-----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, PEqf8AiWygcA+LUWhK/rwxmWFyJKelkRaeu+imMbMbCc4xUJLU1prVSlVmAgE45B ViLgkk5s8Yu5ECVfka3ABA== 0000051720-96-000003.txt : 19960401 0000051720-96-000003.hdr.sgml : 19960401 ACCESSION NUMBER: 0000051720-96-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960329 SROS: CSX SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERSTATE POWER CO CENTRAL INDEX KEY: 0000051720 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 420329500 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-03632 FILM NUMBER: 96541528 BUSINESS ADDRESS: STREET 1: 1000 MAIN ST STREET 2: PO BOX 769 CITY: DUBUQUE STATE: IA ZIP: 52004-0769 BUSINESS PHONE: 3195825421 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C 20549 FORM 10-K For the fiscal year ended December 31, 1995 Commission file number 1-3632 (Mark One) (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended December 31, 1995 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from to INTERSTATE POWER COMPANY (Exact name of registrant as specified in its charter) DELAWARE 42-0329500 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1000 Main St., P.O. Box 769, Dubuque, IA 52004-0769 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code 319-582-5421 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered Common Stock Par Value $3.50 Per Share ) New York Stock Exchange ) Chicago Stock Exchange ) Pacific Stock Exchange Securities registered pursuant to Section 12(g) of the Act: N O N E 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. [ X ] As of February 1, 1996 the aggregate market value of the voting stock held by non-affiliates of the registrant was $308,448,256. Indicate the number of shares outstanding of each of the issuer's classes of common stock. Shares Outstanding February 1, 1996 Common Stock Par Value $3.50 Per Share 9,564,287 Documents incorporated by reference - portions of the Annual Report to Stockholders for 1995 (Exhibit EX-13) are incorporated by reference in Parts I, II and IV; portions of the Annual Proxy Statement for 1996 are incorporated by reference in Part III. INTERSTATE POWER COMPANY 1995 Form 10-K Annual Report Table of Contents Page Part I Item 1. Business 1 General 1 Construction Program 1 Electric Operations 1 Sources and Availability of Raw Materials 2 Duration and Effect of Electric Patents and Franchises 3 Electric Seasonal Business 3 Working Capital Items 3 Electric Governmental Regulations 4 Electric Competitive Conditions 4 Other Sources of Power 6 Other Electric Operations 7 Gas Operations 7 Gas Sources and Availability of Raw Materials 8 Duration and Effect of Gas Patents and Franchises 9 Gas Seasonal Business 9 Gas Governmental Regulations 9 Gas Competitive Conditions 10 Dependence of Segment Upon a Single Customer 11 Research and Development 11 Electric and Magnetic Fields 11 Environmental Regulations 11 Employees 14 Accounting Matters 14 Item 2. Properties 15 Electric Properties 15 Generating Stations 16 Gas Properties 17 General Properties 17 Titles 17 Item 3. Legal Proceedings 17 Item 4. Submission of Matters to a Vote of Security Holders 18 Part II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 18 Item 6. Selected Financial Data 18 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 18 Item 8. Financial Statements and Supplementary Data 18 Item 9. Disagreements on Accounting and Financial Disclosure 18 Part III Item 10. Executive Officers of the Registrant 19 Item 11. Executive Compensation 19 Item 12. Security Ownership of Certain Beneficial Owners and Management 20 Item 13. Certain Relationships and Related Transactions 20 Part IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 20 PART I ITEM 1. BUSINESS (General) Interstate Power Company (the company), is an operating public utility incorporated in 1925 under the laws of the State of Delaware. The company is engaged in the generation, purchase, transmission, distribution and sale of electricity. It owns property in portions of twenty-five counties in the northern and northeastern parts of Iowa, in portions of twenty-two counties in the southern part of Minnesota, and in portions of four counties in northwestern Illinois. The company also engages in the distribution and sale of natural gas in Albert Lea, Minnesota; Clinton, Mason City and Clear Lake, Iowa; Fulton and Savanna, Illinois and in a number of smaller Minnesota, Iowa and Illinois communities, and in the transportation of natural gas within Iowa, Illinois and Minnesota, and in interstate commerce. For information pertaining to industry segments and lines of business please refer to page 27 of Exhibit EX-13 (the Annual Report to Stockholders). (Construction Program) The table below shows actual construction expenditures for 1995 and estimated expenditures for the period 1996 through 2000: (Thousands of Dollars) 1995 Actual $28,200 1996 Est. $32,200 1997 Est. $36,000 1998 Est. $38,000 1999 Est. $35,400 2000 Est. $38,400 Revisions in the long range construction program have resulted in a reduction in the projected additional permanent financing. In 1994, the company originally planned on issuing $25 million of common stock in 1995. This issue was later delayed until 1996. Current projections have now postponed indefinitely the need for this public offering. Refer to (Environmental Regulations) on page 11 for additional information on construction expenditures related to compliance with the regulations of the Clean Air Act of 1990. (Electric Operations) Of the 234 communities served with electricity, Dubuque, Iowa, is the largest with a population of approximately 58,000. Other major cities served are Albert Lea, Minnesota and Clinton and Mason City, Iowa. The remainder of the communities served are under 15,000 population, of which 193 are less than 1,000 population. The company currently sells electricity at wholesale to 19 small communities which have municipal distribution systems, 13 of which are total requirements customers, and 6 of which are partial requirements customers. As discussed under (Electric Competitive Conditions), six firm municipal electric wholesale customers have given the company notice that they intend to purchase their requirements from other utilities when their contracts expire in 1996. The estimated population of the company's service area is 340,000. Six large industrial customers account for 32% of electric MWH sales. A diverse mixture of residential, agricultural, and industrial customers constitute the remainder of the company's 163,000 electric customers. There have been no significant changes since the beginning of the fiscal year in the kind of products produced, services rendered, markets or method of distribution. The facilities owned or operated by the company include facilities for the transmission of electric energy in interstate commerce or the sale of electric energy at wholesale in interstate commerce. (Sources and Availability of Raw Materials) Electricity generated by the company in 1995 was 90.9% from coal as a fuel, 0.2% from oil and 8.9% from natural gas. In 1996, the sources of such generation are estimated to be: 91.8% from coal, 0.6% from middle distillate oils, and 7.6% from natural gas. In 1995, 73.7% of the company's coal requirements came from long-term contracts. In 1996, the company anticipates that 77.7% of its coal requirements will be from long-term contracts. These contracts have expiration dates ranging through August 31, 1999. The company entered into a contract effective March 1, 1995 for a total of 450,000 tons per year of 0.5% sulfur Colorado coal for its Kapp #2, a 217 MW unit at Clinton, Iowa. The contract continues through August 1999, and will allow the company to comply with sulfur dioxide restrictions mandated by the Clean Air Act Amendments of 1990. The company has a contract for 500,000 tons per year for its 260 MW Lansing #4 unit. Lansing Unit #4 requires low sulfur coal, which is being purchased in the Powder River Basin of Wyoming. The coal is shipped by rail and then transloaded to barge at facilities near Keokuk, Iowa. A contract with Orba-Johnson Transshipment Company, Inc., covers rail to barge coal transloading. Coal required for generation at the Neal #4 unit, located near Sioux City, Iowa, and the Louisa #1 unit, located near Muscatine, Iowa, is contracted for by the operator, MidAmerican Energy Company, under terms of the Unit Participation Agreements. The company will purchase coal on an annual basis for the Dubuque Power Plant and for Lansing Units #1, #2 and #3. The company owns 120 coal cars and has an undivided ownership (21.528%) in 372 coal cars in connection with Neal #4. The company has an undivided ownership (4%) in 136 cars in connection with Louisa #1. Coal requirements in 1996 will require using leased cars for the Louisa #1 coal supply. The company relies on spot purchases of oil. The company burned 867,116 gallons of No. 2 and No. 6 oil in 1995 and has 6,477,000 gallons of oil storage capacity in which to store adequate reserves during periods of high demand on refineries. The company presently has interruptible natural gas available for its electric generation station at Clinton, Iowa through Natural Gas Pipeline Company of America. At the Fox Lake and Dubuque plants, interruptible gas is available through Peoples Natural Gas Company. There is no assurance that interruptible gas will continue to be available as fuel for electric generating plants. (Duration and Effect of Electric Patents and Franchises) The company owns no patents. The company has, in the opinion of its legal counsel, all necessary franchises or other rights from the incorporated communities and other governmental subdivisions now served, required for the operation of its properties. With 195 electric franchises in effect in cities and villages, and with the majority of such franchises being for a term of 25 years, the renewal of such franchises is a continuing process. Twenty-six percent (51) of the franchises have been secured since January 1, 1986. (Electric Seasonal Business) The effects of air conditioning in summer and heating in winter have a seasonal impact. The air conditioning sales in the summer months are primarily related to the residential and commercial customer classes, however, the company does not meter air conditioning sales separately. During the past five years, the highest and lowest average residential consumption in the peak summer month has been 960 Kwh (August 1995) and 571 Kwh (June 1993), respectively, compared to 811 Kwh (January 1991) and 651 Kwh (February 1992) during the peak winter month. The company estimates that hot summer weather boosted 1995 residential electric revenues and electric margin by $4.7 million and $3.6 million, respectively, over 1994. The company cannot estimate with any degree of accuracy the impact of warm or humid weather on commercial or large power & light sales. Refer to the (Electric Governmental Regulations) section for a discussion of Iowa and Minnesota seasonal rates. (Working Capital Items) Three of the company's generating stations are located on the Mississippi River at Clinton, Dubuque and Lansing, Iowa. The coal supply for the three plants is delivered by barge during the shipping season (approximately April 1st to December 1st). Refinements to the company's fuel delivery process have decreased the amount of inventory required to carry the company over the winter. Coal shipments to the company's Neal #4 and Louisa #1 generating stations are able to continue through the winter as river transportation is not involved. (Electric Governmental Regulations) In August 1993, the company implemented a revised electric tariff structure. The new tariffs give greater weight to the demand component of electric usage, and include a provision for a higher rate during the summer cooling season (June-September), but did not change the company's overall annual electric revenue. The company filed an Iowa electric rate increase application in March 1995. The application requested an annual increase of $13.1 million. Interim rates in an annual amount of $7.1 million were placed in effect on June 29, 1995, subject to refund. A December 1995 Iowa Utilities Board (IUB) Order allowed an annual increase of $6.6 million, including a return on common equity of 11.35%. The company's original rate increase request included a return on common equity (ROE) and a management efficiency reward which totaled 13.25%. The IUB allowed a ROE of 11.35% and no efficiency reward. The lower ROE granted will not have a significant adverse impact on operating results. In 1996, the company will refund to customers approximately $250,000 collected in 1995 in excess of the final order. The 1995 financial statements include a provision for the refund. The company filed a Minnesota electric rate increase application in June 1995. The application requested an annual increase of $4.6 million (later adjusted by the company to $3.3 million). The proposed tariffs include a seasonal rate mechanism similar to that used in the State of Iowa. Interim rates were not requested. On March 8, 1996 the MPUC received the report of the Administrative Law Judge (ALJ) hearing the case. The ALJ recommended a $2.3 million revenue increase. The major component of the $1.0 million reduction in revenue requirements is the disallowance of the Minnesota portion of 100 MW of purchased power contracts. The disallowance is similar to a ruling in a previous rate case, thus, is not expected to have a material adverse impact on the company's financial condition. A MPUC Order is expected by April 1996. The company's electric rate tariffs provide for recovery of the cost of fuel through energy adjustment clauses. These clauses are subject to revision from time to time by the regulatory authority having jurisdiction, and are designed to pass on to the consumer the increases or decreases in the cost of fuel without formal rate proceedings. Purchased capacity costs are not recovered from customers through energy adjustment clauses, but rather must be addressed in base rates in a formal rate proceeding. In the company's Iowa electric jurisdiction, the company is required to return to customers any jurisdictional revenue from capacity sales to other utilities. (Electric Competitive Conditions) In 1993 the Illinois Commerce Commission entered an order determining that the company, and not Jo-Carroll Electric Cooperative, had the right to provide electric service to a large new freezer service plant near East Dubuque, IL. The company is providing service to that plant pursuant to Commission order. Jo-Carroll filed for judicial review of the Commission action in the Illinois 15th Judicial Circuit, which court remanded the proceeding to the Commission for further hearings. Proceedings on remand are now pending before the Commission. The Energy Policy Act of 1992 (Act) allows FERC to order utilities to grant access to transmission systems by third-party power producers. The Act specifically prohibits federally-mandated wheeling of power for retail customers. The company has experienced difficulty in retaining electric wholesale customers which take service under one year contracts. To date, 6 of the company's 18 firm municipal electric wholesale customers have put the company on notice that they intend to purchase their requirements from other utilities when their contracts expire. These six customers account for about 62% of the company's municipal electric load. Firm electric sales to municipal utilities account for approximately 3.8% of the company's electric sales and 2.7% of its electric revenue. It is anticipated that five of the six municipal customers will use the company's transmission system to transport power from other utilities, and these five municipal customers will be required to pay the company a wheeling fee. The net impact on the company's financial condition is not expected to be significant. The company's industrial rates generally compare favorably with those of neighboring utilities. For the company's six largest industrial customers, the aggregate 1995 rate was approximately 3.4 cents per KWH. This rate also compares favorably with that of potential independent power producers and electric wholesale generators. The company's favorable rates mitigate the incentive that these customers might otherwise have to relocate, self-generate or purchase electricity from other suppliers. The company anticipates that its generating cost will decline slightly over the next several years as long-term coal purchase and transloading contracts expire and are renegotiated. The company currently has no competition from the same type of public utility service in the sale of electricity in any of the incorporated communities it serves. In the States of Iowa, Illinois and Minnesota, territorial laws govern the question of possible service to customers in unincorporated areas, and such laws regulate competition in such areas. Laws and statutory regulations in the different states in which service is rendered provide, under varying terms and conditions, for municipal ownership of electric generating plants and distribution systems. Certain franchises under which utility service is rendered give the municipality the right to purchase the system of the company within said municipality upon certain terms and conditions. However, no such purchase option and no right of condemnation of the company's properties has been exercised and no municipal generating plant or municipal distribution system has been established in the territory now served by the company during the past twenty-five years. The Iowa Utilities Board, the Illinois Commerce Commission and the Minnesota Public Utilities Commission have each approved tariffs that allow the company to offer interruptible electric service for qualifying customers. The availability of this service provides price incentives to those customers having the ability to interrupt their connected load. The primary objective of the incentives is to reduce the system peak. The incentives also serve to retain existing customers and attract new customers. (Other Sources of Power) The company has been a participant in the Mid-Continent Area Power Pool (MAPP) Agreement since March 31, 1972. MAPP had a total coincident 1995 summer peak of 27,961 MW at which time the net capacity of the pool was 31,182 MW. Membership in the pool permits sharing of reserve capacities of the members which affects reductions in plant facilities investment for MAPP members. The minimum reserve margin for participants in MAPP has been established at 15%. Parties to the MAPP Agreement include, as participants, 28 electric power suppliers consisting of 8 investor-owned utilities, the United States Department of Interior (Western Area Power Administration), a Canadian system, public power districts and rural electric generating and transmission cooperative associations, municipal electric supply agencies and, as associate participants, 30 other electric power suppliers operating in Canada and in the North Central region of the United States. The pool coordinates planning and operation of power suppliers in Minnesota, Wisconsin, Montana, Iowa, Nebraska, North Dakota and South Dakota and provides reliability and economy for the company's bulk power supply. The MAPP Agreement was filed with the FERC and accepted as an initial rate filing effective December 1, 1972 and has been in operation since that time. In 1995, MAPP implemented an intra-pool transmission service fee. The company has little historical data to use as a basis for quantifying the potential maximum intra-pool transmission service fees that are now required under the MAPP agreement. Current projections of such a maximum, assuming the MAPP reorganization receives Federal Energy Regulatory Commission approval, would be little change in 1996 and up to 3 times the current expense level in the period 1997 to 2001. The company cannot estimate the impact beyond 2001 due to uncertainties regarding capacity requirements. The company realized revenues of $211,000 and transmission service expenses of $91,000 in 1995. In addition to MAPP, the company has interchange connections with certain Missouri and Illinois utilities through 345 KV transmission systems. Future interconnections are planned to meet transmission requirements for the next ten years. In 1992, the company entered into three long-term power purchase contracts with other utilities. The contracts provide for the purchase of 255 MW of capacity through April 2001. Energy is available at the company's option at approximately 100% to 110% of monthly production costs for the designated units. The three power purchase contracts required capacity payments of $24.6, $24.6, and $24.1 million in 1995, 1994, and 1993, respectively. Over the remaining life of the contracts, total capacity payments will be approximately $130 million. The purchased power contract payments are not for debt service requirements of the selling utility, nor do they transfer risk or rewards of ownership. In Iowa the IUB has concluded that the capacity purchases were prudent and allowed recovery of costs in rates. The rate structure approved by the MPUC does not provide for full recovery of purchased power applicable to the Minnesota jurisdiction. A 1992 rate order by the MPUC held that the company had 100 MW of excess capacity. The company is seeking to adjust this disallowance in its current rate case. The company has not filed for rate recovery of the allocable portions of the purchased power payments in the Illinois and FERC jurisdictions. The payments of approximately $2.5 million annually are expensed as incurred. The company has contracts with several governmental power agencies whereby the company provides transmission service to their customer/members. During 1995, the company received $1,263,408 for transmission service to customers of the Western Area Power Administration (WAPA), and $1,321,801 from Cooperative Power Association (CPA) for wheeling power to nine of its member distribution cooperatives. The company's contract with CPA also provides for payment by the company for needed mutually utilized facilities constructed and owned by CPA. During 1995, these payments amounted to $329,471. The company and Southern Minnesota Municipal Power Agency (SMMPA) have agreed by contract to compensate each other if over/underinvestment in the shared transmission system occurs. During 1995, SMMPA made payments to the company in the amount of $340,397. The company's contract with Central Iowa Power Cooperative (CIPCO) provides for compensation to each other if over/underinvestment in the shared transmission system occurs. During 1995, the company paid CIPCO $136,827 for underinvestment in the Liberty Substation property, of which $41,038 was owed for 1994. (Other Electric Operations) The 1995 peak of 1,010,821 KW occurred on July 14, 1995 between 2:00 and 3:00 in the afternoon. At the time of its 1995 peak the company had a net effective electric capability of 1,310,600 KW. Of this net effective capability, 903,300 KW was in steam generation, 113,500 KW was in combustion turbine and the balance was in internal combustion units and purchases. The previous historical system net peak load for a sixty-minute period, of 932,081 KW, was reached on June 17, 1994. (Gas Operations) The company supplies retail gas service in 39 communities and serves approximately 48,800 gas customers. There have been no significant changes since the beginning of the fiscal year in the kind of products produced, markets or methods of distribution. (Gas Sources and Availability of Raw Materials) The company purchases pipeline transportation capacity from Northern Natural Gas Company (NNG), Natural Gas Pipeline Company of America (NGPL) and Northern Border Pipeline Company (NBPL). During 1995 the company purchased gas from eleven non-traditional suppliers, i.e. producers, brokers and marketers, at market responsive rates. FERC Order 636 became effective in 1993. Order 636 unbundled pipeline supply from its capacity. Subsequent to Order 636, FERC continues to approve the tariffs of NNG and NGPL, but only with regard to capacity and storage rates, subject to change as rate cases are filed. Gas for the company's Mason City, Albert Lea and Savanna service areas is transported by NNG under capacity contracts for 36,338 Mcf daily, and for an additional 15,657 Mcf in the November to March time frame. The majority, 26,999 Mcf, of the above capacities is from the producing areas of Oklahoma and Texas, etc. These contracts expire in October, 1997. Gas is supplied by producers, marketers and brokers, as well as from storage services, to meet the peak heating season requirements. The company had 15,170 Mcf/d of storage, with the necessary pipeline capacity, available for the 1994-1995 heating season. Gas for its Clinton service area is transported by NGPL under capacity contracts for 19,611 Mcf annually, with expiration dates of November 30, 1998, December 1, 2000, February 28, 1996, and November 30, 1996. This gas is supplied by producers, marketers and brokers. The company supplements this capacity with storage gas, which has the pipeline capacity embedded in its FERC approved rate. The company had 16,609 Mcf of storage available for the 1994-1995 heating season. During 1995, the company utilized approximately 34.9% of its annualized daily contract gas available from its firm suppliers. The company's 1995 total throughput level of 35,320,385 Mcf represents a 4.9% increase over 1994. The total throughput was composed of sales gas (22.1%), spot gas (3.1%) and customer transportation gas (74.8%). During 1995, twenty-one of Interstate's customers transported a total of 26,400,766 Mcf of their own gas over the company's pipeline and distribution systems. This reflects an increase over 1993 and 1994 in the number of customers exercising the transportation option. In 1993, nineteen of Interstate's customers transported a total of 23,994,891 Mcf, and in 1994, eighteen customers transported a total of 24,498,793 Mcf. The customer owned gas was delivered by interstate pipeline companies for those customers' accounts to Interstate's town border stations. The company subsequently delivered the gas to customers under tariffs approved by respective state commissions. Company policy is to assist any customer that wishes to purchase gas directly from the producing sector. The company owns propane-air gas plants in Albert Lea, Minnesota and Clinton and Mason City, Iowa. The daily output capacities are: 5,000 Mcf, 4,000 Mcf and 9,600 Mcf of propane-air mix gas respectively. The requirement for gas on the peak winter day of the 1994-1995 season was 141,109 Mcf, including both firm and interruptible customers. This peak consisted of 21.5% jurisdictional sales gas, 9.1% spot gas, 53.4% customer purchased gas, 16.0% storage gas and 0.0% propane-air from the company's peak-shaving plant. The maximum daily firm gas sales during the 1994-1995 season were as follows: Albert Lea 12,497 Mcf; Savanna 2,808 Mcf; Clinton 20,651 Mcf; Mason City 25,218 Mcf, or 43.4% of the peak winter day throughput. (Duration and Effect of Gas Patents and Franchises) The company owns no patents. The company has, in the opinion of its legal counsel, all necessary franchises or other rights from the incorporated communities and other governmental subdivisions now served, required for the operation of its properties. With 34 gas franchises in effect in cities and villages, and with the larger majority of such franchises being for a term of 25 years, the renewal of such franchises is a continuing process. Forty-seven percent (16) of the franchises have been secured since January 1, 1986. (Gas Seasonal Business) The effects of heating sales to the residential and commercial classes of customers have a significant seasonal impact on the company's business. The heating sales in the winter months account for 98% of the total annual sales to these classes of customers. The average consumption for a residential customer during the peak winter months is 18.7 Mcf compared to the average of 2.5 Mcf during the summer. The average consumption for a commercial customer during the peak winter months is 90.3 Mcf compared to the average of 12.6 Mcf during the summer. (Gas Governmental Regulations) The company filed an Iowa gas rate increase application in August 1995. The application requested an annual increase of $2.2 million. Interim rates in an annual amount of $1.3 million were placed in effect on October 20, 1995, subject to refund. The company and other parties to the rate application have agreed on an increase of $1.1 million subject to approval by the IUB. The IUB, by order dated February 21, 1996, has approved the $1.1 million increase in revenue requirements for the company's Iowa gas jurisdiction. The increase represents a 3.5% increase in rates to Iowa gas customers and 0.4% of total 1995 revenue. An IUB Order is expected by June 1996. Iowa gas rates implemented in October 1995 did not include recovery of any investigative or remediation costs to be incurred in the clean-up of former manufactured gas plants. However, the company recovered $0.7 million annually of costs through the prior Iowa gas tariffs, and the company anticipates that future investigation and remediation costs applicable to the Iowa jurisdiction will be recovered from customers. The company filed a Minnesota gas rate increase application in May 1995. The application requested an annual increase of $2.4 million, including a return on common equity of 11.75%. Interim rates in an annual amount of $1.5 million were placed in effect in June 1995, subject to refund. A MPUC Order issued February 29, 1996 allowed an annual increase of $2.1 million and a return on common equity of 10.75%. On March 20, 1996 the Minnesota Department of Public Service and the Office of the Attorney General both requested reconsideration of the MPUC Order. The $2.1 million increase in revenues included in the MPUC Order represented a 24% increase in rates for Minnesota gas customers and approximately 5% of the company's total gas revenues. The return on equity granted by the MPUC (10.75%) is lower than expected, however, it is within a reasonable range and the lower rate will not have a material adverse impact on the company's financial condition. FERC Order 636 provides a mechanism under which pipelines can recover prudently incurred transition costs associated with the restructuring process. The company's pipeline suppliers have filed with the FERC to recover transition costs from the local distribution companies. The company incurred $2.0 million of transition costs in 1995 and is currently recovering these costs from customers through the purchased gas adjustment clause. The Illinois Commerce Commission, in Docket No. 93-0328, allowed recovery of Gas Supply Realignment costs. The Iowa Utilities Board accepted transition costs as a component of the purchased gas adjustment in Dockets PGA-92-229, PGA-92-244, and PGA- 93-7. The Minnesota Public Utilities Commission allowed Order 636 transition costs to be passed through the purchased gas adjustment in Docket No. G001/AA-94-762. While the ultimate level of transition costs could vary as Order 636 filings are revised and proceedings completed, the company estimates that the remainder will aggregate approximately $3.2 million payable in declining installments from 1996 to 2005. The company anticipates that under customary ratemaking practices, future transition costs will be recovered from customers, and has recorded on its balance sheet a liability and a corresponding regulatory asset in the amount of $3.2 million. (Gas Competitive Conditions) The company has no competition from the same type of public utility service in the sale of gas in any of the incorporated communities serviced by it. Certain major industrial customers of the company purchase their own gas supply from producers and have that gas transported by the company as described in the "Gas Sources and Availability of Raw Materials" section. One customer recently proposed to construct independent distribution facilities and bypass the company's system. This situation raises a new competitive issue which the company has not previously dealt with. The company is evaluating its response to the bypass issue and developing policies to deal with future competitive conditions which could result from potential system bypass. The customers most likely to bypass the company's distribution facilities are transportation customers. At the present time the company has 21 gas transportation customers with total revenues of $2.6 million (6% of gas revenues and 0.8% of total company revenues). Over 60% of the $2.6 million of revenues occurs in an area where the potential for bypass is considered to be minimal. The loss of any one customer would not have a material adverse impact on the company's financial condition. (Dependence of Segment Upon a Single Customer) In 1995, 1994 and 1993, the company had no single customer or industry for which electric and/or gas sales accounted for 10% or more of the company's consolidated revenues. In 1995, the company's three largest industrial customers accounted for 1,396,284,716 Kwh of electric sales ($45,777,786) and 23,540,434 Mcf of gas sales and transportation ($1,922,694). The company's largest gas customer, which represents 31% of the company's total gas throughput, is committed by contract for the next six years. (Research and Development) The company has no full-time professional employees engaged in research activities and had no company-sponsored research programs during 1995, 1994 and 1993. In the public utility industry, research is commonly and traditionally done by manufacturers of equipment, trade organizations to which the company belongs, and university research programs. In 1995 approximately $1,054,925 was paid for research activities compared with $1,072,871 in 1994 and $1,090,184 in 1993. (Electric and Magnetic Fields) The possibility that exposure to electric and magnetic fields emanating from power lines and other electric sources may result in adverse health effects has been a subject of increased public, governmental and media attention. A considerable amount of scientific research has been conducted on this topic with no definitive results. Research is continuing. It is not possible to tell what, if any, impact these actions may have on the company's financial condition. (Environmental Regulations) The company is subject to various federal and state government environmental regulations. The company meets existing air and water regulations. The Federal Clean Air Act Amendments of 1990 requires reductions in certain emissions from power plants. The legislation has two deadlines for compliance, Phase 1 (January 1, 1995) and Phase 2 (January 1, 2000). The company has switched to a low sulfur coal and installed low nitrogen oxide burners at the 217 MW plant affected by Phase 1. Management anticipates that additional costs incurred will be recovered through customer rates. The United States EPA and the states have promulgated discharge limits necessary to meet water quality standards. A National Pollutant Discharge Elimination System (NPDES) permit is required for all discharges. The company has current NPDES permits for all discharges and meets or falls within the required discharge limits. Early this century, various utilities including the company operated plants which produced manufactured gas for cooking and lighting. The company's facilities ceased operations approximately 40 years ago when natural gas pipelines were extended into the upper Midwest. Some of the former gasification sites contain coal tar waste products which may present an environmental hazard. The company has identified nine sites which may contain waste from former coal gasification sites. The company has recorded an estimated liability for its pro rata share of expenses applicable to the sites. Of the nine sites, 3 are on property currently owned by the company, while the remaining 6 are located on property currently owned by other parties. The company has been named a Potentially Responsible Party (PRP) by Federal or State environmental agencies for most of its former manufactured gas plant sites. In December 1994, the U.S. EPA, in submitting an information request, claimed that the company is a present and former owner of the Clinton, Iowa site. The company has not been officially named as a PRP for the Savanna and Galena sites by those agencies. In addition, the current owner of the Galena, Illinois site has claimed that the company is a PRP at that site based upon a predecessor company's ownership of the site. The estimated environmental liabilities recorded on the books of the company include amounts expected to be incurred to complete the investigation of those sites where the investigative process has begun, and the minimum of the estimated cost range for those sites where the investigation is in its early stages or not been started. At the present time the company has insufficient information, regarding the sites that have not been fully investigated, to revise those cost estimates. It is possible that cost estimates may be revised upwards as the investigative process proceeds. In view of the past rate treatment allowed by the Iowa, Minnesota and Illinois Commissions, the company believes that prudently incurred unreimbursed costs will be recovered from customers and that the investigation, remediation or monitoring process will not have a material adverse impact on the company's financial condition or the results of operations. In 1957, the company purchased facilities in Mason City, Iowa, from Kansas City Power & Light Company (KCPL) which included land previously used for a coal gasification plant. Coal tar waste was discovered on the property in 1984. In 1995, a settlement was reached with KCPL for sharing of costs to remediate the site. Interstate Power Company has been reimbursed $1.0 million by KCPL for expenses incurred in the past. The reimbursement has been deferred, pending a decision by the IUB on the amount to be refunded to customers. KCPL will pay for future soil remediation costs up to a $2.6 million level. If soil remediation costs exceed that level, the next $1.0 million will be shared 2/3 KCPL and 1/3 Interstate Power Company. If soil remediation costs exceed the $3.6 million level, Interstate Power Company is 100% responsible. Any ground water remediation cost will be split 50 - 50 between KCPL and Interstate Power Company. A Remedial Investigation and Feasibility Study has been approved and the company has assumed responsibility for managing the remediation of the Mason City site. The current estimated cost of soil remediation is $2.6 million, which will be paid by KCPL. The company formerly operated a manufactured gas plant in Rochester, Minnesota. Soil remediation was completed in 1995 and post- remediation groundwater monitoring is underway. From 1991 through 1995, the company incurred costs aggregating $6.7 million applicable to the Rochester site. Groundwater monitoring costs are expected to be $75,000 to $100,000 per year for a period of two to twenty years. The MPUC accounting order allows the company to defer these costs and recover them in subsequent rate cases. This level of expenditure would be considered to be immaterial, therefore, the company may choose to expense them as incurred. In addition to the Rochester site, the company owned or operated four other manufactured gas plant sites in Minnesota: Albert Lea, Austin, New Ulm and Owatonna. Wastes associated with former coal gasification operations have been identified at each site. The company anticipates that these sites will be investigated in 1996 or 1997. When the investigation process is complete, the company will be able to determine if any remediation will be necessary. In addition, the company has identified three other sites: Galena and Savanna, Illinois, and Clinton, Iowa. Wastes associated with former coal gasification operations have been identified at each of these sites. Little or no activity is expected at any of these sites in 1996. In 1994, the company filed a lawsuit against certain of its insurers to recover the costs of investigating and remediating the former coal gasification plants. On June 23, 1995, the company filed a lawsuit in the District Court of Iowa in Clinton County, Iowa against certain of its insurers to recover the costs of investigating and remediating the former coal gasification plants. The insurers named as defendants in this lawsuit include: American Home Assurance Company, American Re-Insurance Company, C.E. Heath Compensation and Liability Insurance Company of California (Successor to Employers' Surplus Lines Insurance Company), Commercial Union Insurance Company (Successor to Employers' Liability Assurance Corporation, Ltd.), The Home Insurance Company, Indemnity Insurance Company of North America, Insurance Company of North America, International Insurance Company (Successor to International Surplus Lines Insurance Company), Signet Star Reinsurance Corporation (Successor to North Star Reinsurance Corporation), Zurich Insurance Company (Successor to Zurich General Accident and Liability Insurance Company), and Certain Underwriters at Lloyd's London & London Market Insurance Companies. The company believes that the insurers have not fulfilled their obligations under insurance policies sold to the company. Because the company is seeking full coverage of costs as they are incurred, no specific dollar amount has been sought in this lawsuit. In addition to seeking monetary damages in an unspecified amount, the company is seeking a declaratory order and equitable relief. Two insurers paid the company a total of $0.3 million in 1995 in order to be discharged from the lawsuit. The trial against the remaining insurers is expected to begin in Iowa in 1997. Neither the company nor its legal counsel is able to predict the amount of any insurance recovery, and accordingly, no potential recovery has been recorded. The company anticipates the recovery of insurance proceeds would first be applied to offset expenses of pursuing the lawsuit against the insurance companies. It is expected that the company's customers paying for environmental clean-up costs would also share in the insurance proceeds. It is uncertain as to what portion of the proceeds, if any, the company's stockholders would be allowed to retain. Therefore, based on the above, the company considers the potential impact on its financial position not to be material. In April 1995, the company received an accounting order from the Minnesota Public Utilities Commission (MPUC) which allows the deferral of investigation and remediation costs applicable to the Rochester and Albert Lea sites and further allows the company to seek recovery in a rate case. The company's Minnesota gas rate case filed in May 1995 seeks recovery of $4.9 million. The company filed a petition in June 1995 for an accounting order which would allow it to defer and seek recovery in a future rate case of costs applicable to the three other Minnesota sites (Austin, Owatonna and New Ulm). Action by the MPUC is pending. Under the Federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), a past waste