreement. 8. NO MITIGATION OBLIGATION: The Company acknowledges that it will be difficult and may be impossible (i) for Employee to find reasonably comparable employment following termination of her Executive Employment and (ii) to measure the amount of damages which Employee may suffer as a result of termination of her Executive Employment. Accordingly, the payment of the Severance Payment provided under this Agreement is acknowledged by the Company to be reasonable and to be liquidated damages, and Employee will not be required to mitigate the amount of the Severance Payment by seeking other employment or otherwise, nor will any profits, income, earnings or other benefits from any source whatsoever create any mitigation, offset, reduction or any other obligation on the part of Employee under this Agreement. 9. LEGAL FEES AND EXPENSES: (a) In the event any dispute in connection with this Agreement arises with respect to obligations of the Employee or the Company that were required to be performed prior to a Change in Control of the Company, all costs, fees and expenses, including attorney fees, of any litigation, arbitration or other legal action in connection with such matters in which the Employee substantially prevails, shall be borne by, and be the obligation of, the Company. -6- (b) After a Change in Control of the Company has occurred it is the intent of the Company that Employee not be required to incur legal fees and the related expenses associated with the interpretation, enforcement or defense of Employee's rights under this Agreement by litigation or otherwise, because the cost and expense thereof would substantially detract from the benefits intended to be extended to Employee under this Agreement. Accordingly, if it should appear to Employee that, following a Change in Control of the Company, the Company has failed to comply with any of its obligations under this Agreement or the Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable or in any way reduce the possibility of collecting the amounts due hereunder, or institutes any litigation or other action or proceeding designed to deny, or to recover from, Employee the benefits provided or intended to be provided under this Agreement, the Company irrevocably authorizes Employee from time to time to retain counsel of Employee's choice, at the expense of the Company as hereafter provided, to advise and represent Employee in connection with any such interpretation, enforcement or defense, including without limitation the initiation or defense of any litigation, arbitration or other legal action, whether by or against the Company or any director, officer, stockholder or other person affiliated with the Company, in any jurisdiction. The Company will pay and be solely financially responsible for any and all attorneys' and related fees and expenses incurred by Employee in connection with any of the foregoing without respect to whether Employee prevails, in whole or in part. (c) In no event shall the Employee be required to reimburse the Company for any of the costs and expenses incurred by the Company relating to arbitration, litigation or other legal action in connection with this Agreement. 10. NON-DISCLOSURE: (a) Employee recognizes and acknowledges that in the course of his/her employment and as a result of the position of trust she holds under this Agreement he/she has obtained private or confidential information and proprietary data relating to the Company, including without limitation financial information, customer lists, patent information and other data which are valuable assets and property rights of the Company. All of such private or confidential information and proprietary data is referred to herein as "Confidential Information"; provided, however, that Confidential Information will not include any information known generally to the public (other than as a result of unauthorized disclosure by Employee). (b) Employee agrees that he/she will not, during his/her Executive Employment or any time after the termination of his/her Executive Employment, either directly or indirectly, disclose or use Confidential Information acquired during his/her employment with the Company, except with the prior written consent of the Chief Executive Officer of the Company. -7- 11. NON-COMPETITION: Employee agrees that he/she will not, for a period of one (1) year after the voluntary termination of his/her Executive Employment (except termination for Good Reason pursuant to Section 6) or the involuntary termination of her employment by the Company due to a Material Breach of this Agreement, in Employee's individual capacity or on behalf of another (i) hire or offer to hire any of the Company's officers, employees or agents, (ii) persuade or attempt to persuade in any manner any officer, employee or agent of the Company to discontinue any relationship with the Company, or (iii) solicit or divert or attempt to divert any customer or supplier of the Company. 12. ASSISTANCE WITH LITIGATION: For a period of one (1) year after the end of the last period for which Employee will have received any compensation under this Agreement, Employee will furnish such information and proper assistance as may be reasonably necessary in connection with any litigation in which the Company is then or may become involved. 13. NO SET-OFF RIGHTS: There will be no right of set-off or counterclaim in respect of any claim, debt or obligation against any payment to Employee provided for in this Agreement. 14. SOURCE OF PAYMENTS: (a) All payments provided in this Agreement will be paid in cash from the general funds of the Company. Employee's status with respect to amounts owed under this Agreement will be that of a general unsecured creditor of the Company, and Employee will have no right, title, or interest whatsoever in or to any, investments which the Company may make to aid the Company in meeting its obligations hereunder. Nothing contained in this Agreement, and no action taken pursuant to this provision, will create or be construed to create a trust of any kind or a fiduciary relationship between the Company and Employee or any other person. (b) Notwithstanding the provisions of paragraph 14(a), the Board of Directors of the Company may establish a trust or trusts out of which benefits provided under this Agreement may be paid. 15. FEDERAL INCOME TAX WITHHOLDING: The Company may withhold from any benefits payable under this Agreement all federal, state, city or other taxes that will be required pursuant to any law or governmental regulation or ruling. 16. ASSIGNMENT: Neither Employee, his/her spouse, nor their estates will have any right to anticipate, encumber or dispose of any payment under this Agreement, which payments and the rights to such payments are expressly declared non-assignable and non-transferable, except as otherwise specifically provided in this Agreement. -8- 17. BINDING EFFECT: This Agreement will inure to the benefit of and be binding upon the Company, its subsidiaries, successors and assigns, including, without limitation, any person, partnership, Company or corporation which may acquire substantially all of the Company's assets or business or with or into which the Company may be liquidated, consolidated, merged or otherwise combined, and will inure to the benefit of and be binding upon Employee, his/her heirs, distributees, and personal representatives. If payments become payable to Employee's surviving spouse or other assigns and such person will thereafter die, such payment will revert to Employee's estate. 18. SEVERABILITY: If any provision of this Agreement is held to be invalid, illegal, or unenforceable, in whole or part, such invalidity will not affect any otherwise valid provision, and all other valid provisions will remain in full force and effect. 19. SURVIVAL OF CERTAIN PROVISIONS: Notwithstanding anything herein to the contrary, to the extent applicable, the obligations of the Company under paragraphs 4, 5, 6 and 9, and the obligations of the Employee under paragraphs 10 and 11, will remain operative and in full force and effect regardless of the expiration of the Term of Employment. 20. COUNTERPARTS: This Agreement may be executed in two or more counterparts, each of which will be deemed an original, and all of which together will constitute one document. 21. TITLES: The titles and headings preceding the text of the paragraphs and subparagraphs of this Agreement have been inserted solely for convenience of reference and do not constitute a part of this Agreement or affect its meaning, interpretation or effect. 22. WAIVER: The failure of either party to insist in any one or more instances upon performance of any terms or conditions of this Agreement will not be construed as a waiver or future performance of any such term, covenant, or condition and the obligations of either party with respect to such term, covenant or condition will continue in full force and effect. 23. NOTICES: All notices required or permitted to be given under this Agreement will be given in writing and will be deemed sufficiently given if delivered by hand or mailed by registered mail, return receipt requested, to Employee's address set forth at the beginning of this Agreement and to the Company's principal executive offices. Either party may, by giving notice to the other party in accordance with this paragraph, change the address at which it is to receive notices hereunder. 24. ENTIRE AGREEMENT; MODIFICATION: This Agreement supersedes all previous agreements, negotiations, or communications between Employee and the Company and contains the complete and exclusive expression of the understanding between the parties. This Agreement cannot be amended, modified, or supplemented in any respect except by a subsequent written agreement entered into by both parties. -9- 25. GOVERNING LAW: This Agreement will be construed and enforced in accordance with the laws of the State of Louisiana. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written. CENTRAL LOUISIANA ELECTRIC COMPANY, INC. By _____________________________________ President ATTEST: _____________________________ Assistant Corporate Secretary EMPLOYEE ____________________________________ -10- EX-10.M1 5 1ST AMEND. TO 401K SAVINGS PLAN EXHIBIT 10(m)(1) CENTRAL LOUISIANA ELECTRIC COMPANY, INC. 401 (K) SAVINGS AND INVESTMENT PLAN ESOP TRUST AGREEMENT (As Established Effective April 2, 1991) FIRST AMENDMENT THIS AGREEMENT, made and entered into this 30th day of July, 1993 but effective as of April 2, 1993, by and between Central Louisiana Electric Company, Inc., a Louisiana corporation (the "Company"), and State Street Bank and Trust Company, a Massachusetts trust company with its principal place of business in Boston, Massachusetts, as Trustee ("the ESOP Trustee"). W I T N E S S E T H WHEREAS, by Agreement effective April 2, 1991 between the Company and State Street Bank and Trust Company (hereinafter referred to as the "ESOP Trust Agreement"), the Company established a trust in order to effectuate the ESOP component of the Central Louisiana Electric Company, Inc. 401(k) Savings and Investment Plan, as amended and restated effective April 2, 1991 (said Plan as it presently exists together with any amendments thereto hereafter made is hereinafter referred to as the "Plan") for the benefit of its employees and the employees of other employers having adopted the Plan and the ESOP Trust Agreement; and WHEREAS, certain amendments to the Plan have been required by the Internal Revenue Service in connection with the issuance of a favorable determination letter and such amendments to the Plan necessitate parallel amendments to the Trust Agreement; and -1- WHEREAS, having reserved the right under Section 9.1 of the ESOP Trust Agreement and Section 10.3 of the Plan to amend the ESOP Trust Agreement, the Company desires to amend the ESOP Trust Agreement. NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the Company and the ESOP Trustee agree that, effective as of April 2, 1991, Section 3.4 of the ESOP Trust Agreement is hereby amended as follows: "3.4 VOTING SHARES. Each Participant (or beneficiary of a deceased Participant) is, for purposes of this Section 3.4, hereby designated as a "named fiduciary" (within the meaning of Section 403(a)(1) of ERISA) with respect to the shares of Stock allocated to his account and a pro rata portion of the unallocated shares of Stock held in the ESOP Fund, and each Participant (or beneficiary or a deceased Participant) shall have the right to direct the ESOP Trustee with respect to the vote of the shares of Stock allocated to his account, on each matter brought before any meeting of the stockholders of the Company. Before each such meeting of stockholders, the Company shall cause to be furnished to each Participant (or beneficiary) a copy of the proxy solicitation material, together with a form requesting confidential directions to the ESOP Trustee on how such shares of Stock allocated to such Participant's (or beneficiary's) account shall be voted on each such matter. Upon timely receipt of such directions, the ESOP Trustee shall on each such matter vote as directed the number of shares (including fractional shares) of Stock allocated to such Participant's (or beneficiary's) account, and the ESOP Trustee shall have no discretion in such matter. The instructions received by the ESOP Trustee from Participants (or beneficiaries) shall be held by the ESOP Trustee in confidence and shall not be divulged or released to any person, including the Committee, officers or employees of the Company or Affiliate (as defined in the Plan). If the ESOP Trustee shall not receive timely instruction from a Participant, the Trustee shall not vote any shares of Company Stock with respect to which such Participant has the right of direction and the ESOP Trustee shall have no discretion in the matter. The ESOP Trustee shall vote unallocated shares in the same proportion as directed shares are voted, and the ESOP Trustee shall have no discretion in such matter. In determining such proportion, the ESOP Trustee shall under all circumstances include in its calculation the votes of Participants (or beneficiaries) on all shares allocated to Participants' (or beneficiaries') Plan accounts, giving effect to all affirmative directions by Participants, including directions to vote for or against, to abstain or to withhold the vote." -2- IN WITNESS WHEREOF, the Company and the ESOP Trustee have caused these presents to be executed by their duly authorized officers in a number of copies, all of which shall constitute one and the same instrument, which may be sufficiently evidenced by any executed copy hereof, this 30th day of July, 1993, but effective as of April 2, 1991. CENTRAL LOUISIANA ELECTRIC COMPANY, INC. By: /s/ DAVID M. EPPLER ATTEST: /s/ VERA J. WHITTINGTON Secretary [SEAL] STATE STREET BANK AND TRUST COMPANY By: /s/ ELLEN B. CAMPAGNA Vice President ATTEST: /s/ JANET DENNEEN Asst. Secretary [SEAL] -3- EX-11 6 COMPUTATION OF NET INCOME PER COMMON SHARE EXHIBIT 11 CENTRAL LOUISIANA ELECTRIC COMPANY, INC. COMPUTATION OF NET INCOME PER COMMON SHARE