generator can be designated by the United States Environmental Protection Agency (U.S. EPA) as a Potentially Responsible Party (PRP). Certain types of used transformer oil (primarily those containing polychlorinated biphenyls, or "PCBs") have been designated as hazardous substances by the U.S. EPA. The company has been cited as a PRP by the U.S. EPA for the clean-up of the facilities formerly operated by Martha C. Rose Chemicals, Inc. in Holden, Missouri. Clean-up of the site began in 1994, with final completion in 1995. The company received a refund of previously paid costs of $0.1 million in 1995 in final settlement, and estimated reserves remaining are adequate for continuing groundwater monitoring. In 1988, the U.S. EPA designated the company a PRP for the clean-up of former salvage facilities operated by the Missouri Electric Works, Inc. (MEW) in Cape Girardeau, Missouri. A portion of the PCB-contaminated equipment found at the site was formerly owned by the company. The company has notified the U.S. EPA that it disclaims responsibility for the site, as the equipment was in proper operating condition when sold by the company to a third party, which subsequently made arrangements to transport this equipment to MEW. The U.S. EPA has not responded to the company's disclaimer. The company has not recorded any liability for the MEW site, and management believes that it will be able to successfully defend itself against any claims applicable to the site. (Employees) The company has 935 regular employees consisting of 902 full-time and 33 part-time employees. (Accounting Matters) The company will be required to adopt SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" in 1996. The new standard imposes stricter standards for regulatory assets by requiring that such assets be probable of future recovery at each balance sheet date. The company believes that the initial adoption of SFAS 121 will not have a material impact on its financial position or results of operations. ITEM 2. PROPERTIES The principal power plants and other materially important physical properties of the company are maintained in accordance with sound operating practices. Their general character and location are described below: (Electric Properties) The company has been a participant in the Mid-Continent Area Power Pool (MAPP) Agreement since March 31, 1972. As a part of this power network the company is the owner of a 55.0 mile section of the 345 KV transmission line extending from St. Louis, Missouri to Minneapolis, Minnesota; a 15.5 mile section of the 345 KV transmission line between Minneapolis, Minnesota and Kansas City, Missouri; a 5.0 mile 345 KV transmission line from near Clinton, Iowa to near Cordova, Illinois; a 49.8 mile 345 KV transmission line from near Clinton, Iowa to a substation south of Dubuque, Iowa; and three associated 345/161 KV substations. The company's electric generating stations at year-end consist of six steam plants, three combustion turbine stations, and five internal combustion facilities. Pertinent information regarding each electric generating station is shown on the following page: INTERSTATE POWER COMPANY GENERATING STATIONS Net Generating Units December 31, 1995 Output Nameplate Capability in KWH Unit Capacity Year KW KW (000's) Location Number KW Installed (Gross) (Net) 1995 STEAM: Dubuque, IA 2 15,000 1929 82,500 78,000 194,561 3 25,000 1952 4 33,000 1959 Clinton, IA 1 15,000 1947 254,900 235,000 1,050,504 (M.L.Kapp Plt.) 2 212,284 1967 Lansing, IA 1 15,000 1948 337,800 320,000 775,611 2 11,500 1949 3 33,000 1957 4 252,649 1977 Sherburn, MN 1 11,500 1950 113,500 108,000 335,179 (Fox Lake Plt.) 2 11,500 1951 3 75,000 1962 Sioux City, IA 4* 125,924 1979 142,000 134,300 993,471 (Neal Unit #4) Louisa County, IA 1** 27,400 1983 29,400 28,000 174,882 (Louisa Unit #1) TOTAL STEAM 960,100 903,300 3,524,208 GAS TURBINE: Montgomery, MN 1 26,535 1974 22,200 22,200 253 Sherburn, MN 4 26,535 1974 21,300 21,300 332 (Fox Lake Plt.) Mason City, IA 1 37,520 1991 70,400 70,000 3,012 (Lime Creek Plt.) 2 37,520 1991 TOTAL GAS TURBINE 113,900 113,500 3,597 INTERNAL COMBUSTION: Dubuque, IA 1 2,000 1966 4,600 4,600 (83) 2 2,000 1966 Hills, MN 2 2,000 1960 2,000 2,000 (57) Lansing, IA 1 1,000 1970 2,000 2,000 11 2 1,000 1971 New Albin, IA 1 685 1970 700 700 (50) Rushford, MN 1 2,000 1961 2,000 2,000 (95) TOTAL INTERNAL COMBUSTION 11,300 11,300 (274) TOTAL COMPANY 1,085,300 1,028,100 3,527,531 * Interstate owns 21.528% of a 584,931 KW unit operated by MidAmerican Energy Company. ** Interstate owns 4.0% of a 685,000 KW unit operated by MidAmerican Energy Company. (Gas Properties) The company owns and operates natural gas distributing systems in Albert Lea, Minnesota; Savanna, Illinois; Clinton, Mason City and Clear Lake, Iowa and in a number of smaller Minnesota, Illinois and Iowa communities. At Albert Lea, the company owns 14 tanks with a liquid propane storage capacity of 357,000 gallons; at Clinton, there are 12 tanks with 306,000 gallons capacity and at Mason City, 22 tanks with 561,000 gallons capacity. The company also owns 95 gas regulating stations and approximately 972 miles of gas distribution mains. (General Properties) The company owns numerous properties in various parts of its territory which are used for office, service and other purposes. The most important of these are three General Office buildings in Dubuque and the district office buildings at Clinton, Decorah, Dubuque, Mason City and Oelwein, Iowa and Albert Lea, and Winnebago, Minnesota and the distribution service buildings in each of those locations. The company, as lessee, leases office space at various locations. The company also leases a few small parcels of land for storage of poles and miscellaneous temporary uses. (Titles) In the opinion of legal counsel for the company, the company has satisfactory title to its properties for use in its utility businesses subject only to permitted liens as defined in the Bond Indenture and to minor defects and encumbrances customarily found in cases of like size and character and which do not materially interfere with the use of such properties. Properties such as electric transmission and electric and gas distribution lines are constructed principally on rights-of-way which are maintained under franchise or held by easement only. All properties of the company, other than "excepted property" as defined in the Bond Indenture, are subject to the lien of the company's Bond Indenture dated as of January 1, 1948, as supplemented, securing the company's outstanding First Mortgage Bonds. ITEM 3. LEGAL PROCEEDINGS Reference is made to "Electric Governmental Regulations", "Electric Competitive Conditions" and "Environmental Regulations" under "Item 1. Business" for certain pending legal proceedings and proceedings known to be contemplated by governmental authorities. Reference is also made to Note 8 to Financial Statements of the Annual Report to Stockholders, included herein as EX-13. Other than these items, there are no material pending legal proceedings, or proceedings known to be contemplated by governmental authorities, other than ordinary routine litigation incidental to the business, to which the company is a party or of which any of the company's property is the subject. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There was no submission of matters to a vote of security holders during the fourth quarter of the 1995 year. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS For information pertaining to common stock market data required by Item 201 of Regulation S-K please refer to page 31 of Exhibit EX-13 (the Annual Report to Stockholders). ITEM 6. SELECTED FINANCIAL DATA For information pertaining to selected financial data required by Item 301 of Regulation S-K please refer to page 30 of Exhibit EX-13 (the Annual Report to Stockholders). ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS For information pertaining to management's discussion and analysis required by Item 303 of Regulation S-K please refer to pages 1 through 9 of Exhibit EX-13 (the Annual Report to Stockholders). ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Financial statements and supplementary data incorporated by reference to Exhibit EX-13 (the Annual Report to Stockholders for 1995): Statements of Income and Retained Earnings Page 10 Balance Sheets Pages 11 & 12 Statements of Cash Flows Page 13 Statements of Capitalization Page 14 Notes to Financial Statements Pages 15 - 27 Independent Auditors' Report Page 28 ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. EXECUTIVE OFFICERS OF THE REGISTRANT Name Age Offices Held Past 5 Years W. H. Stoppelmoor 62 5-1-90 - President, Chief Executive Officer & Chairman of the Board M. R. Chase 57 1-1-91 - Vice President-Production 5-7-91 - Vice President-Power Production 7-1-95 - Executive Vice President *A. D. Cordes 64 5-1-90 - Vice President-District Administration & Public Affairs R. R. Ewers 51 5-1-90 - Vice President-Administrative Services 7-1-95 - Vice President-Administration D. E. Hamill 59 9-1-80 - Vice President-Budgets & Regulatory Affairs **G. L. Kopischke 64 9-1-80 - Vice President-Electric Operations J. C. McGowan 58 2-1-89 - Secretary & Treasurer R. P. Richards 59 1-1-91 - Vice President-Gas Operations D. R. Sharp 55 7-1-95 - Vice President-Power Production 1-1-96 - Vice President-Engineering W. C. Troy 57 5-1-86 - Controller *Retired effective 7-1-95 **Retired effective 1-1-96 All officers are elected and serve as such until the next annual meeting of directors. There are no arrangements or understandings with respect to election of any person as an officer. For information pertaining to directors, and other data required by Items 401 and 405 of Regulation S-K, refer to pages 136 through 139 of the company's Official Proxy Statement to be filed with the Securities and Exchange Commission within 120 days after the last day of the fiscal year ended December 31, 1995. ITEM 11. EXECUTIVE COMPENSATION Refer to information on pages 141 through 145 of the company's Official Proxy Statement filed with the Securities and Exchange Commission to be filed with the Securities and Exchange Commission within 120 days after the last day of the fiscal year ended December 31, 1995. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Refer to information on pages 139 and 140 of the company's Official Proxy Statement filed with the Securities and Exchange Commission to be filed with the Securities and Exchange Commission within 120 days after the last day of the fiscal year ended December 31, 1995. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Transactions with Management and Others: In 1995 there were no transactions and there are presently proposed no transactions with management, to which the company or its subsidiary was or is to be a party, of the character as to which answer is called for in response to Item 404(a) of Regulation S-K. Indebtedness of Management: No director or officer, or nominee for election as a director, or any associate of any thereof, was indebted to the company or its subsidiary during 1995, as to which answer is called for in response to Item 404(b) of Regulation S-K. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) List of documents filed as part of this report: 1. The financial statements, including supporting schedules, are listed in the Index to Financial Statements, Schedules and Exhibits filed as part of this Annual Report. 2. Exhibits which are filed herewith, including those incor- porated by reference are listed in the Index to Financial Statements, Schedules and Exhibits filed as part of this Annual Report. (b) Reports on Form 8-K: The company filed a Form 8-K report with the Securities and Exchange Commission dated November 17, 1995. This report related to the signing of a merger agreement on November 10 1995, by Interstate Power Company, IES Industries Inc., and WPL Holdings, Inc., providing for the combination of the three companies into a holding company which will be known as Interstate Energy Corporation. INDEX TO FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS The 1995, 1994 and 1993 financial statements, together with the Independent Auditors' Report thereon of Deloitte & Touche LLP, dated January 26, 1996, appearing on pages 10 through 28 of Exhibit EX-13 (the 1995 Annual Report to Stockholders), are incorporated in this Form 10-K Annual Report. The following additional data, as attached on EX-23.a, EX-23.b, and S-1 should be read in conjunction with the financial statements in such Exhibit EX-13. Schedules and other historical financial information not included with this additional financial data have been omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. Page or Exhibit Reference Exhibit EX-13 Form (Annual Report to 10-K Stockholders) Report of Independent Auditors EX-23.a Consent of Independent Auditors EX-23.b Financial Statements: Statements of Income and Retained Earnings for the years ended December 31, 1995, 1994 and 1993 10 Balance Sheets, December 31, 1995 and 1994 11 & 12 Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993 13 Statements of Capitalization, December 31, 1995 and 1994 14 Notes to Financial Statements 15 - 27 Selected Financial Data 30 Common Stock Market Data 31 Management's Discussion and Analysis 1 - 9 Schedule II: Valuation and Qualifying Accounts and Provisions S-1 INDEX TO FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS (CONT'D.) Exhibits filed as part of this report: EX-3.(ii) By-Laws of Interstate Power Company as adopted April 20, 1925 and as amended January 26, 1996. EX-10.a Coal Transloading Agreement between Interstate Power Company and Orba-Johnson Transshipment Company dated December 20, 1995 EX-10.b Coal Transshipment Agreement by and between Interstate Power Company and Orba-Johnson Transshipment Company dated December 20, 1979 (previously physically filed in Form 10-K for the Year Ended December 31, 1979 as EXHIBIT F) EX-10.c Interstate Amendment Agreement between Orba-Johnson Transshipment Company and Interstate Power Company dated September 1, 1981 (previously physically filed in Form 10-K for the Year Ended December 31, 1981 as EXHIBIT J) EX-12 Statement re Computation of Ratios EX-13 The Company's 1995 Annual Report to Stockholders. EX-23.a Report of Independent Auditors EX-23.b Consent of Independent Auditors EX-27 Financial Data Schedule EX-99.a Listing of current material contracts, indentures and other exhibits and identified as having been previously filed with the Commission. EX-99.b Interstate Power Company Supplemental Retirement Plan as amended and restated November 10, 1995. 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. INTERSTATE POWER COMPANY Date March 29, 1996 By /s/ W. H. STOPPELMOOR (W. H. Stoppelmoor, President and Chief Executive Officer) 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 date indicated. Signature Title /s/ W. H. STOPPELMOOR President and Chief Executive (W. H. Stoppelmoor) Officer (Principal Executive Officer and Principal Financial Officer) /s/ W. C. TROY Controller (Principal (W. C. Troy) Accounting Officer) /s/ A. B. ARENDS Director (A. B. Arends) /s/ J. E. BYRNS Director (J. E. Byrns) /s/ M. R. CHASE Director (M. R. Chase) /s/ A. D. CORDES Director (A. D. Cordes) /s/ J. L. HANES Director (J. L. Hanes) /s/ G. L. KOPISCHKE Director (G. L. Kopischke) Date March 29, 1996 SCHEDULE II INTERSTATE POWER COMPANY VALUATION AND QUALIFYING ACCOUNTS AND PROVISIONS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (Thousands of Dollars) COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E ADDITIONS BALANCE AT CHARGED CHARGED DEDUCTION BALANCE BEGINNING TO TO OTHER FROM AT END DESCRIPTION OF YEAR INCOME ACCOUNTS RESERVES OF YEAR YEAR ENDED DEC. 31, 1995 Valuation account deducted from caption of which it applies - accumulated provision for doubtful accounts $200 $169 $144 (a) $313 (b) $200 Provision for medical benefits, injuries and damages $4,671 $5,729 $1,081 $6,799 (c) $4,682 YEAR ENDED DEC. 31, 1994 Valuation account deducted from caption of which it applies - accumulated provision for doubtful accounts $203 $243 $148 (a) $394 (b) $200 Provision for medical benefits, injuries and damages $4,105 $7,240 $2,757 $9,431 (c) $4,671 YEAR ENDED DEC. 31, 1993 Valuation account deducted from caption of which it applies - accumulated provision for doubtful accounts $206 $225 $134 (a) $362 (b) $203 Provision for medical benefits, injuries and damages $1,506 $4,302 $3,521 $5,224 (c) $4,105 (a) Recoveries on accounts previously written off. (b) Accounts written off. (c) Claims and damages paid and expenses in connection therewith. S-1 INDEX OF EXHIBITS EX-3.(ii) By-Laws of Interstate Power Company as adopted April 20, 1925 and as amended January 26, 1996. EX-10.a Coal Transloading Agreement between Interstate Power Company and Orba-Johnson Transshipment Company dated December 20, 1995 EX-10.b Coal Transshipment Agreement by and between Interstate Power Company and Orba-Johnson Transshipment Company dated December 20, 1979 (previously physically filed in Form 10-K for the Year Ended December 31, 1979 as EXHIBIT F) EX-10.c Interstate Amendment Agreement between Orba-Johnson Transshipment Company and Interstate Power Company dated September 1, 1981 (previously physically filed in Form 10-K for the Year Ended December 31, 1981 as EXHIBIT J) EX-12 Statement re Computation of Ratios EX-13 The Company's 1995 Annual Report to Stockholders. EX-23.a Report of Independent Auditors EX-23.b Consent of Independent Auditors EX-27 Financial Data Schedule EX-99.a Listing of current material contracts, indentures and other exhibits and identified as having been previously filed with the Commission. EX-99.b Interstate Power Company Supplemental Retirement Plan as amended and restated November 10, 1995. EX-3 2 EX-3.(ii) INTERSTATE POWER COMPANY (A DELAWARE CORPORATION) BY-LAWS ADOPTED APRIL 20, 1925 AS AMENDED OCTOBER 24, 1938 NOVEMBER 16, 1939 JUNE 28, 1943 APRIL 11, 1944 MAY 24, 1944 MAY 9, 1947 AUGUST 29, 1947 AUGUST 21, 1953 NOVEMBER 5, 1957 JANUARY 16, 1958 FEBRUARY 11, 1959 FEBRUARY 17, 1965 MAY 4, 1965 JANUARY 16, 1969 JULY 15, 1970 NOVEMBER 19, 1970 MAY 2, 1973 JUNE 13, 1979 NOVEMBER 19, 1980 JUNE 18, 1981 JANUARY 1, 1982 DECEMBER 13, 1982 JANUARY 31, 1984 JULY 24, 1986 JULY 23, 1987 OCTOBER 15, 1987 DECEMBER 10, 1987 JULY 20, 1989 MAY 7, 1991 January 26, 1996 BY-LAWS OF INTERSTATE POWER COMPANY (a Delaware Corporation) ARTICLE I. OFFICES. SECTION 1: The registered office shall be in the City of Wilmington, County of New Castle, State of Delaware. (Amended 2/17/65; 1/16/69.) SECTION 2: The Corporation may also have an office in the City of Dubuque, Iowa, and also offices at such other places as the Board of Directors may from time to time determine or the business of the Corporation may require. (Amended 2/11/59; 2/17/65.) ARTICLE II. SEAL. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization, and the words "CORPORATE SEAL, DELAWARE." Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced. (Amended 8/29/47.) ARTICLE III. STOCKHOLDERS' MEETINGS. SECTION 1: All meetings of the stockholders entitled to vote thereat shall be held in Dubuque, Iowa, or at such other location as set by the Board of Directors from time to time, at such place as designated by the Board of Directors and stated in the notice of meeting. (Amended 2/17/65; 1/16/69; 10/15/87.) SECTION 2: The annual meeting of the stockholders entitled to vote thereat shall be held in Dubuque, Iowa, or at such other location as set by the Board of Directors from time to time, at such place as designated by the Board of Directors and stated in the notice of meeting on the first Tuesday of May of each year at the hour of two o'clock P.M., local time in the place where the meeting is to be held unless such day shall be a legal holiday, in which event the meeting shall be held on the next succeeding business day, or on such other day and/or time as set by the Board of Directors from time to time, and stated in the notice of meeting. At said meeting the stockholders shall elect by a plurality vote, by ballot, a board of directors, the number and term of which shall be set by SECTION 1 and SECTION 1(b) of ARTICLE IV of these By-Laws. The order of business at a stockholders' meeting shall be as follows: 1. Call meeting to order. 2. Proof of notice of meeting. 3. Reading of minutes of last previous meeting. 4. Reports of committees. 5. Election of directors when that is the purpose of the meeting. 6. Miscellaneous business. (Amended 11/16/39; 4/11/44; 5/9/47; 2/17/65; 1/16/69; 1/1/82; 12/13/82; 7/23/87; 10/15/87; 12/10/87; 7/20/89; 5/7/91; 1/26/96.) SECTION 3: The holders of a majority of the stock issued and outstanding and entitled to vote, present in person or represented by proxy, shall be requisite and sufficient to constitute a quorum at all meetings of the stockholders for the transaction of business, except as otherwise provided by law, by the Certificate of Incorporation, or these By-Laws. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or by proxy shall have power to adjourn the meeting from time to time without notice other than announcement at the meeting, until a quorum shall be present or represented, when any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. (Amended 1/16/69.) SECTION 4: When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the Certificate of Incorporation a different vote is required, in which case such express provision shall govern; and control the decision of such question. (Added 2/17/65.) SECTION 5: At each meeting of the stockholders, every stockholder entitled to vote or to express consent or dissent to corporate action in writing without a meeting may vote or act in person or by proxy appointed by an instrument in writing subscribed by such stockholder or by his duly authorized attorney and delivered to the Secretary of the Corporation. But no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. Unless otherwise provided in the Restated Certificate of Incorporation, as amended, each stockholder entitled to vote shall have one vote upon each matter submitted to a vote at a meeting of shareholders for each share of stock registered in his name on the record date fixed by the Board of Directors for said meeting or action by stockholders. The principle of cumulative voting shall not apply. The vote for directors, and, upon the demand of any stockholder entitled to vote, the vote upon any question before the meeting shall be by written ballot. All elections shall be had by plurality vote and all other questions shall be decided by a majority vote, except as otherwise provided by law, the Restated Certificate of Incorporation, as amended, or these By-Laws. (Amended 2/17/65; 1/16/69; 5/7/91.) SECTION 6: Unless otherwise required by law, written notice of any stockholders' meeting shall be mailed, postage prepaid, to each stockholder entitled to vote thereat at such address as appears on the records of the Corporation, which notice shall state the place, date and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, and said notice shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting. (Amended 1/16/69; 6/13/79.) SECTION 7: Subject to the provisions of Article FOURTH of the Certificate of Incorporation, and unless otherwise prescribed by statute, special meetings of the stockholders for any purpose or purposes may be called by the Board of Directors, or by the Chairman of the Board of Directors, the President or a Vice- President, and shall be called at the request in writing of stockholders owning twenty-five percent (25%) of the shares of stock of the Corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. (Amended 8/21/53; 11/5/57; 2/17/65; 1/16/69.) SECTION 8: Business transacted at any special meeting shall be confined to objects stated in the call and matters germane thereto. (Former Section 9 deleted 1/16/69) ARTICLE IV. DIRECTORS. SECTION 1: The property, business and affairs of this Corporation shall be managed by its Board of Directors. Such Board of Directors shall consist of: seven (7) directors. They shall be elected by the stockholders at the annual meeting of the stockholders of the Corporation, except as provided in SECTION 1(b) and SECTION 2 of this Article, and each director shall hold office until his successor is duly elected and qualified. Directors need not be stockholders. (Amended 4/11/44; 5/9/47; 2/17/65; 1/1/82; 12/13/82; 1/31/84; 7/24/86; 12/10/87; 5/7/91.) SECTION 1(a): The Chairman of the Board of Directors shall preside at all meetings of the stockholders and the Board of Directors. In order to assist the Board of Directors in the formulation of policies to be pursued by the officers of the Corporation he shall provide oversight over major problems, policies and activities of the Corporation and make reports and recommendations as appropriate to ensure that policies of the Board of Directors are effected. He shall be a member and Chairman of the Executive Committee and shall ex-officio be a member of all standing committees and, except as otherwise provided in these By- Laws or ordered by the Board of Directors, shall appoint all special or other committees of the Board of Directors, and, in general, he shall perform such other duties as may, from time to time, be assigned to him by the Board of Directors. (Added 1/1/82; amended 7/24/86.) SECTION 1(b): At each annual meeting of stockholders, directors of the Corporation shall be elected to hold office until the expiration of the term for which they are elected, and until their successors have been duly elected and qualified; except that if any such election shall not be so held, such election shall take place at a stockholders' meeting called and held in accordance with the Delaware General Corporation Law. The directors of the Corporation shall be divided into three classes as nearly equal in size as is practicable, hereby designated Class I, Class II, and Class III. The term of office of the initial Class I directors shall expire at the next succeeding annual meeting of stockholders, the term of office of the initial Class II directors shall expire at the second succeeding annual meeting of stockholders and the term of office of the initial Class III directors shall expire at the third succeeding annual meeting of the stockholders. For the purposes hereof, the initial Class I, Class II and Class III directors shall be those directors elected at the May 7, 1991 annual meeting and designated as members of such Class. At each annual meeting after the May 7, 1991 annual meeting, directors to replace those of a Class whose terms expire at such annual meeting shall be elected to hold office until the third succeeding annual meeting and until their respective successors shall have been duly elected and shall qualify. If the number of directors is hereafter changed, any newly created directorships or decrease in directorships shall be so apportioned among the classes as to make all classes as nearly equal in number as is practicable. Notwithstanding the foregoing, the Board of Directors may, by resolution adopted or to be adopted by them, require that directors mandatorily retire prior to the expiration of the term for which they are elected upon their attaining a particular age, as may be set by resolution of the Board, or upon their relocating from the Company's service area, subject to such short extensions within their elected term as the remaining directors may judge to be in the best interests of the Company. The foregoing provisions relating to the classification of the Board are subject to the provisions of Paragraph XII of Article FOURTH of the Restated Certificate of Incorporation, as amended.(Added 5/7/91.) SECTION 1(c): Any director may be removed from office only for cause in accordance with Article EIGHTH, subparagraph (1) of the Restated Certificate of Incorporation, as amended. (Added 5791.) SECTION 2: Subject to the provisions of Paragraph XII of Article FOURTH of the Certificate of Incorporation, vacancies on the Board of Directors and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director at any meeting of the Board of Directors and the directors so chosen shall hold office until the next election of the Class for which such directors shall have been chosen and until their successors shall have been duly elected and qualified, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by statute. If, at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent of the total number of shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office. (Added 2/17/65; amended 1/16/69; 6/13/79; 5/7/91.) SECTION 3: The directors may hold their meetings and have one or more offices and keep the books and records of the Corporation (except such as are required by law to be kept within the State of Delaware), at the office of the Corporation in the City of Dubuque, Iowa, or at such other places as they may from time to time determine. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account, and minute books, may be kept on, or be in the form of, punch cards, magnetic tape, photographs, micro-photographs, or any other information storage device; provided that the records so kept can be converted into clearly legible form within a reasonable time. (Amended 1/17/65; 1/16/69.) SECTION 4: In addition to the powers and duties by these By- Laws expressly conferred upon it, the Board of Directors may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these By-Laws directed or required to be exercised or done by the stockholders. SECTION 5: Compensation for attendance at a regular or special meeting of the Board of Directors, or of any committee thereof, shall be payable in such amounts as the Board shall determine by resolution from time to time, but only to directors or persons who are not full-time employees or officers of the Corporation. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. (Added 6/28/43; amended 5/24/44; 2/17/65; 6/13/79.) ARTICLE V. MEETINGS OF THE BOARD - COMMITTEES. SECTION 1: A regular meeting of the Board of Directors shall be held annually immediately following the annual meeting of the stockholders, and other regular meetings of the Board shall be held at such time and place as may be fixed by resolution of the Board. No notice of regular meetings of the Board shall be required. Any meeting of the Board may be held either within or without the State of Delaware. SECTION 2: At all meetings of the Board a majority of the directors shall be necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the Certificate of Incorporation or by these By-Laws. If a quorum shall not be present at any meeting of the Board, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. (Amended 2/17/65.) SECTION 3: Special meetings of the Board may be called by the Chairman, the President or any two directors on two days' notice by mail or one day's notice by telephone or telegraph to each director, which notice shall state the time, place and purpose of the holding thereof. (Amended 8/21/53; 11/5/57; 2/17/65.) SECTION 4: The Board of Directors may designate and appoint a standing committee to be known as the "Executive Committee" to consist of three members, including the Chairman, with the full powers of the Board of Directors in the management of the business and affairs of the Corporation including the declaration of a dividend, the issuance of stock and the voting powers, designations, preferences, and relative, participating, optional or other rights thereof, if any, or the qualifications, limitations or restrictions thereof, if any, (except as the Board of Directors shall otherwise direct and except when the Board of Directors shall be in session), but subject to the restrictions of Section 5 of this Article and of any applicable statute, and with power to authorize the seal of the Corporation to be affixed to all papers which may require it. (Added 2/17/65; amended 11/19/70; 6/13/79; 1/1/82; 7/23/87.) SECTION 5: The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees in addition to the Executive Committee, each committee to consist of one or more of the directors of the Corporation, which, to the extent provided by the resolution, shall have and may exercise the powers of the Board in the management of the business and affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the By-Laws of the Corporation. In the absence or disqualification of any member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board. (Added 2/17/65; amended 11/19/70; 6/13/79.) SECTION 6: Each committee shall keep regular minutes of its meetings and report the same to the Board when required. (Added 2/17/65.) SECTION 7: Unless otherwise restricted by statute, or by the Certificate of Incorporation or by these By-Laws, any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting, if prior to such action a written consent thereto is signed by all members of the Board or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board or committee. (Added 2/17/65.) ARTICLE VI. OFFICERS SECTION 1: The officers of the Corporation shall be a President, an Executive Vice-President, one or more other Vice- Presidents, a Secretary, a Treasurer, a Controller, an Assistant Controller, and one or more Assistance Secretaries and Assistant Treasurers, who shall be elected by the Board of Directors at its first meeting after each annual meeting of the stockholders. (Amended 10/24/38; 8/21/53; 11/5/57; 2/17/65; 6/13/79; 1/1/82.) SECTION 2: The Board may appoint such other officers and agents as it shall deem necessary, who shall have such authority and perform such duties as from time to time shall be prescribed by the Board or the President. (Amended 1/1/82.) SECTION 3: The salaries of all officers of the Corporation shall be fixed by the Board of Directors. SECTION 4: The officers of the Corporation shall hold office for one year and until their successors are elected and qualified. Any officers elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the whole Board of Directors. (Amended 2/17/65.) ARTICLE VII. DUTIES OF OFFICERS. SECTION 1: President. The President shall be the chief executive officer of the Corporation; in the absence or disability of the Chairman, he shall preside at all meetings of the stockholders; he shall ex-officio be a member of all standing committees; he shall have general and active management of and exercise general supervision over the business and property of the Corporation and shall have such other power and duties as usually appertain to the office of President and as may be assigned to him by the Board of Directors. (Amended 8/21/53; 11/5/57; 2/17/65; 11/19/70; 6/13/79; 11/19/80; 1/1/82.) SECTION 2: Vice-Presidents. In the absence or disability of the President, the Executive Vice-President shall perform the duties and exercise the powers of the President. If other Vice- Presidents are elected, they shall have such powers and perform such duties as the President or Board of Directors shall from time to time assign to them. (Amended 10/24/38; 8/21/53; 11/5/57; 2/17/65; 11/19/70; 6/13/79; 1/1/82.) SECTION 3: Secretary and Assistant Secretaries. The Secretary shall attend all meetings of the stockholders and Board of Directors, and shall record all votes and other proceedings in a book to be kept for that purpose. He shall give, or cause to be given, all required notices of meeting of the stockholders and Board of Directors. He shall have the custody of the seal of the Corporation and of its records and shall perform such other duties as usually appertain to the office of Secretary and as may be prescribed by the President or the Board of Directors. He shall be sworn to the faithful discharge of his duty. The Assistant Secretaries shall perform such duties as shall be delegated to them by the Board of Directors, the President or the Secretary. (Amended 8/21/53; 11/5/57; 2/17/65; 11/19/70; 6/13/79; 1/1/82.) SECTION 4: Treasurer and Assistant Treasurers. The Treasurer shall have the custody of the corporate funds, and securities, and shall keep full and accurate accounts of receipts and disbursements in books of the Corporation to be kept for that purpose, and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation, in such depositaries as may be designated by authority of the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the Board of Directors, or the President taking proper vouchers for such disbursements, and shall render to the Board of Directors, at the regular meetings of the Board, or whenever it may so require, an account of all his transactions as Treasurer and of the financial condition of the Corporation and shall have such other powers and duties as may be assigned to him by the President or the Board of Directors. The Assistant Treasurers shall perform such duties as shall be delegated to them by the Board of Directors, the President or the Treasurer. (Amended 8/21/53; 11/5/57; 2/17/65; 11/19/70; 6/13/79; 1/1/82.) SECTION 5: Controller and Assistant Controller. The Controller shall be the principal accounting officer and as such shall have charge of the books and accounts of the Corporation subject to the direction of the President. He shall keep or cause to be kept full and complete books of account of all operations of the Corporation and of its assets and liabilities (except those kept by the Treasurer as herein provided). He shall render to the Chairman, the President and the Board of Directors, as and when requested, reports of the operations and business of the Corporation and of its financial condition. He shall have such other powers and perform such other duties as the President and the Board of Directors may from time to time assign to him. The Assistant Controller shall perform such duties as shall be delegated to him or her by the board of Directors, the President or the Controller. (Added 2/17/65; amended 11/19/70; 6/13/79; 1/1/82.) SECTION 6: The Board of Directors may, by resolution, require any officers of the Corporation to furnish bonds conditioned for the faithful performance of their respective duties as such officers, with a surety company satisfactory to such Board as surety, the expense of which shall be paid by the Corporation. (Amended 8/21/53; 11/5/57.) ARTICLE VIII. OFFICERS - VACANCIES. If the office of the President, the Executive Vice-President, Vice-President, Secretary, Treasurer, Controller, or other officer or agent, one or more, becomes vacant by reason of death, resignation, retirement, disqualification, removal from office or otherwise, the directors then in office may choose a successor or successors, who shall hold office for the unexpired term in respect of which such vacancy occurred. (Amended 8/21/53; 11/5/57; 2/17/65; 1/1/82.) ARTICLE IX. DUTIES OF OFFICERS MAY BE DELEGATED. In case of the absence of any officer of the Corporation, or for any other reason that the Board may deem sufficient, the Board may delegate the powers or duties of such officer to any other officer, or to any director, for the time being. ARTICLE IX-A. INDEMNIFICATION OF DIRECTORS AND OTHERS BY THE CORPORATION. Provided he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, he had no reasonable cause to believe his conduct was unlawful, every person (and the heirs, executors and administrators of such person) who is or was a director, officer, employee or attorney of the Corporation, or of any partnership, joint venture, trust or other enterprise or of any other corporation which he served or is serving as such at the request of the Corporation, and, as to such other corporation, in which the Corporation owns shares of capital stock or is a creditor, shall be indemnified by the Corporation against all legal and other fees and expenses (including judgements, fines or penalties and amounts paid, other than to the Corporation, or actually and reasonably incurred in connection with settlements, whether with or without court approval, made with a view to curtailment of costs of litigation and with the approval of a majority of the Directors of the Corporation then in office other than those who have incurred expenses in relation to the matter for which indemnification is or has been sought, whether or not such majority constitutes a quorum, or if there are no such Directors then with the approval of independent Counsel appointed by the Board) actually and reasonably incurred by him in connection with or resulting from any threatened, pending or completed claim, action, suit or proceeding (whether brought by or in the right of the Corporation or such other corporation or otherwise), civil, criminal, administrative or investigative, or any appeal therein, in which he is made a party by reason of his serving or having served at the request of the Corporation as a director, officer, employee or attorney of the Corporation, or such other corporation, partnership, joint venture, trust or other enterprise, before or after the adoption of this By- Law. Such person shall be indemnified against expenses (including attorneys fees) except in relation to matters as to which he shall be finally determined as a result of such claim, action, suit or proceeding to be liable to the Corporation, whether such determination is made by a court of competent jurisdiction or, in the absence of that, either by such majority of Directors not seeking indemnification, acting on the advice of Counsel, or by independent Counsel appointed by the Board, unless and only to the extent a court of competent jurisdiction, upon timely application being made, despite a final determination of liability, determines that in view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court deems proper. Expenses incurred with respect to any claim, action, suit or proceeding of the character above described shall be advanced by the Corporation prior to the final disposition thereof upon receipt of an undertaking by or on behalf of the recipient to repay such amount if it is ultimately determined that he is not entitled to indemnification under this Article IX-A. In the case of any claim, action, suit or proceeding (whether civil, administrative or investigative), a judgment in or settlement of a civil, administrative or investigative claim, action, suit or proceeding, or in the case of a criminal action, suit or proceeding, a conviction or judgment (whether based on a plea of guilty or nolo contendere or its equivalent, or after trial) shall not be deemed a determination or create a presumption that such director, officer, employee or attorney, or former director, officer, employee, or attorney, did not act in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his conduct was unlawful. Notwithstanding any prior judgement, settlement or conviction as aforesaid, indemnification hereunder shall be mandatory upon the determination that such director, officer, employee, or attorney, or former director, officer, employee, or attorney, was acting in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation and with respect to any criminal action or proceeding, had no reasonable cause to believe that his conduct was unlawful. The indemnification and advancement of expenses granted hereunder shall not be deemed exclusive of any other rights to which such director, officer, employee, or attorney may be entitled under any agreement, vote of stockholders, or at law or in equity or otherwise, and the indemnification hereby granted shall be in addition to and not in restriction or limitation of any other privilege or power which the Corporation may lawfully exercise with respect to the indemnification or advancement of expenses to directors, officers, employees, or attorneys, or persons formerly holding such positions. For the purposes of this Article IX-A, references to the "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees, or attorneys, so that any person who is or was a director, officer, employee, or attorney of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee, or attorney of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this Article IX-A with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. (Adopted by stockholders 5/4/65; amended 7/15/70; 5/2/73; 6/13/79; 10/15/87.) ARTICLE IX-B. REGARDING DUTIES OF DIRECTORS AND OTHERS. SECTION 1: Unless otherwise provided by statute, or by the Certificate of Incorporation, no liability shall attach to any person (and the heirs, executors and administrators of such person) who is or was a director, officer, employee or attorney of the Corporation, or of any partnership, joint venture, trust or other enterprise in which position he is or was acting as such at the request of the Corporation, or of any other corporation which he served or is serving as such at the request of the Corporation, and in which the Corporation owns shares of capital stock or is a creditor (hereinafter in this Article referred to as "such person"), who shall perform or have performed his duties in good faith in a manner he reasonably believes or believed to be in or not opposed to the best interests of the Corporation with such care that an ordinarily prudent person in a like position would use under similar circumstances. (Added 6/18/81; amended 10/15/87.) SECTION 2: Any "such person" in the performance of his duties shall be entitled to rely in good faith on information, opinions, reports or statements, including financial statements and other financial data, in each case prepared or presented by: (a) one or more officers or employees of the Corporation whom "such person" reasonably believes to be reliable and competent in the matters presented, (b) counsel, public accountants, appraisers or other persons as to matters which "such person" reasonably believes to be within the other person's professional or expert competence, or (c) a committee of the Board upon which he does not serve, duly designated in accordance with a provision of the Certificate of Incorporation of the By-Laws, as to matters within its designated authority, which committee "such person" reasonably believes to merit confidence; but he shall not be considered to be acting in good faith if he has knowledge concerning the matter in question that would cause such reliance to be unwarranted. Any "such person" who so performs his duties for the Corporation shall have no liability by reason of such reliance. (Added 6/18/81.) SECTION 3: No "such person" who makes or causes to be made any disclosure in any application, report or document found to be misleading with respect to any material fact shall have any liability who shall sustain the burden of proof with respect to (a) any matter not purporting to be made on the authority of an expert, and not purporting to be a copy of or extract from a report or valuation of an expert, and not purporting to be made on the authority of a public official document or statement, that he had, after reasonable investigation, reasonable ground to believe and did believe, at the time such matter was published, that the statements therein were true and that there was no omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and (b) as regards any matter purporting to be made upon his authority as an expert or purporting to be a copy of or extract from a report or valuation of himself as an expert, (i) he had, after reasonable investigation, reasonable ground to believe and did believe, at the time such matter was published, that the statements therein were true and that there was no omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or (ii) such matter did not fairly represent his statement as an expert or was not a fair copy of or extract from his report or valuation as an expert; and (c) as regards any matter purporting to be made on the authority of an expert (other than himself), he had no reasonable ground to believe and did not believe, at the time such matter was published, that the statements therein were untrue or that there was an omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that such matter did not fairly represent the statement of the expert or was not a fair copy of or extract from the report or valuation of the expert; and (d) as regards any matter purporting to be a statement made by an official person or purporting to be a copy of or extract from a public official document, he had no reasonable ground to believe and did not believe, at the time such matter was published, that the statements therein were untrue, or that there was an omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that such matter did not fairly represent the statement made by the official person or was not a fair copy of or extract from the public official document. (Added 6/18/81.) SECTION 4: In determining, for the purpose of Section 3 of this Article, what constitutes reasonable investigation and reasonable ground for belief, the standard of reasonableness shall be that required of a prudent man in the management of his own property. (Added 6/18/81.) SECTION 5: Any suit for liability as above provided may be to recover only such damages as shall represent the difference between the amount paid for the security issued by the Corporation (not exceeding the price at which the security was offered to the public) and (i) the value thereof as of the time such suit was brought, or (ii) the price at which such security shall have been disposed of in the market before suit, or (iii) the price at which such security shall have been disposed of after suit but before judgment if such damages shall be less than the damages representing the difference between the amount paid for the security (not exceeding the price at which the security was offered to the public) and the value thereof as of the time such suit was brought: Provided, that if the defendant proves that any portion or all of such damages represents other than the depreciation in value of such security resulting from such material misleading matter, with respect to which his liability is asserted, not being true or omitting to state a material fact required to be stated therein or necessary to make the statements therein not misleading, such portion of or all such damages shall not be recoverable. (Added 6/18/81.) SECTION 6: All or any one or more of the persons held liable as above provided in Section 5 of this Article shall be jointly and severally liable, and every person who becomes so liable to make any payment may recover contribution as in cases of contract from any person who, if sued separately, would have been liable to make the same payment, unless the person who has become liable was, and the other was not, guilty of fraudulent misrepresentation. (Added 6/18/81.) SECTION 7: In no case shall the amount recoverable exceed the price at which the security was offered to the public. (Added 6/18/81.) ARTICLE X. SECTION 1: Every holder of stock in the Corporation shall be entitled to have a certificate, signed by, or in the name of the Corporation by the President or a Vice-President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, certifying the number of shares owned by him in the Corporation. If such certificate is countersigned (1) by a transfer agent other than the Corporation or its employee, or, (2) by a registrar other than the Corporation or its employee, any other signature on the certificate may be a facsimile. In case any officer or officers who have signed, or whose facsimile signature or signatures have been used on, any such certificate or certificates shall cease to be such officer or officers of the Corporation, whether because of death, resignation or otherwise, before such certificate or certificates have been delivered by the Corporation, such certificate or certificates may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures have been used thereon had not ceased to be such officer or officers of the Corporation. (Amended 8/29/47; 2/17/65; 1/16/69; 1/1/82.) SECTION 2: If the Corporation shall be authorized to issue more than one class of stock, or more than one series of any class, the designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the Corporation shall issue to represent such class of stock; provided, however, that except as otherwise provided by statute, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, a statement that the Corporation will furnish without charge to each stockholder who so requests, the designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. (Added 2/17/65.) ARTICLE XI. TRANSFER OF STOCK, FIXING RECORD DATE, ETC. SECTION 1: The shares of stock of the Corporation shall be transferable as provided in the Uniform Commercial Code as enacted in the State of Delaware. (Amended 1/16/69.) SECTION 2: In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. (Amended 1/16/58; 2/17/65; 1/16/69) SECTION 3: The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to or interest in such shares on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the laws of Delaware. SECTION 4: The Board of Directors may appoint one or more transfer agents and registrars for its stock, and may require all stock certificates to bear the signature either of a transfer agent or of a registrar, or both. ARTICLE XII. LOST, STOLEN OR DESTROYED CERTIFICATES. Any person claiming a certificate of stock to be lost, stolen or destroyed shall make an affidavit or affirmation of the fact and advertise the same in such manner as the Board of Directors may require, and shall give the Corporation and/or the transfer agents and/or the registrars, if they shall so require, a bond of indemnity, in form and with one or more sureties satisfactory to the Board, and/or the transfer agents and/or the registrars, in such sum as they may direct, whereupon a new certificate may be issued of the same tenor and for the same number of shares as the one alleged to be lost, stolen or destroyed, but always subject to the approval of the Board of Directors. (Amended 2/17/65; 1/16/69.) ARTICLE XIII. INSPECTION OF BOOKS. The Board of Directors shall determine from time to time whether, and, if allowed, when and under what conditions and regulations the accounts and books of the Corporation (except such as may by statute be specifically open to inspection) or any of them, shall be open to the inspection of the stockholders, and the stockholder's rights in this respect are and shall be restricted and limited accordingly. ARTICLE XIV. CONTRACTS, ETC. SECTION 1: All checks, notes, drafts, acceptances or other demands or orders for the payment of money of the Corporation shall be signed by such officer or officers or person or persons as the Board of Directors may from time to time designate. SECTION 2: All contracts, deeds, mortgages, leases or instruments that require the corporate seal of the Corporation to be affixed thereto shall be signed by the President or a Vice- President, and by the Secretary, or an Assistant Secretary, or by such other officer or officers, or person or persons, as the Board of Directors may by resolution prescribe. (Amended 8/21/53; 11/5/57; 2/17/65; 1/1/82.) ARTICLE XV FISCAL YEAR. The fiscal year shall be the calendar year. ARTICLE XVI. DIVIDENDS. Subject to the provisions of law and of the Certificate of Incorporation, the Board of Directors shall have absolute discretion in the declaration of dividends and in fixing and changing the date for the declaration and payment of dividends. Before payment of any dividend or making any distribution of profits, the Board of Directors may set aside, out of the surplus or net profits of the Corporation, such sum or sums as the directors may from time to time in their absolute discretion deem proper as a reserve or reserves to meet contingencies or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for any other purpose which the directors shall think conducive to the interests of the Corporation and the directors may modify or abolish any such reserve. (Amended 2/17/65.) ARTICLE XVII. NOTICES. SECTION 1: Notices to directors and stockholders shall be in writing and delivered personally or mailed to the directors or stockholders at their addresses appearing on the books of the Corporation or, in default of other address, to such director, officer or stockholder at the General Post Office in the City of Dubuque, Iowa. Notice by mail shall be deemed to be given at the time when the same shall be mailed. Notice to directors may also be given by telegram. (Amended 2/17/65.) SECTION 2: Whenever any notice is required to be given under the provisions of the statutes or of the Certificate of Incorporation or of these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. (Amended 2/17/65.) ARTICLE XVIII. AMENDMENTS. These By-Laws may be altered, amended or repealed, and new By- Laws may be made at any annual, regular or special meeting of the stockholders by the affirmative vote of a majority in interest of the stock then issued and outstanding and entitled to vote, or at any regular or special meeting of the Board of Directors by the affirmative vote of a majority of such Board. EX-10 3 EX-10.a COAL TRANSLOADING AGREEMENT By and Between INTERSTATE POWER COMPANY and ORBA-JOHNSON TRANSSHIPMENT COMPANY December 20, 1995 Effective May 31, 1996 COAL TRANSLOADING AGREEMENT Table of Contents ARTICLE I. DUTIES OF OJT: SCOPE 1.1 Compliance 1.2 Operating Capabilities l.3 Limitations 1.4 Weights II. DUTIES OF INTERSTATE 2.1 General Duties 2.2 Shipping Estimate 2.3 Minimum Tonnage 2.4 Responsibility for Interstate Coal 2.5 Consistent Delivery and Pickup 2.6 Equipment III. COMPENSATION: PAYMENT TERMS 3.1 Schedule of Payments 3.2 Harbor and Fleeting Service 3.3 Excess Storage 3.4 Reconciliation and Verification 3.5 Third Party Contracts 3.6 Escalation 3.7 Barge and Train Weights 3.8 Train Storage 3.9 Winter Storage 3.10 Other Storage 3.11 Shipping Season 3.12 Remaining Coal IV. INDEMNITIES 4.1 Indemnification by OJT 4.2 Indemnification by Interstate 4.3 Application of Available Insurance; Waiver of Subrogation V. TERM & TERMINATION 5.1 Term 5.2 Extended Term 5.3 Termination VI. DEFAULTS 6.1 Events of Default 6.2 Remedies VII. INSURANCE 7.1 OJT Coverages VIII. FORCE MAJEURE IX. RESOLUTION OF DISPUTES: ARBITRATION X. REPRESENTATIONS AND WARRANTIES 10.1 Interstate Representation 10.2 OJT Representation XI. MISCELLANEOUS 11.1 Delays 11.2 Notices 11.3 Entire Subject Matter 11.4 Governing Law 11.5 Binding Nature 11.6 Assignment 11.7 Representatives of Parties 11.8 Article and Section Headings FORMULA EXAMPLE 1 EXAMPLE 2 COAL TRANSSHIPMENT AGREEMENT THIS COAL TRANSSHIPMENT AGREEMENT, made on this 20 day of December, 1995, and effective as of May 31, 1996, (this "Agreement") by and between INTERSTATE POWER COMPANY, a Delaware corporation, having its principal office at 1000 Main Street, Dubuque, Iowa 52004 ("Interstate"); and ORBA-JOHNSON TRANSSHIPMENT COMPANY, an Iowa joint venture having addresses c/o ORBA CORPORATION, P. O. Box 369, Alvin, Texas 77512-0369, and c/o JOHNSON BROS. CORPORATION, P. O. Box 1002, Litchfield, Minnesota 55355 ("OJT"). W I T N E S S E T H: WHEREAS, Interstate wishes to enter into an agreement with ORBA- JOHNSON TRANSSHIPMENT CO. "OJT") for the transloading of Interstate coal thru the OJT terminal on the right descending bank of the Mississippi River at River Mile 371, north of Keokuk, Iowa, (the "Facility"); and WHEREAS, OJT is a joint venture formed pursuant to a Partnership Agreement, dated as of October 3, 1979, between ORBA TRANSSHIPMENT CORPORATION OF IOWA, an Iowa corporation, which is a wholly-owned subsidiary of ORBA CORPORATION ("ORBA"), and JOHNSON BROS. TRANSSHIPMENT CORPORATION OF IOWA, an Iowa corporation, which is a wholly-owned subsidiary of JOHNSON BROS. CORPORATION ("JBC"); and WHEREAS, Interstate wishes to designate and to engage OJT for the receiving, storage and transshipment of coal, ("Interstate Coal"), and OJT is willing to so engage itself and the Facility, all on the terms hereinafter set forth; and NOW THEREFORE, in consideration of the premises, and of the mutual covenants and agreements of the parties set forth herein, the parties hereto agree as follows: ARTICLE I DUTIES OF OJT: SCOPE 1.1 Compliance OJT will comply in all material respects with applicable laws, ordinances, rules and regulations of any court or other governmental authority having jurisdiction. 1.2 Operating Capabilities During the term of this Agreement, OJT will: a. Provide sufficient personnel and equipment to properly man and operate the Facility in accordance herewith; b. Unload railcars, store the coal and load barges in accordance with sound and customary practice in the industry. c. Operate the Facility on a 24 hour demand schedule; i.e., unload trains upon arrival and load barges on a schedule to minimize barge delays. d. Operate the Facility so that each unit train is unloaded during the allowable 4.5 hours of free time, unless exempted by force majeure conditions. 1.3 Limitations Notwithstanding any other provisions hereof, OJT shall have no liability or obligation to Interstate, and OJT shall not be deemed in default hereunder, with respect to any of the following matters: a. Any operating or other problems, delays, costs or expenses incurred by Interstate due to Force Majeure conditions, or due to the tender of coal by Interstate or any other party in excess of the Shipping Estimate or the reasonable receiving, storage or loading capacities of the Facility; b. Any loss, cost, expense or damage arising out of or attributable to operational requests or directives of Interstate or of any railroad or barge line serving the Facility other than as contemplated hereby; c. Any loss, cost, expense or damage to the Facility or any property of Interstate except (i) to the extent otherwise provided by the insurance described in Article VII hereof, and (ii) those matters as to which OJT has indemnified Interstate pursuant to Section 4.1 hereof; d. Any incidental, special or consequential damages of any nature whatsoever incurred by Interstate or any other person or entity; e. Demurrage, delay charges, or any consequential costs associated with transportation delays. f. Inventory losses or gains due to wind, erosion, water or for any other reasons. 1.4 Weights OJT plans on using the existing scale system for weights for loaded barges. In the event of a breakdown, OJT will use its best efforts to fix the scales as soon as possible and, in the meantime, will use calculated weights based on each barge characteristics. ARTICLE II DUTIES OF INTERSTATE 2.1 General Duties During the Term of this Agreement, Interstate will cooperate with OJT in the performance of its duties under this Agreement, and in any event shall: (a) Provide OJT with reasonably current reports of the scheduled arrival of trains and barges used for Interstate Coal; (b) Make the payments in the manner required by Article III hereof; (c) Obtain all required approvals or authorizations, if any, of any governmental authority for the execution, delivery and performance of this Agreement. (d) Cause certification of each train weight. 2.2 Shipping Estimate On or before March 1, 1996, and November 1st of each year during the Term, Interstate shall submit to OJT its written estimate of the anticipated number of tons of Interstate Coal to be delivered to and loaded out from the Facility, but not less than 500,000 tons, forecast on a monthly basis for the succeeding year (herein referred to as the "Shipping Estimate"). Interstate may revise the Shipping Estimate as frequently as required, and shall promptly notify OJT of such revisions. 2.3 Minimum Tonnage Interstate agrees that during the Term hereof, it shall pay for the transshipment of no less than 500,000 tons annually of Interstate Coal (the "Minimum Annual Interstate Tonnage") through the Facility. Failure to transship all or any part of such Minimum Interstate Tonnage shall not under any circumstances relieve Interstate of the obligation to make the payments required by Article III hereof, which shall be computed and paid as if the Minimum Interstate Tonnage had been transshipped through the Facility, except for the 1996 fiscal year for which the Minimum Interstate Tonnage will be the coal actually transshipped from May 31, 1996 through December 31, 1996, and the payment obligations of Interstate under Article III shall be absolute and unconditional and shall not be subject to any abatement, diminution, setoff, counterclaim, recoupment, agreement, defense, suspension, deferment, interruption, or other right which Interstate may have against OJT or any other person or entity for any reason whatsoever, including, without limitation, (a) any damage to, destruction, theft or loss of the Facility or any portion thereof,(b) any event of Force Majeure, (c) breach of any warranty of any seller or manufacturer of the Facility, or any component thereof, (d) the physical failure of the Facility, or any component thereof due to inadequacy, condemnation, confiscation or public requisition of the Facility or any portion thereof, (e) any claim as a result of business dealings between OJT and Interstate, (f) any circumstance which might give rise to a claim by Interstate of commercial frustration, or (g) any insolvency, bankruptcy, reorganization or similar proceedings by or against Interstate. 2.4 Responsibility for Interstate Coal Interstate is responsible for and owner of the Interstate Coal and shall be liable for any costs or charges due to its ownership thereof, including all taxes. 2.5 Consistent Delivery and Pickup Interstate shall be responsible for reasonably consistent deliveries and pickups. "Reasonably consistent" shall mean 75% to 125% of the annual Shipping Estimate as projected on a monthly basis. 2.6 Equipment a. Rail equipment shall be rotary dump cars of a weight and size consistent with OJT's existing capabilities as of January 1, 1995. b. Barge equipment shall be standard jumbo hopper barges with a nominal capacity of 1400 tons for rake barges and 1600 tons for box barges and shall be seaworthy when brought to the OJT dock. OJT reserves the right to not load any barge that it deems to be unseaworthy at no cost to OJT for recycling the barge. c. No train delivered to OJT shall have more than 117 cars and (3 engines and 1 caboose) or (4 engines). d. OJT shall be indemnified by Interstate from any damage to transportation equipment or personnel in accordance with Section 4.2 hereof. ARTICLE III COMPENSATION: PAYMENT TERMS 3.1 Schedule of Payments (See attached Formula) a. The fee will be $2.25 per transshipped ton plus Harbor and Fleeting Service (as described in Section 3.2), and escalation (as described in Section 3.6). b. Interstate will pay OJT per the attached Formula, subject to the reconciliation as described in Section 3.4. c. Transshipped tons are defined as: Tonnage received plus tonnage shipped, the sum of which is divided by two (2). 3.2 Harbor and Fleeting Service Interstate shall pay to OJT the cost for Harbor and Fleeting Service at OJT as contracted for and provided and invoiced to and by OJT, subject to the Harbor and Fleeting Service Contract attached. 3.3 Excess Storage Interstate shall pay to OJT $0.10/ton per month for any coal storage in excess of 150,000 tons. The tonnage shall be calculated on the highest tonnage in the month in which the tonnage is in excess of 150,000 tons. 3.4 Reconciliation and Verification At the end of each calendar year, OJT shall verify the actual transshipped tonnage and reimburse Interstate for over-payment or invoice Interstate for under-payment. The verification will be complete and submitted by December 31 of the current calendar year. Interstate, upon proper notification, may perform an audit of the reconciliation. 3.5 Third Party Contracts To the extent that Interstate enters into contracts with third parties that affect OJT's operations and/or costs to transship coal, the unit price for each transshipped ton will be adjusted accordingly. 3.6 Escalation a. Escalation in the cost per ton shall be calculated in December of each year and will be based on the increase in the Producer Price Index (all commodities) from December, 1994. The Producer Price Index (all commodities) in December 1994 was 121.9. b. The index will be calculated annually in December and escalation will be based on the December, 1994 publication of the Producer Price Index (all commodities). c. If the December publication is not available prior to invoicing, the adjustment will be made as soon as the publication is available and will be invoiced on the next billing. 3.7 Barge and Train Weights Interstate, or its agents, shall furnish to OJT, in writing, the weight of each train loaded and OJT shall furnish to Interstate, in writing, the weight of each barge loaded. 3.8 Train Storage If train storage is available and Interstate desires to use it, Interstate shall pay OJT $1.00 per day per car for car storage on OJT property. 3.9 Winter Storage Interstate shall pay OJT $0.01 per ton per day for coal left on the ground at OJT from the end of the shipping season to the beginning of the next shipping season. However, Interstate will not be obligated for payment of the winter storage charges beyond March 15th of any year if on or after March 15th force majeure conditions exist that prevent the loading of coal into barges. 3.10 Other Services Interstate shall pay OJT for other services requested by Interstate and agreed to by OJT at a rate equal to OJT's cost plus 10%. 3.11 Shipping Season The shipping season is nominally defined as March 15th through November 15th. 3.12 Remaining Coal Coal on the ground at the beginning of this Agreement (May 31, 1996) will be invoiced at one-half (1/2) of the transloading rates as referred to in Section 3.1 (see Example 2). ARTICLE IV INDEMNITIES 4.1 Indemnification by OJT OJT hereby agrees to indemnify Interstate, its directors, officers, employees and agents from and against any and all claims, damages, demands, expenses, liabilities and losses of every kind, character and nature (other than incidental, special or consequential damages) asserted by or on behalf of any person, firm, corporation or governmental authority arising out of or resulting from the acts or omissions of OJT in breach or violation of the provisions of this Agreement, or on account of the willful misconduct or gross negligence of OJT. OJT also covenants and agrees at no expense to Interstate to indemnify and save Interstate and such of its related persons harmless of, from, and against all costs and expenses (including reasonable counsel fees) incurred in investigating or defending against any such claims and demands, including those arising in any proceeding or action. In the event that any such claims or demands are asserted against Interstate or any of its related persons, Interstate shall give notice thereof to OJT within twenty (20) days thereafter, and OJT shall thereupon have the right and option to assume (and at the request of Interstate shall assume) the defense of any such claim or demands, including the right to compromise and settle the matter on such basis as it shall deem appropriate. Interstate and its counsel may, at the option of Interstate, participate in the defense, compromise and settlement of such claims or demands as to which OJT has assumed the defense, provided that Interstate shall bear the costs and expenses relating to such participation. Notwithstanding the foregoing, OJT shall not be required to indemnify and save Interstate and such of its related persons harmless with respect to any such claims, losses and the like otherwise described in this section 4.1 (i) arising out of any willful or negligent acts or omissions of Interstate or any of such of its related persons, (ii) to the extent that such claims or losses exceed the amount of the insurance proceeds available therefor from the insurance to be procured and maintained by OJT, as set forth in Section 7.1 hereof, or (iii) as to which Interstate is obligated to indemnify OJT pursuant to Section 4.2 hereof. 4.2 Indemnification by Interstate Interstate, for and on behalf of itself and its insurers, successors and assigns, hereby covenants and agrees, at no expense to OJT or the other indemnified parties set forth below, to indemnify and save OJT, its joint venture participants, ORBA and JBC, and the respective officers, directors, employees and agents of any of them, of, from and against, any and all claims, damages, demands, expenses, liabilities and losses of every kind, character and nature (other than incidental, special or consequential damages) asserted by or on behalf of any person, firm, corporation or governmental authority arising out of, or resulting from any (i) acts or omissions by railroad, barge line or other transportation personnel or equipment, (ii) acts or omissions of Interstate in breach of its obligations hereunder, or (iii) the willful misconduct or gross negligence of Interstate. Interstate also covenants and agrees to indemnify and save OJT, and any other indemnified party set forth above, harmless of, from and against all costs and expenses (including reasonable counsel fees) incurred in investigating or defending against any such claims and demands, including those arising in any proceeding or action. In the event that any such claims or demands are made against OJT or any of such other persons, the persons claiming indemnity shall give notice thereof to Interstate within twenty (20) days thereafter, and Interstate shall thereupon have the right and option to assume (and at the request of the indemnified party shall assume) the defense of any such claims, demands, action or proceeding based upon or arising out of any such claim or demand. The obligations of Interstate to OJT hereunder shall not extend to any claims, damages, demands, expenses, liabilities or losses of any kind for which OJT is obligated to indemnify Interstate or its related persons pursuant to Section 4.1 hereof. 4.3 Application of Available Insurance: Waiver of Subrogation The obligations of the parties to provide the indemnification set forth above shall be reduced to the extent that (or, in the case of OJT limited to) proceeds received under any insurance policies to cover any loss, cost or expense of any indemnified party. Each party waives for itself and any insurer engaged by it, any rights of subrogation whatsoever. ARTICLE V TERM & TERMINATION 5.1 Term The term of this agreement shall be from May 31, 1996 to December 31, 1998, (the "Term"). 5.2 Extended Term The Term may be extended for five (5) years, at a price mutually agreed upon, in writing, by Interstate and OJT. In any event, Interstate will notify OJT not less than twelve (12) months prior to the end of the Term of its intention to extend or not extend, as the case may be. 5.3 Termination This Agreement may not be terminated prior to December 31, 1998 without the prior written approval of both parties. ARTICLE VI DEFAULTS 6.1 Events of Default Any one of the following occurrences shall be an "Event of Default" hereunder: (a) Either party shall: (i) Consent to the appointment of a receiver, trustee or a liquidator of itself or of a substantial part of its property, or admit in writing its inability to pay its debts generally as they come due, or shall make a general assignment for the benefit of creditors; or (ii) File a voluntary petition in bankruptcy or a voluntary petition or an answer seeking reorgani- zation in a proceeding under any bankruptcy laws (as now or hereafter in effect) or an answer admitting the material allegations of a petition filed against it in any such proceeding or, by voluntary petition, answer or consent, seek relief under the provisions of any other now-existing or future bankruptcy or other similar law (other than a law which does not provide for or permit the readjustment or alteration of its obligations hereunder) providing for an agreement, composition, extension or adjustment with its creditors; or (iii) Suffer the entry of an order, judgment or decree in any proceeding by any court of competent jurisdiction appointing, without its consent, a receiver, trustee or liquidator of such party or of any substantial part of its property, which shall remain in force undismissed, unstayed or unvacated for a period of ninety (90) days after the date of entry thereof; or (iv) Permit a petition against it in a proceeding under the Federal bankruptcy laws or other insolvency laws to be filed and not withdrawn or dismissed within sixty (60) days thereafter or, permit any court of competent jurisdiction to assume jurisdiction, custody or control of such party or of any substantial part of its property, which jurisdiction, custody or control shall remain in force unrelinquished, unstayed or unterminated for a period of sixty (60) days; or (b) Interstate shall fail to make any payment required by Section 3.1 (a) on the date such payment shall become due; or (c) Interstate shall fail to make any other payments required by Article III with in ten (10) days after the same shall become due; or (d) Except as provided in Section 6.1 (e) and provided that such failure is not due to Force Majeure cause, either party is in default in the performance of any other material covenant, agreement or undertaking to be performed by it pursuant to this Agreement, and such default shall continue for a period of thirty (30) days after notice thereof from the other party (or, if such default is not susceptible of being cured within thirty (30) days, such longer period as shall be required to cure the same through diligent effort, so long as the defaulting party is in good faith exercising diligent efforts to cure the same); or (e) OJT shall fail promptly to transship any Interstate Coal tendered pursuant and subject to the terms and provisions of this Agreement for transshipment, or shall fail to load out any Interstate Coal requested by Interstate from the Facility, provided that any such failure is not due to Force Majeure cause, or that any such failure is not cured by OJT within forty-five (45) days of notice of such failure by Interstate to OJT. 6.2 Remedies (a) Upon the occurrence of an Event of Default on the part of Interstate, and so long as the same shall be continuing, OJT shall, at its option, be excused from performance of any of its obligations hereunder, and may, at its option, declare this Agreement to be in default, and at any time after such declaration, so long as Interstate shall not have remedied all such outstanding Events of Default, OJT may do any one or more of the following: (i) terminate this Agreement; (ii) exercise any other legal or equitable right or remedy which may be available to it or proceed by appropriate arbitration or court action to enforce the terms hereof or to recover damages for the breach hereof. (b) Upon the occurrence of an Event of Default on the part of OJT, and so long as the same shall be continuing, Interstate may, at its option, declare this Agreement to be in default, and at any time thereafter, so long as OJT shall not have remedied all such outstanding Events of Default, Interstate may do any one or more of the following: (i) with respect to defaults under Section 6.1 (a), terminate this Agreement. (ii) with respect to all defaults, including defaults under Section 6.1 (e), exercise any legal right or remedy which may be available to it (other than termination of this Agreement or failure or refusal to make the payments required hereunder or otherwise to carry out its obligations hereunder) or proceed by appropriate arbitration or court action to enforce the terms hereof, or to recover damages for the breach hereof; (iii) with respect to any defaults under Section 6.1 (e) (but only after all applicable cure and grace periods have expired), upon written notice to OJT given after such cure and grace periods have expired, terminate this Agreement effective as of a date no earlier than three (3) months from the date of such notice (which date of termination may be extended by Interstate from time to time by written notice to OJT). (c) Except as otherwise expressly provided above, no remedy referred to in this Article is intended to be exclusive, but each shall be cumulative and in addition to any other remedy referred to above or otherwise available at law or in equity, including without limitation the right to enforce the terms hereof or to recover damages for breach of any terms hereof; and the exercise or beginning of exercise of any one or more of such remedies shall not preclude the simultaneous or later exercise of any or all such other remedies. No express or implied waiver of any Event of Default shall in any way be, or be construed to be, a waiver of any future or subsequent Event of Default. (d) Notwithstanding any other provision of this Agreement, neither party shall be liable for any incidental, special or consequential damages arising out of or relating to this Agreement for any reason whatsoever. ARTICLE VII INSURANCE 7.1 OJT Coverages OJT shall furnish to Interstate certificates of insurance evidencing the following coverages: Worker's Compensation & Statutory Employers Liability $ 100,000 General Liability $ 500,000 BI $ 500,000 PD Umbrella Liability $1,000,000 ARTICLE VIII FORCE MAJEURE As used herein, the term "Force Majeure" shall include an Act of God, strike, lock-out or other labor dispute, act of the public enemy, war declared or undeclared, riot, insurrection, civil commotion, lightning, fire, storm, flood, earthquake, insured or uninsured casualty, condemnation of all or any part of the Facility, embargo, inability to obtain or delay in obtaining governmental approvals, permits, licenses or allocations, fuel or power shortages and rationing, lack of available coal to ship, legal impediments to the transportation or storage of coal or the use or operation of the Facility, any inability or failure to the Facility to transship coal within its designed capacity because of faulty design, construction, manufacture, erection or materials, or otherwise, lack of available trains, hopper cars, river barges or tugs, equipment failures of any kind, and other like or similar occurrences, whether of the kind specifically enumerated above or otherwise, which like or similar occurrences are not reasonably within the control of the party claiming Force Majeure. ARTICLE IX RESOLUTION OF DISPUTES: ARBITRATION (a) The parties hereto shall attempt in good faith to negotiate between themselves a settlement or resolution of any dispute which may arise under this Agreement. If no such settlement or resolution is reached within sixty (60) days after the existence of a dispute, such dispute shall be submitted to arbitration in the following manner: Either party hereto may request arbitration by delivery of written notice to the other party, and within fifteen (15) days after delivery of such notice each party shall appoint one arbitrator, and the two arbitrators so appointed shall appoint a third arbitrator. If either party shall fail to appoint an arbitrator, or if their respective arbitrators shall be unable to agree upon a third arbitrator, the arbitrator or arbitrators not so appointed shall be appointed by the American Arbitration Association (b) All arbitrations hereunder shall be held in Chicago, Illinois, under the rules of the American Arbitration Association in effect at the time, although such proceedings need not be conducted under the auspices of the Association. The parties agree that there shall be no suspension of work nor of payment when any such arbitrable dispute arises, or while it is subject to arbitration. (c) The award of any two of the arbitrators shall be final and binding upon the parties, and a decree or judgment on the award may be entered in any court having jurisdiction thereof. (d) Notwithstanding the foregoing, all matters involving disputes as to financial or accounting matters shall be submitted to a panel of three accountants who are members of accounting firms of recognized national standing, and who shall be selected as provided above. ARTICLE X REPRESENTATIONS AND WARRANTIES 10.1 Interstate Representation Interstate hereby represents and warrants to OJT, which representations shall survive the execution and delivery of this Agreement, as follows: (a) Interstate has full power and authority to enter into this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement, and the performance thereof, has been authorized by all corporate action required on the part of Interstate. (b) The execution, delivery and performance of this Agreement on the part of Interstate has received whatever consents, approvals and other authorizations as may be required from any governmental authority pursuant to existing law, and Interstate has received opinions of counsel to such effect. (c) The execution, delivery and performance of this Agreement on the part of Interstate will not conflict with any provision of any indenture, agreement or other instrument to which Interstate is a party or by which it or its properties are bound. 10.2 OJT Representations OJT hereby represents and warrants to Interstate, which representations and warranties shall survive the execution and delivery of this Agreement, as follows: (a) OJT has full power and authority to enter into this agreement and to perform its obligations hereunder. The execution and delivery of this Agreement, and the performance thereof, has been authorized by all corporate and other action required on the part of OJT. ARTICLE XI MISCELLANEOUS 11.1 Delays Neither party hereto shall be liable for any delay or default with respect to performance of its obligations hereunder occasioned by any Force Majeure condition or occurrence, and the time for performance in any such instance shall be extended for a period equal to the delay caused by such condition or occurrence, provided that except as provided in Section 6.2 (b)(iii) hereof, neither the occurrence of any Force Majeure condition nor any other event of any sort shall relieve Interstate of its obligations to pay when due the charges payable pursuant to Article III. Promptly after a party becomes aware of any Force Majeure condition, such party shall give written notice thereof, specifying the nature and probable duration of such condition and the resultant delay. 11.2 Notices All notices and instruction permitted to be given or required hereunder shall be deemed sufficiently given if delivered in person or mailed by Registered or Certified Mail, postage prepaid; or sent via facsimile, receipt acknowledged, as follows: (a) If to OJT: TO: Orba-Johnson Transshipment Company P. O. Box 788 Keokuk, IA 52632 Attention: General Manager Facsimile: (319)524-6843 (b) If to Interstate: TO: Interstate Power Company P. O. Box 769 Dubuque, IA 52004-0769 Attention: President Facsimile: (319)557-2265 Either party may change the address for sending of notices by giving notice in compliance herewith. 