FOR THE YEARS ENDED DECEMBER 31, (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) ----------------------------------------- 1995 1994 1993 ----------- ----------- ----------- PRIMARY Net income applicable to common stock ........................ $ 46,651 $ 43,017 $ 39,827 =========== =========== =========== Weighted average number of shares of common stock outstanding during the year ....................................................... 22,417,522 22,394,891 22,350,475 Common stock under stock option grants ....................... 13,237 19,940 38,060 ----------- ----------- ----------- Average shares ............................................. 22,430,759 22,414,831 22,388,535 =========== =========== =========== Primary net income per common share .......................... $ 2.08 $ 1.92 $ 1.78 =========== =========== =========== FULLY DILUTED Net income applicable to common stock ........................ $ 46,651 $ 43,017 $ 39,827 Adjustments to net income related to Employee Stock Ownership Plan (ESOP) under the "if-converted" method: Add loss of deduction from net income for actual dividends paid on convertible preferred stock, net of tax ............................................... 1,474 1,486 1,497 Deduct additional cash contribution required which is equal to dividends on preferred stock less dividends paid at the common dividend rate, net of tax ................................................... (176) (213) (250) Add tax benefit associated with dividends paid on allocated common shares ......................... 185 114 78 ----------- ----------- ----------- Adjusted income applicable to common stock ................... $ 48,134 $ 44,404 $ 41,152 =========== =========== =========== Weighted average number of shares of common stock outstanding during the year ........................ 22,417,522 22,394,891 22,350,475 Number of equivalent common shares attributable to ESOP ..................................... 1,416,360 1,427,368 1,437,901 Common stock under stock option grants ....................... 15,972 19,940 38,278 ----------- ----------- ----------- Average shares ............................................. 23,849,854 23,842,199 23,826,654 =========== =========== =========== Fully diluted net income per common share .................... $ 2.01 $ 1.86 $ 1.73 =========== =========== ===========
EX-12 7 COMPUTATION OF EARNINGS TO FIXED CHARGES EXHIBIT 12 CENTRAL LOUISIANA ELECTRIC COMPANY, INC. COMPUTATION OF EARNINGS TO FIXED CHARGES AND EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
FOR THE YEARS ENDED DECEMBER 31, (IN THOUSANDS, EXCEPT RATIOS) ------------------------------------------------ 1995 1994 1993 1992 1991 -------- ------- ------- ------- ------- Earnings from continuing operations $ 48,703 $45,043 $41,812 $45,239 $44,929 Income taxes ...................... 25,229 19,901 19,565 18,595 18,918 -------- ------- ------- ------- ------- Earnings from continuing operations before income taxes ............. 73,932 64,944 61,377 63,834 63,847 -------- ------- ------- ------- ------- Fixed charges: Interest, long-term debt ........ 24,516 23,194 22,089 26,142 28,192 Interest, other ................. 3,482 2,542 2,750 1,604 2,233 Amortization of debt expense and premium, net ................. 1,234 1,223 1,402 1,282 1,118 Portion of rental expense representative of interest factor ....................... 457 707 485 547 527 -------- ------- ------- ------- ------- Total fixed charges ....... 29,689 27,666 26,726 29,575 32,070 -------- ------- ------- ------- ------- Earnings from continuing operations before income taxes and fixed charges ................... $103,621 $92,610 $88,103 $93,409 $95,917 ======== ======= ======= ======= ======= Ratio of earnings to fixed charges 3.49X 3.35x 3.30x 3.16x 2.99x ======== ======= ======= ======= ======= Fixed charges from above .......... $ 29,689 $27,666 $26,726 $29,575 $32,070 Preferred dividends ............... 2,960 2,966 3,008 3,440 3,008 -------- ------- ------- ------- ------- Total fixed charges and preferred stock dividends ............... $ 32,649 $30,632 $29,734 $33,015 $35,078 ======== ======= ======= ======= ======= Ratio of earnings to combined fixed charges and preferred stock dividends ................. 3.17x 3.02x 2.96x 2.83x 2.73x ======== ======= ======= ======= =======
EX-13 8 MANAGEMENT'S DISCUSSION AND ANALYSIS EXHIBIT 13 MANAGEMENT'S DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net income applicable to common stock for 1995 totaled $46.7 million, or $2.08 per share, an increase of $0.16 per share from 1994 earnings of $1.92 per share. Earnings for 1993 were $1.78 per share on net income applicable to common stock. Results for 1995 were affected by increased kilowatt-hour sales resulting from the warmer-than-normal weather, partially offset by higher operating expenses compared to the previous year. Net income for 1994 included a $0.03 per share after-tax restructuring charge for a customer service office consolidation plan. Earnings for 1994 were also affected by an increase in sales, which were more than offset by higher operating expenses compared to 1993. Earnings for 1993 included a $0.31 per share after-tax restructuring charge arising out of an organizational effectiveness study. REVENUES AND SALES Revenues and kilowatt-hour (kwh) sales were as follows: Revenues 1995 1994 - -------- ------------------- ------------------- In Percent In Percent Thousands Change Thousands Change -------- ---- -------- ---- Base (nonfuel) ............... $261,143 7.0% $244,047 2.7% Fuel cost recovery ........... 133,283 (1.7)% 135,556 (6.5)% -------- ---- -------- ---- Total revenues ............ $394,426 3.9% $379,603 (0.7)% ======== ==== ======== ==== Sales 1995 1994 - ----- ----------------- ----------------- Million Percent Million Percent kwh Change kwh Change ----- ---- ----- ----- Regular customers Residential ......................... 2,763 9.1% 2,532 2.5% Commercial .......................... 1,265 7.2% 1,180 6.4% Industrial .......................... 2,227 9.7% 2,030 1.2% Other ............................... 502 3.1% 487 5.2% Sales for resale .................... 360 71.4% 210 20.0% ----- ---- ----- ----- Total sales to regular customers ....... 7,117 10.5% 6,439 3.5% Short-term sales to other utilities .... 68 (60.9)% 174 (34.6)% ----- ---- ----- ----- Total electric sales ................ 7,185 8.6% 6,613 1.9% ===== ==== ===== ===== The Company's base rates did not change in 1995, 1994 or 1993. Total operating revenues were higher in 1995 compared to 1994 largely resulting from the effect on base revenues of weather-related increases in kilowatt-hour sales. The increase in revenues resulted from an increase in base revenues reduced slightly by a decrease in fuel cost recovery revenues resulting from lower natural gas prices. Net income is not affected by changes in the cost of fuel and purchased power because these cost fluctuations are passed on to customers through fuel adjustment clauses. Total operating revenues were lower in 1994 compared to 1993 due primarily to a decrease in fuel cost recovery revenues resulting from lower natural gas prices and lower sales to other utilities. Kilowatt-hour sales are influenced significantly by weather. During 1995 the unusually hot weather together with industrial growth produced more favorable sales compared to 1994. Winter temperatures in 1994 were more favorable for sales compared to 1993, but the summer weather in 1994 was less favorable than 1993. During the past five years, sales growth averaged 4.0% per year, and is expected to range from 2% to 2.5% per year during the next five years. The level of future sales will depend upon weather conditions, customer conservation efforts, the Company's retail marketing and business development programs, acquisitions of other electric utility properties and the overall economy of the service area. Sales to industrial customers are also affected by the national economy and worldwide demand for wood products, since the Company's two largest customers are producers of such products. Issues facing the electric utility industry that could affect sales include deregulation, retail wheeling, retention of large industrial customers, municipal franchises and transmission access. The citizens of Leesville voted to approve a 20-year franchise with the Company in April 1995. The Company continued to serve the city after the previous franchise expired on December 31, 1994. The nonexclusive municipal franchise commenced on June 1 and affects approximately 5,000 customers. Two existing industrial customers are building new plants. Boise Cascade Corporation is building a $50 million engineered wood products plant near the Company's Rodemacher Power Station, and Martco Partnership is building a $50 million plywood plant a little farther north. The two plants, both scheduled for completion in 1996, will add a combined load of about 12 megawatts. On May 1, 1995, the Company began providing approximately 13 megawatts of wholesale power service to the city of St. Martinville under a five-year contract -15- subject to the jurisdiction of the Federal Energy Regulatory Commission (FERC). This contract was challenged in 1993 by the previous supplier, Louisiana Energy and Power Authority (LEPA), as well as the city of Lafayette and the American Public Power Association, with assertions of preferential, discriminatory and predatory pricing. An initial decision of the FERC's presiding administrative law judge (ALJ) in February 1995 rejected LEPA's arguments. Under FERC procedures, LEPA has filed a brief requesting the FERC to revise the initial decision. The Company has opposed LEPA's brief. Management believes that the ALJ's initial decision will be upheld. FUEL AND PURCHASED POWER Changes in fuel and purchased power expenses reflect fluctuations in generation mix, fuel costs, availability of economy power and deferral of expenses for recovery from customers through fuel adjustment clauses in subsequent months. The Company obtains natural gas, coal and lignite under long-term contracts and purchases natural gas on the spot market when prices are advantageous. Power is purchased from other utilities when the purchase price is less than the Company's cost to generate or when needed to meet system requirements. Last year the Company negotiated modifications to certain contracts which provide us with lignite from a Louisiana mine and provide for rail transportation of coal from Wyoming. Both of these newly modified contracts will help lower the prices and increase the reliability of these important supplies of power plant fuel. CO-OP DEVELOPMENTS In February 1994 the Company approached the management of Teche Electric Cooperative, Inc. (Teche) about the possibility of purchasing Teche. Teche serves about 8,600 customers, and its service area, which comprises parts of Iberia, St. Martin and St. Mary parishes, is adjacent to the Company's service area. Based on available data, the acquisition of Teche would result in an increase in the Company's kilowatt-hour sales to regular customers of about 2.4%. In February 1995 Teche and the Company executed a purchase and sale agreement for a purchase price, including the Company's assumption or other discharge of Teche's liabilities, of approximately $22.4 million. The members of Teche overwhelmingly approved the sale at their annual meeting in March 1995. Closing of the transaction is subject to a number of conditions, including the approval by the Louisiana Public Service Commission (LPSC) and the Rural Utilities Service, successful resolution of Teche's power supply contract with Cajun Electric Power Cooperative, Inc. (Cajun) and certain other conditions. All costs incurred as of December 31, 1995, in association with the acquisition of Teche have been expensed. In December 1994 the Company announced its interest in purchasing Washington-St. Tammany Electric Cooperative, Inc. (WST). WST serves approximately 30,600 customers in an area adjacent to the Company's service territory. The Company's proposal to acquire WST, submitted to WST's board on February 14, 1995, has expired without action from the WST board. The Company has not renewed