11.3 Entire Subject Matter This Agreement, together with the appendices, schedules and examples referred to herein, contains the entire agreement of the parties hereto with respect to the subject matter hereof and may not be altered or amended except by an instrument in writing executed by all of the parties hereto. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and which, together, shall constitute one and the same instrument. 11.4 Governing Law This Agreement shall be governed by and construed in accordance with the laws of the State of Iowa applicable to agreements made and to be performed in such state. 11.5 Binding Nature This Agreement shall be binding upon and subject to the provisions of Section 11.6, and shall inure to the benefit of Interstate and OJT and their respective successors, assigns, receivers and other representatives. 11.6 Assignment (a) Neither party shall have the right to assign any of its rights, duties or obligations under this Agreement without the prior written consent of the other party, which consent shall not be unreasonably withheld. Either party may, however, upon thirty (30) days' prior written notice, assign this Agreement to any other firm or corporation controlling, controlled by or under common control with it, but such assignment shall not relieve the assignor from liability hereunder. In no event shall this Section prohibit OJT's ability to sell or transfer all or a part of its interest in the Facility provided the purchaser or transferee agrees to assume OJT's obligations under this Agreement. 11.7 Representatives of Parties (a) Interstate hereby designates Ed Jertson as project manager with respect to the Facility. OJT shall be entitled to deal with such project manager as the duly authorized representative of Interstate with respect to all actions to be taken by Interstate. Interstate reserves the right to change the designation of the project manager from time to time upon advance written notice to OJT. (b) OJT hereby designates Breen Turley as project manager with respect to the Facility. Interstate shall be entitled to deal with such project manager as the duly authorized representative of OJT with respect to all actions to be taken by OJT. OJT reserves the right to change the designation of project manager from time to time upon advance written notice to Interstate. 11.8 Article and Section Headings The use of Article and Section headings herein is merely for convenience of reference and shall not be construed to limit, broaden or affect the meaning of the provisions contained in each paragraph. The illegality or invalidity of any provisions of this Agreement shall not impair, affect or invalidate the other provisions of this Agreement. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by one of their duly authorized officers, effective as of the date first above written. Executed in the presence of: INTERSTATE POWER COMPANY /s/ J. C. McGowan By /s/ Dale R. Sharp Date: 12/18/95 V.P. Power Production ORBA-JOHNSON TRANSSHIPMENT COMPANY By ORBA Transshipment Corporation of Iowa, a Partner /s/ W. Breen Turley By /s/ Jeffry D. Love Date: 12/20/95 V.P. By Johnson Bros. Transshipment Corporation of Iowa, Partner /s/ W. Breen Turley By /s/ Walter D. Johnson Date: 12/20/95 Pres. FORMULA Invoicing will be monthly beginning on January 1 and ending on September 1. The invoice amount will be the resultant of the Annual Shipping Estimate Tonnage divided by 9 (months) times the effective rates per ton as set out in Article III and shown in Example 1. Adjustments for variations between actual and projected tonnage will be resolved by December 31st of the current fiscal year. OJT may request in writing an extension of the adjustment time not later than December 1. Interstate may not unreasonably delay or withhold its approval. EXAMPLE 1 ANNUAL SHIPPING ESTIMATE x 1.0125 550,000 Tons TIMES X 1/2 MOISTURE FACTOR 1.0125 TIMES X BASE RATE $2.25/Ton TIMES X ESCALATION PRODUCER PRICE INDEX (all commodities) 125.5 (December, 1995) DIVIDED BY / PRODUCER PRICE INDEX (all commodities) 121.9 (December, 1994) EQUALS = SUBTOTAL $1,289,971.93 PLUS + HARBOR SERVICE RATE $0.259/Ton TIMES X ANNUAL SHIPPING ESTIMATE 550,000 TIMES X 1/2 MOISTURE FACTOR 1.0125 EQUALS = SUBTOTAL $ 144,230.63 TOTAL $1,434,202.56 DIVIDED BY / 9 MONTHS 9 EQUALS = ACTUAL MONTHLY INVOICE $ 159,355.84 1. 55O,OOO is the projected tonnage for 1996. 2. Harbor Service ($0.259) is the average cost as bid by the Harbor Service. 3. The Producer Price Index (all commodities) was 121.9 in December, 1994, and projected Producer Price Index (all commodities) for December, 1995, is an estimate. EXAMPLE 2 COAL AT OJT ON 5-31-96 50,000 Tons TIMES X 1/2 MOISTURE FACTOR 1.0125 TIMES X BASE RATE $2.25/Ton TIMES X PRODUCER PRICE INDEX (all commodities) 125.5 (December, 1995) DIVIDED BY / PRODUCER PRICE INDEX (all commodities) 121.9 (December, 1994) EQUALS = SUBTOTAL $ 117,270.18 PLUS + HARBOR SERVICE RATE $0.259/Ton TIMES X ANNUAL SHIPPING ESTIMATE 50,000 TIMES X 1/2 MOISTURE FACTOR 1.0125 EQUALS = HARBOR SERVICE CHARGES $ 13,111.88 SUBTOTAL $ 130,382.06 DIVIDED BY / TWO 2 ACTUAL CHARGES FOR REMAINING COAL $ 65,191.03 1. 5O,OOO is an estimate. 2. Harbor Service is the average cost as bid. 3. The Producer Price Index (all commodities) of 124.0 is an estimate. EX-10 4 EX-10.b AMENDED AND RESTATED COAL TRANSSHIPMENT AGREEMENT By and Between INTERSTATE POWER COMPANY and ORBA-JOHNSON TRANSSHIPMENT COMPANY December 20, 1979 As of October 3, 1979 AMENDED AND RESTATED COAL TRANSSHIPMENT AGREEMENT Table of Contents ARTICLE I. Duties of OJT; Scope 1.1 Acquisition of Facility 1.2 General Duties 1.3 Start-up of Operations 1.4 Annual Operating Budget; Estimated Operating Charge Per Ton 1.5 Limitation on OJT Obligations II. Duties and Responsibilities of Interstate 2.1 General Duties 2.2 Shipping Estimate 2.3 Minimum Tonnage III. Compensation; Payment Terms 3.1 Amount of Compensation for OJT Services 3.2 Definition of Financial Terms 3.3 Payments During 1979 3.4 Payment during 1980 and Thereafter 3.5 Payment of Usage Fee 3.6 Reconciliation and Verification IV. Third Party Coal 4.1 Authorization 4.2 Fees for Third Party Coal 4.3 Expenses of Third Party Coal 4.4 Priority of Interstate Coal 4.5 Procedures for Third Party Coal 4.6 Third Party Coal Revenues After Expiration of Term 4.7 Competitive Ventures V. Special Arrangements 5.1 Prohibition on Other Activities 5.2 Contracts with Venture Partners and Affiliates 5.3 Obligations of Orba and JBC 5.4 Responsibility for Interstate Coal 5.5 Disposition of Excess Property VI. Indemnities 6.1 Indemnification by OJT 6.2 Indemnification by Interstate 6.3 Application of Available Insurance; Waiver of Subrogation VII. Term and Termination 7.1 Initial Term; Extended Terms 7.2 Termination for Delay in Start-up, Lack of Facility Financing or Litigation VIII. Defaults 8.1 Events of Default 8.2 Remedies IX. Insurance; Casualty; Condemnation 9.1 OJT Coverages 9.2 Casualty 9.3 Condemnation X. Force Majeure XI. Resolution of Disputes; Arbitration XII. Representations and Warranties 12.1 Interstate Representations 12.2 OJT Representations XIII. Miscellaneous 13.1 Delays 13.2 Notices 13.3 Entire Subject Matter 13.4 Governing Law 13.5 Binding Nature 13.6 Assignment 13.7 Representatives of Parties 13.8 Article and Section Headings AMENDED AND RESTATED COAL TRANSSHIPMENT AGREEMENT THIS AGREEMENT, made on the 3rd day of December, 1979, and effective as of October 3, 1979, by and between INTERSTATE POWER COMPANY, a Delaware corporation having its principal office at 1000 Main Street, Dubuque, Iowa 52001 ("Interstate"); and ORBA-JOHNSON TRANSSHIPMENT COMPANY, an Iowa joint venture having addresses c/o ORBA CORPORATION, One Gothic Plaza, Fairfield, New Jersey 07006, and c/o JOHNSON BROS. CORPORATION, P.O. Box 1002, Litchfield, Minnesota 55355 ("OJT"). W I T N E S S E T H: WHEREAS, Interstate has entered into an agreement (the "Facility Development Agreement") with ORBA-JOHNSON SYSTEMS, INC. ("OJS") for the construction and development of a rail-to-barge coal transloading and storage facility located on the right descending bank of the Mississippi River at River Mile 371, north of Keokuk, Iowa (hereinafter referred to as the "Facility") on the real property described in Schedule A annexed hereto; and WHEREAS, OJT is a joint venture formed pursuant to a Partnership Agreement, dated as of October 3, 1979, between ORBA TRANSSHIPMENT CORPORATION OF IOWA, an Iowa corporation ("O-Sub"), which is a wholly- owned subsidiary of ORBA CORPORATION ("ORBA"), and JOHNSON BROS. TRANSSHIPMENT CORPORATION OF IOWA, an Iowa corporation ("J-Sub"), which is a wholly-owned subsidiary of JOHNSON BROS. CORPORATION ("JBC"); and WHEREAS, the Facility Development Agreement provides for the purchase by Interstate or its designee of the Facility upon the completion thereof; and WHEREAS, the Facility is now complete and has been accepted by Interstate, and Interstate wishes to designate OJT under the Facility Development Agreement as the purchaser of the Facility, and to engage OJT and the Facility for the receiving, storage and transshipment of coal, and OJT is willing to so engage itself and the Facility, all on the terms hereinafter set forth; and WHEREAS, Interstate and OJT have previously entered into a Coal Transshipment Agreement, dated as of October 3, 1979 (the "Original Transshipment Agreement") and now desire to amend and restate the terms of the Original Transshipment Agreement as hereinafter set forth, all effective as of October 3, 1979. NOW THEREFORE, in consideration of the premises, and of the mutual covenants and agreements of the parties set forth herein, the parties hereto agree as follows: ARTICLE I DUTIES OF OJT; SCOPE 1.1 Acquisition of Facility. Interstate hereby designates OJT as its designee to acquire the Facility from OJS pursuant to the Facility Development Agreement and OJT agrees to use its best efforts to acquire the Facility and to make the Facility available pursuant hereto. In addition, OJT shall use its best efforts to obtain long-term financing for such acquisition. 1.2 General Duties. During the term of this Agreement and following acquisition of the Facility, OJT will operate, manage and maintain the Facility and all Mobile Equipment (hereinafter defined) Inventory Items (hereinafter defined) and other supplies and equipment acquired by it by purchase or lease for use in performing its obligations hereunder (which items, together with the Mobile Equipment and Inventory Items, are hereinafter collectively referred to as the "Ancillary Hardware") in a good and workmanlike manner in accordance with sound and customary practices in the industry. OJT shall dedicate all reasonable efforts to the proper and efficient management of the Facility and the transshipment operations in a manner consistent with the reasonable requirements of Interstate, and subject to the conditions and limitations contained in this Agreement, including limitations relating to the reasonable receiving, storage and loading capacities of the Facility and Ancillary Hardware, OJT shall receive, store and transship through the Facility all of the coal which Interstate may tender to it for transshipment. The parties acknowledge and agree that the factors listed on Schedule 1.2 hereof relating to the construction and design of the Facility are the limitations which determine the reasonable receiving, storage and loading capacities of the Facility and Ancillary Hardware. As used herein, "Interstate Coal" shall mean all coal owned by Interstate tendered for transshipment through the Facility and intended for use at any generating plant owned by Interstate. By way of amplification and not by way of limitation of the foregoing, OJT shall: (a) Operate, service and maintain the Facility and Ancillary Hardware and the components and equipment thereof in a manner comparable to that which is employed by other concerns similarly situated, having due regard, however, for the operational requirements of the Facility and the Ancillary Hardware and the requirements of Interstate as outlined herein and in the Shipping Estimate; (b) Form and maintain an organization of qualified personnel and/or subcontractors capable of meeting the reasonable requirements of Interstate for the storage and transshipment of coal as set forth on the Shipping Estimate, as in effect from time to time; (c) Procure (subject to the prior approval of Interstate as provided in Sections 1.3 and 1.4 hereof) and maintain an inventory of spare parts, supplies, equipment and tools (hereinafter referred to as "Inventory Items") to support the operation of the Facility; (d) Maintain accurate accounting and cost records in reasonable detail and prepare and submit the Annual Operating Budget hereinafter referred to, together with periodic updates and quarterly reports showing variance of actual cost from the Annual Operating Budget; (e) Keep the Facility and the Ancillary Hardware and the components thereof in good operating order and perform in a timely manner any repairs and service to the Facility and Ancillary Hardware and their components as shall be reasonably required to keep the Facility and Ancillary Hardware in usable condition for the intended purposes; (f) Comply in all material respects with all applicable laws, ordinances, rules and orders of any court or other governmental authority with respect to the maintenance and operations of the Facility and Ancillary Hardware and with any reasonable operational regulations and procedures as will not unduly interfere with the operation of the Facility and as shall be mutually agreed upon in writing by Interstate and OJT; (g) Procure and maintain in effect the insurance required to be provided by OJT pursuant to Section 9.1; and (h) Take such action as the designee of Interstate, as shall be reasonable to enforce the warranties with respect to design, construction and installation of the Facility available pursuant to the Facility Development Agreement and the subcontracts thereunder. 1.3 Start-up of Operations. The parties acknowledge that in order to be fully operational as a coal storage and transshipment facility, it will be necessary for OJT to obtain an adequate supply of Inventory Items (as defined in Section 1.2(c)) and certain bulldozing and other mobile equipment (the "Mobile Equipment"). OJT shall promptly provide Interstate with its estimate of the Inventory Items and Mobile Equipment (and estimated costs thereof) initially required for operation of the Facility, which shall be subject to the approval of Interstate. After such approval, OJT shall promptly procure such Inventory Items and Mobile Equipment, either by purchase or under lease, on such basis as OJT and Interstate may agree. Additions or replacements of the Inventory Items and Mobile Equipment shall be made by OJT as and when required for the proper and prudent operation of the Facility, provided that the cost of any such items acquired during any Fiscal Year shall either have been included in the Annual Operating Budget for such Fiscal Year or shall otherwise have been approved by Interstate. 1.4 Annual Operating Budget; Estimated Operating Charge Per Ton. (a) On or before December 1, 1979 and December 1st of each succeeding year during the Term, OJT shall submit to Interstate its itemized written estimate of the Reimbursable Costs, as hereinafter defined, for providing the services required hereunder for the succeeding Fiscal Year (herein referred to as the "Annual Operating Budget"). The Annual Operating Budget shall be limited to said Reimbursable Costs and shall not include the Base Charge per Ton, as hereinafter defined, which shall be payable to Interstate under all circumstances until this Agreement is terminated as provided in Articles VII or VIII hereof. In addition, commencing with 1980, each Annual Operating Budget shall also contain a computation of the "Estimated Operating Charge Per Ton", which shall be the per ton charge derived by dividing the Reimbursable Costs shown on the Annual Operating Budget, by the greater of the Minimum Interstate Tonnage or the number of tons of Interstate Coal shown on the Shipping Estimate. Interstate shall have the right to dispute such Annual Operating Budget, by written notice to OJT within thirty (30) days after the receipt thereof, specifying its objection. If any such written objections are submitted, and the parties are unable to resolve such objections within thirty (30) days after submission thereof, the matter shall be submitted to arbitration as hereinafter provided. The submission of any such objections to arbitration shall not relieve Interstate from its obligation to make interim payments of the Estimated Operating Charge Per Ton required by such Annual Operating Budget, as provided in Section 3.4 hereof, subject to adjustment as determined by said arbitration. (b) OJT may revise the Annual Operating Budget (and the Estimated Operating Charge Per Ton) not more frequently than quarterly, based upon actual or projected variations from its prior estimates or from the Shipping Estimates of Interstate or any Third Party User (hereinafter defined). Any such revision shall be subject to the review and objection of Interstate in accordance with the provisions of Section 1.4(a) above, provided that subsequent interim payments of the Estimated Operating Charge Per Ton shall be made on the basis of such revision, subject to credit to Interstate for excess prior payments or reimbursement to OJT for deficient prior payments, as provided in Section 3.6 hereof. 1.5 Limitations on OJT Obligations. Notwithstanding any other provision hereof, OJT shall have no liability or obligation to Interstate, and OJT shall not be deemed in default hereunder, with respect to any of the following matters: (a) Any operating or other problems, delays, costs or expenses incurred by Interstate due to Force Majeure conditions, or due to the tender of coal by Interstate or any other party in excess of the Shipping Estimate or the reasonable receiving, storage or loading capacities of the Facility and Ancillary Hardware; (b) Any loss, cost, expense or damage arising out of or attributable to operational requests or directives of Interstate or of any railroad or barge line serving the Facility other than as contemplated hereby; (c) Any loss, cost, expense or damage to the Facility or Ancillary Hardware or any property of Interstate except (i) to the extent otherwise provided in Article IX hereof, and (ii) those matters as to which OJT has indemnified Interstate pursuant to Section 6.1 hereof; (d) Any incidental, special or consequential damages of any nature whatsoever incurred by Interstate; or (e) Any modifications, additions or improvements to the Facility or Ancillary Hardware required (i) to bring the Facility or Ancillary Hardware into compliance with any present or future laws, regulations or ordinances of any federal, state or local governmental entity, except that, at the written request of Interstate, OJT shall use its best efforts to accomplish such modifications, additions or improvements required to bring the Facility into such compliance, so long as Interstate shall agree in writing in advance that the costs of doing so are Reimbursable Costs hereunder, and except that, if in accordance with the provisions of the Facility Development Agreement and the Subcontracts thereunder, OJS (or ORBA or JBC) would be obligated to provide modification, additions or improvements without cost to Interstate, OJT and, to such extent as shall be reasonable and appropriate, Interstate, each hereby covenants to enforce such rights as each, respectively, shall have under the Facility Development Agreement and said Subcontracts to cause OJS to fulfill such obligations, or (ii) to meet the operational requirements of Interstate in order to transship in excess of 1,000,000 tons of Interstate Coal in any Fiscal Year, or if such operational requirements are materially more burdensome on OJT than those contemplated hereunder as mutually agreed upon in writing between Interstate and OJT. ARTICLE II DUTIES AND RESPONSIBILITIES OF INTERSTATE 2.1 General Duties. During the Term of this Agreement, Interstate will cooperate with OJT in the performance of its duties under this Agreement, and in any event shall: (a) provide OJT with reasonably current reports of the scheduled arrival of trains and barges used for Interstate Coal; (b) Make the payments in the manner required by Article III hereof; (c) Obtain all required approvals or authorization, if any, of any governmental authority for the execution, delivery and performance of this Agreement or the utilization of the Facility and the Ancillary Hardware on the part of Interstate; and (d) to such extent as shall be reasonable and proper, take such action as may be directed by OJT or any lender providing the Facility Financing to enforce the warranties with respect to the design, construction and installation of the Facility available to Interstate pursuant to the Facility Development Agreement and subcontracts thereunder. Interstate hereby acknowledges that any such warranties are not enforceable against OJT. 2.2 Shipping Estimate. On or before November 1, 1979 and November 1st of each succeeding year during the Term, Interstate shall submit to OJT its written estimate of the anticipated number of tons of Interstate Coal to be delivered to and loaded out from the Facility, forecast on a monthly basis for the succeeding Fiscal Year (herein referred to as the "Shipping Estimate"). Interstate may revise the Shipping Estimate as frequently as required, and shall promptly notify OJT of such revisions. Interstate recognizes that its operational requirements do not permit the efficient operation or utilization of the Facility and agrees that Reimbursable Costs shall reflect its transloading requirements. 2.3 Minimum Tonnage. Interstate agrees that during each Fiscal Year during the Term hereof, it shall pay for the transshipment of no less than 800,000 tons of Interstate Coal (the "Minimum Interstate Tonnage") through the Facility. Unless and until this Agreement is terminated in accordance with the provisions of Article VII or Article VIII hereof, or Interstate is relieved of its obligation to pay the Operating Charge Per Ton under Section 8.2(b)(iii) hereof (but only to such extent), failure to transship all or any part of such Minimum Interstate Tonnage shall not under any circumstances relieve Interstate of the obligation to make the payments required by Article III hereof, which shall be computed and paid as if the Minimum Interstate Tonnage had been transshipped through the Facility, and the payment obligations of Interstate under Article III shall be absolute and unconditional and shall not be subject to any abatement, diminution, set-off, counterclaim, recoupment, agreement, defense, suspension, deferment, interruption, or other right which Interstate may have against OJT or any other person or entity for any reason whatsoever, including, without limitation, (a) any damage to, destruction, theft or loss of the Facility or any portion thereof, (b) any event of Force Majeure, (c) breach of any warranty of any seller or manufacturer of the Facility or the Ancillary Hardware, or any component thereof, (d) the physical failure of the Facility, the Ancillary Hardware or any component thereof due to inadequacy, condemnation, confiscation or public requisition of the Facility or the Ancillary Hardware or any portion thereof, (e) any claim as a result of business dealings between OJT and Interstate, (f) any circumstance which might give rise to a claim by Interstate of commercial frustration, or (g) any insolvency, bankruptcy, reorganization or similar proceedings by or against Interstate. ARTICLE III COMPENSATION; PAYMENT TERMS 3.1 Amount of Compensation for OJT Services. As compensation for its services hereunder, Interstate shall pay OJT during each Fiscal Year an amount equal to: (i) a Base Charge Per Ton for each ton of the Minimum Interstate Tonnage; plus (ii) an Operating Charge Per Ton for the greater of (1) each ton of Minimum Interstate Tonnage, or (2) each ton of Interstate Coal transshipped through the Facility during such Fiscal Year; plus (iii) a Usage Fee for each ton of Interstate Coal in excess of 1,000,000 tons transshipped through the Facility in each Fiscal Year during the Initial Term, and for each ton of Interstate Coal so transshipped in each Fiscal Year during any Extended Term. 3.2 Definition of Financial Terms. (a) "Base Charge Per Ton" shall mean the per ton charge derived by dividing (i) the aggregate amount of all debt service payments due in any Fiscal Year with respect to the Facility Financing (including any balloon payments), by (ii) the Minimum Interstate Tonnage. (b) "Facility Financing" shall mean any indebtedness incurred by OJT to finance the acquisition of the Facility, any portion of the Ancillary Hardware and certain of the start-up expenses, and any renewals or refinancings thereof, including any construction financing assumed by OJT in connection with the acquisition of the Facility (the "Construction Financing"). (c) "Estimated Monthly Interstate Tonnage" shall be the greater of (i) 67,000 tons, or (ii) one-twelfth (1/12th) of the aggregate annual tons of Interstate Coal shown on the Shipping Estimate then in effect. (d) "Estimated Operating Charge Per Ton" shall be the annual Operating Charge Per Ton as estimated from time to time by OJT on the basis of the Annual Operating Budget and the Shipping Estimate, all in accordance with Section 1.4 hereof. (e) "Operating Charge Per Ton" shall mean total aggregate Reimbursable Costs incurred by OJT during any Fiscal Year, divided by the number of tons of Interstate Coal transshipped during such Fiscal Year. (f) "Fiscal Year" shall mean the year or other fiscal period ending on December 31st, or such other date as OJT and Interstate may agree in writing. In the event that any Fiscal Year during the Term of this Agreement is less than twelve full calendar months, then all computations and calculations hereunder dependent upon passage of time during a full Fiscal Year shall be equitably pro-rated; and (g) "Reimbursable Costs" shall mean all costs reasonably incurred by OJT in the performance of its services hereunder, including services for the handling, storage and transshipment of Third Party Coal pursuant to Article IV hereof, except those otherwise specifically limited by the terms of this Agreement. (h) "Ton(s) ... transshipped through the Facility" during any Fiscal Year when used as the basis for any computations under this Agreement shall mean the aggregate number of tons of coal received at the Facility during such Fiscal Year. Computation of the number of tons shall be based upon the weight records of the incoming railroads, or on such other basis as OJT and Interstate may agree in writing. (i) "Usage Fee" shall mean initially a fee of $.25 per ton for each ton of Interstate Coal over 1,00,000 Tons transshipped through the Facility in any Fiscal Year during the Initial Term commencing with 1980, and for each ton of Interstate Coal transshipped through the Facility in any Fiscal Year during any Extended Term, provided that the Usage Fee shall be increased or decreased, as the case may be, on an annual basis commencing with such Fee due during 1981 and succeeding Fiscal Years in such a manner that the amount due during such Fiscal Year shall be determined by multiplying the Usage Fee in effect for 1980 by a fraction, the numerator of which is the Gross National Product Implicit Prices Deflator, as published by the U.S. Department of Commerce Bureau of Economic Analysis in the "Survey of Current Business" (the "GNP Deflator") for the last quarter of the preceding Fiscal Year, and the denominator of which is such GNP Deflator for the last calendar quarter of 1979. 3.3 Payments During 1979. Interstate shall make the following payments to OJT during 1979: Due Date Amount October 15, 1979 $250,000 November 1, 1979 535,000 December 1, 1979 525,000 The foregoing payment schedule shall remain in effect until submission of the 1979 Operating Budget, which shall thereafter be subject to monthly revision by OJT, and all payments due in 1979 shall be based upon the Operating Budget then in effect. The 1979 Operating Budget and any revisions thereof shall be subject to the arbitration provisions of Section 1.4. All such payments shall be made in immediately available funds and shall be credited against the obligations of Interstate to pay the Base Charge Per Ton and Operating Charge Per Ton on all tons of Interstate Coal transshipped during 1979. The parties acknowledge and agree that the Minimum Interstate Tonnage for 1979 to be utilized in measuring the per ton charge incurred during 1979 shall be 200,000 Tons. Any excess or deficiency of the amounts paid by Interstate during 1979 shall be reconciled, verified and adjusted in accordance with Section 3.6. 3.4 Payments During 1980 and Thereafter. (a) On the first day of each month, commencing with January, 1980, Interstate shall pay to OJT, or its designee, an amount equal to the Base Charge per Ton multiplied by 67,000 tons, which is the allocable share of the Minimum Interstate Tonnage attributable to each month. The parties acknowledge that OJT intends to designate an escrow agent to receive all payments due from Interstate pursuant to this Section 3.4(a) and that all such payments received by such escrow agent are to be applied to the payments due from OJT with respect to the Facility Financing. OJT agrees that all investment income, if any, earned on any such payments deposited with such escrow agent, net of the costs of such escrow agent's services, may be paid out by such escrow agent to OJT from time to time, and the amount thereof so paid to OJT shall be credited against the obligation of Interstate for the next succeeding monthly payment due pursuant to Section 3.4(b). OJT or the escrow agent shall promptly notify Interstate of the payment of any such amount. (b) On the first day of each month commencing with January, 1980, Interstate shall pay to OJT an amount equal to the Estimated Operating Charge Per Ton multiplied by the Estimated Monthly Interstate Tonnage. On or about the 20th of each month, OJT shall invoice Interstate for the payment with respect to the Operating Charge Per Ton due on the first of the next succeeding month. The monthly payment due under this Section 3.4(b) shall be made in immediately available funds and may be adjusted no more frequently than quarterly on the basis of revisions to the Annual Operating Budget, Estimated Operating Charge Per Ton and the Shipping Estimate. In the event that the Annual Operating Budget is revised, as provided in Section 1.4(b), then all monthly payments due under this Section 3.4(b) after the submission of such revised Annual Operating Budget, Estimated Operating Charge Per Ton and/or Shipping Estimate shall be based upon such revision, provided that Interstate shall be entitled to credit for any excess payments made pursuant to this Section 3.4(b) prior to such revisions against the next monthly payment(s) due under this Section 3.4(b) (and not against any payments due under Section 3.4(a)), or Interstate shall promptly pay OJT any deficiency in such prior payments arising on account of such revisions. OJT shall use reasonable efforts to invest such amounts received from Interstate pursuant to this Section 3.4(b) in short-term United States Government securities or in a "Business Investment Account" or its equivalent with the escrow agent or agents referred to in Section 3.4(a), and any investment income received by OJT pursuant to said investment shall be credited to Interstate's obligations under this Section 3.4(b) for the month following the month of receipt of such income. (c) No objection by Interstate to the annual Operating Budget or the Estimated Operating Charge Per Ton, or any revision thereof, nor to any computation of the Transshipment Fee or other payment due to OJT hereunder, shall entitle Interstate to withhold or delay payment to OJT in accordance with the terms hereof. Any such objection shall be resolved by the parties as provided herein, either informally or pursuant to the procedures for arbitration set forth in Article XI, provided, however, that Interstate shall have no right to object to payments required pursuant to Section 3.4(a) or to withhold or delay any such payments. 3.5 Payment of Usage Fee. OJT shall promptly notify Interstate during the Initial Term when the number of tons of Interstate Coal transshipped during any Fiscal Year has exceeded 1,000,000 tons. Thereafter, on or before the tenth day of the month following the remaining months of the Fiscal Year, and on or before the tenth day of each month during any Extended Term, OJT shall compute and provide a written statement to Interstate of the amount of Usage Fee due for the prior month, which amount shall be paid to OJT within twenty (20) days after receipt of such statement. 3.6 Reconciliation and Verification. (a) Not later than sixty (60) days after the end of each Fiscal Year, OJT shall prepare and submit to Interstate (i) an audited statement of its Reimbursable Costs actually incurred with respect to such Fiscal Year in providing its services hereunder (hereinafter referred to as the "Operating Statement"), with itemized statements conforming to the cost classification of its Annual Operating Budget, (ii) a statement of the actual amounts due and payable with respect to the Facility Financing during such Fiscal Year, (iii) a computation of the number of Tons of Interstate Coal transhipped through the Facility during such Fiscal Year, (iv) a computation of the aggregate Base Charge Per Ton and Operating Charges Per Ton due from Interstate to OJT for such Fiscal Year, and (v) a computation of the Usage Fee earned during such Fiscal Year. Subject to possible adjustment arising out of the review provided for in subsection (b) below, Interstate shall pay to OJT (or OJT shall pay or apply to subsequent obligations of Interstate to pay the Operating Charge Per Ton or the Usage Fee, as the case may be), within twenty (20) days after submission of the Operating Statement and such other computations, the difference between the amounts shown to be due from Interstate with respect to the Operating Charge Per Ton, Base Charge Per Ton and Usage Fee on the basis of such Operating Statement and other computations, and the aggregate interim payments to OJT by Interstate with respect to such Fiscal Year. (b) Interstate shall have a period of sixty (60) days from the date of submission of the Operating Statement and such other computations to give written notice to OJT of any exceptions to such information, specifying each item with respect to which an exception is raised, and the grounds for the exceptions, provided, however, that Interstate shall have no such right to raise any exception with respect to any payments required to be made pursuant to Section 3.4(a). The Operating Statement and such other computations shall become final and binding upon the parties as to those items to which no exception is made during such period, and as to those items to which exception is taken, such items not resolved by the parties in accordance with the provision of Article XI. (c) OJT shall keep and have audited all books and records of its Reimbursable Costs, costs for Facility Financing and other financial data required hereunder in accordance with this Agreement and generally accepted accounting principles consistently applied, and such books and records shall be available, at reasonable times and upon reasonable notice, for audit and review by Interstate or by any nationally recognized independent accounting firm engaged by Interstate, provided that the right to such audit shall not affect the obligation to make payments in the manner required by Sections 3.3, 3.4 and 3.5. OJT shall maintain satisfactory records of the time spent by its personnel in the performance of services under this Agreement, and shall furnish to Interstate such statements, invoices, receipts, vouchers, and other information as may be reasonably required by Interstate to verify the Reimbursable Costs incurred by OJT. (d) OJT shall use its best efforts to include in any contracts with subcontractors and vendors which are on a "cost-plus" basis, provisions as to the verification of costs which are similar to those contained in this Article III. (e) OJT shall submit to Interstate such evidence, including waivers of lien from subcontractors, as Interstate may reasonably request, that all payrolls, material bills, and other obligations theretofore incurred by OJT in connection with the performance of its services have been paid. ARTICLE IV THIRD PARTY COAL 4.1 Authorization. The parties acknowledge that the Facility and Ancillary Hardware have a capacity for storage and transloading of coal exceeding the anticipated requirements of Interstate. Accordingly, subject to the prior written approval of Interstate as to each agreement for handling the coal ("Third Party Coal") owned by others ("Third Party Users"), and all of the terms and conditions thereof (which approval may not be unreasonably withheld or delayed), OJT may contract with Third Party Users for the transloading of Third Party Coal through the Facility. OJT shall use its best efforts to locate potential Third Party Users of the Facility and to negotiate satisfactory arrangements with them, provided that OJT shall have no liability or obligation to Interstate in the event that OJT is unable to locate Third Party Users, and provided further that OJT shall have no obligation to make additions to the Facility or Ancillary Hardware to accommodate the transshipment of Third Party Coal. 4.2 Fees for Third Party Coal. (a) Any gross revenues received by OJT for the transloading of Third Party Coal through the Facility during the Initial Term, or either Extended Term hereof, shall be shared and credited two- thirds (2/3rds) for the account of Interstate and one-third (1/3rd) for the account of OJT. (b) The amount of any such Third Party Coal revenues actually received by OJT which is due to Interstate shall be promptly paid to Interstate, or may, at the option of Interstate, be credited against payments due (i) on account of the Base Charge Per Ton or the Usage Fee due to OJT pursuant to Section 3.4(a) hereof, but only to the extent that the funds so applied as a credit have been deposited in an escrow account solely for the benefit of the lenders providing the Facility Financing, or (ii) on account of the Operating Charge Per Ton or the Usage Fee due to OJT pursuant to Sections 3.3, 3.4(b) or 3.5 hereof. At the request of Interstate, OJT shall make such escrow account deposits. Promptly after the end of each month, OJT shall provide Interstate with written reports of the tons of Third Party Coal transloaded through the Facility, and the fees paid or accrued with respect thereto. 4.3 Expenses of Third Party Coal. All expenses in locating potential Third Party Users and of negotiating arrangements with them shall be borne by OJT, and all costs of receiving, storage and transshipment of Third Party Coal (other than costs required for additions to the Facility or Ancillary Hardware required to transship Third Party Coal) shall be deemed to be part of the Reimbursable Costs and paid by Interstate as part of the Operating Charge Per Ton. The Annual Operating Budget prepared by OJT shall be appropriately modified to reflect any gain or loss of Third Party Coal during any Fiscal Year. 4.4 Priority of Interstate Coal. OJT acknowledges that, to the maximum extent feasible and consistent with agreements with Third Party Users which have been approved by Interstate, Interstate Coal shall be entitled to priority over Third Party Coal in the receiving, storage and loading functions of the Facility and Ancillary Hardware. 4.5 Procedures for Third Party Coal. OJT shall develop and submit for the approval of Interstate, prior to the transloading of any Third Party Coal, procedures for the handling, segregation and storage of Third Party Coal and determining the respective amounts of Interstate Coal and Third Party Coal received and stored at and shipped from the Facility, and shall maintain appropriate records relating to such matters. 4.6 Third Party Coal Revenues After Expiration of Term. Following the Initial Term or the First Extended Term, in the event that Interstate does not elect to extend this Agreement for the First Extended Term and/or the Second Extended Term, then during the period as to which Interstate has not elected to extend, OJT shall pay to Interstate, within 120 days after the end of each Fiscal Year, or at such other time or times as the parties may agree, an amount equal to 50% of the net pre-tax profit earned by OJT with respect to all tons of Third Party Coal transshipped through the Facility during such Fiscal Year pursuant to agreements with such Third Party Users in effect for the Facility at the end of the Initial Term, or First Extended Term, as the case may be, for ten or five years, respectively. 4.7 Competitive Ventures. OJT, ORBA and JBC agree that during the Term hereof, none of them, nor any subsidiary of any of them, shall have any material financial interest in any coal transshipment facilities located on the Mississippi River within 200 river miles of the Facility unless all proposals for the transshipment of coal through such facilities shall first have been submitted to Interstate for approvals as Third Party Coal contracts for the Facility, or any such potential Third Party User shall have certified to OJT and Interstate in writing its objections to use of the Facility, specifying the reasons therefor provided that nothing contained herein shall limit the right of either ORBA or JBC, or any affiliate of either, from participating in the design, construction or erection of any coal handling facilities, nor shall the provision hereof extend to any contact with a single transshipper for an annual volume of coal in excess of the then remaining unused reasonable capacity of the Facility. ARTICLE V SPECIAL ARRANGEMENTS 5.1 Prohibition on Other Activities. Neither O-Sub nor J-Sub shall engage in any material business activities, or incur any material liabilities, except in connection with its participation in OJT. In addition, without the prior written consent of Interstate, OJT shall not engage in any material business activities, either at the Facility or elsewhere, other than the storage and transshipment of Interstate Coal approved by Interstate. 5.2 Contracts with Venture Partner and Affiliates. Any contracts, agreements or arrangements between OJT and any of O-Sub, J-Sub, ORBA or JBC, or any entity controlled by or controlling any such corporation shall be performed on a cost-plus basis on terms satisfactory to Interstate. 