its proposal to acquire WST. The potential purchase of WST would be subject to similar conditions to which the Teche acquisition is subject and to approval by WST members. NONFUEL OPERATING EXPENSES AND INCOME TAXES The changes in nonfuel operating expenses for 1995 and 1994 were as follows: Increase (Decrease) from Prior Year (In thousands except %) 1995 1994 ----------------------- ----------------------- Other operation ....... $ 9,402 16.6% $ 5,868 11.6% Maintenance ........... $(2,064) (8.4)% $ (311) (1.2)% Depreciation .......... $ 1,157 2.9% $ 2,715 7.3% Other taxes ........... $ 164 0.6% $ 1,888 7.0% Income taxes .......... $ 5,328 26.8% $ 336 1.7% Excluding the effects of restructuring charges, 1995 nonfuel operating expenses increased 8.2% over 1994. This increase was primarily due to costs associated with the Company's co-op acquisition efforts, an employee incentive plan, prior year criteria pollutant fees assessed by the Louisiana Department of Environmental Quality in 1995, costs associated with the start-up of the Company's 24-hour call center (while customer service offices remained open until full implementation of the call center) and uncollectible accounts expense resulting from higher sales and a pre-bankruptcy receivable from Cajun. Maintenance expenses in 1995 decreased relative to 1994 as a result of a major inspection at Teche power plant performed in 1994 and a reduction in the portion of employees' time associated with maintenance activities. Income taxes increased primarily due to higher taxable income in 1995. In 1994 nonfuel operating expenses, excluding restructuring charges, increased 6.6% over 1993. Other operation expenses increased due to increases in retirement plan costs, computer software expenses, uncollectible accounts expense, expenses associated with the FERC proceeding in connection with service to St. Martinville and Company efforts related to the acquisition of Teche. Depreciation expenses increased in 1994 due to the installation of a customer information system and the completion of a large transmission line in 1993, along with -16- the Company's continuing construction program. Property taxes increased because of routine additions to utility plant in service and higher millages. Higher city franchise taxes resulted from increased sales and the renegotiation of several small municipal franchise agreements. An audit of the Company's 1991 and 1992 tax returns was completed by agents of the Internal Revenue Service (IRS) in January 1995. A number of assessments were proposed that would substantially increase federal and Louisiana taxable income for those years. The Company has contested most of these assessments. Deferred federal taxes have been provided for all temporary differences, and reserves have been provided for other issues. If the IRS is completely successful on all of the contested issues, an additional liability in excess of current reserves would arise for interest and, if assessed, penalties. In October 1995 agents of the IRS began an audit of the Company's 1993 and 1994 tax returns. A number of parishes have attempted in recent years to impose franchise fees on retail revenues earned within the unincorporated areas served by the Company. If the parishes are ultimately successful, taxes other than income taxes could increase substantially in future years. INTEREST AND OTHER INCOME AND INTEREST EXPENSE Other income increased in 1995 as a result of earnings from short-term instruments held by an unregulated subsidiary. Earnings from investments held by this subsidiary declined in 1994 due to unfavorable market conditions. Interest expense increased in 1995 due to higher interest rates on short-term debt and variable rate pollution control bonds. Also during 1995 $25 million of medium-term notes were issued at a weighted average interest rate of 6.63% to refinance $14 million of maturing 5.0% first mortgage bonds and to reduce short-term debt levels. In 1994 the increase in interest expense attributable to higher interest rates on short-term and variable rate pollution control bond debt was partially offset by lower average short-term debt balances and a full year's effect of lower long-term debt costs due to refinancings in 1993. ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION (AFUDC) AFUDC represents the estimated cost of financing construction work-in-progress and is not a current source of cash. A return on and recovery of AFUDC is generally permitted by regulatory bodies in setting rates charged for utility services. AFUDC increased in 1995 from the prior year as a result of higher average construction balances. AFUDC for 1994 declined from 1993 primarily due to declining levels of construction work-in-progress, whereas average construction balances resulted in higher AFUDC in 1993. AFUDC accounted for 4.5% of net income applicable to common stock in 1995, compared to 3.3% in 1994 and 4.6% in 1993. EARNINGS PER SHARE In 1994 potentially dilutive securities had more than a 3% dilutive effect on net income per common share due to the assumed conversion of the Incentive Stock Option Plan and the convertible preferred stock held by the Employee Stock Ownership Plan (ESOP). As a result, both primary and fully diluted average shares of common stock outstanding and earnings per share are presented in the Consolidated Statements of Income. FINANCIAL CONDITION LIQUIDITY AND CAPITAL RESOURCES Financing for construction requirements and operational needs is dependent upon the cost and availability of external funds through capital markets and from financial institutions. Access to funds is dependent upon factors such as general economic conditions, regulation and the Company's credit rating. Since 1990 the Company has participated in a program where up to $35 million of receivables are sold on an ongoing basis. The amount of receivables that may be sold at any time depends upon seasonal fluctuations in the amount of eligible receivables. The program was amended in March 1995 to allow for its continuation until the year 2000. The Company has an effective shelf registration statement and all regulatory approvals necessary to issue up to $50 million of preferred stock. At December 31, 1995 and 1994, the Company had $23.1 million and $29.0 million, respectively, of short-term debt outstanding in the form of commercial paper borrowings and bank loans. In June 1995 the Company replaced its $100 million revolving credit agreement. The new $100 million agreement provides support for the issuance of commercial paper and is scheduled to continue through June 15, 2000. Uncommitted lines of credit with banks totaling $20 million are available to meet short-term working capital needs. Additionally, at December 31, 1995, an unregulated consolidated subsidiary of the Company had $18.6 million of cash and marketable securities. CASH GENERATION AND CASH REQUIREMENTS During 1995 the Company generated $87.7 million of cash flows from operating activities as shown in the Consolidated Statements of Cash Flows. Net cash provided by operating activities results from net income, adjusted for noncash charges to income and changes in working capital. Net cash used in investing activities is related to additions to utility plant and changes in utility and nonutility investments. Net cash used in financing activities results principally from the payment of dividends to shareholders and long-term financing -17- activities. In recent years the construction program has consisted primarily of enhancements to the transmission and distribution systems. Expenditures, excluding AFUDC, totaled $55 million in 1995 and $53 million in 1994. Construction expenditures, excluding AFUDC, for 1996 are estimated to be $57 million and for the five-year period ending 2000 are expected to total $302 million. Projected expenditures for the five-year period ending 2000 include a distribution resource management system, enhancements to the information technology infrastructure, a new employee information and payroll system and the addition of a new 230 kv substation. Also included in the five-year period are the refurbishment of two retired natural gas units and the conversion of one natural gas unit to combined cycle. In mid-1995 the Company issued $25 million of medium-term notes at an average interest rate of 6.63%. Proceeds were used to retire a $14 million issue of 5.0% first mortgage bonds which matured in September 1995 and to reduce short-term debt. In early January 1996, the Company issued $25 million of medium-term notes at an average interest rate of 6.40%. Proceeds from the issuances were used to reduce short-term debt and for other general corporate purposes. All debt securities registered under the Company's shelf registration statement have now been issued. Scheduled maturities of debt and preferred stock will total about $0.3 million for 1996 and approximately $66.6 million for the five-year period ending 2000. In 1991 the Company began a common stock repurchase program, and as part of that program, up to $23.5 million of common stock may be repurchased in the future. The Company may require additional funds to purchase outstanding shares of the Company's common stock. Approximately 93% of total construction requirements were funded internally in 1995 as compared to 100% in 1994 and 90% in 1993. Without the costs of restructuring in 1993, construction requirements in 1993 would have been entirely funded with internally generated funds. In 1996 all construction requirements are expected to be funded internally. For the five-year period ending 2000, approximately 89% of construction requirements are expected to be funded internally. Other capital requirements in 1995 and 1993 were funded by the issuance of debt, while in 1994, other capital requirements were funded internally. RETAIL RATES Retail rates, which are regulated by the LPSC, account for 95% of total revenues. Fuel costs and monthly fuel adjustment billing factors are subject to audit by the LPSC. The LPSC establishes base rates for the Company which reflect nonfuel costs, including the cost of capital, and sales. In the past the Company has sought increases in base rates to reflect the cost of service related to plant facility additions and increases in operating costs. If the Company were to request an increase in its rates and adequate rate relief was not granted on a timely basis, the Company's ability to attract capital at reasonable costs to finance its operations and capital improvements might be impaired. The LPSC has elected to review the earnings of all electric, gas, water and telecommunication utilities regulated by it to determine if the returns on equity of these companies may be higher than returns that might be awarded in the current economic environment. The LPSC project team began its review of the Company in August 1995. Resolution of the earnings review, which is not subject to any statutory or procedural deadlines, is expected in early 1996. Although the Company's rates are among the lowest in the state, we cannot predict the outcome of the review or the effect on the Company's financial position, results of its operations or its cash flows. INFLATION The Company is a capital-intensive electric utility. As such, it is affected by inflation since depreciation, which is based on the historical cost of assets, will in all likelihood not fully reflect the cost of replacing assets. Although the cost of fuel used for electric generation is a major component of total costs, the Company is not exposed to the effects of inflation in fuel prices since fuel costs are recovered from customers through fuel adjustment clauses. ENVIRONMENTAL MATTERS The Company is subject to federal, state and local laws and regulations governing the protection of the environment. Violations may result in substantial fines and penalties. The Company has obtained all material environmental permits necessary for its operations and believes it is in substantial compliance with all applicable environmental laws and regulations. The Company is preparing operating permit applications under the Clean Air Act Amendments of 1990 (Clean Air Act). Implementation of Phase I of the Clean Air Act will not require the Company to reduce sulfur emissions at its solid-fuel generating units, which either burn low-sulfur coal or utilize pollution control equipment. Installation of continuous emission monitoring equipment on its generating units has been completed at a cost of approximately $2.9 million. Although Phase II of the legislation, effective in 2000, involves more stringent limits on emissions, it should not significantly affect the way the Company's generating units are operated. However, some capital investment may be necessary in order to comply with Phase II requirements. Capital expenditures for environmental matters in 1996 are estimated to be $1.4 million. In 1986 the Company was one of a number of -18- companies named by the Environmental Protection Agency as potentially responsible parties for the cleanup of a site in Missouri previously operated by an authorized PCB (polychlorinated biphenyl) processor. The Company participated with other parties in the cleanup of this site, which was completed in 1995. The site is required to be monitored over the next eight to ten years. All anticipated costs have been funded. REGULATORY MATTERS On March 29, 1995, the FERC issued a Notice of Proposed Rulemaking (NOPR) addressing two key issues: open transmission access and recovery of stranded cost. The open access provisions of the NOPR propose to require FERC-regulated electric utilities to offer third parties open access to transmission under the same or comparable terms and conditions as the utilities' use of their own systems. Providing unbundled transmission services to firm-requirements customers may have significant financial consequences to the utility industry. Providing open access for nonfirm sales may have a significant effect on utility operations. The stranded-cost proposal would allow utilities to recover investments in assets stranded by customers departing as a result of opening the transmission systems. This proposal could mitigate the financial consequences of unbundling transmission services to wholesale customers. Currently, the Company has three wholesale full-requirements customers representing about 1.2% of the Company's total kilowatt-hour sales. At this time, it is not possible to predict whether the NOPR will become a final rule, and if it does become a final rule, the form of such final rule and its effect on the Company. Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" (SFAS 121) was issued in March 1995, and effective for fiscal years beginning after December 15, 1995. SFAS 121 establishes accounting standards for determining if long-lived assets are impaired, and when losses, if any, should be recognized and how any such losses should be recognized. In addition, the Company has recorded regulatory assets and liabilities, primarily for the effects of income taxes, as a result of past rate actions of the Company's regulators, pursuant to Statement of Financial Accounting Standards No. 71, "Accounting for the Effects of Certain Types of Regulation" (SFAS 71). The effects of potential deregulation of the industry or possible future changes in the method of rate regulation of the Company could require that the Company discontinue the application of SFAS 71, pursuant to Statement of Financial Accounting Standards No. 101, "Regulated Enterprises - Accounting for the Discontinuation of Application of FASB Statement No. 71". Management believes that for the foreseeable future, the Company's rates will remain based on its costs of providing service. The effects of these standards on the Company's financial position, results of its operations and its cash flows will be determined by the facts and circumstances at that time. NEW ACCOUNTING STANDARD Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation", requires beginning in 1996, a fair value based method of accounting for stock-based compensation plans or, in lieu of a change in accounting, the disclosure of pro forma differences in net income and earnings per share. Because of the limited number of shares of common stock currently being granted pursuant to compensation plans in effect, management estimates that there would be no significant difference in net income or earnings per share between the fair value method and the intrinsic value method currently being used. -19- CONSOLIDATED STATEMENTS OF INCOME (In thousands, except share and per share amounts) For the Years Ended December 31 1995 1994 1993 ---------- ---------- ---------- OPERATING REVENUES ................... $394,426 $379,603 $382,433 ---------- ---------- ---------- Operating expenses Fuel used for electric generation 108,322 120,546 119,197 Power purchased ................. 27,367 17,376 28,088 Other operation ................. 65,963 56,561 50,693 Restructuring charges ........... 1,203 10,851 Maintenance ..................... 22,616 24,680 24,991 Depreciation .................... 41,164 40,007 37,292 Taxes other than income taxes ... 29,063 28,899 27,011 Federal and state income taxes .. 25,229 19,901 19,565 ---------- ---------- ---------- Total operating expenses ... 319,724 309,173 317,688 ---------- ---------- ---------- OPERATING INCOME ..................... 74,702 70,430 64,745 Interest income ...................... 219 238 358 Allowance for other funds used during construction ................. 1,912 1,716 2,556 Other income (expenses), net ......... 74 (967) (88) ---------- ---------- ---------- INCOME BEFORE INTEREST CHARGES ....... 76,907 71,417 67,571 ---------- ---------- ---------- Interest charges Interest on debt and other ...... 27,998 25,736 24,839 Allowance for borrowed funds used during construction ............ (1,028) (585) (482) Amortization of debt discount, premium and expense, net ....... 1,234 1,223 1,402 ---------- ---------- ---------- Total interest charges ..... 28,204 26,374 25,759 ---------- ---------- ---------- NET INCOME ........................... 48,703 45,043 41,812 Preferred dividend requirements, net . 2,052 2,026 1,985 ---------- ---------- ---------- NET INCOME APPLICABLE TO COMMON STOCK ........................ $46,651 $43,017 $39,827 ========== ========== ========== AVERAGE SHARES OF COMMON STOCK OUTSTANDING Primary ......................... 22,430,759 22,414,831 22,388,535 Fully diluted ................... 23,849,854 23,842,199 23,826,654 ========== ========== ========== EARNINGS PER SHARE Primary ......................... $2.08 $1.92 $1.78 Fully diluted ................... $2.01 $1.86 $1.73 ========== ========== ========== CASH DIVIDENDS PAID PER SHARE OF COMMON STOCK ..................... $1.49 $1.45 $1.41 ========== ========== ========== The accompanying notes are an integral part of the consolidated financial statements. -20- CONSOLIDATED BALANCE SHEETS (In thousands) At December 31 1995 1994 ----------- ----------- ASSETS Utility plant (Notes A and B) Property, plant and equipment .............. $ 1,319,815 $ 1,276,266 Accumulated depreciation ................... (441,686) (410,513) ----------- ----------- Net property, plant and equipment .......... 878,129 865,753 Construction work-in-progress .............. 51,390 46,379 ----------- ----------- Total utility plant, net .............. 929,519 912,132 ----------- ----------- Investments and other assets (Note D) ........... 8,097 20,327 ----------- ----------- Current assets Cash and cash equivalents (Note A) ......... 20,621 7,440 Accounts receivable, net (Note C) Customer accounts receivable .......... 6,081 2,165 Other accounts receivable ............. 10,994 8,982 Unbilled revenues .......................... 3,098 573 Fuel inventory, at average cost ............ 8,699 10,184 Material and supplies inventory, at average cost ........................... 15,819 14,945 Prepayments and other current assets ....... 2,501 2,374 ----------- ----------- Total current assets .................. 67,813 46,663 ----------- ----------- Prepayments ..................................... 8,213 7,861 ----------- ----------- Regulatory assets and other deferred charges .... 185,934 151,831 ----------- ----------- Accumulated deferred federal and state income taxes (Note J) .......................... 66,458 39,377 ----------- ----------- TOTAL ASSETS .......................... $ 1,266,034 $ 1,178,191 =========== =========== CAPITALIZATION AND LIABILITIES Common shareholders' equity Common stock, $2 par value, authorized 50,000,000 shares, issued 22,745,104 and 22,720,074 shares at December 31, 1995 and 1994, respectively (Note F) ...... $ 45,490 $ 45,440 Premium on capital stock ................... 113,444 113,070 Retained earnings .......................... 224,688 211,198 Treasury stock, at cost, 318,446 and 329,433 shares at December 31, 1995 and 1994, respectively .................... (6,459) (6,681) ----------- ----------- Total common shareholders' equity ..... 377,163 363,027 Preferred stock (Note H) Not subject to mandatory redemption ........ 30,519 30,748 Subject to mandatory redemption ............ 6,610 6,920 Deferred compensation related to preferred stock held by ESOP ............................. (22,595) (24,404) Long-term debt, net (Note E) .................... 360,822 336,589 ----------- ----------- Total capitalization .................. 752,519 712,880 ----------- ----------- Current liabilities Short-term debt (Note E) ................... 23,062 28,977 Long-term debt due within one year (Note E) ............................. 14,676 Accounts payable ........................... 51,087 43,466 Customer deposits .......................... 19,725 19,513 Taxes accrued (Note J) ..................... 2,503 3,262 Interest accrued ........................... 8,909 8,298 Accumulated deferred fuel .................. 3,651 6,114 Other current liabilities .................. 2,343 2,618 ----------- ----------- Total current liabilities ............. 111,280 126,924 ----------- ----------- Deferred credits Accumulated deferred federal and state income taxes (Note J) ..................... 266,873 228,803 Accumulated deferred investment tax credits (Note J) .......................... 33,173 34,987 Regulatory liabilities and other deferred credits .......................... 102,189 74,597 ----------- ----------- Total deferred credits ................ 402,235 338,387 ----------- ----------- Commitments and contingencies (Notes C, E, F, H, I, J and K) ----------- ----------- TOTAL CAPITALIZATION AND LIABILITIES .. $ 1,266,034 $ 1,178,191 =========== =========== The accompanying notes are an integral part of the consolidated financial statements. -21- CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31 (In thousands) 1995 1994 1993 -------- --------- --------- OPERATING ACTIVITIES Net income ............................................... $ 48,703 $ 45,043 $ 41,812 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization ....................... 42,398 40,095 37,940 Allowance for funds used during construction ........ (2,940) (2,301) (3,038) Amortization of investment tax credits .............. (1,814) (1,819) (1,826) Deferred income taxes ............................... 2,854 2,445 1,327 Deferred fuel costs ................................. (2,463) 799 1,869 Restructuring charge ................................ 1,152 7,135 Gain (loss) on disposition of utility plant, net .... (270) 25 Changes in assets and liabilities Accounts receivable, net ....................... (5,928) (446) (2,655) Unbilled revenues .............................. (2,525) 933 (384) Fuel, material and supplies inventories ........ 611 776 (5,195) Accounts payable ............................... 7,621 2,076 (2,014) Customer deposits .............................. 212 875 867 Taxes accrued .................................. (759) (1,807) 2,372 Interest accrued ............................... 611 (31) 1,044 Other, net .......................................... 1,343 981 (3,075) -------- --------- --------- Net cash provided by operating activities ...... 87,654 88,796 76,179 -------- --------- --------- INVESTING ACTIVITIES Additions to utility plant ............................... (57,839) (55,445) (51,507) Allowance for funds used during construction ............. 2,940 2,301 3,038 Sale of utility plant .................................... 546 373 377 Purchase of investments .................................. (2,618) (203,165) (292,178) Sale of investments ...................................... 14,278 203,749 296,658 -------- --------- --------- Net cash used in investing activities .......... (42,693) (52,187) (43,612) -------- --------- --------- FINANCING ACTIVITIES Issuance of common stock ................................. 379 208 1,160 Repurchase of common stock ............................... (309) Redemption of preferred stock (310) (322) (150) Issuance of long-term debt ............................... 25,000 75,000 Retirement of long-term debt ............................. (15,481) (650) (35,583) Increase (decrease) in short-term debt, net .............. (5,915) 603 (35,497) Dividends paid on common and preferred stock, net ........ (35,453) (34,501) (33,493) -------- --------- --------- Net cash used in financing activities .......... (31,780) (34,971) (28,563) -------- --------- --------- NET INCREASE IN CASH AND CASH EQUIVALENTS ..................... 13,181 1,638 4,004 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ................ 7,440 5,802 1,798 -------- --------- --------- CASH AND CASH EQUIVALENTS AT END OF YEAR ...................... $ 20,621 $ 7,440 $ 5,802 ======== ========= ========= Supplementary cash flow information Interest paid (net of amount capitalized) ................ $ 27,744 $ 27,457 $ 24,116 Income taxes paid ........................................ $ 24,357 $ 25,762 $ 17,326 ======== ========= =========
The accompanying notes are an integral part of the consolidated financial statements. -22- CONSOLIDATED STATEMENTS OF CHANGES IN COMMON SHAREHOLDERS' EQUITY (In thousands, except share and per share amounts)
For the Years Ended Common Stock Premium Treasury Stock ---------------------- on Capital Retained --------------- December 31, 1993, 1994 and 1995 Shares Amount Stock Earnings Shares Cost ----------- -------- --------- -------- ------- ------ BALANCE, JANUARY 1, 1993 ......................... 22,634,081 $ 45,268 $ 111,811 $192,637 328,334 $6,639 ----------- -------- --------- -------- ------- ------ Redemptions of preferred stock ................... 8 Incentive stock options exercised ................ 74,793 150 1,010 Issuance of treasury stock ....................... (1,981) (40) Incentive shares forfeited ....................... 27 1 Capital stock expense ............................ (48) Dividend requirements, preferred stock, net ...... (1,985) Cash dividends paid, common stock, $1.41 per share (31,508) Net income ....................................... 41,812 ----------- -------- --------- -------- ------- ------ BALANCE, DECEMBER 31, 1993 ....................... 22,708,874 45,418 112,829 200,908 326,380 6,600 ----------- -------- --------- -------- ------- ------ Redemptions of preferred stock ................... 48 Incentive stock options exercised ................ 11,200 22 186 Repurchase of common stock ....................... 14,300 309 Issuance of treasury stock ....................... 7 (11,247) (228) Capital stock expense ............................ (12) Dividend requirements, preferred stock, net ...... (2,026) Cash dividends paid, common stock, $1.45 per share (32,475) Unrealized holding loss on available-for-sale securities, net ................................. (240) Net income ....................................... 45,043 ----------- -------- --------- -------- ------- ------ BALANCE, DECEMBER 31, 1994 ....................... 22,720,074 45,440 113,070 211,198 329,433 6,681 ----------- -------- --------- -------- ------- ------ Redemptions of preferred stock ................... 39 Incentive stock options exercised ................ 25,030 50 329 Issuance of treasury stock ....................... 6 (10,987) (222) Dividend requirements, preferred stock, net ...... (2,052) Cash dividends paid, common stock, $1.49 per share (33,401) Change in unrealized holding loss on available-for-sale securities, net .......... 240 Net income ....................................... 48,703 ----------- -------- --------- -------- ------- ------ BALANCE, DECEMBER 31, 1995 ....................... 22,745,104 $ 45,490 $ 113,444 $224,688 318,446 $6,459 =========== ======== ========= ======== ======= ======
The accompanying notes are an integral part of the consolidated financial statements. -23- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRESENTATION AND REGULATION The consolidated financial statements include the accounts of Central Louisiana Electric Company, Inc. (the Company) and its wholly owned subsidiaries. The Company maintains its accounts in accordance with the Uniform System of Accounts prescribed for electric utilities by the Federal Energy Regulatory Commission (FERC), as adopted by the Louisiana Public Service Commission (LPSC). The Company provides electric service to a diversified base of residential, commercial and industrial customers in 23 parishes of Louisiana. The Company's retail rates for residential, commercial and industrial customers and other retail sales are regulated by the LPSC, and its rates for transmission services and wholesale power sales are regulated by the FERC. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. UTILITY PLANT AND DEPRECIATION Utility plant is stated at the original cost of construction, which includes certain materials, labor, payroll taxes and benefits, administrative and general costs, and the estimated cost of funds used during construction. The cost of repairs and minor replacements is charged as incurred to the appropriate operating expense and clearing accounts. The cost of improvements is capitalized. Upon retirement or disposition, the recorded cost of depreciable plant and the cost of removal, net of salvage value, are charged to accumulated depreciation. The provision for depreciation is computed using the straight-line method at rates which will amortize the unrecovered cost of depreciable property over its estimated useful life. Annual depreciation provisions expressed as a percentage of average depreciable property were 3.19% for 1995, 3.17% for 1994 and 3.11% for 1993. CASH EQUIVALENTS The Company considers highly liquid, marketable securities and other similar instruments with original maturity dates of three months or less at the time of purchase to be cash equivalents. INCOME TAXES Deferred income taxes are provided at the current enacted income tax rate on all temporary differences between tax and book bases of assets and liabilities. The Company recognizes regulatory assets and liabilities for the tax effect of temporary differences which, to the extent past ratemaking practices are continued by regulators, will be realized over the accounting lives of the related properties. INVESTMENT TAX CREDITS Investment tax credits which were deferred for financial statement purposes are amortized to income over the estimated service lives of the properties which gave rise to the credits. DEBT EXPENSE, PREMIUM AND DISCOUNT Expense, premium and discount applicable to debt securities are amortized to income ratably over the lives of the related issues. Expense and call premium related to refinanced debt are amortized over the remaining life of the original issue. REVENUES AND FUEL COSTS Revenues from sales of electricity are recognized based upon the amount of energy delivered. The cost of fuel is recovered from customers through fuel adjustment clauses, based upon fuel costs incurred in prior months. These adjustments are subject to audit and final determination by regulators. ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION (AFUDC) The capitalization of AFUDC is a utility accounting practice prescribed by the FERC. AFUDC represents the estimated cost of financing construction work-in-progress. AFUDC does not represent a current source of cash, but under regulatory practices, a return on and recovery of AFUDC is permitted in setting rates charged for utility services. The composite AFUDC rate, including borrowed and other funds on a combined basis, for 1995, 1994 and 1993 was 15.10% on a pre-tax basis (9.29% net of tax). NET INCOME PER COMMON SHARE Net income per common share has been computed using the weighted average number of shares of common stock outstanding during the year. In 1994 potentially dilutive securities had more than a 3% dilutive effect on net income per common share due to the assumed conversion of the Incentive Stock Option Plan and the convertible preferred stock held by the Employee Stock Ownership Plan (ESOP). As a result, both primary and fully diluted average shares of common stock outstanding and earnings per share are presented. -24- NOTE B -- JOINTLY OWNED GENERATING UNITS Two electric generating units operated by the Company are jointly owned with other utilities. The Company's proportionate share of operation and maintenance expenses associated with these two units is reflected in the financial statements. (Dollar amounts in thousands) Rodemacher Dolet Hills At December 31, 1995 Unit #2 Unit #1 ------- -------- Percentage of ownership ..................... 30% 50% Utility plant in service .................... $84,765 $270,789 Accumulated depreciation .................... $34,238 $ 78,415 Unit capability (thousand kilowatts) ........ 523.0 650.0 Share of capability (thousand kilowatts) .... 156.9 325.0 NOTE C -- RECEIVABLES The Company sells an ownership interest in certain types of accounts receivable and accrued unbilled revenues. A maximum of $35,000,000 of receivables may be sold at any time, and new receivables are sold as previously sold receivables are collected. Sales of the Company's receivables are scheduled to continue through February 2000. The Company is obligated to repurchase a limited amount of receivables if such receivables were to become uncollectible. The Company maintains an allowance for uncollectible accounts, based on historical experience, against which losses on all receivables are charged. (In thousands) For the year ended December 31 1995 1994 ------- ------- Receivables sold but not collected (at year end) ... $35,000 $34,000 Average amount of receivables sold ................. $34,058 $34,557 Costs charged to operating expense ................. $ 2,251 $ 1,751 Receivables subject to repurchase (at year end) .... $ 4,137 $ 3,510 Accumulated provision for uncollectible accounts (at year end) ............................ $ 538 $ 444 NOTE D -- INVESTMENTS AND OTHER FINANCIAL INSTRUMENTS In 1994 the Company classified various debt and equity securities it owned which were invested through an outside investment manager as "available-for-sale" securities and carried these securities at fair value. In 1995 this portfolio was liquidated and the proceeds were invested in government/agency securities and other securities classified as cash equivalents through a different outside investment manager pending final determination by the Company as to their ultimate utilization. (In thousands) 1995 1994 Original Fair Market Original Fair Market At December 31 Cost Value Cost Value ------ ------ ------- ------- Equity securities ............... $6,750 $6,466 U.S. Treasury/Government Agency . $ 594 $ 594 4,371 4,317 Corporate obligations ........... 1,333 1,303 ------ ------ ------- ------- Total marketable securities ... $ 594 $ 594 $12,454 $12,086 ====== ====== ======= ======= Proceeds from the sales of available-for-sale securities in 1995 were $15,092,000 and in 1994 were $14,448,000. The gross realized gains from these sales were approximately $78,000 in 1995 and $1,295,000 in 1994 and the gross realized losses were approximately $76,000 in 1995 and $2,170,000 in 1994. The contractual maturities of debt securities classified as available-for-sale at December 31, 1995, were within one year. The amounts reflected in the financial statements at December 31, 1995 and 1994 for cash and cash equivalents, accounts receivable, accounts payable and short-term debt approximate fair value because of their short-term nature. The fair value of investments at December 31, 1995 and 1994 is estimated based on quoted market prices for these or similar investments. The fair value of the Company's long-term debt and nonconvertible preferred stock is estimated based upon the quoted market price for the same or similar issues or by a discounted present value analysis of future cash flows using current rates obtainable by the Company for debt and preferred stock with similar maturities. The fair value of convertible preferred stock is estimated assuming its conversion into common stock at the market price per common share at December 31, 1995 and 1994, with proceeds from the sale of the common stock used to repay the principal balance of the Company's loan to the ESOP. (In thousands) At December 31 1995 1994 Carrying Estimated Carrying Estimated Value Fair Value Value Fair Value -------- -------- -------- -------- Investments .............. $ 7,786 $ 7,786 $ 19,558 $ 19,558 Long-term debt ........... $361,260 $384,427 $351,741 $345,810 Preferred stock not subject to mandatory redemption .............. $ 7,924 $ 13,359 $ 6,344 $ 6,722 Preferred stock subject to mandatory redemption .............. $ 6,610 $ 4,597 $ 6,920 $ 5,927 -25- NOTE E -- DEBT The Company has a $100,000,000 revolving credit facility with a group of banks that provides for uncollateralized borrowings at prevailing market interest rates or at interest rates established by competitive bids. The facility has a scheduled termination date of June 15, 2000. The Company pays a commitment fee (currently 0.10%) on the full amount of the facility, based upon the Company's lowest senior secured debt rating. The Company is not required to maintain compensating balances in connection with the revolving credit facility. Since the revolving credit facility provides liquidity support for the issuance of commercial paper, the aggregate amount of commercial paper notes and borrowings under the revolving credit facility cannot exceed $100,000,000. In addition to its revolving credit facility, the Company also has various uncommitted borrowing arrangements with banks totaling $20,000,000. The banks are not obligated to lend under these arrangements, and any borrowings are made at negotiated interest rates and are uncollateralized. The Company pays no fees on any of these arrangements, nor are compensating balances required. The weighted average interest rate on short-term debt was 5.90% at December 31, 1995 and 5.87% at December 31, 1994. In January 1996 the Company issued $25 million of medium-term notes at an average interest rate of 6.40%. (In thousands) At December 31 1995 1994 --------- --------- Commercial paper, net .................... $ 22,922 $ 28,977 Bank loans ............................... 140 --------- --------- Total short-term debt ............... $ 23,062 $ 28,977 ========= ========= First mortgage bonds Series L, 5%, retired 1995 .......... $ 14,000 Series X, 9 1/2%, due 2005 .......... $ 60,000 60,000 Series Y, 9 5/8%, due 2021 .......... 50,000 50,000 Pollution control revenue bonds, variable rate, due 2018 ................. 61,260 61,260 Medium-term notes 9.13%, due 1997 ..................... 15,000 15,000 7.85%, due 2000 ..................... 25,000 25,000 7.53%, due 2004 ..................... 25,000 25,000 7.00%, due 2003 ..................... 10,000 10,000 6.90%, due 1998 ..................... 15,000 15,000 5.90%, due 1999 ..................... 10,000 10,000 6.55%, due 2003 ..................... 15,000 15,000 6.33%, due 2002 ..................... 25,000 25,000 5.78%, due 2001 ..................... 10,000 10,000 6.20%, due 2006 ..................... 15,000 15,000 6.42%, due 2001 ..................... 15,000 6.95%, due 2006 ..................... 10,000 Mortgage notes, 2%, retired 1995 ......... 171 Capitalized lease obligations, 5.0% - 6.875%, retired 1995 ............. 1,310 --------- --------- Total long-term debt ................ 361,260 351,741 Amount due within one year ............... (14,676) Unamortized premium and discount, net ....................... (438) (476) --------- --------- Total long-term debt, net ........... $ 360,822 $ 336,589 ========= ========= (In thousands) 1997 1998 1999 2000 Thereafter Total ------- ------- ------- ------- -------- -------- Amounts payable under long-term debt agreements ............ $15,000 $15,000 $10,000 $25,000 $296,260 $361,260 NOTE F -- COMMON STOCK In association with incentive compensation plans in effect during the three-year period ended December 31, 1995, certain officers and key employees could be awarded shares of restricted or unrestricted common stock or granted options to purchase shares of the Company's common stock at 100% of the fair market value of the common stock at the dates the options were granted. The cost of the restricted stock awards, as measured by the fair market value of the common stock at the time of the grant, is recorded as compensation expense during the periods in which the restrictions on the common stock lapse. The Company makes no charge to expense with respect to the granting of options. At December 31, 1995, all options were exercisable, while the number of shares of restricted stock previously awarded for which restrictions had not lapsed totaled 29,037 shares. -26- Changes in incentive shares for the three-year period ended December 31, 1995 were as follows: Incentive Shares ---------------------------------------------- Option Price Unexercised Available for per Share Option Shares Future Grants -------- -------- -------- Balance, January 1, 1993 ...... 145,223 784,232 -------- -------- -------- Options exercised ............. $ 8.875 (6,118) $ 14.75 (35,275) $ 16.78 (33,400) Restricted stock granted ...... (10,320) Restricted stock forfeited .... 27 Incentive stock awarded ....... (2,624) -------- -------- -------- Balance, December 31, 1993 .... 70,430 771,315 -------- -------- -------- Options exercised ............. $ 14.75 (6,500) $ 16.78 (4,700) Restricted stock granted ...... (9,263) Incentive stock awarded ....... (2,274) -------- -------- -------- Balance, December 31, 1994 .... 59,230 759,778 -------- -------- -------- Options exercised ............. $ 14.75 (18,230) $ 16.78 (6,800) Restricted stock granted ...... (11,186) -------- -------- -------- Balance, December 31, 1995 .... 34,200 748,592 ======== ======== ======== Various debt agreements of the Company contain covenants which restrict the amount of retained earnings that may be distributed as dividends to common shareholders. The most restrictive covenant requires that common shareholders' equity be not less than 30% of total capitalization, including short-term debt. At December 31, 1995, approximately $144 million of retained earnings was not restricted. NOTE G -- SUPPLEMENTARY PROFIT AND LOSS INFORMATION (In thousands) For the years ended December 31 1995 1994 1993 ------- ------- ------- Operating revenue derived from one customer .............................. $28,695 $28,259 $29,731 ======= ======= ======= Other taxes included in the consolidated income statements ............ $29,063 $28,899 $27,011 Other taxes capitalized to plant ........... 1,010 742 882 ------- ------- ------- Total other taxes .......................... $30,073 $29,641 $27,893 ======= ======= ======= Other taxes consist of: State and municipal property .......... $15,868 $15,406 $14,174 State and municipal franchise ......... 10,072 10,424 9,443 Other ................................. 4,133 3,811 4,276 ------- ------- ------- Total other taxes .......................... $30,073 $29,641 $27,893 ======= ======= ======= NOTE H -- PREFERRED STOCK In 1991 the Company sold 300,000 shares of 8.125% convertible preferred stock to the ESOP. Each share of preferred stock is convertible into 4.8 shares of common stock. The amount of total capitalization reflected in the consolidated financial statements has been reduced by an amount of deferred compensation expense related to the shares of convertible preferred stock which have not yet been allocated to ESOP participants. The amount shown in the consolidated financial statements for preferred dividend requirements in 1995, 1994 and 1993 has been reduced by $716,000, $771,000 and $840,000, respectively, to reflect the benefit of the income tax deduction for dividend requirements on unallocated shares held by the ESOP. Upon involuntary liquidation, preferred shareholders are entitled to receive par value for shares held before any distribution is made to common shareholders. Upon voluntary liquidation, preferred shareholders are entitled to receive the redemption price per share applicable at the time such liquidation occurs plus any accrued dividends. -27- Information about the components of preferred stock capitalization is as follows:
(In thousands, except share amounts) Balance Balance Balance Balance January 1, December 31, December 31, December 31, 1993 Change 1993 Change 1994 Change 1995 ----------- ----------- ----------- ----------- ----------- -------- ----------- CUMULATIVE PREFERRED STOCK, $100 par value NOT SUBJECT TO MANDATORY REDEMPTION 4.50% $ 1,029 $ 1,029 $ 1,029 $ 1,029 Convertible, Series of 1991, variable rate .................. 29,994 $ (41) 29,953 $ (234) 29,719 $ (229) 29,490 ----------- ----------- ----------- ----------- ----------- -------- ----------- $ 31,023 $ (41) $ 30,982 $ (234) $ 30,748 $ (229) $ 30,519 =========== =========== =========== =========== =========== ======== =========== SUBJECT TO MANDATORY REDEMPTION 4.50%, Series of 1955 .. $ 520 $ (40) $ 480 $ (40) $ 440 $ (40) $ 400 4.65%, Series of 1964 .. 3,500 3,500 (140) 3,360 (140) 3,220 4.75%, Series of 1965 .. 3,380 (118) 3,262 (142) 3,120 (130) 2,990 ----------- ----------- ----------- ----------- ----------- -------- ----------- $ 7,400 $ (158) $ 7,242 $ (322) $ 6,920 $ (310) $ 6,610 =========== =========== =========== =========== =========== ======== =========== Deferred compensation related to convertible preferred stock held by the ESOP ..... $ (28,306) $ 2,188 $ (26,118) $ 1,714 $ (24,404) $ 1,809 $ (22,595) =========== =========== =========== =========== =========== ======== =========== CUMULATIVE PREFERRED STOCK, $100 par value Number of Shares Authorized ................. 1,420,800 (1,181) 1,419,619 (2,819) 1,416,800 (2,700) 1,414,100 Issued and Outstanding ..... 384,232 (1,994) 382,238 (5,562) 376,676 (5,389) 371,287 =========== =========== =========== =========== =========== ======== =========== CUMULATIVE PREFERRED STOCK, $25 par value Number of Shares Authorized ................. 3,000,000 3,000,000 3,000,000 3,000,000 Issued and Outstanding
Preferred stock, other than the convertible preferred stock held by the ESOP, is redeemable at the Company's option, subject to 30 days' prior written notice to holders. Preferred stock subject to mandatory redemption is redeemable annually through sinking funds or purchase funds at prices of not more than $100 per share until all shares have been redeemed. The convertible preferred stock is redeemable at any time upon the occurrence of certain events and, after April 1, 1996, is redeemable at the Company's option. If the Company were to elect to redeem the convertible preferred shares, shareholders may elect to receive the optional redemption price or convert the preferred shares into common stock. The redemption provisions for the various series of preferred stock are shown in the following table. Optional Redemption Mandatory Redemption ---------- --------------------------- Price per Number of Price per Series Share Shares Annually Share - ------ ---- --------------- ----- 4.50% .................................. $101 4.50%, Series of 1955 .................. $102 400 $100 4.65%, Series of 1964 .................. $102 1,400 $100 4.75%, Series of 1965 .................. $100 1,300 $100 Convertible, Series of 1991 Through April 1, 1996 ............. $104.875 Thereafter ........................ $104.0625 to $100 -28- NOTE I -- PENSION PLAN AND EMPLOYEE BENEFITS Substantially all employees are covered by a noncontributory, defined benefit pension plan. Benefits under the plan reflect an employee's years of service, age at retirement and highest total average compensation for any consecutive five calendar years during the last ten years of employment with the Company. The Company's policy is to fund contributions to the employee pension plan based upon actuarial computations utilizing the projected unit credit method, subject to the Internal Revenue Service full funding limitation. No contributions to the pension plan were required during the three-year period ended December 31, 1995. Effective January 1, 1993, the Company began accounting for its pension plan on an accrual basis for ratemaking purposes with the approval of the LPSC staff. A previously recorded regulatory credit with regard to the pension plan is being amortized to income over a five-year period, subject to review by the LPSC in future proceedings. (In thousands) For the years ended December 31 1995 1994 1993 ------- ------- ------- Service costs for benefits earned during the period ............... $ 2,498 $ 2,648 $ 2,559 Interest costs on projected benefit obligation ..................... 6,542 6,269 5,674 Actual gain on assets ................... (8,920) (8,730) (8,164) Special termination benefits ............ 3,903 Net amortization and deferral ........... (1,037) (1,037) (1,109) ------- ------- ------- Net pension benefit cost ................ $ (917) $ (850) $ 2,863 ======= ======= ======= Actuarial assumptions Weighted average discount rate ..... 7.00% 7.50% 7.00% Rate of increase in future compensation ............... 5.00% 5.00% 5.00% Rate of return on plan assets ...... 9.50% 9.50% 9.50% ======= ======= ======= Employee pension plan assets are invested in the Company's common stock, other publicly traded domestic common stocks, U.S. government, federal agency and corporate obligations, an international equity fund, commercial real estate funds and pooled temporary investments. The employee pension plan's funded status as determined by the actuary at December 31, 1995 and 1994 is presented in the following table. (In thousands) 1995 1994 --------- --------- Actuarial present value of benefit obligation Vested benefits ............................... $ (77,427) $ (71,740) Nonvested benefits ............................ (3,479) (3,149) --------- --------- Accumulated benefit obligation ................ (80,906) (74,889) Effect of projected future compensation levels .......................... (19,352) (14,438) --------- --------- Projected benefit obligation for service rendered to date .................................. (100,258) (89,327) Plan assets at fair market value ................... 121,801 101,432 --------- --------- Plan assets in excess of projected benefit obligation ................................ 21,543 12,105 Unamortized transition asset ....................... (10,578) (11,896) Unrecognized net loss (gain) ....................... (6,336) 3,504 --------- --------- Prepaid pension asset .............................. $ 4,629 $ 3,713 ========= ========= Substantially all employees are eligible to participate in a savings and investment plan (401(k) Plan). The Company makes matching contributions to 401(k) Plan participants by allocating shares of convertible preferred stock held by the ESOP. Compensation expense related to the 401(k) Plan is based upon the value of shares of preferred stock allocated to ESOP participants, and the amount of interest incurred by the ESOP, less dividends on unallocated shares held by the ESOP. At December 31, 1995 and 1994, the ESOP had allocated to employees 71,761 and 55,086 shares, respectively. The table below contains information about the 401(k) Plan and the ESOP: (In thousands) For the years ended December 31 ............ 1995 1994 1993 ------ ------ ------ 401(k) Plan expense ........................ $1,542 $1,537 $1,449 ------ ------ ------ Dividend requirements to ESOP on convertible preferred stock ............... $2,396 $2,415 $2,434 ------ ------ ------ Interest incurred by ESOP on its indebtedness .......................... $1,905 $2,008 $2,079 ------ ------ ------ Company contributions to ESOP .............. $1,071 $1,205 $1,270 ====== ====== ====== -29- The Company's retirees and their dependents are eligible to receive health, dental and life insurance benefits. The Company recognizes the expected cost of these benefits during the periods in which the benefits are earned. The components of net postretirement benefit cost for 1995 and 1994 were as follows: (In thousands) 1995 1994 ------ ------ Service costs for benefits earned .................. $ 639 $ 640 Interest costs ..................................... 1,066 1,025 Amortization of transition obligation .............. 513 567 ------ ------ Net postretirement benefit cost .................... $2,218 $2,232 ====== ====== The financial status of the postretirement benefit plan at December 31, 1995 and 1994, as determined by the actuary, is presented in the following table. (In thousands) 1995 1994 -------- -------- Accumulated benefit obligation Retirees ........................................ $ 10,255 $ 10,042 Fully eligible participants ..................... 1,958 2,412 Other active participants ....................... 3,954 2,758 -------- -------- Total accumulated benefit obligation ................. 16,167 15,212 Unamortized transition obligation .................... (8,726) (9,240) Unrecognized loss .................................... (630) (949) -------- -------- Accrued unfunded postretirement benefit liability .... $ 6,811 $ 5,023 ======== ======== The assumed health care cost trend rate used to measure the expected cost of benefits was 10% in 1995, declining to 5.5% by 2008 and remaining at 5.5% thereafter. If the health care cost trend rate assumptions were increased by 1%, the accumulated benefit obligation would be $16,844,000 at December 31, 1995, and the aggregate of the service and interest cost components of the net periodic cost of health care benefits would be $1,801,000 annually. The weighted average assumed discount rate used to measure the accumulated benefit obligation in 1995 was changed from 7.5% to 7% and resulted in an unrecognized loss. The weighted average assumed discount rate used to measure the accumulated benefit obligation in 1994 was changed from 7% to 7.5% and resulted in an unrecognized gain. In 1994 the Company announced a plan to consolidate 25 customer service offices into ten regional offices by June 1995. This plan resulted in a restructuring charge to 1994 earnings of $1,203,000. This charge consisted mainly of voluntary severance benefits and customer service office lease commitment costs. In 1993 the Company's organizational structure was streamlined. The resulting reduction in staff was achieved through enhanced early retirement and voluntary severance programs. The restructuring charge, which totaled $10,851,000, included $3,903,000 for special pension termination benefit costs, $1,953,000 for net postretirement plan curtailment costs, and $4,995,000 for voluntary severance, relocation and other costs. NOTE J -- INCOME TAXES Federal income tax expense is less than the amount computed by applying the statutory federal rate to book income before tax as follows:
(In thousands, except for %) For the years ended December 31 1995 1994 1993 ------------------ ------------------------- ------------------ Amount % Amount % Amount % -------- ----- -------- ------- -------- ----- Book income before tax .......... $73,932 100.0 $64,944 100.0 $61,377 100.0 -------- ----- -------- ------- -------- ----- Tax at statutory rate on book income before tax ......... $25,876 35.0 $22,730 35.0 $21,482 35.0 Increase (decrease): Tax effect of AFUDC ........ (1,029) (1.4) (805) (1.2) (1,063) (1.7) Amortization of investment tax credits ............... (1,814) (2.5) (1,819) (2.8) (1,827) (2.9) Tax effect of prior-year tax benefits not deferred ..... 900 1.2 537 0.8 444 0.7 Other, net ................. (1,435) (1.9) (3,219) (5.0) (2,194) (3.6) -------- ----- -------- ------- -------- ----- Total federal income tax expense 22,498 30.4 17,424 26.8 16,842 27.5 -------- ----- -------- ------- -------- ----- Current state income tax expense 2,731 3.7 2,477 3.8 2,723 4.4 -------- ----- -------- ------- -------- ----- Total federal and state income tax expense .................... $25,229 34.1 $19,901 30.6 $19,565 31.9 ======== ===== ======== ======= ======== =====
-30- Information about current and deferred income tax expense is as follows: (In thousands) 1995 1994 1993 -------- -------- -------- Current federal income tax expense ......... $ 21,458 $ 16,798 $ 17,342 Deferred federal income tax expense ........ 2,854 2,445 1,327 Amortization of accumulated deferred investment tax credits ........... (1,814) (1,819) (1,827) -------- -------- -------- Total federal income tax expense ........... 22,498 17,424 16,842 Current state income tax expense ........... 2,731 2,477 2,723 -------- -------- -------- Total federal and state income tax expense ............................... $ 25,229 $ 19,901 $ 19,565 ======== ======== ======== Deferred federal income tax expense attributable to: Depreciation .......................... $ 3,746 $ 4,466 $ 5,022 Storm damages ......................... (15) (340) 414 Asset basis differences ............... (1,213) (352) (882) Employee benefits ..................... (558) (455) (2,074) Fuel costs ............................ 890 (244) (620) Other ................................. 4 (630) (533) -------- -------- -------- Total deferred federal income tax expense .. $ 2,854 $ 2,445 $ 1,327 ======== ======== ======== The balance of accumulated deferred federal and state income tax assets and liabilities at December 31, 1995 and 1994 was comprised of the tax effect of the following: (In thousands) 1995 1994 ------------------- ------------------- Asset Liability Asset Liability ------- -------- ------- -------- Depreciation and property basis differences ............... $ 6,311 $125,494 $ 5,717 $122,210 Allowance for funds used during construction ............. 42,038 41,933 Investment tax credits ........... 20,844 21,979 FASB 109 adjustments ............. 34,126 93,383 7,427 59,720 Other ............................ 5,177 5,958 4,254 4,940 ------- -------- ------- -------- Accumulated deferred federal and state income taxes .......... $66,458 $266,873 $39,377 $228,803 ======= ======== ======= ======== In 1993 there was no material effect on the Company's results of operations from the implementation of the new accounting standard for income taxes or the increase in the federal corporate income tax rate. Regulatory assets recorded for deferred taxes at December 31, 1995 and 1994 were $160,987,000 and $125,356,000, respectively. Regulatory liabilities recorded for deferred taxes at December 31, 1995 and 1994 were $79,332,000 and $51,712,000, respectively. Regulatory assets and liabilities will be realized over the accounting lives of the related properties to the extent past ratemaking practices are continued by regulators. NOTE K -- COMMITMENTS AND CONTENGENCIES Construction expenditures for 1996 are estimated to be $57,000,000, excluding AFUDC, and for the five-year period ending 2000 are expected to total $302,000,000, excluding AFUDC. Scheduled maturities of debt and preferred stock will total about $310,000 for 1996 and approximately $66,550,000 for the five-year period ending 2000. The Company has entered into various long-term contracts for the procurement of lignite, coal and natural gas to fuel its generating stations. Most of these contracts contain provisions for price changes, minimum purchase levels and other financial commitments. The Company has accrued for liabilities to third parties, environmental claims, employee medical benefits, storm damages and deductibles under insurance policies which it maintains on major properties, primarily generating stations and transmission substations. Consistent with regulatory treatment, annual charges to operating expense to provide a reserve for future storm damages are based upon the average amount of noncapital, uninsured storm damages experienced by the Company during the previous five years. An audit of the Company's 1991 and 1992 tax returns was completed by agents of the Internal Revenue Service (IRS) in January 1995. A number of assessments were proposed that would substantially increase the Company's federal and Louisiana taxable income for those years. The Company has contested most of these assessments. Deferred taxes have been provided for all temporary differences and reserves have been provided for other issues. If the IRS is completely successful on all of the contested issues, an additional liability in excess of current reserves would exist for interest and, if assessed, penalties. In October 1995 agents of the IRS began an audit of the Company's 1993 and 1994 tax returns. -31- In early 1995 the Company and Teche Electric Cooperative, Inc. (Teche) executed a purchase and sale agreement regarding a purchase of all of the assets of Teche by the Company for a purchase price, including the Company's assumption or other discharge of Teche's liabilities, of approximately $22.4 million. Closing of the transaction is subject to a number of conditions, including approval by the LPSC and the Rural Utilities Service, successful resolution of Teche's power supply contract with Cajun Electric Cooperative and certain other conditions. The Teche members approved the sale at their annual meeting in March 1995. The LPSC is currently reviewing the Company's earnings. Although the Company's rates are among the lowest in the state, at this time management cannot predict the outcome of the review or the effect on the Company's financial position, results of its operations or its cash flows. Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" (SFAS 121) was issued in March 1995 and establishes accounting standards for determining if long-lived assets are impaired, and when and how losses, if any, should be recognized. In addition, the Company has recorded regulatory assets and liabilities, primarily for the effects of income taxes, as a result of past rate actions of the Company's regulators, pursuant to Statement of Financial Accounting Standards No. 71, "Accounting for the Effects of Certain Types of Regulation" (SFAS 71). The effects of potential deregulation of the industry or possible future changes in the method of rate regulation of the Company could require that the Company discontinue the application of SFAS 71, pursuant to Statement of Financial Accounting Standards No. 101, "Regulated Enterprises -- Accounting for the Discontinuation of Application of FASB Statement No. 71". Management believes that for the foreseeable future, the Company's rates will remain based on its costs of providing service. The future effects of these standards on the Company's financial position, results of its operations and its cash flows will be determined by the facts and circumstances at that time. Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation", requires beginning in 1996, a fair value based method of accounting for stock-based compensation plans or, in lieu of a change in accounting, the disclosure of pro forma differences in net income and earnings per share. Because of the limited number of shares of common stock currently being granted pursuant to compensation plans in effect, management estimates that there would be no significant difference in net income or earnings per share between the fair value method and the intrinsic value method currently being used. NOTE L -- MISCELLANEOUS FINANCIAL INFORMATION (UNAUDITED) Quarterly information for 1995 and 1994 is shown below. (In thousands, except per share amounts) 1995 ---------------------------------------------- 1st 2nd 3rd 4th Quarter Quarter Quarter Quarter ------- -------- -------- -------- Operating revenues ... $79,872 $100,599 $123,383 $ 90,572 Operating income ..... $14,589 $ 20,295 $ 27,444 $ 12,374 Net income applicable to common stock ..... $ 7,582 $ 13,490 $ 20,556 $ 5,023 Primary net income per average common share $ 0.34 $ 0.60 $ 0.92 $ 0.22 Fully diluted net income per average common share ........ $ 0.33 $ 0.58 $ 0.88 $ 0.22 Dividends paid per common share ........ $ 0.365 $ 0.375 $ 0.375 $ 0.375 Market price per share High ............ $24 1/2 $ 24 1/2 $ 25 5/8 $ 28 1/8 Low ............. $22 $ 22 1/8 $ 22 1/4 $ 25 1/4 ======= ======== ======== ======== 1994 ---------------------------------------------- 1st 2nd 3rd 4th Quarter Quarter Quarter Quarter ------- -------- -------- -------- Operating revenues ... $84,147 $100,940 $112,633 $ 81,883 Operating income ..... $14,779 $ 19,276 $ 24,093 $ 12,282 Net income applicable to common stock ..... $ 8,081 $ 12,268 $ 17,100 $ 5,568 Primary net income per average common share $ 0.36 $ 0.55 $ 0.76 $ 0.25 Fully diluted net income per average common share ........ $ 0.35 $ 0.53 $ 0.73 $ 0.25 Dividends paid per common share ........ $ 0.355 $ 0.365 $ 0.365 $ 0.365 Market price per share High ............ $24 7/8 $ 25 5/8 $ 24 3/8 $ 23 5/8 Low ............. $21 1/4 $ 22 1/4 $ 21 1/4 $ 20 7/8 ======= ======== ======== ======== The Company's common stock is listed for trading on the New York and Pacific stock exchanges under the ticker symbol "CNL". The Company's preferred stock is not listed on any stock exchange. On December 31, 1995, the Company had 12,148 common and 195 preferred shareholders, as determined from the records of the transfer agent. On January 26, 1996, the Company's Board of Directors declared a quarterly dividend of 37 1/2 cents per share payable February 15, 1996, to common shareholders of record on February 5, 1996. -32- REPORT OF MANAGEMENT To the Shareholders of Central Louisiana Electric Company, Inc. The management of Central Louisiana Electric Company, Inc. is responsible for the preparation of the financial statements and accompanying disclosures. Financial information throughout this annual report is consistent with the financial statements. The financial statements have been prepared in conformity with generally accepted accounting principles and include amounts based upon currently available facts and the informed estimates and judgments of management. Management maintains a system of internal accounting controls which it believes is adequate to provide reasonable assurance as to the integrity of the accounting records and the protection of assets. The system of internal accounting controls is supported by written policies and procedures, by a staff of internal auditors who conduct comprehensive internal audits, by the selection and training of qualified personnel and by an organizational structure that provides for appropriate delegation of authority and segregation of responsibilities. The Audit Committee of the Board of Directors, comprised entirely of outside directors, meets periodically with management, internal auditors and the Company's independent accountants to discuss accounting, auditing and financial reporting matters. To ensure their independence, both the internal auditors and the independent accountants have unrestricted access to the Audit Committee. DAVID K. WARNER Vice President - Finance and Chief Financial Officer JOHN L. BALTES, JR. Controller January 26, 1996 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Central Louisiana Electric Company, Inc. We have audited the accompanying consolidated balance sheets of Central Louisiana Electric Company, Inc. as of December 31, 1995 and 1994, and the related consolidated statements of income, cash flows and changes in common shareholders' equity for each of the three years in the period ended December 31, 1995. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based upon our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Central Louisiana Electric Company, Inc. as of December 31, 1995 and 1994, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. New Orleans, Louisiana January 26, 1996 -33- EX-23 9 CONSENT OF INDEPENDENT ACCOUNTANTS EXHIBIT 23 COOPERS CERTIFIED PUBLIC ACCOUNTANTS & LYBRAND L.L.P. CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of Central Louisiana Electric Company, Inc. on Form S-8 (Registration Nos. 2-79671, 33-10169, 33-38362 and 33-44663) and Form S-3 (Nos. 33-24895, and 33-62950) of our reports dated January 26, 1996, on our audits of the consolidated financial statements and financial statement schedule of Central Louisiana Electric Company, Inc. as of December 31, 1995 and 1994 and for each of the three years in the period ended December 31, 1995, which reports are included or incorporated by reference in this Annual Report on Form 10-K. COOPERS & LYBRAND L.L.P. New Orleans, Louisiana March 27, 1996 EX-24 10 POWER OF ATTNY. FROM DIRECTORS EXHIBIT 24 CENTRAL LOUISIANA ELECTRIC COMPANY, INC. POWER OF ATTORNEY WHEREAS, Central Louisiana Electric Company, Inc., a Louisiana corporation (the "Company"), intends to file with the Securities and Exchange Commission (the "Commission") under the Securities Exchange Act of 1934, as amended (the "Act"), an Annual Report on Form 10-K (the "Form 10-K") for the Company's fiscal year ended December 31, 1995, with any and all amendments thereto as may be necessary or appropriate, together with any and all exhibits and other documents having relation to the Form 10-K; NOW, THEREFORE, the undersigned, in the capacity of a director or officer or both a director and officer of the Company, as the case may be, does hereby appoint Gregory L. Nesbitt and David K. Warner, and each of them severally, his true and lawful attorney(s)-in-fact and agent(s) with power to act without the other, with full power of substitution and resubstitution, to execute in his name, place and stead, in any and all capacities, the Form 10-K and any and all amendments thereto and any and all instruments necessary or incidental in connection therewith, to file the same with the Commission and to appear before the Commission in connection with any matter relating thereto. Each of said attorneys-in-fact and agents shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying, approving and confirming the acts that said attorneys-in-fact and agents and each of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney as of the 26th day of January, 1996. SHERIAN G. CADORIA CENTRAL LOUISIANA ELECTRIC COMPANY, INC. POWER OF ATTORNEY WHEREAS, Central Louisiana Electric Company, Inc., a Louisiana corporation (the "Company"), intends to file with the Securities and Exchange Commission (the "Commission") under the Securities Exchange Act of 1934, as amended (the "Act"), an Annual Report on Form 10-K (the "Form 10-K") for the Company's fiscal year ended December 31, 1995, with any and all amendments thereto as may be necessary or appropriate, together with any and all exhibits and other documents having relation to the Form 10-K; NOW, THEREFORE, the undersigned, in the capacity of a director or officer or both a director and officer of the Company, as the case may be, does hereby appoint Gregory L. Nesbitt and David K. Warner, and each of them severally, his true and lawful attorney(s)-in-fact and agent(s) with power to act without the other, with full power of substitution and resubstitution, to execute in his name, place and stead, in any and all capacities, the Form 10-K and any and all amendments thereto and any and all instruments necessary or incidental in connection therewith, to file the same with the Commission and to appear before the Commission in connection with any matter relating thereto. Each of said attorneys-in-fact and agents shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying, approving and confirming the acts that said attorneys-in-fact and agents and each of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney as of the 26th day of January, 1996. J. PATRICK GARRETT CENTRAL LOUISIANA ELECTRIC COMPANY, INC. POWER OF ATTORNEY WHEREAS, Central Louisiana Electric Company, Inc., a Louisiana corporation (the "Company"), intends to file with the Securities and Exchange Commission (the "Commission") under the Securities Exchange Act of 1934, as amended (the "Act"), an Annual Report on Form 10-K (the "Form 10-K") for the Company's fiscal year ended December 31, 1995, with any and all amendments thereto as may be necessary or appropriate, together with any and all exhibits and other documents having relation to the Form 10-K; NOW, THEREFORE, the undersigned, in the capacity of a director or officer or both a director and officer of the Company, as the case may be, does hereby appoint Gregory L. Nesbitt and David K. Warner, and each of them severally, his true and lawful attorney(s)-in-fact and agent(s) with power to act without the other, with full power of substitution and resubstitution, to execute in his name, place and stead, in any and all capacities, the Form 10-K and any and all amendments thereto and any and all instruments necessary or incidental in connection therewith, to file the same with the Commission and to appear before the Commission in connection with any matter relating thereto. Each of said attorneys-in-fact and agents shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying, approving and confirming the acts that said attorneys-in-fact and agents and each of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney as of the 26th day of January, 1996. F. BEN JAMES, JR. CENTRAL LOUISIANA ELECTRIC COMPANY, INC. POWER OF ATTORNEY WHEREAS, Central Louisiana Electric Company, Inc., a Louisiana corporation (the "Company"), intends to file with the Securities and Exchange Commission (the "Commission") under the Securities Exchange Act of 1934, as amended (the "Act"), an Annual Report on Form 10-K (the "Form 10-K") for the Company's fiscal year ended December 31, 1995, with any and all amendments thereto as may be necessary or appropriate, together with any and all exhibits and other documents having relation to the Form 10-K; NOW, THEREFORE, the undersigned, in the capacity of a director or officer or both a director and officer of the Company, as the case may be, does hereby appoint Gregory L. Nesbitt and David K. Warner, and each of them severally, his true and lawful attorney(s)-in-fact and agent(s) with power to act without the other, with full power of substitution and resubstitution, to execute in his name, place and stead, in any and all capacities, the Form 10-K and any and all amendments thereto and any and all instruments necessary or incidental in connection therewith, to file the same with the Commission and to appear before the Commission in connection with any matter relating thereto. Each of said attorneys-in-fact and agents shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying, approving and confirming the acts that said attorneys-in-fact and agents and each of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney as of the 26th day of January, 1996. HUGH J. KELLY CENTRAL LOUISIANA ELECTRIC COMPANY, INC. POWER OF ATTORNEY WHEREAS, Central Louisiana Electric Company, Inc., a Louisiana corporation (the "Company"), intends to file with the Securities and Exchange Commission (the "Commission") under the Securities Exchange Act of 1934, as amended (the "Act"), an Annual Report on Form 10-K (the "Form 10-K") for the Company's fiscal year ended December 31, 1995, with any and all amendments thereto as may be necessary or appropriate, together with any and all exhibits and other documents having relation to the Form 10-K; NOW, THEREFORE, the undersigned, in the capacity of a director or officer or both a director and officer of the Company, as the case may be, does hereby appoint Gregory L. Nesbitt and David K. Warner, and each of them severally, his true and lawful attorney(s)-in-fact and agent(s) with power to act without the other, with full power of substitution and resubstitution, to execute in his name, place and stead, in any and all capacities, the Form 10-K and any and all amendments thereto and any and all instruments necessary or incidental in connection therewith, to file the same with the Commission and to appear before the Commission in connection with any matter relating thereto. Each of said attorneys-in-fact and agents shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying, approving and confirming the acts that said attorneys-in-fact and agents and each of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney as of the 26th day of January, 1996. A. DELOACH MARTIN, JR. CENTRAL LOUISIANA ELECTRIC COMPANY, INC. POWER OF ATTORNEY WHEREAS, Central Louisiana Electric Company, Inc., a Louisiana corporation (the "Company"), intends to file with the Securities and Exchange Commission (the "Commission") under the Securities Exchange Act of 1934, as amended (the "Act"), an Annual Report on Form 10-K (the "Form 10-K") for the Company's fiscal year ended December 31, 1995, with any and all amendments thereto as may be necessary or appropriate, together with any and all exhibits and other documents having relation to the Form 10-K; NOW, THEREFORE, the undersigned, in the capacity of a director or officer or both a director and officer of the Company, as the case may be, does hereby appoint Gregory L. Nesbitt and David K. Warner, and each of them severally, his true and lawful attorney(s)-in-fact and agent(s) with power to act without the other, with full power of substitution and resubstitution, to execute in his name, place and stead, in any and all capacities, the Form 10-K and any and all amendments thereto and any and all instruments necessary or incidental in connection therewith, to file the same with the Commission and to appear before the Commission in connection with any matter relating thereto. Each of said attorneys-in-fact and agents shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying, approving and confirming the acts that said attorneys-in-fact and agents and each of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney as of the 26th day of January, 1996. ROBERT T. RATCLIFF CENTRAL LOUISIANA ELECTRIC COMPANY, INC. POWER OF ATTORNEY WHEREAS, Central Louisiana Electric Company, Inc., a Louisiana corporation (the "Company"), intends to file with the Securities and Exchange Commission (the "Commission") under the Securities Exchange Act of 1934, as amended (the "Act"), an Annual Report on Form 10-K (the "Form 10-K") for the Company's fiscal year ended December 31, 1995, with any and all amendments thereto as may be necessary or appropriate, together with any and all exhibits and other documents having relation to the Form 10-K; NOW, THEREFORE, the undersigned, in the capacity of a director or officer or both a director and officer of the Company, as the case may be, does hereby appoint Gregory L. Nesbitt and David K. Warner, and each of them severally, his true and lawful attorney(s)-in-fact and agent(s) with power to act without the other, with full power of substitution and resubstitution, to execute in his name, place and stead, in any and all capacities, the Form 10-K and any and all amendments thereto and any and all instruments necessary or incidental in connection therewith, to file the same with the Commission and to appear before the Commission in connection with any matter relating thereto. Each of said attorneys-in-fact and agents shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying, approving and confirming the acts that said attorneys-in-fact and agents and each of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney as of the 26th day of January, 1996. EDWARD M. SIMMONS CENTRAL LOUISIANA ELECTRIC COMPANY, INC. POWER OF ATTORNEY WHEREAS, Central Louisiana Electric Company, Inc., a Louisiana corporation (the "Company"), intends to file with the Securities and Exchange Commission (the "Commission") under the Securities Exchange Act of 1934, as amended (the "Act"), an Annual Report on Form 10-K (the "Form 10-K") for the Company's fiscal year ended December 31, 1995, with any and all amendments thereto as may be necessary or appropriate, together with any and all exhibits and other documents having relation to the Form 10-K; NOW, THEREFORE, the undersigned, in the capacity of a director or officer or both a director and officer of the Company, as the case may be, does hereby appoint Gregory L. Nesbitt and David K. Warner, and each of them severally, his true and lawful attorney(s)-in-fact and agent(s) with power to act without the other, with full power of substitution and resubstitution, to execute in his name, place and stead, in any and all capacities, the Form 10-K and any and all amendments thereto and any and all instruments necessary or incidental in connection therewith, to file the same with the Commission and to appear before the Commission in connection with any matter relating thereto. Each of said attorneys-in-fact and agents shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying, approving and confirming the acts that said attorneys-in-fact and agents and each of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney as of the 26th day of January, 1996. ERNEST L. WILLIAMSON EX-27 11 FINANCIAL DATA SCHEDULE UT
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 PER-BOOK 929,519 8,097 67,813 252,392 8,213 1,266,034 45,490 106,985 224,688 377,163 6,610 7,924 170,822 0 190,000 23,062 0 0 0 0 490,453 1,266,034 394,426 25,229 294,495 319,724 74,702 2,205 76,907 28,204 48,703 2,052 46,651 33,401 14,551 87,654 2.08 2.01
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