5.3 Obligations of ORBA and JBC. In the event that OJT becomes obligated or liable to Interstate hereunder and is unable to fully discharge such obligation or liability, then each of ORBA and JBC have agreed to advance funds to OJT to discharge any such obligation or liability thus undischarged (but no more than $1,000,000 in the aggregate, or $500,000 each as to ORBA and JBC respectively, less (i) the amount of such liability discharged by OJT, and (ii) in each case less the amount of funds otherwise advanced by ORBA and JBC in O-Sub and J-Sub, respectively, by way of equity, debt or open account advance.) Notwithstanding the fact that employees and agents of JBC and ORBA may, from time to time, perform managerial or professional services for OJT related to the Facility, except as stated above, nothing herein shall impose any liability or other obligations upon JBC or ORBA, as parents of their respective subsidiaries which make up the joint venture of OJT and, except as expressly stated in this Section 5.3, Interstate agrees to look solely to such subsidiaries and OJT with respect to any damages, obligations or liabilities arising hereunder. In measurement of any damage assessed hereunder against OJT, there shall be allocated to OJT only such amount of damages as shall be commensurate with the responsibility which its fault bears to the aggregate of the circumstances which cause such damages to be incurred, provided that such limitation shall be effective only in such circumstances where Interstate shall be entitled to recover from all other parties at fault the balance of such damages not allocated to OJT. 5.4 Responsibility for Interstate Coal. Interstate and OJT acknowledge that Interstate is and shall be deemed for all purposes to be the owner of the Interstate Coal received and stored at the Facility and transloaded from the Facility, and that all risk of loss to such Interstate Coal, whether by casualty, disappearance or causes unknown, shall be borne by Interstate, except for loss caused solely by the willful misconduct or gross negligence of OJT or loss required to be indemnified by OJT pursuant to section 6.1. The parties shall develop mutually satisfactory written procedures for determining the number of tons of coal received at and transloaded from the Facility during any Fiscal Year and stored at the Facility at any time. 5.5 Disposition of Excess Property. In the event that OJT acquires the Facility or Ancillary Hardware and subsequently disposes of any portion of the property or rights so acquired, all proceeds received upon such disposition shall be promptly applied by OJT against the outstanding balance of the Facility Financing to the extent permitted by the lender thereof. Otherwise, such proceeds shall be applied as agreed in writing by Interstate and OJT. Notwithstanding the foregoing, proceeds of disposition of excess or obsolete Ancillary Hardware may be utilized to acquire replacement Ancillary Hardware. The provisions of this Section 5.5 are subject to the requirements of any agreements with any lenders providing the Facility Financing. ARTICLE VI INDEMNITIES 6.1 Indemnification by OJT. OJT hereby agrees to indemnify Interstate, its directors, officers, employees and agents from and against any and all claims, damages, demands, expenses, liabilities and losses of every kind, character and nature (other than incidental, special or consequential damages) asserted by or on behalf of any person, firm, corporation or governmental authority arising out of or resulting from the acts or omissions of OJT in breach or violation of the provisions of this Agreement, or on account of the willful misconduct or gross negligence of OJT. OJT also covenants and agrees at no expense to Interstate to indemnify and save Interstate and such of its related persons harmless of, from and against all costs and expenses (including reasonable counsel fees) incurred in investigating or defending against any such claims and demands, including those arising in any proceeding or action. In the event that any such claims or demands are asserted against Interstate or any of its related persons, Interstate shall give notice thereof to OJT within twenty (20) days thereafter, and OJT shall thereupon have the right and option to assume (and at the request of Interstate shall assume) the defense of any such claim or demands, including the right to compromise and settle the matter on such basis as it shall deem appropriate. Interstate and its counsel may, at the option of Interstate, participate in the defense, compromise and settlement of such claims or demands as to which OJT has assumed the defense, provided that Interstate shall bear the costs and expenses relating to such participation. Notwithstanding the foregoing, OJT shall not be required to indemnify and save Interstate and such of its related persons harmless with respect to any such claims, losses and the like otherwise described in this Section 6.1 (i) solely arising out of any willful or negligent acts or omissions of Interstate or any of such of its related persons, (ii) to the extent that such claims or losses exceed the amount of the insurance proceeds available therefor from the insurance to be procured and maintained by OJT, as set forth in Section 9.1 hereof, or (iii) as to which Interstate is obligated to indemnify OJT pursuant to Section 6.2 hereof. Nothing herein shall limit or impair the rights of Interstate to obtain damages or any other remedy expressly permitted pursuant to Section 8.2 hereof. 6.2 Indemnification by Interstate. Interstate, for and on behalf of itself and its insurers, successors and assigns, hereby covenants and agrees, at no expense to OJT or the other indemnified parties set forth below, to indemnify and save OJT, its joint venture participants, ORBA and JBC, and the respective officers, directors, employees, and agents of any of them, as well as the lenders providing the Facility Financing harmless of, from and against, any and all claims, damages, demands, expenses, liabilities and losses of every kind, character and nature (other than incidental, special or consequential damages) asserted by or on behalf of any person, firm, corporation or governmental authority arising out of, resulting from or in any way connected with (i) the acts or omission of Interstate in breach of its obligations hereunder, or (ii) the willful misconduct or gross negligence of Interstate. Interstate also covenants and agrees to indemnify and save OJT, and any other indemnified party set forth above, harmless of, from and against all costs and expenses (including reasonable counsel fees) incurred in investigating or defending against any such claims and demands, including those arising in any proceeding or action. In the event that any such claims or demand are made against OJT or any of such other persons, the persons claiming indemnity shall give notice thereof to Interstate within twenty (20) days thereafter, and Interstate shall thereupon have the right and option to assume (and at the request of the indemnified party shall assume) the defense of any such claims, demands, action or proceeding based upon or arising out of any such claim or demand. The obligations of Interstate to OJT hereunder (but not to the lenders providing the Facility Financing) shall not extend to any claims, damages, demands, expenses, liabilities or losses of any kind for which OJT is obligated to indemnify Interstate or its related persons pursuant to Section 6.1 hereof. 6.3 Application of Available Insurance; Waiver of Subrogation. The obligations of the parties to provide the indemnification set forth above shall be reduced to the extent that proceeds are received under any insurance policies to cover any loss, cost or expense of any indemnified party. Each party waives for itself and any insurer engaged by it, any rights of subrogation whatsoever. ARTICLE VII TERM AND TERMINATION 7.1 Initial Term; Extended Terms. (a) The initial term of the Agreement shall commence as of October 3, 1979, and shall continue until May 30, 1996, subject to earlier termination as provided herein and in Article VIII (the "Initial Term"). (b) Interstate shall have the right to extend this Agreement beyond the Initial Term for an additional term of five (5) years ending May 30, 2001 (the "First Extended Term") and for an additional extended term of five (5) years ending May 30, 2006 (the "Second Extended Term"), all on the same terms and conditions as contained herein, provided that (i) the Usage Fee provided for in Section 3.5 shall apply to each ton on Interstate Coal transshipped during either such Extended Term, and (ii) there shall be no Base Charge per Ton, except with respect to Facility changes and additions agreed upon in writing by OJT and Interstate. Interstate shall exercise its options to extend by notice in writing to OJT not less than six months prior to the end of the Initial Term, or First Extended Term, as the case may be. 7.2 Termination for Delay in Start-Up, Lack of Facility Financing or Litigation. (a) Provided that no Facility Financing in addition to the Construction Financing has been consummated, in the event that the acquisition and start-up of the Facility is not accomplished by OJT on or before December 31, 1979, then either party may terminate this Agreement upon not less than ten (10) days' prior written notice. (b) In the event that OJT acquires the Facility on or before December 31, 1979, but Facility Financing in addition to the Construction Financing is not consummated by such date for any reason whatsoever, then upon not less than ten (10) days' prior written notice from either party this Agreement shall be terminated, and Interstate, or an entity designated by Interstate, shall purchase the Facility and Ancillary Hardware from OJT for a price equal to (i) the price paid or payable to OJS to purchase the Facility pursuant to the Facility Development Agreement, (ii) all Reimbursable Costs incurred by OJT in acquiring, owning and disposing of the Facility to the extent not covered by the payments required to be made by Interstate pursuant to Article 3 hereof, (iii) the costs of acquiring the Ancillary Hardware, and (iv) any amounts then due to OJT pursuant to any indemnity or other arrangements or agreements between Interstate and OJT. (c) If hereafter governmental regulatory jurisdiction were to be established over the execution, delivery and/or performance of this Agreement, by a final, non-appealable order of any governmental agency or court of competent jurisdiction and governmental regulatory approval or authority is not forthcoming within a period of one hundred twenty (120) days from the date of any such order becoming final and non- appealable, then, at the option of OJT, (i) Interstate, or an entity designated by it, shall purchase the Facility and all Ancillary Hardware owned by OJT, and all other assets of OJT (all of which shall be transferred free and clear of any liens securing the Facility Financing), and satisfy or assume all liabilities of OJT incurred in connection with the operation of the Facility and Ancillary Hardware and the performance of its services hereunder, other than OJT's liabilities for the Facility Financing or any liabilities incurred in violation or contravention of the provisions of this Agreement (the "Operating Liabilities") for a price equal to the aggregate amount of the higher of (A) or (B) below, plus the amount of the Operating Liabilities, and (ii) effective upon a conveyance of the Facility to Interstate or such designated entity and the release of any liens securing the Facility Financing, this Agreement shall terminate. Concurrently with tender of appropriate documents of transfer and conveyance, Interstate (or such entity), shall pay the purchase price thereof to OJT by a cash payment in an amount equal to the higher of (A) the Net Book Value of the Facility and Ancillary Hardware owned by OJT, as defined in Section 8.2 (a) (ii), or (B) the outstanding principal, interest and other charges (including prepayment premium, if any) payable with respect to the Facility Financing, and by satisfaction or assumption of the Operating Liabilities. (d) In the event that OJT acquires the Facility and successfully consummates or assumes the Facility Financing (including Construction Financing), and thereafter is ordered by any court or governmental agency of competent jurisdiction under a final, non- appealable order to transfer the Facility to any third party, then, effective upon such conveyance, this Agreement shall terminate, and Interstate shall purchase, for cash, all Ancillary Hardware owned by OJT, and other assets of OJT not required to be transferred all of which shall be transferred free and clear of any lien securing the Facility Financing, and shall pay OJT concurrently with such transfer and conveyance a cash payment in an amount equal to the excess of (i) the higher of the Net Book Value of the Facility and Ancillary Hardware and other assets transferred, or the aggregate amount of the outstanding principal, interest and other charges (including prepayment premium, if any), payable with respect to the Facility Financing (including the Construction Financing), plus in each case, all other amounts then due to OJT pursuant to this Agreement, over (ii) the cash payment received by OJT from the transferee in consideration of such conveyance of the Facility and any other properties or assets conveyed in connection therewith. In addition, concurrently with such conveyance, Interstate shall satisfy or assume all Operating Liabilities of OJT and secure or cause to be secured the release of any liens on the Facility or the Ancillary Hardware securing the Facility Financing. Any cash proceeds subsequently received by OJT from the transferee of the Facility and such other properties or assets on account of such conveyance shall be promptly turned over to Interstate. ARTICLE VIII DEFAULTS 8.1 Events of Default. Any one of the following occurrences shall be an "Event of Default" hereunder: (a) Either party shall: (i) Consent to the appointment of a receiver, trustee or liquidator of itself or of a substantial part of its property, or admit in writing its inability to pay its debts generally as they come due, or shall make a general assignment for the benefit of creditors; or (ii) File a voluntary petition in bankruptcy or a voluntary petition or an answer seeking reorganization in a proceeding under any bankruptcy laws (as now or hereafter in effect) or an answer admitting the material allegations of a petition filed against it in any such proceeding or, by voluntary petition, answer or consent, seek relief under the provisions of any other now-existing or future bankruptcy or other similar law (other than a law which does not provide for or permit the readjustment or alteration of its obligations hereunder) providing for an agreement, composition, extension or adjustment with its creditors; or (iii) Suffer the entry of an order, judgement or decree in any proceeding by any court of competent jurisdiction appointing, without its consent, a receiver, trustee or liquidator of such party or of any substantial part of its property, which shall remain in force undismissed, unstayed or unvacated for a period of ninety (90) days after the date of entry thereof; or (iv) Permit a petition against it in a proceeding under the Federal bankruptcy laws or other insolvency laws to be filed and not withdrawn or dismissed within sixty (60) days thereafter or, permit any court of competent jurisdiction to assume jurisdiction, custody or control of such party or of any substantial part of its property, which jurisdiction, custody or control shall remain in force unrelinquished, unstayed or unterminated for a period of sixty (60) days; or provided, however, that no such occurrence with respect to OJT or Interstate, respectively shall constitute an "Event of Default" hereunder where such occurrence has been caused, directly or indirectly, by any default by the other party of any of such other party's obligations hereunder; or (b) Interstate shall fail to make any payment required by Section 3.4(a) on the date such payment shall become due; or (c) Interstate shall fail to make any other payments required by Article III within ten (10) days after the same shall become due; or (d) Except as provided in Section 8.1(e) and provided that such failure is not due to Force Majeure cause, either party is in material default in the performance of any other covenant, agreement or undertaking to be performed by it pursuant to this Agreement, and such default shall continue for a period of thirty (30) days after notice thereof from the other party (or, if such default is not susceptible of being cured within thirty (30) days, such longer period as shall be required to cure the same through diligent effort, so long as the defaulting party is in good faith exercising diligent efforts to cure the same); or (e) OJT shall fail promptly to transship any Interstate Coal tendered pursuant and subject to the terms and provisions of this Agreement for transshipment, or shall fail to load out any Interstate Coal requested by Interstate from the Facility, provided that any such failure is not due to Force Majeure cause, or that any such failure is not cured by OJT within forty-five (45) days of notice of such failure by Interstate to OJT. 8.2 Remedies. (a) Upon the occurrence of an Event of Default on the part of Interstate, and so long as the same shall be continuing, OJT may, at its option, declare this Agreement to be in default, and at any time thereafter, so long as Interstate shall not have remedied all such outstanding Events of Default, OJT may do any one or more of the following: (i) terminate this Agreement; (ii) require that Interstate purchase the Facility and all Ancillary Hardware owned by OJT, and all other assets of OJT (all of which shall be transferred free and clear of any liens securing the Facility Financing) and satisfy or assume all liabilities of OJT incurred in connection with the operation of the Facility and the performance of its services hereunder, other than OJT's Facility Financing liabilities or liabilities incurred in violation or contravention of the provisions of this Agreement (the "Operating Liabilities"), for a price equal to the aggregate amount of the highest of (A),(B) or (C) below, plus the amount of the Operating Liabilities, and upon tender of appropriate documents of transfer and conveyance, Interstate shall pay the purchase price by a cash payment equal to the greatest of (A) the fair market value of the property purchased, as determined by independent appraisal, (B) the depreciated book value of the property purchased, as shown on the books of OJT (the "Net Book Value"), or (C) the outstanding principal, accrued interest and other charges (including prepayment premium, if any) payable with respect to the Facility Financing as of the date of purchase, and by satisfaction or assumption of the Operating Liabilities and shall secure or cause to be secured the release of any liens on the Facility or Ancillary Hardware securing the Facility Financing. The foregoing obligation of Interstate may be fulfilled by an entity designated by it. In the event of the exercise of OJT of its rights under this Subsection 8.2(a)(ii), the amount due under (C) above shall be paid in cash immediately upon such exercise, and the excess, if any, of (A) or (B) over such amount shall be paid immediately upon the determination of the purchase price; (iii) exercise any other legal or equitable right or remedy which may be available to it or proceed by appropriate arbitration or court action to enforce the terms hereof or to recover damages for the breach hereof. (b) Upon the occurrence of an Event of Default on the part of OJT, and so long as the same shall be continuing, Interstate may, at its option, declare this Agreement to be in default, and at any time thereafter, so long as OJT shall not have remedied all outstanding Events of Default, Interstate may do any one or more of the following: (i) with respect to defaults under Section 8.1(a), terminate this Agreement, provided that upon termination, Interstate, or any entity designated by it in writing shall have the right and option to purchase the Facility and all Ancillary Hardware owned by OJT, and all other assets of OJT, provided that in connection therewith Interstate shall satisfy or assume the Operating Liabilities and upon tender of appropriate documents of transfer and conveyance Interstate shall pay the purchase price by a cash payment equal to the greater of (A) the Net Book Value of the property purchased, or (B) the outstanding principal, interest and other charges (including prepayment premium, if any) payable with respect to the Facility Financing as of the date of purchase and by satisfaction or assumption of the Operating Liabilities, and shall secure or cause to be secured the release of any liens on the Facility or the Ancillary Hardware securing the Facility Financing. (ii) with respect to all defaults, including defaults under Section 8.1(e) exercise any legal or equitable right or remedy which may be available to it (other than termination of this Agreement or failure or refusal to make the payments required hereunder or otherwise to carry out its obligations hereunder) or proceed by appropriate arbitration or court action to enforce the terms hereof, or to recover damages for the breach hereof; (iii) with respect to any defaults under Section 8.1(e) (but only after all applicable cure and grace periods have expired), upon written notice to OJT given after such cure and grace periods have expired and subject to the right to cure hereinafter set forth, terminate this Agreement effective as of a date no earlier than six (6) months from the date of such notice (which date of termination my be extended by Interstate from time to time by written notice to OJT), and during any such period, Interstate need not tender any Interstate Coal for transshipment, provided that prior to the date of termination of this Agreement, (A) Interstate shall continue payment of the Base Charge Per Ton in the amount and at the times required hereunder, and (B) Interstate shall continue to pay the Operating Charge Per Ton unless it, or an entity designated by Interstate in writing, shall exercise the right and option hereby granted, upon written notice to OJT, to assume and take over control of the operations of the Facility and Ancillary Hardware, provided that Interstate's operation of the Facility and Ancillary Hardware shall at all times be consistent with the obligations and duties of OJT pursuant to any agreements with lenders providing the Facility Financing, and all costs arising out of the operations or use of the Facility and Ancillary Hardware by Interstate, or its designee, during such period shall be paid by Interstate, and (C) if at any time prior to the date of termination, and regardless of whether Interstate shall have exercised its option provided in clause (B) hereof, any assignee of OJT's rights hereunder or, with the written consent of such assignee, OJT shall cure (and Interstate and OJT hereby jointly grant OJT and any such assignee the right, directly or indirectly, to assume and take control of the Facility and Ancillary Hardware at any time during any such period in order to attempt to effect such cure) all existing defaults of OJT, then Interstate shall relinquish its control of the Facility and Ancillary Hardware to OJT (or such assignee) and this Agreement shall not be terminated except pursuant to the provisions hereof for defaults occurring subsequent thereto. Nothing contained herein shall limit or impair the rights of Interstate to seek and recover damages from OJT on account of such default, notwithstanding any period of control of the Facility and Ancillary Hardware by Interstate or any cure of defaults, provided that no assignee of OJT's rights shall be or become liable for any damages resulting from such a default. (c) Except as otherwise expressly provided above, no remedy referred to in this Section is intended to be exclusive, but each shall be cumulative and in addition to any other remedy referred to above or otherwise available at law or in equity, including without limitation the right to enforce the terms hereof or to recover damages for breach of any terms hereof; and the exercise or beginning of exercise of any one or more of such remedies shall not preclude the simultaneous or later exercise of any or all such other remedies. No express or implied waiver of any Event of Default shall in any way be, or be construed to be, a waiver of any future or subsequent Event of Default. (d) Notwithstanding any other provision of this Agreement, neither party shall be liable for any incidental, special or consequential damages arising for any reason whatsoever. ARTICLE IX INSURANCE; CASUALTY; CONDEMNATION 9.1 OJT Coverages. During the term of this Agreement, OJT shall maintain the insurance coverages required by Schedule 9.1 annexed hereto. The insurance policies shall name Interstate as an additional insured, and OJT shall furnish Certificates of Insurance providing for not less than thirty (30) days' prior notice to Interstate and any assignee of OJT's rights hereunder of cancellation or non- renewal. Such policies shall otherwise comply with the requirements of Schedule 9.1 hereof. All losses, costs, damages, expenses and other similar items of cost covered by insurance but within the deductible amounts permitted in such insurance coverage or in excess of the policy limits or similar items of cost which could be insured against but are not required to be so insured against by the requirements of Schedule 9.1 shall be Reimbursable Costs hereunder. 9.2 Casualty. In the event that the Facility or Ancillary Hardware or any component thereof shall be damaged or destroyed by fire or other casualty, then, subject to any requirements of the agreements with any lenders providing the Facility Financing, the following provisions shall apply: (a) If the estimated cost to repair, rebuild or replace the damaged portion of the Facility or Ancillary Hardware shall be less than $100,000, then OJT shall promptly commence work to accomplish such repair, rebuilding and/or replacement and to bring the Facility and Ancillary Hardware into operating condition in compliance with this Agreement. All proceeds of any insurance recoverable or paid on account of such casualty shall be paid over to OJT to cover the cost of such repair and/or replacement work, and any excess cost not covered by such proceeds shall be deemed to be part of the Reimbursable Expenses for operating the Facility, except to the extent that OJT is required to indemnify Interstate with respect thereto pursuant to Section 6.1 hereof. (b) If the estimated cost to repair or replace the damaged portion of the Facility or Ancillary Hardware equals or exceeds $100,000, then OJT shall not be obligated to repair, rebuild or replace such damaged portions except to the extent that the aggregate amount of insurance proceeds and other funds made available by Interstate (at no cost to OJT) for such purpose shall equal or exceed the estimated cost of such repair, rebuilding or replacement. In the event that such funds are sufficient, OJT shall promptly prepare plans and specifications covering such work and submit the same to Interstate for approval, and upon receipt of such approval, OJT shall diligently commence and complete such repair, rebuilding, or replacement work. All proceeds of any insurance or payments by Interstate shall be deposited with an escrow agent satisfactory to Interstate and OJT and shall be released to OJT periodically to cover the cost of work completed in such repair, rebuilding, or replacement. (c) In the event that any damage to the Facility or Ancillary Hardware results in the inability of OJT to use the Facility as contemplated by this Agreement and proceeds from any business interruption insurance are paid or payable to OJT, then any such proceeds actually received by OJT shall be promptly deposited with the escrow agent designated by OJT to receive payments on account of the Base Charge Per Ton due under Section 3.4(a), and to the extent of such deposits, shall be applied against the obligations of Interstate to make such payments required by Section 3.4(a) hereof. 9.3 Condemnation. (a) OJT shall give Interstate prompt written notice of the institution of any proceedings for the taking of the Facility or any part thereof in condemnation or by the power of eminent domain, and will keep Interstate fully advised of the status thereof. OJT shall not consent to any such taking except as approved by Interstate. (b) In the event of the taking of all of the Facility, or of a substantial part thereof to the extent that the Facility cannot be practicably utilized for the transshipment of at least 1,125,000 tons of coal in any Fiscal Year, then (i) all proceeds arising out of such taking shall be applied, first to the payment of the outstanding principal, interest and other charges (including prepayment premium, if any) payable with respect to the Facility Financing, second to the reimbursement of OJT for any costs incurred in connection with such taking, and third to OJT in an amount equal to the excess of the then book value of the property subject to the taking over the amount of the Facility Financing, and (ii) the balance shall be divided between the parties as partial compensation for their respective loss of bargain hereunder, 50% to OJT and 50% to Interstate. Any remaining portions of the Facility may be retained by OJT for its own uses and purposes. (c) In the event of a partial taking of the Facility such that it can be utilized, or with the performance of a reasonable amount of repair, rebuilding or restoration work having an estimated cost of no more than the proceeds arising out of such taking, can be practicably utilized for the transshipment of at least 1,125,000 tons of coal in any Fiscal Year, then OJT shall promptly commence work to repair, rebuild and restore the Facility to such capacity. The proceeds arising out of any such taking shall be deposited with an escrow agent satisfactory to Interstate and OJT and shall be paid out, first to OJT periodically to reimburse it for the cost of such repair, rebuilding and restoration work completed, second to OJT to reimburse it for other costs incurred in connection with or as a result of such taking, and third to OJT in an amount equal to the excess of the then book value of the property subject to the taking over, the cost of the repair, rebuilding and restoration work, and the balance shall be divided between the parties as partial compensation for their loss of bargain hereunder, 50% to OJT and 50% to Interstate. (d) In the event of any temporary taking of the Facility or any portion thereof, all proceeds arising out of such taking actually received by OJT shall be promptly deposited with the escrow agent designated by OJT to receive payments under section 3.4(a), and to the extent of such deposit, shall be applied against the obligations of Interstate to make such payments required by Section 3.4(a) hereof. (e) The foregoing provisions of this Section 9.3 shall be subject to the requirements of any agreements with any lenders providing the Facility Financing. ARTICLE X FORCE MAJEURE As used herein, the term "Force Majeure" shall include an Act of God, strike, lock-out or other labor dispute, act of the public enemy, war declared or undeclared, riot, insurrection, civil commotion, lightning, fire, storm, flood, earthquake, insured or uninsured casualty, condemnation of all or any part of the Facility, embargo, inability to obtain or delay in obtaining governmental approvals, permits, licenses or allocations, fuel or power shortages and rationing, lack of available coal to ship, legal impediments to the transportation or storage of coal or the use or operation of the Facility, any inability or failure of the Facility to transship coal within its designed capacity because of faulty design, construction, manufacture, erection or materials, or otherwise, lack of available trains, hopper cars, river barges or tugs, equipment failures of any kind, and other like or similar occurrences, whether of the kind specifically enumerated above or otherwise, which like or similar occurrences are not reasonably within the control of the party claiming Force Majeure. ARTICLE XI RESOLUTION OF DISPUTES; ARBITRATION The parties hereto shall attempt in good faith to negotiate between themselves a settlement or resolution of any dispute which may arise under this Agreement. If no such settlement or resolution is reached within sixty (60) days after the existence of a dispute, such dispute shall be submitted to arbitration in the following manner. Either party hereto may request arbitration by delivery of written notice to the other party, and within fifteen (15) days after delivery of such notice each party shall appoint one arbitrator, and the two arbitrators so appointed shall appoint a third arbitrator. If either party shall fail to appoint an arbitrator, or if their respective arbitrators shall be unable to agree upon a third arbitrator, the arbitrator or arbitrators not so appointed shall be appointed by the American Arbitration Association. All arbitrations hereunder shall be held in Chicago, Illinois, under the rules of the American Arbitration Association in effect at the time, although such proceedings need not be conducted under the auspices of the Association. The parties agree that there shall be no suspension of work nor of payment when any such arbitrable dispute arises, or while it is subject to arbitration. The award of any two of the arbitrators shall be final and binding upon the parties, and a decree or judgement on the award may be entered in any court having jurisdiction thereof. Notwithstanding the foregoing, all matters involving disputes as to financial or accounting matters shall be submitted to a panel of three accountants who are members of accounting firms of recognized national standing, and who shall be selected as provided above. The costs incurred by OJT in connection with the arbitration of the Annual Operating Budget or the Operating Statement shall be a Reimbursable Cost, except in instances where the position or claim of OJT is specifically found by the arbitrator to be without reasonable basis, in which case OJT shall bear its own cost. The parties hereto shall give notice of any arbitration or other proceedings pursuant to this Article XI to each lender providing the Facility Financing. ARTICLE XII REPRESENTATIONS AND WARRANTIES 12.1 Interstate Representations. Interstate hereby represents and warrants to OJT, which representations shall survive the execution and delivery of this Agreement, as follows: (a) Interstate has full power and authority to enter into this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement, and the performance thereof, has been authorized by all corporate action required on the part of Interstate; and (b) The execution, delivery and performance of this Agreement on the part of Interstate has received whatever consents, approvals and other authorizations as may be required from any governmental authority pursuant to existing law, and Interstate has received opinions of counsel to such effect. (c) The execution, delivery and performance of this Agreement on the part of Interstate will not conflict with any provision of any indenture, agreement or other instrument to which Interstate is a party or by which it or its properties are bound. 12.2 OJT Representations. OJT hereby represents and warrants to Interstate, which representations and warranties shall survive the execution and delivery of this Agreement, as follows: (a) OJT has full power and authority to enter into this Agreement and to perform its obligations hereunder, and that the execution and delivery of this Agreement, and the performance hereof, has been authorized by all corporate and other action required on the part of OJT; and (b) Based upon the representations of qualified environmental consultants, OJT believes that all permits, approvals and authorizations of all governmental agencies required for the use and operation of the Facility and Ancillary Hardware either have been obtained or can be obtained within a reasonable period without jeopardizing the continuous use of the Facility. ARTICLE XIII MISCELLANEOUS 13.1 Delays. Neither party hereto shall be liable for any delay or default with respect to performance of its obligations hereunder occasioned by any Force Majeure condition or occurrence, and the time for performance in any such instance shall be extended for a period equal to the delay caused by such condition or occurrence, provided that except as provided in Section 8.2(b)(iii) hereof, neither the occurrence of any Force Majeure condition nor any other event of any sort shall relieve Interstate of its obligations to pay when due the charges payable pursuant to Article III. Promptly after a party becomes aware of any Force Majeure condition, such party shall give written notice thereof, specifying the nature and probable duration of such condition and the resultant delay. 13.2 Notices. (a) All notices and instructions permitted to be given or required hereunder shall be deemed sufficiently given if delivered in person or mailed by Registered or Certified Mail, postage prepaid, as follows: (a) If to OJT: TO: Orba-Johnson Transshipment Company c/o Orba Corporation One Gothic Plaza Fairfield, New Jersey 07006 Attention: President and: c/o Johnson Bros. Corporation P.O. Box 1002 Litchfield, Minnesota 55355 Attention: President (b) If to Interstate: TO: Interstate Power Company 1000 Main Street Dubuque, Iowa 52001 Attention: President Either party may change the address for sending of notices by giving notice in compliance herewith. (b) Any notices hereunder shall also be given to any lenders providing the Facility Financing and to any assignee of OJT's rights hereunder. 13.3 Entire Subject Matter. This Agreement, together with the appendices referred to herein) contains the entire agreement of the parties hereto with respect to the subject matter hereof and may not be altered or amended except by an instrument in writing executed by all of the parties hereto, provided that after the Facility Financing has been consummated, no such alteration or amendment shall be effective without the written consent of the lender thereof and of any assignee of OJT's rights hereunder. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and which, together, shall constitute one and the same instrument. 13.4 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Iowa applicable to agreements made and to be performed in such state. 13.5 Binding Nature. This Agreement shall be binding upon and, subject to the provisions of Section 13.6, shall inure to the benefit of Interstate and OJT and their respective successors, assigns, receivers and other representatives. 13.6 Assignment. (a) Neither party shall have the right to assign any of its rights, duties or obligations under this Agreement without the prior written consent of the other party, provided, however, that (i) either party, upon thirty (30) days' prior written notice, may assign this Agreement to any other firm or corporation controlling, controlled by or under common control with it, but no such assignment shall relieve the assignor from liability hereunder, and (ii) as permitted by Subsection (b) below, OJT may assign its rights hereunder in connection with obtaining the Facility Financing. (b) The parties acknowledge that OJT contemplates making a security assignment to the lender(s) providing the Facility Financing of OJT's rights to payments due under Sections 3.4(a), 5.5, 7.2 and 8.2, and its rights to enforce the performance of Interstate's obligations hereunder (but excluding any obligations or liabilities of OJT hereunder), including the rights of OJT to receive the Base Charge Per Ton in the manner contemplated hereby and subject to the terms hereof. No consent or acknowledgement by Interstate of any such assignment by OJT of its rights hereunder shall in any manner whatsoever obligate Interstate to assume any obligation or liability, whether as endorser, guarantor, surety or otherwise, with respect to any indebtedness of OJT or any security issued by it or on its behalf. Upon any such assignment by OJT, the parties hereto recognize and agree that, to the extent set forth in said assignment or in other documents relating to the Facility Financing, OJT will be prohibited, without the prior consent of said assignee, from giving consents, reaching mutual agreement with Interstate, amending this Agreement, acting with respect to the resolution of certain disputes or arbitration or taking certain other action contemplated by this Agreement. 13.7 Representatives of Parties. (a) Interstate hereby designates Earl Forslund as project manager with respect to the Facility. OJT shall be entitled to deal with such project manager as the duly authorized representative of Interstate with respect to all actions to be taken by Interstate. Interstate reserves the right to change the designation of the project manager from time to time upon advance written notice to OJT. (b) OJT hereby designates William E. Hall II as project manager with respect to the Facility. Interstate shall be entitled to deal with such project manager as the duly authorized representative of OJT with respect to all actions to be taken by OJT. OJT reserves the right to change the designation of project manager from time to time upon advance written notice to Interstate. 13.8 Article and Section Headings. The use of Article and Section headings herein is merely for convenience of reference and shall not be construed to limit, broaden or affect the meaning of the provisions contained in each paragraph. The illegality or invalidity of any provisions of this Agreement shall not impair, affect or invalidate the other provisions of this Agreement. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by one of their duly authorized officers, effective as of the date first above written. Executed in the INTERSTATE POWER COMPANY presence of: BY /s/ D. J. Carlson Title: Vice President ORBA-JOHNSON TRANSSHIPMENT COMPANY By ORBA Transshipment Corporation of Iowa, a Partner By /s/ C. H. Ricker, Jr. Title: Executive Vice President By Johnson Bros. Transshipment Corporation of Iowa, a Partner By /s/ Walter D. Johnson Title: Secretary Agreement of ORBA and JBC The undersigned ORBA Corporation and Johnson Bros. Corporation are executing this Agreement solely to evidence their respective consent and agreement to the provisions of Sections 4.7 and 5.3 hereof, and for no other purpose whatsoever. ORBA CORPORATION By /s/ C. H. Ricker, Jr. Title: Executive Vice President JOHNSON BROS. CORPORATION By /s/ Title: Vice President STATE OF MINNESOTA) ) ss COUNTY OF HENNEPIN) On the 4th day of December, 1979, before me, the undersigned, in and for said County and State, personally appeared D. J. Carlson, to me personally known, who, being duly sworn, did say that he is the Vice President of Interstate Power Company; that the seal affixed thereto is the seal of said corporation; that said instrument was signed and sealed on behalf of said corporation by authority of its Board of Directors; that the said D. J. Carlson as such officer acknowledged the execution of said instrument to be the voluntary act and deed of said corporation, by it and by him voluntarily executed. /s/ W. A. Whitlock Notary Public in and for said County and State (SEAL) W. A. WHITLOCK NOTARY PUBLIC - MINNESOTA HENNEPIN COUNTY My Commission Expires June 16, 1985 STATE OF MINNESOTA) ) ss COUNTY OF HENNEPIN) On the 4th day of December, 1979, before me, the undersigned, in and for said County and State, personally appeared Charles H. Ricker, Jr. to me personally known, who being duly sworn, did say that he is the President of ORBA Transshipment Corporation of Iowa, one of the partners of ORBA-Johnson Transshipment Company, an Iowa partnership, that said corporation has no seal; that said instrument was signed by him on behalf of such corporation as a partner of such partnership by authority of the board of directors of such corporation; and that the said Charles H. Ricker, Jr. in such capacity acknowledged the execution of said instrument to be the voluntary act of said corporation as a partner of such partnership, by it and him voluntarily executed. /s/ W. A. Whitlock Notary Public in and for said County and State (SEAL) W. A. WHITLOCK NOTARY PUBLIC - MINNESOTA HENNEPIN COUNTY My Commission Expires June 16, STATE OF MINNESOTA ) ) ss COUNTY OF HENNEPIN ) On the 4th day of December, 1979, before me, the undersigned, in and for said County and State, personally appeared Walter D. Johnson to me personally known, who, being duly sworn, did say that he is the Secretary of Johnson Bros. Transshipment Corporation of Iowa, one of the partners of ORBA-Johnson Transshipment Company, an Iowa partnership; that said corporation has no seal; that said instrument was signed by him on behalf of such corporation as a partner of such partnership by authority of the board of directors of such corporation; and that the said Walter D. Johnson in such capacity acknowledged the execution of said instrument to be the voluntary act of said corporation as a partner of such partnership, by it and him voluntarily executed. /s/ W. A. Whitlock Notary Public in and for said County and State (SEAL) W. A. WHITLOCK NOTARY PUBLIC - MINNESOTA HENNEPIN COUNTY My Commission Expires June 16, 1985 SCHEDULE A TO COAL TRANSSHIPMENT AGREEMENT Tract I The Fractional North 1/2, N1/2, NW1/4, Fractional Section 30, T66N, R4W, 5th P.M., Lee County, Iowa, described by the following metes and bounds: Beginning at the NW corner of said Sec. 30; thence East, 19 chains, 1,254 ft., to the original meander line of the Mississippi River; thence Southerly parallel with the shoreline to the south line of the N1/2, N1/2, NW1/4, said Sec. 30; thence west with said line to the west line of said Sec. 30; thence North, 667.5 ft. with the section line to the point of beginning and subject to public road easement over the West 33 ft. and an 80 ft. railroad right of way along the Mississippi River, and excepting therefrom the House Tract sold to Walter and Marcia Caldwell. (Vollie Rose Farm) Tract II The Fractional North 106.0 ft. of the S1/2, N1/2, NW1/4, Fractional Section 30, T66N, R4W, 5th P.M., Lee County, Iowa, fronting 106.0 ft. on the East side of the Keokuk-Montrose River Road and extending to the Mississippi River, containing 3.0 acres, including the county highway right of way along the west boundary and the Burlington Northern Railroad right of way along the river, and excepting therefrom the House Tract sold to Walter and Marcia Caldwell. (Richard C. Bryant and Barbara A. Bryant Tract) Tract III Commencing at the NW corner of Fractional Section 30, T66N, R4W, 5th P.M., Lee County, Iowa; thence S00deg55'E, 600.9 ft. with the section line and centerline of county road to the point of beginning; thence S89deg52'E, 600 ft.; thence N19deg30'E, 452 ft.; thence S89deg52'E, 150 ft.; thence S00deg08'W, 600 ft.; thence N89deg52'W, 900 ft. to the section line and centerline of county road; thence N00deg55'E, 173.5 ft. to the point of beginning and subject to public road right of way along the west boundary. (Caldwell House Tract) Tract IV The S1/2, N1/2, of the Fractional NW1/4, Section 30, except the North 106 ft. thereof, and all of the S1/2, Fractional NW1/4, Section 30 which is north of the following described line: Beginning on the West line of said Fractional Sec. 30 at a point located 1258.7 ft. south of the NW corner of said Sec. 30; thence East, 33 ft. to the east right of way line of the county road (River Road); thence the following courses with an existing fence: S63deg26'E, 76.6 ft.; S52deg57'E, 147.6 ft.; S79deg29'E, 159.7 ft.; S44deg23'E, 326.3 ft.; S00deg14'E, 457.2 ft. to a corner located 400 ft. normal to the Bryant south property line; thence N89deg46'E, 589.7 ft. parallel and 400 ft. normal to the said south property line to a point located 60 ft. normal to the westerly right of way line of the Burlington Northern Railroad; thence S04deg56'W, 301.2 ft. parallel to an 50 ft. normal to westerly right of way of the Burlington Northern Railroad; thence East to the Original Meander Line of the Mississippi River. except, the right of way of the Burlington Northern Railroad along the Easterly side of said tracts; a strip of land along the Easterly side of said tract heretofore conveyed to the Keokuk and Hamilton Water Power Company by two deeds recorded in Deed Book 73, at pages 281 and 294; and a strip of land Sixty (60') feet in width along the Westerly side of said tracts conveyed to Lee County, Iowa, for road purposes described in Deed Book 77, page 179. (Bryant Tract) Tract V A wedge shaped tract in the SE corner of Section 24, T66N, R5W, 5th P.M., described as follows: Beginning at the SE corner of said Sec. 24, thence North, 75 ft. with the section line thence West, 285.5 ft. to the centerline of Keokuk-Montrose River Road; thence with said road centerline the following courses and distances: S03deg40'E, 448 ft. and S35deg00'E, 398 ft. to the South line of said Sec. 24; thence East, 28.6 ft. to the place of beginning, of which 0.60 acre is subject to road right of way. Also, a rectangular tract in the SW corner of Frac. Sec. 19, T66N, R4W, 5th P.M., described as follows: beginning at the southwest corner of said Sec. 19; thence North, 1449 ft. with the section line; thence East, 820 ft. to the westerly right of way line of the Burlington Northern Railroad; thence S09deg21'E, 1465 ft. with said railroad right of way line to the south line of said Sec. 19; thence West, 1058.5 ft. to the section corner and point of beginning. (Alyn Erickson Tracts) Tract VI The West Half (W1/2) of the Southeast Quarter (SE1/4) of Section 24, T66N, R5W, of the 5th P.M., Lee County, Iowa, containing 80 acres, and subject to public road right of way along the south and west boundaries. (Paul D. Boyd and Vera M. Boyd Tract) Tract 1: The Northwest Quarter (NW 1/4) of Fractional Section 30, Township 66 North, Range 4 West of the 5th P.M., Lee County, Iowa, EXCEPTING therefrom the following: The South 166.6 feet thereof; The right of way of the Burlington Northern Railroad along the easterly side of said tract; A strip of land along the easterly side of said tract conveyed to the Keokuk and Hamilton Power Company by two deeds recorded in Deed Book 73, at Pages 281 and 294; A strip of land 60 feet in width along the Westerly side of said tract conveyed to Lee County, Iowa, for road purposes described in Deed Book 77, Page 179; and That part thereof lying North of the following described line: Beginning at a point on the West line of said Fractional Section 30 at a point located 1258.7 feet South of the NW corner of said Section 30; thence East 33 feet to the east right of way line of the County road (River Road); thence the following courses with an existing fence: South 63deg26' East, 76.6 feet; South 52deg57' East, 147.6 feet; South 79deg29' East, 159.7 feet; South 44deg23' East, 326.3 feet; South 00deg14' East, 457.2 feet to a corner located 566.6 feet normal to the 1/4 Section line; thence North 89deg46' East, 589.7 feet parallel with and 566.6 feet normal to the 1/4 Section line to a point located 50 feet normal to the westerly right of way line of the Burlington Northern Railroad; thence South 04deg56' West, 301.2 feet parallel with and 50 feet normal to the said railroad right of way; thence North 89deg46' East to the original meander line of the Mississippi River, extending parallel with and 266.6 feet normal to the 1/4 Section line. Tract 2: All that part of Lots Thirty-three (33), Thirty-four (34) and One Hundred Eighty-Six (186) in the Town of Galland, formerly known as Nashville, which lies East of the Keokuk, and Montrose River Road; also those parts of the North one-half (N1/2) of Broadway Street, and West one-half (W1/2) of Main Street adjacent to said portion of said lots except for Railroad Right of Way. Tract 3: That part of the South One Hundred Sixty-six and Six-tenths (166.6) feet of the fractional Northwest Quarter (NW1/4) of Section Thirty (30) Township Sixty-six (66) North, Range Four (4) West, which lies easterly of a line drawn parallel to, 45 feet Westerly of and normal to the westerly right of way line of the Burlington Northern Railroad, except that part thereof included within said right of way. Tract 4: All that part of the following described premises: the Fractional Northwest Quarter of the Southwest Quarter of Section Thirty, Township Sixty-six north, Range Four West in Lee County, Iowa, except the north 400 feet thereof; lying easterly of a line drawn parallel with, 25 feet westerly of and normal to the westerly right of way line of the Burlington Northern Railroad, except that part thereof included within said right of way. Tract 5: A 1.11 Acre Tract in the Southeast quarter (SE1/4) of Section Twenty-four (24), Township Sixty-six (66) North, Range Five (5) West of the 5th Principal Meridian, Montrose Township, Lee County, Iowa, fronting on the Easterly side of River Road and described by the following metes and bounds: Commencing at the Southeast Corner of said Southeast Quarter (SE1/4) of Section Twenty-four (24); thence North, One Thousand Six Hundred Seventy-seven and Eight-tenths (1667.8) feet with the Section Line; thence West One Hundred Ninety-one and Eight-tenths (191.8) feet to the Point of Beginning; thence continuing West, Two Hundred Sixteen and Two- tenths (216.2) feet to the centerline of River Road; thence Northerly, Three Hundred Thirty-five and Six-tenths (335.6) feet with a Three Hundred Seventy (370) Foot Radius Curve Concave Southeasterly to the centerline of an entrance roadway; thence with said centerline the following courses and distances; South Forty-five (45) Degrees Twenty- eight (28) minutes East, Two Hundred Forty-six and Eight-tenths (246.8) feet and East Twenty-two and Five-tenths (22.5) feet; thence South One Hundred Fifty and Nine-tenths (150.9) feet to the point of beginning, containing One and Eleven Hundredths (1.11) Acres, of which the Westerly Thirty-three (33) feet is subject to right of way for River Road, Lee County, Iowa. Tract 6: A Two (2) Acre Tract Fronting Two Hundred Ninety-seven (297.0) feet on the East side of the County River Road, located in the Southeast Quarter (SE 1/4) of the Southeast Quarter (SE 1/4) of Section Twenty-four (24), Township Sixty-six (66) North, Range Five (5) West, of the Fifth Principal Meridian, Lee County, Iowa, and described by the following metes and bounds: Beginning on the East line of said Section Twenty-four (24) at a point located Seven Hundred Seventy-five (775) feet North of the Southeast Corner; thence West Two Hundred Eighty-five and Five-tenths (285.5) feet to the center of the Keokuk-Montrose River Road; thence North Three (03) Degrees Forty (40) Minutes West, Two Hundred Ninety- seven (297.0) feet with the said Center of the Road; thence East Three Hundred Four and Five-tenths (304.5) feet to the Section line; thence South Two Hundred Ninety-six and Four-tenths (296.4) feet with the Section line to the point of beginning and containing Two and One- hundredths (2.01) Acres with the Westerly Thirty-three (33) feet, more or less, subject to Public Road Right-of-way, in Lee County, Iowa. Tract 7: Lots One Hundred Seven (107), One Hundred Eight (108) and One Hundred Nine (109) in the Town of Galland, (Formerly Nashville) in Lee County, Iowa; also those parts of the West one-half (W1/2) of Main Street, South one-half (S1/2) of Broadway Street, and East one-half (E1/2) of Alley, all adjacent to said lots except Keokuk and Montrose River Road. Tract 8: All of the South half of Section Nineteen (19), Township Sixty-six (66), Range Four (4) lying West of the right-of-way of C. B. & Q. Railroad, South of a line beginning at the center of the County Highway on the West line of Lot One Hundred Eighty-two (182) in the town of Galland; thence Easterly following the center line of the highway to the center line of Prospect Street in said town; thence South on the center line of Prospect Street to the line dividing former Lots One Hundred Fifty-three (153) and One Hundred Fifty-four (154) in said town, produced Westerly; thence East on said produced line and on line between former Lots One Hundred Fifty-three (153) and One Hundred Fifty-four (154) and on line between former Lots One Hundred Nine (109) and One Hundred Ten (110) and said line produced Easterly to the center line of vacated Main Street in this portion of said town; thence South on said center line of vacated Main Street to center line of vacated Harrison Street; thence East on center line of vacated Harrison Street to the right of way of said C. B. & Q. Railroad, and North of a line beginning on the West line of said Section Nineteen (19), Fourteen Hundred Forty-nine (1449) feet North of the Southwest corner of said Section Nineteen (19), said point being in the center of the West line of former Lot One Hundred Seventy- eight (178) in the town of Galland; thence East on center line of former Lots One Hundred Seventy-eight (178) and One Hundred Sixty-one (161) and the North line of former Lots One Hundred Forty-seven (147), One Hundred Sixteen (116) and Ninety-seven (97), Eight Hundred Twenty (820) feet, more or less, to the Westerly right of way line of C. B. & Q. Railroad, in Lee County, Iowa. Tract 9: A 4.61 Acre Tract fronting 2670.4 Feet on the West side of the Burlington Northern Railroad, located in Section Thirteen (13), Township Sixty-six (66) North, Range Five (5) West, of the 5th P.M., Lee County, Iowa, more particularly described as follows: Commencing at the Northwest Corner of the Southeast Quarter of said Section Thirteen (13): thence Easterly, 575.00 Feet with the North line of said Southeast Quarter (SE 1/4); thence North 52deg24' East, 301.7 Feet, more or less, to the Westerly right of way line of the Burlington Northern Railroad, being 33 feet normally distant from and parallel to the centerline of said Railroad; thence South 30deg21'10" East, 983.2 feet with said Right of Way line to the Southeast Corner of a Tract presently owned by John E. and Mary J. Koehler, said Southeast corner being the true point of beginning; thence South 55deg25'00" West, 75.2 feet with the North line of Union Electric Company's Lot 48 to the Southwest Corner of the Tract; thence North 30deg21'10" West, 2675.96 feet on a line 75 feet normally distant from and parallel to said Westerly Right of Way line to the centerline of an existing 30 foot access road; thence North 59deg38'57" East, 75.00 feet with the centerline of said access road to the Westerly Right of Way Line of said Railroad and the Northwest Corner of the Tract; thence South 30deg21'10" East, 2670.4 feet with the Westerly Right of Way Line to the point of Beginning, containing 4.61 Acres, more or less, of which the Northerly .03 Acre is subject to said access roadway easement, being 15 foot normal and parallel to the centerline of said access roadway. Tract 10: The North Six and Eighty-eight Hundredths (6.88) Acres in the Southeast Quarter (SE 1/4) of Section Twenty-four (24), Township Sixty- six (66) North, Range Five (5) West, Fifth Principal Meridian, Lee County, Iowa, located South and East of the centerline of River Road; described by the following metes and bounds: Beginning at the Southeast corner of this tract, located on the East line of said Section Twenty-four (24) at a point One Thousand Four Hundred Seventy-seven and Three-tenths (1477.3) feet North of the Southeast corner of the Section; thence West, Three Hundred Thirty and Five-tenths (330.5) Feet to the centerline of the River Road; thence the following courses and distances with said centerline of roadway; Northwesterly, One Hundred Forty and One-tenth (140.1) Feet with a Seven Hundred Sixteen and Two-tenths (716.2) Foot Radius Curve Concave Westerly (L.C. North Twelve (12) Degrees Fifty-two (52) Minutes West, One Hundred Thirty-nine and Nine-tenths (139.9) Feet) and tangent to the following course; North Nineteen (19) Degrees Forty (40) Minutes West, Eighty-seven and Six-tenths (87.6) Feet; Northeasterly, Six Hundred Seventeen and Two- tenths (617.2) Feet with a Three Hundred Ninety-five and Fourteen Hundredths (395.14) Foot Radius Curve Concave Easterly and tangent to the preceding course (L.C. North Twenty-five (25) Degrees Five (05) Minutes East, Five Hundred Fifty-six and Thirty-seven Hundredths (556.37) Feet); North Sixty-nine (69) Degrees Fifty (50) Minutes East, Sixty-nine and Six-tenths (696) Feet; Northeasterly, Ninety-seven and Three-tenths (97.3) Feet with a Two Hundred Eighty-six and Forty-eight Hundredths (286.48) Foot Radius Curve Concave Southerly (L.C. North Seventy-nine (79) Degrees Fifty-five (55) Minutes East, Ninety-six and Eight-tenths (96.8) Feet) to the East line of said Section; thence South, Seven Hundred Sixty-two and Seven-tenths (762.7) Feet with the Section Line to the point of beginning, containing Six and Thirteen Hundredths (6.13) Acres exclusive of the West and Northerly Thirty-three (33) Feet that is subject to public road right of way, in Lee County, Iowa. EXCEPTING THEREFROM: Beginning at a point 1477.3 Feet North of the Southeast Corner of Section 24, Township 66, North, Range 5 West, which is also the Northeast corner of a tract presently owned by Theodore Charles Breakbill, thence due North with the East line of said Section 200 Feet; thence West to the center line of the Keokuk-Montrose River Road approximately 387.4 feet; thence Southerly following the center line of said River Road 208.4 feet to a point due West of point of beginning; thence due East to the point of beginning with the Northerly line of said Breakbill tract 330.5 feet, subject to the right of way of said River Road and containing approximately 1-1/2 acres. ALSO EXCEPTING THEREFROM: A 1.11 Acre Tract in the Southeast Quarter of Section 24, Township 66 North, Range 5 West of the 5th P.M., Montrose Township, Lee County, Iowa, fronting on the Easterly side of River Road and described by the following metes and bounds: Commencing at the Southeast Corner of said Southeast Quarter of Section 24; thence North 1,677.8 Feet with the Section Line; thence West 191.8 Feet to the Point of Beginning; thence continuing West 216.2 Feet to the centerline of River Road; thence Northerly 335.6 Feet with a 370 Foot Radius Curve Concave Southeasterly to the centerline of an entrance roadway; thence with said centerline the following courses and distances; South 45 Degrees 28 Minutes East, 246.8 Feet and East 22.5 Feet; thence South 150.9 Feet to the point of beginning, containing 1.11 acres, of which the Westerly Thirty-three feet is subject to right of way for River Road, Lee County, Iowa. Tract 11: That part of the Southeast Quarter (SE 1/4) of Section Thirteen (13), in Township Sixty-six (66) North, Range Five (5) West of the Fifth Principal Meridian, in Lee County, Iowa, described as follows, to-wit: Beginning at the Southwest Corner of the Southeast Quarter (SE 1/4) of said Section Thirteen (13); thence South 89 Degrees East 1165 Feet, the South line of said Section Thirteen (13) to the Westerly right of way line of the Chicago, Burlington and Quincy Railroad; thence North 28 Degrees 45 Minutes West thereon 1800 feet; thence North 63 Degrees 59 Minutes West 430 feet; thence South 82 Degrees 14 Minutes West 193 feet to the Intersection of the center lines of the relocated Keokuk and Montrose Wagon Road and Miller's Creek; thence along the center line of said Miller's Creek on the following courses: South 71 Degrees 30 Minutes West 60 Feet, South 24 Degrees 15 Minutes West 128 Feet, South 70 Degrees 00 Minutes West 262 Feet to the West line of the Southeast Quarter (SE 1/4) of the Northwest Quarter (NW 1/4) of the Southeast quarter (SE 1/4) of said Section Thirteen (13); thence South 1 Degree 5 Minutes West 837.4 feet; thence South 89 Degrees 04 Minutes East 649.5 feet; thence South 00 Degrees 45 Minutes West 664.4 feet, more or less, to the place of beginning. Excepting therefrom that part lying Westerly of the relocated Keokuk-Montrose Wagon Road, and further excepting therefrom the said relocated Keokuk-Montrose Wagon Road extending across the same and being 60 feet in width; also that part conveyed to Lee County, Iowa for road purposes by Easement for Public Highway document dated September 13, 1977, filed for record November 18, 1977 in Deed Book 169 at Page 434. Tract 12: All that part of the north 400 feet of the Northwest Quarter of the Southwest Quarter of Fractional Section 30, Township 66 North, Range Four West, lying easterly of a line drawn parallel to and 25 feet Westerly of and normal to the Westerly right of way line of the Burlington Northern Railroad, except that part thereof included within said right of way. Tract 13: That part of the East Half of the SE 1/4 of Section 24, Township 66, Range 5 lying South of center of public highway running East and West through said tract as located on June 1, 1912, and West of the public highway running North and South through said tract, being known as the Keokuk to Montrose Highway, in Lee County, Iowa. Parcel 13-1: All that part of the Southeast 1/4 of Fractional Section 13, Township 66 North, Range 5 West, 5th P.M., Lee County, Iowa, described as follows: Commencing at the Northwest corner of said Southeast 1/4; thence Easterly on the North line of said Southeast 1/4, 575 feet; thence N52deg24'E, 301.7 feet to the Westerly right of way line of the Burlington Northern Railroad; thence Southeasterly along said Westerly right of way line 983.2 feet to the point of beginning; thence continuing on said Westerly right of way line 465.3 feet to a point distant 1800 feet measured along said Westerly right of way line from the South line of said Southeast 1/4; thence N63deg09'W, 430 feet; thence S82deg14'W, 62.75 feet; thence N43deg52'30"W, 59.43 feet; thence N55deg26'E, 306.12 feet to the point of beginning. Parcel 19/24-1: All that part of the Northeast 1/4 of Fractional Section 24, Township 66 North, Range 5 West, 5th P.M., and the Northwest 1/4 of Fractional Section 19, Township 66 North, Range 4 West, 5th P.M., Lee County, Iowa, and Lots 211, 212 and 213, Short Street and Franklin Street, as platted for the Town of Galland (formerly Nashville), lying East of the Keokuk and Montrose River Road and lying West of the Westerly right of way line of the Burlington Northern Railroad. Parcel 19-2: All that part of Lots 103, 104, 105 and 106, as platted for the Town of Galland (formerly Nashville), Lee County, Iowa, lying West of the Westerly right of way line of the Burlington Northern Railroad. Also, that part of the North 1/2 of Harrison Street lying East of the centerline of Main Street and West of the Westerly right of way line of the Burlington Northern Railroad, and that part of the East 1/2 of Main Street lying North of the Westerly extension of the South line of Lot 103 and West of the Westerly right of way line of said railroad, all as platted for the Town of Galland (formerly Nashville), Lee County, Iowa. Parcel 19-2A: All that part of Lots 31 and 32, as platted for the Town of Galland (formerly Nashville), Lee County, Iowa, lying East of the Keokuk and Montrose River Road. Also that part of the West 1/2 of Main Street, as platted for the Town of Galland (formerly Nashville), Lee County, Iowa, lying North of the Easterly extension of the South line of Lot 32, Town of Galland, and West of the Westerly right of way line of the Burlington Northern Railroad. Parcel 19-3: All that part of the Southwest 1/4 of Fractional Section 19, Township 66 North, Range 4 West, 5th P.M., Lee County, Iowa, described as follows: Beginning at the intersection of the South line of said Fractional Southwest 1/4 and the Easterly right of way line of the Burlington Northern Railroad, said point lying 1148.1 feet East of the Southwest corner of said Fractional Southwest 1/4; thence 38deg39'W along said Easterly right of way line 2692 feet to the North line of said Fractional Southwest 1/4; thence Easterly on said Fractional 1/4 Section line 150 feet to the bank of a creek; thence Southerly and Southwesterly 350 feet on said bank of creek; thence S68deg39'E, 2350 feet to the intersection of the West bank of the Des Moines Rapids Canal and the South line of said Fractional Southwest 1/4; thence Westerly on said Section line 60 feet to the point of beginning, including portions of Lots 38-42 and 102-106, Union, Harrison, Main and Broadway Streets, and the alley adjacent to Lots 51-54, but excluding Lots 49-55, as platted for the Town of Galland (formerly Nashville). Parcel 19-3A: All that part of the Fractional Northwest 1/4 of Section 19, Township 66 North, Range 4 West, 5th P.M., Lee County, Iowa, being an irregularly shaped strip of land lying East of and abutting the Easterly right of way line of the Burlington Northern Railroad and comprising part of Lots 5, 8, 9, 10, 15, 16, 17, 18 and 37 in the Town of Galland (formerly Nashville) and Main Street, Liberty Street, Monroe Street and Wall Street, in the platted Town of Galland (formerly Nashville), more particularly described as follows, to wit: Commencing at the intersection of the said Easterly right of way line and the South line of said Fractional Northwest 1/4 Easterly 693.2 feet from the Southwest corner thereof; thence North 8deg39' West 696 feet on said Easterly right of way line; thence Northwesterly 1960 feet by a 50 minute curve to the Left on said right of way line to the West line of said Fractional Northwest 1/4; thence Northerly 70 feet thereon to bank of the Mississippi River; thence Southeasterly and Southerly following the shore line of said river 2870 feet more or less to the South line of said Fractional Northwest 1/4; thence Westerly 150 feet thereon to the place of beginning. Parcel 13/24-1: All that part of the Southeast 1/4 of Fractional Section 13, Township 66 North, Range 5 West, 5th P.M., Lee County, Iowa, lying South of the centerline of Miller's Creek, and the Northeast 1/4 of Fractional Section 24, Township 66 North, Range 5 West, 5th P.M., Lee County, Iowa; all of same lying East of the Easterly right of way line of the Burlington Northern railroad. A tract formerly submerged by the Mississippi River consisting of 5.76 acres in the NW 1/4, Fractional Section 30, T66N, R4W, 5th P.M. described by the following metes and bounds: Beginning on the north line said NW 1/4, Frac. Sec. 30 at a point 1254.0 ft. (19 chains) east of the NW corner said NW 1/4, Frac. Sec. 30; thence East, 305.5 ft. with the Section Line; thence S08deg39'E, 782.4 ft. parallel with the shore line and Burlington Northern Railroad; thence West 446.6 ft. to the easterly right of way line of the Burlington Northern Railroad and ordinary high water line of the Mississippi River; thence Northerly, 106.3 ft. with said right of way line to the south line of the N 1/2, NW 1/4, NW 1/4, said Frac. Sec. 30; thence East, 133.0 ft. with said south line of the N 1/2, NW 1/4, NW 1/4, Frac. Sec. 30 to a point located 150 ft. normally distant from the centerline tangent of the Burlington Northern Railroad; thence N08deg39'W, 675.2 ft. parallel with the railroad tangent and west shoreline of the Mississippi River to the point of beginning. (INRC Leased Tract). 1. Easement over, across, and under that portion of real estate conveyed to the Chicago, Burlington and Quincy Railroad in Deed Book 137, page 380, dated September 21, 1964, and assigned by assignment dated October 28, 1977 and filed for record October 28, 1977 in Deed Book 169 at page 375. 2. Easement rights granted from Edna Fern Fortune, a widow, to Orba-Johnson Systems, Inc. by document dated October 31, 1977 and filed for record October 31, 1977 in Deed Book 169 at Page 403 of the records of Lee County, Iowa; said Easement covering property legally described as: That part of the Fractional Southwest Quarter (SW 1/4) of the Southwest Quarter (SW 1/4) of Section 30 on Township 66 North, Range 4 West of the 5th P.M., lying Easterly of a line drawn parallel with and 25 feet Westerly of and normal to the Westerly right-of-way line of the Burlington Northern Railroad, except that part thereof included within said right-of-way. Schedule 1.2 To Coal Transshipment Agreement Design and Construction Factors Determining Capacities of Facility and Ancillary Hardware A. System 1 - Receiving/Stockpiling System Components: a. Unit Train Handling: Car Dumper and Car Positions b. Stocking - out Conveyor System: Belt Feeders #1 and #2 and Stocking - out Conveyor #1 Capacity: Design Rate capacity of 3,000 tons of coal per hour (2,000 lbs. per ton). Design rate is maximum instantaneous rate of handling coal achieved at any time during operation of System. B. System 2 - Reclaim/Barge Loading System Components: a. Storage Reclaim System: Vibratory Feeders and Reclaim Conveyor #2 b. Barge Loading System: Barge Loading Shuttle Conveyor #3 and Shuttle Traverse Drive Capacity: Design Rate capacity of 1,500 tons per hour (2,000 lbs. per ton). Design rate is maximum instantaneous rate of handling coal achieved at any time during operation of System. C. System 3 - Storage On-ground storage capacity of at least 150,000 tons of Amax Coal Co. coal from its Belle Ayr Mine near Gillette, Wyoming (average density) compacted with normal and usual means. D. Ancillary Hardware a. Operation assumes use of leased D9 Caterpillar Dozer and 988 Caterpillar Front-end Loader for all compaction, storage and loading operations. b. Basic minimal spare parts inventory to be located at site; some spare parts to be available from inventory at other similar facilities managed by Orba. EX-10 5 EX-10.c INTERSTATE AMENDMENT AGREEMENT This Agreement dated as of September 1, 1981 (the "Interstate Amendment Agreement") between ORBA-JOHNSON TRANSSHIPMENT COMPANY, AN IOWA PARTNERSHIP ("OJT") and INTERSTATE POWER COMPANY, a Delaware corporation ("Interstate"), W I T N E S S E T H: WHEREAS, OJT is an Iowa partnership formed pursuant to a Second Amended Partnership Agreement dated as of December 20, 1979 (the "Partnership Agreement") between Johnson Bros. Transshipment Corporation of Iowa, an Iowa corporation ("J-Sub"), which is a wholly-owned subsidiary of Johnson Brothers Corporation, a Minnesota corporation ("Johnson Bros."), and Orba Transshipment Corporation of Iowa, an Iowa corporation ("O-Sub"), which is a wholly-owned subsidiary of Orba Corporation, a Delaware corporation ("Orba"); WHEREAS, Interstate Power Company ("Interstate") designated OJT to acquire a rail-to-barge coal transloading and storage facility located on the right descending bank of the Mississippi River at River Mile 371, North of Keokuk, Iowa (the "Facility") and engaged OJT and the Facility for the receiving, storage and transshipment of coal, and OJT so acquired and agreed to so operate, and has so operated, the Facility; WHEREAS, Interstate and OJT have entered into a Second Amended and Restated Coal Transshipment Agreement, dated as of December 20, 1979, effective October 3, 1979, which agreement was recorded on December 20, 1979 in Book 9 at page 152 in the Records of Lee County, Iowa (the "Transshipment Agreement"), and OJT is operating the Facility upon the terms and conditions thereof; WHEREAS, OJT and The Travelers Insurance Company, on its own behalf and on behalf of a certain separate account maintained by it (collectively, the "Lender"), entered into two Bond Agreements, dated as of December 20, 1979 (collectively, the "1979 Agreement"), pursuant to which the Lender loaned OJT $27,000,000 for the long-term financing of the Facility and pursuant to which OJT issued its 10 3/8% First Mortgage Bonds, due March 1, 1996 (the "1979 Bonds"); WHEREAS, pursuant to a Representation Agreement dated as of December 20, 1979 between OJT and Interstate (the "Representation Agreement"), Interstate provided OJT with certain representations, warranties and covenants, the rights under which were assigned by OJT to the Lender for the benefit of the holders of the 1979 Bonds; WHEREAS, Lender, acting on behalf of a certain separate account maintained by it, is entering into a Bond Agreement, dated as of the date hereof, pursuant to which the Lender will loan OJT up to $540,000 for financing the planning and installation of certain environmental control equipment for the Facility, and OJT will issue its 15 1/2% First Mortgage Bonds, Series B, due July 1, 1986 (the "Series B Bonds") to the Lender as evidence of such loan; WHEREAS, in order to finance additions or improvements to the Facility, the Lender may, from time to time, make further purchases of first mortgage bonds, to be issued in additional series by OJT, pursuant to additional bond agreements between OJT and the Lender (the 1979 Agreement, the Series B Bond Agreement and any such additional bond agreements, collectively referred to herein as the "Bond Agreement"; the 1979 Bonds, the Series B Bonds and any additional bonds issued pursuant to any such additional bond agreements between OJT and the Lender, collectively referred to herein as the "Bonds"); and WHEREAS, pursuant to a Security Agreement and Assignment of Contracts, dated as of December 20, 1979, as amended as of September 1, 1981 (the "Security Agreement"), OJT has assigned to Lender all of its right, title and interest in, to and under the Collateral (as defined in the Security Agreement), including its rights under the Transshipment Agreement, in order to secure the prompt and complete payment and performance when due of all of the Obligations (as defined in the Security Agreement); and WHEREAS, pursuant to the terms of an Indemnity Assignment from OJT, Orba and Johnson Bros. to the Lender, dated as of December 20, 1979 (the "Indemnity Assignment"), and pursuant to the terms of a Consent and Clarification, dated as of October 3, 1979, OJT, Orba and Johnson Bros. assigned to the Lender for the benefit of all holders of the 1979 Bonds all their rights under an indemnity letter (the "Indemnity Letter") dated October 3, 1979 from Interstate to Orba and Johnson; WHEREAS, in order to induce the Lender to enter into the Series B Bond Agreement and any such additional bond agreements which may be entered into between the Lender and OJT from time to time to finance additions or improvements to the Facility, and in consideration of the Lender's entering into the Series B Bond Agreement and purchasing the Series B Bonds pursuant to the terms thereof, and in consideration of the Lender's entering into any additional bond agreements between the Lender and OJT to finance additions or improvements to the Facility and purchasing any additional series of Bonds pursuant to the terms thereof, OJT intending to be legally bound hereby has agreed to provide the Lender with the protection and security provided by the following amendments to the Transshipment Agreement, the Representation Agreement and the Consent and Clarification contained herein; WHEREAS, in order to induce the Lender and OJT to carry out the transactions contemplated hereby and by the Transshipment Agreement, Interstate has been requested by OJT and the Lender to provide, and Interstate has agreed to provide, the amendments to the various agreements contained herein; WHEREAS, the Lender desires to amend the Representation Agreement, the Transshipment Agreement and the Consent and Clarification so that the holders of all Bonds will be entitled to all rights and benefits provided to the holders of the 1979 Bonds under the Representation Agreement, the Transshipment Agreement, the Security Agreement and the Indemnity Assignment; NOW THEREFORE, in consideration of the premises, of the agreements of OJT contained in the Transshipment Agreement, of the agreements of OJT and the Lender with respect to the long-term financing of the Facility and additions and improvements thereto and of the mutual covenants and agreements contained herein, the parties hereto agree as follows: SECTION 1 REPRESENTATION AGREEMENT 1.1 The first paragraph and the "Witnesseth" clause of the Representation Agreement are hereby amended to read as follows: "This REPRESENTATION AGREEMENT dated as of December 20, 1979, as amended as of September 1, 1981, between ORBA-JOHNSON TRANSSHIPMENT COMPANY, an Iowa partnership ("OJT") and INTERSTATE POWER COMPANY, a Delaware corporation ("INTERSTATE"), W I T N E S S E T H: WHEREAS, Interstate has designated OJT to acquire a rail-to-barge coal transloading and storage facility located on the right descending bank of the Mississippi River at River Mile 371, North of Keokuk, Iowa (the "Facility") and has engaged OJT and the Facility for the receiving, storage and transshipment of coal, and OJT has so acquired and agreed to so operate the Facility; WHEREAS, Interstate and OJT have entered into a Second Amended and Restated Coal Transshipment Agreement, dated as of December 20, 1979, effective as of October 3, 1979, as further amended as of September 1, 1981 (the "Transshipment Agreement"), pursuant to which OJT will so operate the Facility and Interstate will make certain payments to OJT upon the terms and conditions thereof; WHEREAS, in order to obtain the requisite long-term financing for the Facility, OJT entered into two Bond Agreements, dated as of December 20, 1979 (collectively, the "1979 Agreement") with The Travelers Insurance Company, on its own behalf and on behalf of a certain separate account maintained by it (collectively, the "Lender"), pursuant to which the Lender loaned OJT up to $27,000,000 for the long-term financing of the Facility and OJT issued its 10 3/8% First Mortgage Bonds (the "1979 Bonds") to the Lender as evidence of such loan; WHEREAS, in order to obtain the financing for the planning and installation of certain environmental control equipment for the Facility, OJT proposes to enter into a Bond Agreement, dated as September 1, 1981, with the Lender, acting on behalf of a certain separate account maintained by it (the "Series B Bond Agreement"), pursuant to which the Lender will loan OJT up to $540,000 for financing the planning and installation of certain environmental control equipment for the Facility and OJT will issue its 15-1/2% First Mortgage Bonds, due July 1, 1986, (the "Series B Bonds") as evidence of such loan; WHEREAS, in order to obtain additional financing for additions and improvements to the Facility, OJT may propose, from time to time, to enter into additional bond agreements with the Lender, pursuant to which the Lender will loan OJT additional amounts and OJT will issue its first mortgage bonds in additional series to the Lender as evidence of such loans (the 1979 Agreement, the Series B Bond Agreement and any such additional bond agreements entered into between OJT and the Lender, collectively referred to herein as the "Bond Agreement"; the 1979 Bonds, the Series B Bonds and any additional first mortgage bonds issued pursuant to any such additional bond agreements, collectively referred to herein as the "Bonds"); and WHEREAS, in order to induce OJT and Lender to carry out the transactions contemplated hereby and by the Transshipment Agreement, Interstate has been requested by OJT and Lender to provide, and Interstate has agreed to provide, certain representations, warranties and covenants, all on the terms and conditions contained herein; NOW, THEREFORE, in consideration of the premises, of the agreements of OJT contained in the Transshipment Agreement, of the agreements of OJT and the Lender with respect to the long-term financing of the Facility and additions or improvements thereto and of the mutual covenants and agreements contained herein, the parties hereto agree as follows: 1.2 Terms Defined. The definition of "Operative Agreements" in Section 5.1 of the Representation Agreement is hereby amended to read as follows: "Operative Agreements - collectively, this Agreement, the Transshipment Agreement, the 1979 Agreement, the Series B Bond Agreement, any additional bond agreement entered into between OJT and the Lender to finance additions or improvements to the Facility, and each of the following agreements as defined in the Series B Bond Agreement, or in the event Lender and OJT enter into any additional bond agreements to finance additions or improvements to the Facility, as defined in the most recent of such bond agreements then in effect: the Lease, the Mortgage, the Guaranty Agreement, the Security Agreement, the Performance Guaranty Agreements, the Indemnity Agreement, the Indemnity Assignment, the Assignment of Option to Repurchase, the Escrow Agreement, the Amendment Agreement, the Interstate Amendment Agreement and the Amendment to the Mortgage and Security Agreement, as each such agreement may be amended or supplemented from time to time." 1.3 Additional Provisions (a) A new Section 2.18 is hereby added to the Representation Agreement to read as follows: "2.18 Financial Statements The consolidated balance sheet of Interstate and its Subsidiaries as of December 31, 1980 and related statements of income, retained earnings and changes in financial position for the fiscal year ended on such date, accompanied by a report as therein noted, by Deloitte, Haskins & Sells, independent certified public accountants, and the consolidated balance sheet of Interstate and its subsidiaries as of June 30, 1981 and the related statements of income, retained earnings and changes in financial position for the six months ended on such date, copies of which have been delivered to Lender, have been prepared in accordance with generally accepted accounting principles consistently applied, and present fairly the financial position of Interstate and its Subsidiaries as of such dates and the results of their operations for such periods. These consolidated financial statements include the accounts of all Subsidiaries of Interstate for the respective periods during which a subsidiary relationship has existed." (b) A new Section 2.19 is hereby added to the Representation Agreement to read as follows: "2.19 Business and Property Interstate's Annual Report on Form 10-K for the fiscal year ended December 31, 1980 filed by Interstate with the Securities and Exchange Commission (the "Form 10-K") correctly describes the general nature of the business and principal properties of Interstate and its Subsidiaries." 1.4 Representations and Warranties. Interstate hereby warrants and represents to OJT that the representations and warranties of Interstate set forth in the Representation Agreement, as hereby amended, are true and correct on and as of the date of execution and delivery of this Agreement with the same force and effect as if such representations and warranties had been made on and as of such date. Interstate hereby affirms to OJT, as of the date of execution and delivery of this Agreement, that it has complied with all covenants and agreements of Interstate contained in the Representation Agreement and will comply with all such covenants and agreements in the Representation Agreement, as hereby amended. SECTION 2 TRANSSHIPMENT AGREEMENT 2.1 Definition of Financial Terms. Subsection (b) of Section 3.2 of the Transshipment Agreement is hereby amended to read as follows: "`Facility Financing' shall mean any long-term indebtedness incurred by OJT to finance the construction or acquisition of the Facility, including the planning, construction, acquisition and installation of any modifications, additions or improvements to the Facility or Ancillary Hardware required to meet the requirements of this Agreement, any portion of the Ancillary Hardware and certain of the start-up expenses, and any renewals or refinancings thereof, including any construction financings assumed by OJT in connection with the acquisition of the Facility (the "Construction Financing")." 2.2 The modifications, additions or improvements to the Facility or Ancillary Hardware (as defined in the Transshipment Agreement, as amended) for the purpose of complying with environmental requirements and the costs related to the planning, construction, acquisition and installation of said modifications, additions or improvements, which are to be financed by the sale of the Series B Bonds, do not constitute "Reimbursable Costs" as defined in Section 3.2(g) of the Transshipment Agreement, as amended, and, notwithstanding the provisions of Section 1.5(e) of the Transshipment Agreement, the financing of such costs will constitute "Facility Financing" as defined in Section 3.2(b) of the Transshipment Agreement, as amended. SECTION 3 CONSENT AND CLARIFICATION 3.1 The second paragraph of the introduction to the Consent and Clarification of Interstate, dated as of December 20, 1979, is hereby amended to read as follows: "Interstate hereby acknowledges notice of the assignment by OJT, ORBA and Johnson Bros. to The Travelers Insurance Company, on its own behalf and on behalf of a certain separate account maintained by it (said Travelers and said separate account being herein called collectively the "Lender") of the right to enforce and collect directly from Interstate all indemnities due pursuant to the Indemnity Letter to OJT, Orba or Johnson Bros. for which OJT, Orba or Johnson Bros. would be obligated to Lender (the "Assignment"). In order to induce Lender to carry out the transactions contemplated by those certain Bond Agreements dated as of December 20, 1979 (collectively, the "1979 Agreement"), that certain Bond Agreement dated as of September 1, 1981 (the "Series B Bond Agreement") and any future bond agreements which may be entered into from time to time by Lender with OJT to finance additions or improvements to the Facility (the 1979 Agreement, the Series B Bond Agreement and any such additional bond agreements are collectively referred to herein as the "Bond Agreement") and thereby to enable OJT to carry out its obligations to Interstate pursuant to the Second Amended and Restated Coal Transshipment Agreement dated December 20, 1979, as amended and restated effective as of October 3, 1979, and as further amended as of September 1, 1981 (the "Transshipment Agreement"), Interstate agrees hereby to consent to such assignment by OJT, Orba and Johnson Bros. and to confirm Lender's direct rights under the Indemnity Letter and to hereby clarify the scope and substance of the indemnification provided to Lender therein." 3.2 The first paragraph of Section 2 of the Consent and Clarification is hereby amended as follows: "Interstate hereby confirms that the Indemnity Letter may and shall be interpreted and enforced so that Lender and any of its successors, assigns, servants and agents, including without limitation, all of the holders, from time to time, of the Bonds (as defined in the Series B Bond Agreement, or, in the event Lender and OJT enter into any additional bond agreements to finance additions or improvements to the Facility, as defined in the most recent of such bond agreements then in effect) (such holders herein called the "Lender Indemnitees") shall each be indemnified by Interstate under the Indemnity Letter and, pursuant thereto, Interstate shall protect, save, keep harmless and make whole each thereof from and against, any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements (including, without limitation, legal fees and expenses and claims involving strict or absolute liability in tort) of any kind and nature whatsoever ("Claims") imposed on, incurred by or asserted against any Indemnitee, in any way relating to or arising out of any of the following:" SECTION 4 OTHER AMENDMENT AGREEMENTS Interstate hereby consents to the terms of the Amendment Agreement, dated as of September 1, 1981 (the "Amendment Agreement"), among OJT, O- Sub, J-Sub, Orba, AMCA International Corporation, a Delaware corporation, Johnson Bros., Northwestern Bank of Minneapolis, a national banking association, the Lender and the other holders of the 1979 Bonds, and to the terms of the Amendment to Mortgage and Security Agreement (the "Amendment to Mortgage and Security Agreement"), dated as of September 1, 1981, between the Lender and OJT. Interstate acknowledges receipt of copies of the Amendment Agreement and the Amendment to Mortgage and Security Agreement. SECTION 5 GENERAL 5.1 Notices. Any notice required or permitted to be given hereunder shall be deemed to have been given when mailed, first class, postage prepaid, addressed as follows: (a) if to Interstate, at 1000 Main Street, Dubuque, Iowa 52001, Attn: President; and (b) if to OJT, at P.O. Box 768, River Road, Keokuk, Iowa 52632, with a copy to OJT c/o Orba Corporation, Attn: President, One Gothic Plaza, Fairfield, New Jersey 07006. 5.2 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Iowa. 5.3. Survival. All warranties, representations, and covenants made by Interstate herein or in any certificate or other instrument delivered by it or on its behalf under this Agreement or any of the other Operative Agreements (as defined in the Series B Bond Agreement, or, in the event the Lender and OJT enter into any additional bond agreements to finance additions or improvements to the Facility, as defined in the most recent of such bond agreements then in effect) shall be considered to have been relied upon by OJT and Lender and shall survive the delivery of this Agreement and the Bonds regardless of any investigation made by or on behalf of either of them. All statements in any such certificate or other instrument shall constitute warranties and representations by Interstate hereunder. 5.4 Successors and Assigns. This Agreement shall inure to the benefit of, and be binding upon, the successors and assigns of each of the parties. The provisions of this Agreement are intended to be for the benefit of all holders, from time to time, of the Bonds, and shall be enforceable by any such holder, whether or not an express assignment to such holder of rights under this Agreement has been made. 5.5 Counterparts. This Agreement may be executed in several counterparts, such counterparts constituting but one and the same agreement. 5.6 Authorization. The execution, delivery and performance of this Agreement by Interstate has been duly authorized by the Executive Committee of Interstate's Board of Directors. 5.7 Effective Date. This Agreement shall become effective when counterparts are executed and delivered on behalf of the parties hereto. Upon such effectiveness, the amendments contained herein shall be effective as of September 1, 1981. The agreements amended hereby shall remain in full force and effect, as so amended. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by one of their duly authorized officers, effective as of the date first above written. Executed in the presence of: /s/ T. H. Mahoney INTERSTATE POWER COMPANY /s/ Ann M. Mongell By /s/ Clyde Kurlander Title: Attorney in Fact /s/ T. H. Mahoney ORBA-JOHNSON TRANSSHIPMENT COMPANY By Orba Transshipment Corporation of Iowa, a Partner /s/ Ann M. Mongell By /s/ Thomas H. Peck Title: Vice President /s/ T. H. Mahoney By Johnson Bros. Transshipment Corporation of Iowa, a Partner /s/ Ann M. Mongell By /s/ Walter D. Johnson Title: Secretary STATE OF Connecticut ) ) ss COUNTY OF Hartford ) On the 15 day of September, 1981, before me, the undersigned, in and for said County and State, personally appeared Walter D. Johnson to me personally known, who, being duly sworn, did say that he is the Secretary of Johnson Bros. Transshipment Corporation of Iowa, one of the partners of Orba-Johnson Transshipment Company, an Iowa partnership, that said corporation has no seal; that said instrument was signed by him on behalf of such corporation as a partner of such partnership by authority of the Board of Directors of such corporation; and that the said Walter D. Johnson in such capacity acknowledged the execution of said instrument to be the voluntary act of said corporation as a partner of such partnership, by it and him voluntarily executed. /s/ Ann M. Mongell Notary Public in and for said County and State STATE OF Connecticut ) ) ss COUNTY OF Hartford ) On the 15 day of September, 1981, before me, the undersigned, in and for said County and State, personally appeared Thomas H. Peck to me personally known, who, being duly sworn, did say that he is the Vice President of Orba Transshipment Corporation of Iowa, one of the partners of Orba-Johnson Transshipment Company, an Iowa partnership, that said corporation has no seal; that said instrument was signed by him on behalf of such corporation as a partner of such partnership by authority of the Board of Directors of such corporation; and that the said Thomas H. Peck in such capacity acknowledged the execution of said instrument to be the voluntary act of said corporation as a partner of such partnership, by it and him voluntarily executed. /s/ Ann M. Mongell Notary Public in and for said County and State STATE OF Connecticut ) ) ss COUNTY OF Hartford ) On the 15 day of September, 1981, before me, the undersigned, in and for said County and State, personally appeared Clyde Kurlander, to me personally known, who, being duly sworn, did say that he is the Attorney in Fact of Interstate Power Company, a Delaware corporation, that the seal affixed thereto is the seal of said corporation; that said instrument was signed and sealed on behalf of said corporation by authority of the Executive Committee of its Board of Directors; that the said Clyde Kurlander as such officer acknowledged the execution of said instrument to be the voluntary act and deed of said corporation, by it and by him voluntarily executed. /s/ Ann M. Mongell Notary Public in and for said County and State EX-12 6 EX-12 Computation of Ratio of Earnings to Fixed Charges 1991 1992 1993 1994 1995 (Thousands of Dollars) Fixed Charges, as defined: Interest on long-term debt $ 15,120 16,292 16,166 15,405 14,811 Other interest 1,605 586 596 1,771 2,325 Interest component of rents charged to operating expenses 232 214 183 177 227 Total Fixed Charges, as defined $ 16,957 17,092 16,945 17,353 17,363 Earnings, as defined: Net income $ 29,510 19,217 18,987 20,667 27,656 Add: Income taxes 17,382 9,698 9,464 9,188 19,453 Fixed charges 16,957 17,092 16,945 17,353 17,363 Total Earnings, as defined $ 63,849 46,007 45,396 47,208 64,472 Ratio of Earnings to Fixed Charges 3.77x 2.69x 2.68x 2.72x 3.71x Computation of Ratio of Earnings to Fixed Charges and Preferred & Preference Dividends 1991 1992 1993 1994 1995 (Thousands of Dollars) Fixed Charges, as defined: Interest on long-term debt $ 15,120 16,292 16,166 15,405 14,811 Other interest 1,605 586 596 1,771 2,325 Interest component of rents charged to operating expenses 232 214 183 177 227 Total Fixed Charges, as defined $ 16,957 17,092 16,945 17,353 17,363 Preferred & Preference Dividends, as defined (a) 4,886 4,476 4,287 3,545 4,187 Fixed Charges and Preferred & Preference Dividends, as defined $ 21,843 21,568 21,232 20,898 21,550 Earnings, as defined: Net income $ 29,510 19,217 18,987 20,667 27,656 Add: Income taxes 17,382 9,698 9,464 9,188 19,453 Fixed charges 16,957 17,092 16,945 17,353 17,363 Total Earnings, as defined $ 63,849 46,007 45,396 47,208 64,472 Ratio of Earnings to Fixed Charges and Preferred & Preference Dividends, as defined 2.92x 2.13x 2.14x 2.26x 2.99x (a) Preferred and preference dividends have been adjusted by multiplying the requirement by the ratio that income before income taxes bears to net income. Such ratios were as follows: 159% in 1991, 151% in 1992, 150% in 1993, 145% in 1994 and 170% in 1995. EX-13 7 EX-13 INTERSTATE POWER COMPANY Annual Report to Stockholders 1995 MANAGEMENT'S DISCUSSION AND ANALYSIS MERGER The Company, WPL Holdings, Inc. (WPLH) and IES Industries Inc. (IES) have entered into an Agreement and Plan of Merger (Merger Agreement), dated November 10, 1995, providing for: a) Interstate Power Company (IPC) becoming a wholly-owned subsidiary of WPLH and b) the merger of IES with and into WPLH, which merger will result in the combination of IES and WPLH as a single holding company (collectively, the Proposed Merger). The new holding company will be named Interstate Energy Corporation (Interstate Energy) and IES will cease to exist. The Proposed Merger, which will be accounted for as a pooling of interests, is subject to approval by the shareholders of each company as well as several federal and state regulatory agencies. The companies expect to receive the shareholder approvals in the second quarter of 1996 and the regulatory approvals by the second quarter of 1997. The business of Interstate Energy will consist of utility operations and various non-utility enterprises, and it is expected that its utility subsidiaries will serve more than 870,000 electric customers and 360,000 natural gas customers in Iowa, Illinois, Minnesota and Wisconsin. Under the terms of the Merger Agreement, the outstanding shares of WPLH's common stock will remain unchanged and outstanding as shares of Interstate Energy. Each outstanding share of IES common stock will be converted to 0.98 shares of Interstate Energy's common stock. Each share of the Company's common stock will be converted to 1.11 shares of Interstate Energy's common stock. It is anticipated that Interstate Energy will retain WPLH's common share dividend payment level as of the effective time of the merger. On January 24, 1996, the Board of Directors of WPLH declared a quarterly dividend of 49.25 cents per share. This represents an equivalent annual rate of $1.97 per share. WPLH is a holding company headquartered in Madison, Wisconsin, and is the parent company of Wisconsin Power and Light Company (WP&L) and Heartland Development Corporation (HDC). WP&L supplies electric and gas service to approximately 377,000 and 146,000 customers, respectively, in south and central Wisconsin. HDC and its principal subsidiaries are engaged in businesses in three major areas: environmental engineering and consulting, affordable housing and energy services. IES is a holding company headquartered in Cedar Rapids, Iowa, and is the parent company of IES Utilities Inc. (Utilities) and IES Diversified Inc. (Diversified). Utilities supplies electric and gas service to approximately 333,000 and 174,000 customers, respectively, in Iowa. Diversified and its principal subsidiaries are primarily engaged in the energy-related, transportation and real estate development businesses. Interstate Energy will be the parent company of Utilities, WP&L and IPC and will be registered under the Public Utility Holding Company Act of 1935 (1935 Act), as amended. The merger agreement provides that these operating utility companies will continue to operate as separate entities for a minimum of three years beyond the effective date of the merger. In addition, the non-utility operations of IES and WPLH will be combined shortly after the effective date of the merger under one entity to manage the diversified operations of Interstate Energy. The corporate headquarters of Interstate Energy will be in Madison. The Securities and Exchange Commission (SEC) historically has interpreted the 1935 Act to preclude registered holding companies, with limited exceptions, from owning both electric and gas utility systems. Although the SEC has recently recommended that registered holding companies be allowed to hold both gas and electric utility operations if the affected states agree, it remains possible that the SEC may require as a condition to its approval of the Proposed Merger that the Company, WPLH and IES divest their gas utility properties, and possibly certain non-utility ventures of IES and WPLH, within a reasonable time after the effective date of the Proposed Merger. Legislation to repeal the 1935 Act was introduced in Congress in 1995 and is pending. No assurance can be given as to when or if such legislation will be considered or enacted. The Staff of the SEC has also recommended that the SEC "permit combination systems by registered holding companies if the affected states concur", and the SEC has proposed rules that would relax current restrictions on investment by registered holding companies in certain "energy related", non-utility businesses. No prediction can be made as to the outcome of these legislative and regulatory proposals. LIQUIDITY AND CAPITAL RESOURCES Cash flow from operating activities was $61 million in 1995. The funds were primarily used to pay the company's construction program, to redeem $14 million of 4 5/8% First Mortgage Bonds which matured, and to pay common and preferred dividends. It is management's opinion that the company has adequate access to capital markets and will be able to satisfy anticipated capital requirements. Construction expenditures were $29, $41 and $34 million in 1995, 1994 and 1993, respectively. For the five year period from 1996 through 2000, construction expenditures are estimated to be $180 million. The company anticipates that approximately 75% of the construction funds for years 1996 and 1997 will be generated internally. The 1996 and 1997 construction programs are estimated to be $32 and $36 million, respectively. Budgeted construction expenditures for 1997 and 1998 include approximately $14 million for a baghouse/precipitator at the Lansing unit #4 plant to comply with the Clean Air Act. The company has authorization from the Federal Energy Regulatory Commission (FERC) to issue up to $70 million in short-term debt. At year end 1995, a $55 million line of credit was available. Lines of credit are generally used in support of commercial paper, which is the primary source of short-term financing. At year end 1995, the company had $39.3 million of commercial paper payable. The company projects that the short-term debt will decline to $36 million at year end 1996. At December 31, 1995, based upon the most restrictive earnings test contained in the company's Indenture pursuant to which first mortgage bonds are issued, the company could issue in excess of $200 million of additional first mortgage bonds. The company's fixed charge coverage ratio was 3.7 times for 1995 and 2.7 times for 1994 and 1993. The company's stock price increased from $23.75 at year end 1994 to $33.125 at year end 1995. Effective December 1994, the company elected to purchase shares of common stock for the Dividend Reinvestment and Stock Purchase Plan on the open market rather than issuing new stock. The company anticipates that it will resume the issuance of new stock to satisfy Dividend Reinvestment and Stock Purchase Plan requirements in the third quarter of 1996. Electric and gas rates include a fuel adjustment clause and a purchased gas adjustment clause whereby increases or decreases in fuel and purchased gas costs are included in current revenue without having changes in base rates approved in formal hearings. Under present regulations, electric capacity costs are not recovered from customers through fuel adjustment clauses, but rather must be addressed in base rates in a formal rate proceeding. However, any Iowa jurisdictional revenue from electric capacity sales to other utilities is returned to customers through the fuel adjustment clause. The company is subject to regulation which recognizes only original cost rate base. This may result in economic losses when the effects of inflation are not recovered from customers on a timely basis. NEW ACCOUNTING STANDARD - SFAS 121 The Company will be required to adopt Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" in 1996. The new standard imposes stricter standards for regulatory assets by requiring that such assets be probable of future recovery at each balance sheet date. The company believes that the initial adoption of SFAS 121 will not have a material impact on its financial position or results of operations. POWER PURCHASE CONTRACTS In 1992, the company entered into three long-term power purchase contracts with other utilities. The contracts provide for the purchase of 255 MW of capacity through April 2001. Energy is available at the company's option at approximately 100% to 110% of monthly production costs for the designated units. The three power purchase contracts required capacity payments of $24.6, $24.6 and $24.1 million in 1995, 1994 and 1993, respectively. Over the remaining life of the contracts, total capacity payments will be approximately $130 million. The purchased power contract payments are not for debt service requirements of the selling utility, nor do they transfer risk or rewards of ownership. The rate structure approved by the Minnesota Public Utilities Commission (MPUC) does not provide for full recovery of purchased power costs applicable to the Minnesota jurisdiction. A 1992 rate order by the MPUC held that the company had 100 MW of excess capacity. The company is seeking to adjust this disallowance in its current rate case. The company has not filed for rate recovery of the allocable portions of the purchased power payments in the Illinois and FERC jurisdictions. The payments of approximately $2.5 million annually are expensed as incurred. CLEAN AIR ACT The company meets the existing federal and state environmental regulations. The Federal Clean Air Act Amendments of 1990 requires reductions in sulfur dioxide and nitrogen oxide emissions from power plants. The most restrictive provisions relate to sulfur dioxide emissions. Phase 1 of the Clean Air Act became effective January 1, 1995, while Phase 2 is effective January 1, 2000. To comply with Phase 1, the company has switched to low sulfur coal and installed low nitrogen oxide burners. Although the financial impact of Phase 2 has not been fully determined, Phase 2 regulations will affect approximately 87% of the company's current generating capacity and will require capital, operating and maintenance costs beyond those required for Phase 1. The company anticipates the costs of compliance with the Clean Air Act will be recovered through the ratemaking process. COAL TAR DEPOSITS Early this century, various utilities including the company operated plants which produced manufactured gas for cooking and lighting. The company's facilities ceased operations approximately 40 years ago when natural gas pipelines were extended into the upper Midwest. Some of the former gasification sites contain coal tar waste products which may present an environmental hazard. The company has identified nine sites which may contain hazardous waste from former coal gasification plants and has recorded an estimated liability for its pro rata share of expenses applicable to the sites. Previous actions by Iowa, Illinois and Minnesota regulators have permitted utilities to recover prudently incurred unreimbursed investigation and remediation costs. In 1957, the company purchased facilities in Mason City, Iowa, from Kansas City Power & Light Company (KCPL) which included land previously used for a coal gasification plant. Coal tar waste was discovered on the property in 1984. In 1995, a settlement was reached with KCPL for sharing of costs to remediate the site. A Remedial Investigation and Feasibility Study has been approved and the company has assumed responsibility for managing the remediation of the Mason City site. The current estimated cost of soil remediation is $2.6 million, which will be paid by KCPL. The company formerly operated a manufactured gas plant in Rochester, Minnesota. Soil remediation was completed in 1995 and post-remediation groundwater monitoring is underway. From 1991 through 1995, the company incurred costs aggregating $6.7 million applicable to the Rochester site. In addition to the Rochester site, the company owned or operated four other manufactured gas plant sites in Minnesota: Albert Lea, Austin, New Ulm and Owatonna. Potentially hazardous wastes associated with former coal gasification operations have been identified at each site. The company anticipates that these sites will be investigated in 1996 or 1997. When the investigation process is complete, the company will be able to determine if any remediation will be necessary. In April 1995, the company received an accounting order from the MPUC which allows the deferral of investigation and remediation costs applicable to the Rochester and Albert Lea sites and further allows the company to seek recovery in a rate case. The company's Minnesota gas rate case filed in May 1995 seeks recovery of $4.9 million. The company filed a petition in June 1995 for an accounting order which would allow it to defer and seek recovery in a future rate case the costs applicable to the three other Minnesota sites (Austin, Owatonna and New Ulm). Action by the MPUC is pending. In addition, the company has identified three other sites: Galena and Savanna, Illinois, and Clinton, Iowa. Potentially hazardous wastes associated with former coal gasification operations have been identified at each of these sites. Little or no activity is expected at any of these sites in 1996. In 1994, the company filed a lawsuit against certain of its insurers to recover the costs of investigating and remediating the former coal gasification plants. Two insurers paid the company a total of $0.3 million in 1995 in order to be discharged from the lawsuit. The trial against the remaining insurers is expected to begin in Iowa in 1997. Neither the company nor its legal counsel is able to predict the amount of any insurance recovery, and accordingly, no potential recovery has been recorded. LARGE ELECTRIC CUSTOMERS The company's six largest electric customers consumed a total of 1,752,340 MWH of electricity in 1995, which accounts for over 32 percent of total MWH sales. These customers are involved in the production of agricultural, chemical and cement products and their usage is generally not affected by weather variations. The company is not aware of any plan by these customers to significantly reduce consumption. Electric consumption by these customers increased 4.9 percent over 1994, while 1994 consumption was 3.0 percent over 1993. The aggregate 1995 rate for these customers was approximately 3.4 cents per KWH. DEMAND SIDE MANAGEMENT COSTS Regulations in Iowa and Minnesota require that utilities conduct demand side management or energy efficiency programs. The company's long-term forecast projects that these programs may offset the need for approximately 150 MW of generating capacity by the year 2001. Program costs and related carrying costs are deferred pending regulatory prudency reviews. The company's Minnesota rates recover jurisdictional demand side management expenditures and lost revenues. Other operating expenses for 1995, 1994 and 1993 include $0.6, $0.5 and $0.5 million, respectively, for the amortization of Minnesota demand side management costs. A 1994 Iowa Utilities Board (IUB) Order allows recovery of $6.7 million of deferred Iowa demand side management costs incurred through 1992 over a four year period; such recovery began October 1994. Other operating expenses for 1995 and 1994 include $1.2 and $0.3 million, respectively, for the amortization of Iowa demand side management costs. As of December 31, 1995 and 1994, the total demand side management costs deferred were $23.1 and $17.0 million, respectively. Of the $23.1 million deferred, approximately $19.8 million relates to demand side management costs incurred in 1995, 1994 and 1993. The company anticipates filing in Iowa in 1996 for recovery of costs incurred through 1995. Management believes that the amounts deferred meet the criteria established for recovery as demand side management costs. ORDER 636 FERC Order 636, effective in late 1993, shifted primary responsibility for gas supply acquisition from pipelines to local distribution companies such as the company. Order 636 provides a mechanism under which pipelines can recover prudently incurred transition costs associated with the restructuring process. The company paid $2.0 million of transition costs in 1995 and is currently recovering these costs from customers through the purchased gas adjustment clause. The company anticipates that under customary ratemaking practices, future transition costs will be recovered from customers, and has recorded on its balance sheet a liability and a corresponding regulatory asset in the amount of $3.2 million. INDUSTRIAL AND COMMERCIAL GAS CUSTOMERS Current regulatory rules allow industrial and commercial customers to purchase their gas supply directly from producers and use the company's facilities to transport the gas. Transportation customers pay the company a fee equivalent to the margin on a retail sale. Acting as a gas transporter, rather than as a merchant, reduces the risk applicable to taking ownership of the gas. Twenty-one large customers currently purchase a majority of their gas requirements from producers or gas marketers. Consumption for the three largest gas customers was up 4.4% over 1994 and currently accounts for approximately 66% of system throughput. The company's largest gas customer, which represents 31% of the company's total gas throughput, is committed by contract for the next six years. GAS SYSTEM PROFITABILITY Over the last five years, gas operating income before income taxes has averaged 5.5% of net gas utility plant. Environmental remediation costs, unfavorable rate treatment and the offering of incentive rates contributed to the low return. The company is seeking recovery of environmental remediation costs from insurance as well as through rates. RATE MATTERS The company filed for rate increases in 1995 in the Iowa electric, Iowa gas, Minnesota electric, and Minnesota gas jurisdictions. Such applications seek to recover the costs associated with the purchased power contracts, the environmental clean-up of former manufactured gas plant sites, jurisdictional post-retirement benefit costs, an increased return on common equity and attrition due to inflation. The company filed an Iowa electric rate increase application in March 1995. The application requested an annual increase of $13.1 million. Interim rates in an annual amount of $7.1 million were placed in effect on June 29, 1995, subject to refund. A December 1995 IUB Order allowed an annual increase of $6.6 million, including a return on common equity of 11.35%. In 1996, the company will refund to customers approximately $250,000 collected in 1995 in excess of the final order. The 1995 financial statements include a provision for the refund. The company filed an Iowa gas rate increase application in August 1995. The application requested an annual increase of $2.2 million. Interim rates in an annual amount of $1.3 million were placed in effect on October 20, 1995, subject to refund. The company and other parties to the rate application have agreed on an increase of $1.1 million subject to approval by the IUB. An IUB Order is expected by June 1996. The company filed a Minnesota electric rate increase application in June 1995. The application requested an annual increase of $4.6 million (later adjusted by the company to $3.3 million). Interim rates were not requested. A MPUC Order is expected by April 1996. The company filed a Minnesota gas rate increase application in May 1995. The application requested an annual increase of $2.4 million, including a return on common equity of 11.75%. Interim rates in an annual amount of $1.5 million were placed in effect in June 1995, subject to refund. A MPUC Order is expected by March 1996. As discussed under Demand Side Management Costs, the company anticipates filing in 1996 for recovery of Iowa demand side management costs incurred in 1995, 1994 and 1993. RESULTS OF OPERATIONS The company's results of operations and financial condition are affected by numerous factors, including weather, general economic conditions and rate changes. Earnings per share of common stock were $2.63 for 1995, compared with $1.92 for 1994 and $1.73 for 1993. Hot summer weather, electric and gas rate increases and cost cutting efforts contributed to the increased earnings. The 1995 return on common equity was 13.0%, compared with 9.5% for 1994 and 8.5% in 1993. Electric retail sales for 1995 were unusually high primarily because of warm and humid weather during the air conditioning season. KWH use per residential customer was 8,280; 7,799 and 7,816 for years 1995, 1994 and 1993, respectively. Electric "margin" is defined as electric revenue less the cost of fuel and power purchased. Electric margins for years 1995, 1994 and 1993 were $155.1, $142.0 and $137.8 million, respectively. The hot summer weather boosted the 1995 electric margin for residential sales by approximately $3.6 million. The Iowa electric rate increase implemented in June 1995 increased the electric margin by approximately $3.6 million. Gas "margin" is defined as gas revenue less purchased gas cost. The gas margins for 1995, 1994 and 1993 were $17.8, $15.0 and $15.4 million, respectively. An increase in residential and transportation gas volumes of 2.3% and 7.8%, respectively, contributed to the higher gas margin. In addition, interim rate increases in the Minnesota and Iowa gas rate cases contributed $0.6 and $0.3 million, respectively. Other operating expenses, excluding a MPUC deferred accounting order, were $51.1, $51.9 and $48.6 million for 1995, 1994 and 1993, respectively. Other operating expenses for 1995 include $1.5 million of merger and strategic planning expenses. Other operating expenses for the years 1995, 1994 and 1993, include $1.0, $1.8 and $3.8 million, respectively, for environmental investigation, remediation and litigation costs. Maintenance expense for 1995 was $14.9 million, compared to $17.2 million in 1994 and $16.8 million in 1993. The reduction is primarily due to cost cutting efforts. Depreciation expense was $29.3, $27.8 and $26.3 million, for 1995, 1994 and 1993, respectively. The increase is primarily due to additional investment in pollution control equipment and the implementation of higher depreciation rates approved by the MPUC. Property taxes were $13.4, $13.7 and $14.5 million, for 1995, 1994 and 1993, respectively. The majority of the decline is applicable to a decrease in assessed values in the state of Iowa. The company and the Internal Revenue Service negotiated a settlement of income tax audits in 1994, for tax years through 1991. To reflect the settlement, the company recorded additional interest income and reduced income tax expense. The additional interest income and reduced income tax expense resulted in approximately $2.1 million of additional 1994 income. Interest on long-term debt was $14.8, $15.4 and $16.2 million for 1995, 1994 and 1993, respectively. The decline is attributable to a 1994 Pollution Control Bond refinancing, as well as the maturity of $14 million of 4 5/8% First Mortgage Bonds on May 1, 1995, and the 1993 maturity of $6 million of 4 3/8% First Mortgage Bonds. The percentage of total capitalization attributable to long-term debt has declined from 45.4% at year end 1994 to 44.8% at year end 1995. Other interest charges for 1995 were $2.3 million, compared with $1.8 million for 1994 and $0.6 million for 1993. Interest on commercial paper payable was $2.1, $0.7 and $0.3 million for 1995, 1994 and 1993, respectively. The increased commercial paper interest expense is primarily attributable to a higher average balance outstanding. At year end 1995, the company had $39.3 million of short-term commercial paper payable, compared with $35.6 million at year end 1994. The company's investment in coal stockpiles was $15.8 million at December 31, 1995 and $19.4 million at December 31, 1994. Refinements to the company's fuel delivery process have decreased the amount of inventory required to carry the company over the winter. The company's investment in gas stored underground was $2.4, $3.7 and $4.6 million at December 31, 1995, 1994 and 1993, respectively. The decline is attributable to low gas prices during the summer injection season of 1995 and the cancellation of a storage service which had been used in the prior two years. Gas Sales 1995 MCF VOLUMES Average 1995 Revenue 1995 vs. 1994 per MCF % of Total % Change Three Largest Transportation $0.07 66.3% 4.4% All Other Transportation 0.32 8.4 45.3 Residential 5.13 13.7 2.3 Commercial 4.31 8.0 1.0 Industrial 3.24 3.2 (28.2) Other 2.91 0.4 144.3 100.0% 5.0% Electric Sales 1995 KWH SALES Average 1995 1994 Revenue 1995 vs. 1994 vs. 1993 per KWH % of Total % Change % Change Six Largest Industrial 3.4 cents 32.3% 4.9% 3.0% All Other Industrial 4.4 cents 27.4 4.6 8.9 Residential (Non-Heat) 7.6 cents 17.3 9.0 2.1 General Service (Commercial) 6.3 cents 10.7 1.4 (5.8) Sales for Resale 3.6 cents 5.6 (36.0) 53.6 Farm 7.7 cents 2.9 0.1 (0.9) Residential (Electric Heat) 6.4 cents 2.0 1.4 (4.3) All Other Categories 7.8 cents 1.8 (8.9) (11.1) Total Company 5.0 cents 100.0% 1.0% 5.8% Statements of Income and Retained Earnings For the years ended December 31 1995 1994 1993 (Thousands of Dollars) OPERATING REVENUES: Electric $274,873 $261,730 $255,759 Gas 43,669 45,920 53,709 Total operating revenues 318,542 307,650 309,468 OPERATING EXPENSES: Operation: Fuel for electric generation 62,164 61,384 64,059 Power purchased 57,566 58,339 53,936 Cost of gas sold 25,888 30,905 38,309 Other operating expenses 45,717 51,917 48,567 Maintenance 14,881 17,160 16,771 Depreciation and amortization 29,560 28,212 26,955 Income taxes: Federal current 11,608 1,395 4,694 State current 3,549 454 1,445 Deferred taxes - net 6,506 7,092 3,856 Investment tax credit amortization (1,028) (1,028) (1,028) Property and other taxes 15,990 16,298 17,080 Total operating expenses 272,401 272,128 274,644 OPERATING INCOME 46,141 35,522 34,824 OTHER INCOME AND DEDUCTIONS (1,690) 1,990 780 INCOME BEFORE INTEREST CHARGES 44,451 37,512 35,604 INTEREST CHARGES: Long-term debt 14,811 15,405 16,166 Other interest charges 2,325 1,772 596 Borrowed funds used during construction (341) (332) (145) Total interest charges 16,795 16,845 16,617 NET INCOME 27,656 20,667 18,987 PREFERRED AND PREFERENCE STOCK DIVIDENDS (2,458) (2,454) (2,861) INCOME AVAILABLE FOR COMMON STOCK 25,198 18,213 16,126 RETAINED EARNINGS BEGINNING OF YEAR 55,893 57,397 60,648 DIVIDENDS ON COMMON STOCK (19,941) (19,717) (19,377) RETAINED EARNINGS END OF YEAR $ 61,150 $ 55,893 $ 57,397 EARNINGS PER AVERAGE COMMON SHARE OUTSTANDING based on 9,564,287; 9,478,741 and 9,316,387 shares, respectively $ 2.63 $ 1.92 $ 1.73 DIVIDENDS PAID PER COMMON SHARE $ 2.08 $ 2.08 $ 2.08 The accompanying notes are an integral part of these financial statements. Balance Sheets ASSETS As of December 31 1995 1994 (Thousands of Dollars) UTILITY PLANT: In Service: Electric: Production $374,489 $369,828 Transmission 183,858 178,891 Distribution 221,645 211,731 General 54,232 50,460 Total Electric 834,224 810,910 Gas 63,303 61,447 897,527 872,357 Less - accumulated depreciation 402,685 379,216 494,842 493,141 Held for future use 590 592 Construction work in progress 3,095 6,948 Net utility plant 498,527 500,681 OTHER PROPERTY AND INVESTMENTS 555 522 CURRENT ASSETS: Cash and cash equivalents 1,537 1,537 Accounts receivable, less reserves of $200 27,797 22,350 Inventories - at average cost: Fuel 19,332 24,220 Materials and supplies 5,509 5,208 Prepaid pension cost 3,870 3,702 Prepaid income tax 6,690 6,197 Other prepayments and current assets 614 2,252 Total current assets 65,349 65,466 DEFERRED DEBITS: Regulatory assets 62,841 54,958 Unamortized debt expense 5,915 6,116 Other 1,129 1,102 Total deferred debits 69,885 62,176 TOTAL $634,316 $628,845 The accompanying notes are an integral part of these financial statements. Balance Sheets CAPITALIZATION AND LIABILITIES As of December 31 1995 1994 (Thousands of Dollars) CAPITALIZATION, per accompanying statements: Common stock, par value $3.50 per share; authorized - 30,000,000 shares; issued and outstanding - 9,564,287 in 1995 and 1994 $ 33,475 $ 33,475 Additional paid-in capital 103,145 103,137 Retained earnings 61,150 55,893 Total common equity 197,770 192,505 Preferred stock (optional sinking fund) 10,819 10,819 Preferred stock (mandatory sinking fund) 24,036 23,933 Long-term debt 188,880 189,032 Total capitalization 421,505 416,289 CURRENT LIABILITIES: Commercial paper 39,300 35,600 Long-term debt maturing within one year - 14,000 Accounts payable 11,868 14,133 Dividends payable - preferred stock 599 599 Payrolls accrued 2,846 2,634 Taxes accrued 16,758 13,778 Interest accrued 2,819 2,930 FERC Order 636 transition costs 3,200 5,200 Other 4,756 2,878 Total current liabilities 82,146 91,752 DEFERRED CREDITS AND OTHER NON-CURRENT LIABILITIES: Accumulated deferred income taxes 95,518 88,176 Accumulated deferred investment tax credits 18,041 19,069 Deferred pension cost 4,900 4,827 Accrued postretirement benefit cost 2,792 2,869 Environmental clean-up costs 6,860 3,470 Other 2,554 2,393 Total deferred credits and other non-current liabilities 130,665 120,804 COMMITMENTS AND CONTINGENCIES TOTAL $634,316 $628,845 Statements of Cash Flows For the years ended December 31 1995 1994 1993 (Thousands of Dollars) RECONCILIATION OF NET INCOME TO CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $27,656 $20,667 $18,987 Adjustment for non-cash items: Depreciation and amortization 29,560 28,212 26,955 Deferred income taxes 6,912 5,488 5,259 Investment tax credit amortization (1,028) (1,028) (1,028) Equity funds used during construction (AFUDC) - (166) (68) Prepaid pension cost 74 9 812 Changes in assets and liabilities: Accounts receivable - net (5,447) 3,710 (1,998) Inventories 4,599 (1,536) 3,751 Accounts payable and other current liabilities (6,415) 4,324 3,686 Accrued and prepaid taxes 2,379 (1,011) (2,602) Interest accrued (111) (160) (1,061) Other prepayments and current assets 1,469 (656) (249) Rate refund payable 256 - (4,064) Regulatory assets - deferred demand side management costs (6,177) (7,295) (5,005) Regulatory assets - other 4,263 (8,267) - Other operating activities 3,275 721 1,930 Cash flows from operating activities 61,265 43,012 45,305 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to utility plant (28,238) (40,600) (33,904) Borrowed funds used during construction (AFUDC) (341) (332) (145) Other 137 (658) (231) Cash flows from investing activities (28,442) (41,590) (34,280) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock - 4,237 2,786 Issuance of preferred stock - - 27,250 Issuance of long-term debt - 13,250 94,000 Retirement of long-term debt (14,235) (13,487) (88,784) Redemption of preferred and preference stock - - (25,474) Debt and stock discount and financing expenses - (357) (8,795) Dividends on common, preferred and preference stock (22,288) (22,111) (22,331) Sale of commercial paper - net 3,700 15,500 11,100 Cash flows from financing activities (32,823) (2,968) (10,248) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ - $(1,546) $ 777 CASH AND CASH EQUIVALENTS: Beginning of year $ 1,537 $ 3,083 $ 2,306 End of year $ 1,537 $ 1,537 $ 3,083 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest (net of interest capitalized) $16,655 $16,773 $17,588 Income taxes $11,134 $ 8,066 $ 8,863 The accompanying notes are an integral part of these financial statements. Statements of Capitalization As of December 31 1995 1994 (Thousands of Dollars) COMMON EQUITY $197,770 46.9% $192,505 46.2% CUMULATIVE PREFERRED STOCKS: Authorized: Preferred - 2,000,000 shares at $50.00 par value Preference - 2,000,000 shares at $1.00 par value (A) Issued and outstanding (B): Redemption Series Shares Price Preferred with optional sinking fund provisions: 4.36% 60,455 $52.30 3,023 3,023 4.68% 55,926 $51.62 2,796 2,796 7.76% 100,000 $52.03 5,000 5,000 10,819 2.6% 10,819 2.6% Preferred with mandatory sinking fund provisions: 6.40% 545,000 $53.20 27,250 27,250 Unamortized Discount on 6.40% Preferred Stock (1,990) (2,053) Unamortized Issuance Expense on 6.40% Preferred Stock (104) (108) Unamortized Call Premiums on Preferred Stock (1,120) (1,156) 24,036 5.7% 23,933 5.8% LONG-TERM DEBT: First Mortgage Bonds: 6 1/8% Series due 1997 17,000 17,000 8 % Series due 2007 25,000 25,000 8 5/8% Series due 2021 25,000 25,000 7 5/8% Series due 2023 94,000 94,000 161,000 161,000 Pollution Control Revenue Bonds: 5.95% due 1996 to 1998 6,300 6,525 6 3/8% due 1998 to 2007 11,400 11,400 5.75% due 2003 1,000 1,000 6.25% due 2009 1,000 1,000 6.30% due 2010 5,600 5,600 6.35% due 2012 5,650 5,650 30,950 31,175 Other Long-Term Debt 104 115 Unamortized Discount on Long-Term Debt (3,174) (3,258) Total Long-Term Debt - net 188,880 44.8% 189,032 45.4% TOTAL CAPITALIZATION $421,505 100.0% $416,289 100.0% (A) None outstanding. (B) Redeemable at the option of the company upon 30 days notice at the current prices shown. The accompanying notes are an integral part of these financial statements. NOTES TO FINANCIAL STATEMENTS 1. Summary of Accounting Policies GENERAL The company is an operating public utility engaged primarily in the generation, transmission, distribution and sale of electricity. The company also distributes and sells natural gas. The company is subject to seasonal variations common to the utility industry. The financial statements are based on generally accepted accounting principles, which give recognition to the ratemaking and accounting practices of the Federal Energy Regulatory Commission (FERC) and state commissions having regulatory jurisdiction over the company. UTILITY PLANT Utility plant is recorded at original cost. The cost of additions to utility plant and replacement of units of property includes contracted labor, company labor, materials, allowance for funds used during construction and overheads. Repairs of property and replacement of items less than units of property are charged to maintenance expense. The original cost of units retired, plus removal costs, less salvage is charged to accumulated depreciation. Substantially all property is subject to the lien of the First Mortgage Bond Indenture. DEPRECIATION Depreciation is computed on the straight-line method based on net salvage values and the estimated remaining service lives of depreciable property. The provision for book depreciation as a percentage of the average balance of depreciable property in service was 3.5% in 1995 and 1994 and 3.4% in 1993. ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION (AFUDC) AFUDC includes the net cost of borrowed funds and a reasonable rate on equity funds used for construction. It was capitalized at gross rates of 6.0% for 1995, 6.3% for 1994 and 6.0% for 1993. Gross AFUDC rates are computed in accordance with the FERC regulations, including approval to incorporate demand side management costs in the formula. AFUDC does not contribute to the current cash flow of the company. Under normal regulatory practices, the company anticipates earning a fair rate of return on such capitalized costs and recovery of those costs in customer rates after completion of the related construction. STATEMENTS OF CASH FLOWS For purposes of the statements of cash flows, the company considers all liquid investments with a maturity of three months or less to be cash equivalents. REVENUES AND FUEL COSTS Annual revenues do not include unbilled revenues for service rendered from the date of the last meter reading to year end. The company's electric and gas tariffs contain a fuel adjustment clause and a purchased gas adjustment clause whereby increases or decreases in fuel costs are included in current revenue without having changes in base rates approved in formal hearings. Purchased capacity costs are not recovered from electric customers through fuel adjustment clauses, but rather must be addressed in base rates in a formal rate proceeding. DEBT REACQUISITION PREMIUM In accordance with normal regulatory practices, the company defers debt redemption premiums and amortizes such costs over the life of the replacement bonds. REGULATORY ASSETS Regulatory assets represent probable future revenue associated with certain incurred costs. The company is subject to the provisions of Statement of Financial Accounting Standards (SFAS) No. 71 "Accounting for the Effects of Certain Types of Regulation". Regulatory assets of $62.8 million are classified as deferred debits on the balance sheet. Deferred income taxes, environmental clean-up costs and FERC Order 636 transition costs have corresponding deferred credits. Demand side management costs (DSM) and Minnesota deferred employee/retiree benefits do not have corresponding liabilities. Regulators allow the company to earn a return on DSM costs, but not on the other regulatory assets. At December 31, 1995, regulatory assets were as follows: Regulatory Assets (Millions of Dollars) Deferred income taxes (Note 9) $27.8 Deferred demand side management (Note 12) 23.1 Environmental clean-up (Note 2) 6.2 FERC Order No. 636 transition costs (Note 8) 3.2 Employee/retiree benefits (Note 7) 2.4 Other 0.1 Total $62.8 NEW ACCOUNTING STANDARD The company will be required to adopt SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" in 1996. The new standard imposes stricter standards for regulatory assets by requiring that such assets be probable of future recovery at each balance sheet date. The company believes that the initial adoption of SFAS 121 will not have a material impact on its financial position or results of operations. SIGNIFICANT ESTIMATES Significant estimates used in the preparation of the accompanying financial statements include environmental remediation costs, depreciation and projection of future employee pension and medical benefits. Such estimates are based on informed judgement with appropriate consideration to materiality. In the opinion of management, the financial statements fairly state the company's financial position and the results of operations. CONCENTRATION OF SALES The company provides service to six large electric customers which account for over 32% of electric MWH sales. The company provides transportation service to three large gas customers, which account for 66% of system throughput. The company does not take title to the gas consumed by these transportation customers. The Management's Discussion and Analysis section of the Annual Report provides additional information regarding these large electric and gas customers. In addition, the company provides electric service to 163,394 electric customers in 234 communities and 48,823 gas customers in 39 communities. Credit risk for these customers is spread over a diversified base of residential, commercial and small industrial customers. RECLASSIFICATIONS Certain reclassifications have been made to the prior years financial statements to conform with the presentation for 1995. Such reclassifications had no impact on net income or stockholders' equity. 2. Environmental Regulations The company is subject to various federal and state government environmental regulations. The company meets existing air and water regulations. The Federal Clean Air Act requires reductions in certain emissions from power plants. The company has switched to a low sulfur coal and installed low nitrogen oxide burners at the 217 MW plant affected by Phase 1, which became effective January 1, 1995. Management anticipates that additional costs incurred to comply with Phase 2 environmental standards, which take effect January 1, 2000, will be recovered through customer rates. The company has identified nine sites which may contain hazardous waste from former coal gasification plants and has recorded an estimated liability for its pro rata share of expenses applicable to the sites. In 1957, the company purchased facilities in Mason City, Iowa, from Kansas City Power & Light Company (KCPL) which included land previously used for a coal gasification plant. Coal tar waste was discovered on the property in 1984. In 1995, a settlement was reached with KCPL for sharing of costs to remediate the site. A Remedial Investigation and Feasibility Study has been approved and the company has assumed responsibility for managing the remediation of the Mason City site. The current estimated cost of soil remediation is $2.6 million, which will be paid by KCPL. The company formerly operated a manufactured gas plant in Rochester, Minnesota. Soil remediation was completed in 1995 and post-remediation groundwater monitoring is underway. From 1991 through 1995, the company incurred costs aggregating $6.7 million applicable to the Rochester site. In addition to the Rochester site, the company owned or operated four other manufactured gas plant sites in Minnesota: Albert Lea, Austin, New Ulm and Owatonna. Potentially hazardous wastes associated with former coal gasification operations have been identified at each site. The company anticipates that these sites will be investigated in 1996 or 1997. When the investigation process is complete, the company will be able to determine if any remediation will be necessary. In April 1995, the company received an accounting order from the Minnesota Public Utilities Commission (MPUC) which allows the deferral of investigation and remediation costs applicable to the Rochester and Albert Lea sites and further allows the company to seek recovery in a rate case. The company's Minnesota gas rate case filed in May 1995 seeks recovery of $4.9 million. The company filed a petition in June 1995 for an accounting order which would allow it to defer and seek recovery in a future rate case of costs applicable to the three other Minnesota sites (Austin, Owatonna and New Ulm). Action by the MPUC is pending. In addition, the company has identified three other sites: Galena and Savanna, Illinois, and Clinton, Iowa. Potentially hazardous wastes associated with former coal gasification operations have been identified at each of these sites. Little or no activity is expected at any of these sites in 1996. In 1994, the company filed a lawsuit against certain of its insurers to recover the costs of investigating and remediating the former coal gasification plants. Two insurers paid the company a total of $0.3 million in 1995 in order to be discharged from the lawsuit. The trial against the remaining insurers is expected to begin in Iowa in 1997. Neither the company nor its legal counsel is able to predict the amount of any insurance recovery, and accordingly, no potential recovery has been recorded. Previous actions by Iowa, Illinois and Minnesota regulators have permitted utilities to recover prudently incurred unreimbursed investigation and remediation costs. 3. Fair Value of Financial Instruments The estimated fair values of the company's financial instruments at year end 1995 and 1994 did not vary significantly from their carrying values. The estimated fair values were based on quoted market prices for the same or similar issues or on the current rates for debt of the same remaining maturities. 4. Preferred, Preference and Common Stock In 1993, the company issued 545,000 shares of 6.40% $50 par value preferred stock with a final redemption date of May 1, 2022. Under the provisions of the mandatory sinking fund, beginning in 2003 the company is required to redeem annually $1.4 million of 6.40% preferred stock (27,250 shares). The discount and other issuance expenses in an aggregate amount of $2.1 million as of year end 1995 are reflected as an offset to preferred stock and are being amortized to common equity. Call premiums related to the 1993 retirement of the preferred and preference stock in the amount of $1.1 million as of year end 1995 are reflected as an offset to preferred stock and are being amortized to common equity. The amortization transfers the amount of the call premiums from preferred to common equity over the life of the refunding 6.40% issue, but has no effect on net income. In 1993, the company retired preferred and preference stock as follows: Number of Shares Total Redemption Issue Retired Price (Thousands) 8% Preferred, $50 par 63,000 $ 3,206 9% Preferred, $50 par 116,643 $ 6,113 9%-A Preferred, $50 par 128,000 $ 6,652 $2.28 Preference, $1 par 400,000 $10,712 The company's Common Stock Dividend Reinvestment and Stock Purchase Plan gives the company the option of issuing new stock or purchasing shares on the open market. The Dividend Reinvestment Plan acquired 176,971; 44,868 and 60,299 shares of common stock on the open market during 1995, 1994 and 1993, respectively. The company received $4.2 million for 174,446 shares of new common stock issued in the first eleven months of 1994 and $2.8 million for 92,093 shares of new common stock issued in 1993. None of the authorized shares of preferred, preference or common stock are reserved for officers and employees, or for options, warrants, conversions and other rights. 5. Long-Term Debt On May 1, 1995, $14 million of 4 5/8% First Mortgage Bonds matured. Total debt maturities for the years 1996 through 2000 are $0.2, $17.2, $6.3, $0.4 and $0.4 million, respectively. Annual sinking fund requirements are $2.0, $1.8, $1.8, $1.8 and $1.8 million for the years 1996 through 2000, respectively. Such sinking fund requirements for first mortgage bonds may be satisfied with property additions at the rate of 167% of such requirements. Sinking fund requirements for 1995 were met by property additions. 6. Short-Term Borrowings The company had available bank lines of credit aggregating $55.0 million at December 31, 1995. There are no compensating balances required, but some of the banks require commitment fees; such fees were not significant. The maximum amount of short-term borrowing at any month end in 1995, 1994 and 1993 was $46.8, $35.6 and $20.1 million, respectively, all in commercial paper, with the average outstanding borrowing during the year of $36.2, $15.6 and $9.4 million, respectively. The average interest rate on borrowings was 5.96%, 4.73% and 3.29% for the years 1995, 1994 and 1993, respectively. At December 31, 1995, the interest rate was 5.85%. 7. Employee/Retiree Benefits The company has a non-contributory defined benefit pension plan for all full-time employees. Plan benefits are based primarily on years of service and employee compensation. The company uses the "projected unit credit" actuarial method in computing pension costs for accounting purposes. Plan assets consist of high-grade bonds, commercial mortgages and other fixed income investments. Company policy is to fund the plan under the "aggregate" actuarial cost method to the extent deductible under tax regulations. Contributions to the plan for the years ended December 31, 1995, 1994 and 1993 were $3.4, $3.4 and $2.8 million, respectively. In addition to the pension plan, the company has a non-qualified supplemental retirement plan which, as amended in 1995, provides a retirement benefit for officers of the company. The company is collecting an annual funding amount in customer rates and anticipates that it will continue to do so. The cumulative difference between the higher funded amount and the accounting pension cost amount is a deferred credit on the balance sheet. Pension Cost Components: 1995 1994 1993 (Thousands of Dollars) Service cost $ 2,369 $ 2,668 $ 1,888 Return on plan assets (3,335) (1,707) (2,214) Interest cost on projected benefit obligation 3,778 3,710 3,504 Net amortization and deferral 196 (953) (1,270) Net pension cost $ 3,008 $ 3,718 $ 1,908 The assumptions used for measurement purposes are as follows: Discount rate for obligation 7.5% 7.5% 7.0% Discount rate for expense 7.5% 7.0% 8.0% Assumed rate of compensation increase 5.0% 5.0% 5.0% Expected long-term rate of return 8.0% 7.0% 8.0% Reconciliation of Funded Status as of November 1: Plan assets at fair value $49,568 $49,282 $48,827 Vested benefit obligation $35,024 $36,626 $34,242 Nonvested benefit obligation 1,970 2,365 1,728 Accumulated benefit obligation 36,994 38,991 35,970 Additional benefits based on estimated future salary levels 16,972 13,547 13,872 Projected benefit obligation $53,966 $52,538 $49,842 Plan assets greater or (less) than the projected benefit obligation $(4,398) $(3,256) $(1,015) Unrecognized net obligation at October 31, 1986, being amortized over 16.1 years 2,412 2,753 3,094 Unrecognized prior service cost 911 3,487 399 Unrecognized net (gain)loss 4,945 718 2,340 Net prepaid pension cost $ 3,870 $ 3,702 $ 4,818 In addition to providing pension benefits, the company provides life insurance for retired employees and health care benefits for 930 retirees and spouses. Substantially all of the company's 902 full-time employees and spouses become eligible for benefits if they reach retirement age while working for the company. The estimated future cost of providing these postretirement benefits is accrued during the employees' service periods, and was $4.1, $4.9 and $4.9 million for 1995, 1994 and 1993, respectively. Funding of the benefit obligation is concurrent with recovery in customer rates. Plan assets consist of high-grade debt securities. Assuming a one percent increase in the medical cost trend rate, the company's 1995 cost of postretirement benefits would increase by $0.5 million and the accumulated benefit obligation would increase by $4.1 million. The table below sets forth the postretirement health care plan's accumulated benefit obligation (in thousands): December 31, 1995 January 1, 1995 Retirees $21,168 $18,902 Active plan participant 13,141 12,642 Total accumulated benefit obligation 34,309 31,544 Less fair value of plan assets 6,640 4,072 Accumulated postretirement benefit obligation in excess of plan assets 27,669 27,472 Unrecognized net gain or (loss) 812 1,756 Unrecognized transition obligation (23,991) (25,253) Accrued postretirement benefit cost $ 4,490 $ 3,975 The components of the estimated cost of postretirement benefits other than pensions for the twelve months ended December 31, 1995 and 1994, are as follows (in thousands): 1995 1994 Service cost $1,097 $1,205 Return on plan assets (440) (48) Interest cost on accrued postretire- ment benefit obligation 2,291 2,345 Amortization of transition obligation 1,543 1,543 Net amortization and deferral (377) (159) Net cost $4,114 $4,886 The assumptions used for measurement purposes are as follows: 1996 1995 Discount rate for obligations 7.5% 7.5% Discount rate for expense 7.5% 7.0% Initial medical cost trend rate 8.0% 9.0% Ultimate medical cost trend rate 6.0% 6.0% Year that the medical cost trend rate is assumed to decrease to the ultimate rate 1997 1997 8. Rate Matters IOWA The company filed an Iowa electric rate increase application in March 1995. The application requested an annual increase of $13.1 million. Interim rates in an annual amount of $7.1 million were placed in effect on June 29, 1995, subject to refund. A December 1995 Iowa Utilities Board (IUB) Order allowed an annual increase of $6.6 million, including a return on common equity of 11.35%. In 1996, the company will refund to customers approximately $250,000 collected in 1995 in excess of the final order. The 1995 financial statements include a provision for the refund. The company filed an Iowa gas rate increase application in August 1995. The application requested an annual increase of $2.2 million. Interim rates in an annual amount of $1.3 million were placed in effect on October 20, 1995, subject to refund. The company and other parties to the rate application have agreed on an increase of $1.1 million subject to approval by the IUB. An IUB Order is expected by June 1996. MINNESOTA The company filed a Minnesota electric rate increase application in June 1995. The application requested an annual increase of $4.6 million (later adjusted by the company to $3.3 million). Interim rates were not requested. A MPUC Order is expected by April 1996. The company filed a Minnesota gas rate increase application in May 1995. The application requested an annual increase of $2.4 million, including a return on common equity of 11.75%. Interim rates in an annual amount of $1.5 million were placed in effect in June 1995, subject to refund. A MPUC Order is expected by March 1996. FEDERAL ENERGY REGULATORY COMMISSION (FERC) FERC Order 636 provides a mechanism under which gas pipelines can recover transition costs from local distribution companies. The company estimates its remaining share of transition costs will aggregate approximately $3.2 million payable in declining annual installments from 1996 to 2005. The company is recovering transition costs from customers. 9. Income Taxes A deferred tax asset or liability is recognized for each temporary book/tax difference. Corresponding regulatory assets or liabilities, reflecting the anticipated future rate treatment, have also been recognized. The balance sheet as of December 31, 1995, includes regulatory assets and deferred tax liabilities in an equal amount of $27.8 million. Investment tax credits have been deferred and are credited to operating income over the lives of the property which gave rise to the credits. The principal components of the company's deferred tax (assets) liabilities recognized in the December 31, 1995 and 1994, balance sheet are shown below: Item: Thousands of Dollars 1995 1994 Property $84,865 $80,484 Energy Conservation Costs 7,589 5,195 Call Premiums on Reacquired Bonds 1,948 2,005 Unbilled Revenue (3,348) (3,310) Other (2,226) (2,396) Total $88,828 $81,978 Gross deferred assets $(6,690) $(6,197) Gross deferred liabilities 95,518 88,175 Total $88,828 $81,978 The total income tax expense produces the overall effective income tax rate shown in the table. The percentages are computed by dividing total income tax expense by the sum of such tax expense and net income. 1995 1994 1993 Federal statutory tax rate 35.0% 35.0% 35.0% Increases (reductions) in taxes resulting from: State income taxes net of federal income tax benefit 5.7% 4.0% 4.7% Investment tax credit amortization (2.2%) (3.4%) (3.6%) Additional depreciation deducted for book purposes 1.5% 2.0% 2.0% Other 1.3% (6.8%) (4.8%) Overall effective income tax rate 41.3% 30.8% 33.3% The current and deferred tax expense is comprised of (Thousands): Federal and state currently payable $15,157 $1,849 $6,139 Deferred income tax - federal and state: Additional tax depreciation - net 3,673 3,270 3,256 Coal contract buyout - - (526) Energy efficiency costs 2,394 2,413 1,466 Environmental clean-up 154 2,010 (1,166) Other 285 (601) 826 Investment tax credit amortization (1,028) (1,028) (1,028) Federal and state currently payable - other income and deductions (1,182) 1,276 497 Total $19,453 $9,189 $9,464 10. Jointly-Owned Utility Plant The company has a 21.528% (134,300 KW) interest in a 624,000 KW coal- fired unit (Neal #4), completed in 1979. Amounts at December 31, 1995 and 1994, included in utility plant were $82.0 million and the accumulated provision for depreciation was $40.8 and $38.6 million, respectively. In addition, the company has a long-term participation power purchase for 25,000 KW of Neal #4 generating capacity which expires in 2003. Minimum future capacity payments under the participation power purchase agreement are approximately $15.7 million. The 21.528% ownership share and the long-term participation purchase provide the company with an aggregate of 159,300 KW of Neal #4 generating capacity. The company also has a 4% (28,000 KW) interest in a 675,000 KW coal-fired unit (Louisa #1), completed in 1983. Utility plant at December 31, 1995 and 1994, was $24.8 million and the accumulated provision for depreciation was $9.6 and $8.8 million, respectively. The company's share of direct expenses of Neal #4 and Louisa #1 is included in the appropriate operating expenses in the statements of income and retained earnings. 11. Purchased Power Contracts The company has three long-term power purchase contracts with other electric utilities. The contracts provide for the purchase of 255 megawatts of capacity through April 2001. The company is obligated to pay the capacity charges regardless of the actual electric demand by the company's customers. Energy is available at the company's option at approximately 100% to 110% of monthly production costs for the designated units. The three power purchase contracts required capacity payments of $24.6, $24.6 and $24.1 million in 1995, 1994 and 1993, respectively. Over the remaining period of the contracts, total capacity payments will be approximately $130 million. In Iowa the IUB has concluded that the capacity purchases were prudent and allowed recovery of costs in rates. The rate structure approved by the MPUC does not provide for full recovery of purchased power applicable to the Minnesota jurisdiction. A 1992 rate order by the MPUC held that the company had 100 MW of excess capacity. The company is seeking to adjust this disallowance in its current rate case. The company has not filed for rate recovery of the allocable portions of the purchased power payments in the Illinois and FERC jurisdictions. The payments of approximately $2.5 million annually are expensed as incurred. The purchased power contract payments are not for debt service requirements of the selling utility, nor do they transfer risk or rewards of ownership. 12. Demand Side Management Costs Minnesota and Iowa regulations require that utilities conduct energy efficiency and demand side management programs. Demand side management expenditures applicable to the Minnesota jurisdiction in an annual amount of approximately $0.6 million are currently being recovered through rates. Iowa jurisdiction tariffs which provide for the recovery of demand side management costs incurred through December 31, 1992, were placed in effect in October 1994. The Iowa tariffs provide for the recovery of $6.7 million of demand side management costs over a four year period. The company anticipates filing in 1996 for recovery of costs incurred through 1995. As of December 31, 1995 and 1994, the amounts deferred were $23.1 and $17.0 million, respectively. 13. Quarterly Information (Unaudited) The quarterly information has not been audited but, in the opinion of the company, reflects all adjustments necessary for the fair statement of the results of operations for each period. The quarterly data shown below reflects seasonal and timing variations which are common in the utility industry. (Thousands of Dollars) (Except Earnings Per Share) 1995 March 31 June 30 Sept. 30 Dec. 31 Operating revenues $82,765 $72,054 $86,340 $77,383 Operating income 11,815 10,880 15,283 8,163 Net income 7,757 3,865 11,731 4,303 Earnings per share of common stock .74 .34 1.16 .38 1994 March 31 June 30 Sept. 30 Dec. 31 Operating revenues $85,575 $71,863 $79,808 $70,404 Operating income 13,051 5,460 10,607 6,404 Net income 9,251 1,354 6,867 3,195 Earnings per share of common stock .91 .07 .65 .27 Net income for the fourth quarter of 1995 was $4.3 million, compared with $3.2 million in 1994. Increased electric and gas sales, electric and gas rate increases and cost containment efforts were major factors. Residential electric sales for the fourth quarter of 1995 increased 6.2% over the same period of 1994, while large power and light sales increased 2.8%. The electric margin for the fourth quarter of 1995 (revenue minus cost of fuel and purchased power) was $36.1 million compared to $33.2 million for the same period of 1994. The Iowa electric rate increase implemented in June 1995 contributed $1.4 million to the fourth quarter electric margin. The gas margin for the fourth quarter of 1995 (revenue minus cost of gas sold) was $5.3 million compared to $2.8 million for the same period of 1994. Residential and transportation gas volumes increased 29.5% and 6.9%, respectively. Minnesota and Iowa interim rate increases in an annual amount of $1.5 and $1.3 million, respectively, were implemented in June and October 1995. Other operating expense for the fourth quarter of 1995 includes $1.3 million of legal and consulting fees related to the proposed merger of Interstate Power Company, IES Industries and WPL Holdings. 14. Commitments and Contingencies The company has a barge transportation contract, coal supply contracts, a rail transportation contract and a coal transloading agreement applicable to its power plants. Such contracts, the last of which expires in 1999, require estimated minimum future payments of $110.7 million. The company has two natural gas supply contracts, four natural gas transportation contracts, and two natural gas storage contracts, which collectively obligate the company for a minimum annual commitment of approximately $9.8 million. Such agreements individually expire from 1996 through 2001. 15. Merger The Company, WPL Holdings, Inc. (WPLH) and IES Industries Inc. (IES) have entered into an Agreement and Plan of Merger (Merger Agreement), dated November 10, 1995, providing for: a) Interstate Power Company (IPC) becoming a wholly-owned subsidiary of WPLH and b) the merger of IES with and into WPLH, which merger will result in the combination of IES and WPLH as a single holding company (collectively, the Proposed Merger). The new holding company will be named Interstate Energy Corporation (Interstate Energy) and IES will cease to exist. The Proposed Merger, which will be accounted for as a pooling of interests, is subject to approval by the shareholders of each company as well as several federal and state regulatory agencies. The companies expect to receive the shareholder approvals in the second quarter of 1996 and the regulatory approvals by the second quarter of 1997. Under the terms of the Merger Agreement, the outstanding shares of WPLH's common stock will remain unchanged and outstanding as shares of Interstate Energy. Each outstanding share of IES common stock will be converted to 0.98 shares of Interstate Energy's common stock. Each share of the Company's common stock will be converted to 1.11 shares of Interstate Energy's common stock. It is anticipated that Interstate Energy will retain WPLH's common share dividend payment level as of the effective time of the merger. On January 24, 1996, the Board of Directors of WPLH declared a quarterly dividend of 49.25 cents per share. This represents an equivalent annual dividend rate of $1.97 per share. WPLH is a holding company headquartered in Madison, Wisconsin, and is the parent company of Wisconsin Power and Light Company (WP&L) and Heartland Development Corporation (HDC). WP&L supplies electric and gas service to approximately 377,000 and 146,000 customers, respectively, in south and central Wisconsin. HDC and its principal subsidiaries are engaged in businesses in three major areas: environmental engineering and consulting, affordable housing and energy services. IES is a holding company headquartered in Cedar Rapids, Iowa, and is the parent company of IES Utilities Inc. (Utilities) and IES Diversified Inc. (Diversified). Utilities supplies electric and gas service to approximately 333,000 and 174,000 customers, respectively, in Iowa. Diversified and its principal subsidiaries are primarily engaged in the energy-related, transportation and real estate development businesses. Interstate Energy will be the parent company of Utilities, WP&L and IPC and will be registered under the Public Utility Holding Company Act of 1935 (1935 Act), as amended. The merger agreement provides that these operating utility companies will continue to operate as separate entities for a minimum of three years beyond the effective date of the merger. In addition, the non-utility operations of IES and WPLH will be combined shortly after the effective date of the merger under one entity to manage the diversified operations of Interstate Energy. The corporate headquarters of Interstate Energy will be in Madison. The Securities and Exchange Commission (SEC) historically has interpreted the 1935 Act to preclude registered holding companies, with limited exceptions, from owning both electric and gas utility systems. Although the SEC has recently recommended that registered holding companies be allowed to hold both gas and electric utility operations if the affected states agree, it remains possible that the SEC may require as a condition to its approval of the Proposed Merger that the Company, WPLH and IES divest their gas utility properties, and possibly certain non-utility ventures of IES and WPLH, within a reasonable time after the effective date of the Proposed Merger. The operating revenues, net income from continuing operations and total assets of the companies were as follows: PRO FORMA COMBINED IES WPLH IPC (Unaudited) (in thousands) 1995 operating revenues $851,010 $807,255 $318,542 $1,976,807 1995 net income from continuing operations 64,176 71,618 25,198 160,992 Assets at December 31, 1995 1,985,591 1,872,414 634,316 4,492,321 16. Segments of Business Information about the company's operations in different segments of business for 1995, 1994 and 1993 are shown in the table below. Electric Gas Total (Thousands of Dollars) 1995 Revenue $274,873 $43,669 $318,542 Operating income (Before income taxes) $ 57,255 $ 9,521 $ 66,776 Depreciation and amortization expense $ 27,442 $ 2,118 $ 29,560 Capital expenditures $ 26,583 $ 2,117 $ 28,700 Utility plant - net $459,250 $39,277 $498,527 1994 Revenue $261,730 $45,920 $307,650 Operating income (Before income taxes) $ 42,881 $ 554 $ 43,435 Depreciation and amortization expense $ 26,156 $ 2,056 $ 28,212 Capital expenditures $ 38,129 $ 2,969 $ 41,098 Utility plant - net $461,245 $39,436 $500,681 1993 Revenue $255,759 $53,709 $309,468 Operating income (Before income taxes) $ 44,573 $ (782) $ 43,791 Depreciation and amortization expense $ 24,732 $ 2,223 $ 26,955 Capital expenditures $ 29,030 $ 5,087 $ 34,117 Utility plant - net $449,430 $38,534 $487,964 Independent Auditors' Report DELOITTE & TOUCHE LLP To the Stockholders and Board of Directors of Interstate Power Company: We have audited the accompanying balance sheets and statements of capitalization of Interstate Power Company as of December 31, 1995 and 1994 and the related statements of income and retained earnings and of cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of the Company at December 31, 1995 and 1994 and the 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. /s/ Deloitte & Touche LLP Deloitte & Touche LLP Davenport, Iowa January 26, 1996 REPORT OF MANAGEMENT ON FINANCIAL STATEMENT RESPONSIBILITY Company management has prepared and is responsible for the integrity and objectivity of the financial statements and related financial information included in this Annual Report to Stockholders. These statements have been prepared in conformity with generally accepted accounting principles and necessarily include amounts based on informed judgements and estimates with appropriate consideration to materiality of events pending at year end. In meeting its responsibility, management has implemented an internal accounting system designed to safeguard the assets of the company and assure that transactions are executed in accordance with its directives. An organizational structure has been developed that provides for appropriate functional responsibilities. A qualified internal audit staff is responsible for monitoring the system of policies, procedures and methods of operation. The company believes its system of internal controls appropriately balances the cost/benefit relationship, and that errors or irregularities will be detected and corrected on a timely basis. The Audit Committee of the Board of Directors, comprised of three directors who are not employees, periodically meets with management and with the independent certified public accountants to discuss and evaluate auditing, internal control and financial reporting matters. Management believes that these policies and procedures provide reasonable assurance that the operations of the company are in accordance with the standards and responsibilities entrusted to management. /s/ Wayne H. Stoppelmoor Wayne H. Stoppelmoor Chairman of the Board, President and Chief Executive Officer Selected Financial Data 1995 1994 1993 1992 1991 (Thousands of Dollars) Operating revenues $318,542 $307,650 $309,468 $285,298 $291,805 Operation 191,335 202,545 204,871 181,391 172,709 Maintenance 14,881 17,160 16,771 16,966 17,567 Depreciation and amortization 29,560 28,212 26,955 25,887 25,303 Income taxes 20,635 7,913 8,967 9,337 17,113 Property and other taxes 15,990 16,298 17,080 16,533 15,315 272,401 272,128 274,644 250,114 248,007 Operating income 46,141 35,522 34,824 35,184 43,798 Other income (deductions) - net (1,690) 1,990 780 724 1,269 Income before interest charges 44,451 37,512 35,604 35,908 45,067 Interest charges 16,795 16,845 16,617 16,691 15,557 Net income 27,656 20,667 18,987 19,217 29,510 Preferred and preference dividends 2,458 2,454 2,861 2,975 3,075 Earnings available for common stock $ 25,198 $ 18,213 $ 16,126 $ 16,242 $ 26,435 Average number of common shares outstanding 9,564,287 9,478,741 9,316,387 9,297,748 9,297,748 Earnings per common share $ 2.63 $ 1.92 $ 1.73 $ 1.74 $ 2.84 Common dividends declared per share $ 2.08 $ 2.08 $ 2.08 $ 2.08 $ 2.04 Total assets $634,316 $628,845 $604,361 $558,100 $550,631 Long-term debt and mandatory sinking fund preferred stock $212,916 $212,965 $227,007 $207,958 $220,818 Common Stock Market Data The company's common stock (IPW) is listed on the New York, Midwest and Pacific Stock Exchanges. The company's preferred stock and first mortgage bonds are traded in the over-the-counter market. The company was reorganized as of March 31, 1948, and dividends on common stock have been paid each quarter since September 20, 1948, with the annual payments rising from $0.60 per share to $2.08 per share. As of December 31, 1995, there were 15,127 holders of common stock and 173 holders of preferred stock. Historical quarterly data for the company's common stock is shown below: Avg. Shares Dividends Price Range Outstanding Quarter Ended Paid High Low 12 Months Ended March 31, 1993 $0.52/Share 34 1/8 - 30 3/8 9,297,748 June 30, 1993 $0.52/Share 32 3/4 - 29 9,297,748 Sept. 30, 1993 $0.52/Share 31 3/4 - 29 9,301,030 Dec. 31, 1993 $0.52/Share 30 3/4 - 29 1/8 9,316,387 March 31, 1994 $0.52/Share 30 1/4 - 26 3/8 9,341,751 June 30, 1994 $0.52/Share 29 - 22 1/4 9,379,249 Sept. 30, 1994 $0.52/Share 24 3/4 - 21 9,428,183 Dec. 31, 1994 $0.52/Share 23 3/4 - 20 7/8 9,478,741 March 31, 1995 $0.52/Share 25 1/4 - 23 9,519,098 June 30, 1995 $0.52/Share 25 - 23 1/2 9,548,054 Sept. 30, 1995 $0.52/Share 27 1/4 - 23 1/4 9,563,020 Dec. 31, 1995 $0.52/Share 33 1/4 - 27 1/8 9,564,287 EX-23 8 EX-23.a DELOITTE & TOUCHE LLP INDEPENDENT AUDITORS' REPORT Interstate Power Company: We have audited the financial statements of Interstate Power Company as of December 31, 1995 and 1994, and for each of the three years in the period ended December 31, 1995, and have issued our report thereon dated January 26, 1996; such financial statements and report are included in your 1995 Annual Report to Stockholders and are incorporated herein by reference. Our audits also included the financial statement schedule of Interstate Power Company, listed in Item 14. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/ Deloitte & Touche LLP Deloitte & Touche LLP Davenport, Iowa January 26, 1996 EX-23 9 EX-23.b DELOITTE & TOUCHE LLP CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in Registration Statement No. 33-59352 on Form S-3 and Registration Statement No. 33-32529 on Form S-8 of Interstate Power Company of our reports dated January 26, 1996, appearing in and incorporated by reference in the Annual Report on Form 10-K of Interstate Power Company for the year ended December 31, 1995. /s/ Deloitte & Touche LLP Deloitte & Touche LLP Davenport, Iowa March 27, 1996 EX-27 10
UT 12-MOS DEC-31-1995 DEC-31-1995 PER-BOOK 498,527 555 65,349 69,885 0 634,316 33,475 103,145 61,150 197,770 24,036 10,819 188,880 0 0 39,300 0 0 105 15 173,391 634,316 318,542 20,635 251,766 272,401 46,141 (1,690) 44,451 16,795 27,656 2,458 25,198 19,941 14,526 0 $2.63 $2.63
EX-99 11 EX-99.a ITEM 11(a)(2). EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. Those financial statement schedules required to be filed by Item 8 of this Form and the financial statements required by Regulation S-X (17 CFR 210) which are excluded from the annual report to stockholders by Rule 14a-3(b)(1). Listed below are current documents incorporated by reference and identified as having been previously filed with the Commission. 1. The Original through the Nineteenth Supplemental Indentures of Interstate Power Company to The Chase Manhattan Bank and Carl E. Buckley and C. J. Heinzelmann, as Trustees, dated January 1, 1948 securing First Mortgage Bonds (physically filed in Registration Statement No. 33-59352 dated March 11, 1993 under the Securities Act of 1933 as Exhibits (4)(b) through (4)(t)). 2. Twentieth Supplemental Indenture of Interstate Power Company to The Chase Manhattan Bank and C. J. Heinzelmann, as Trustees, dated May 15, 1993 (physically filed in Registration Statement No. 33- 59352 dated March 11, 1993 under the Securities Act of 1933 as Exhibit (4)(u)). 3. Dividend Reinvestment and Stock Purchase Plan filed on Form S-3 covering the registration of 500,000 shares of Common Stock, dated May 11, 1993 (physically filed in Registration Statement No. 33- 66244 under the Securities Act of 1933). 4. Guaranty Agreement between Interstate Power Company and Commerce Union Bank as Trustee dated as of December 1, 1973 (City of Dubuque, Iowa $4,400,000 Pollution Control Revenue Bonds) (physically filed in Registration Statement No. 2-50685 as EXHIBIT 5-GG.1a). 5. Security Agreement dated as of December 1, 1973 between Interstate Power Company (Guarantor) and Commerce Union Bank (Trustee) (City of Dubuque, Iowa $4,400,000 Pollution Control Revenue Bonds) (physically filed in Registration Statement No. 2-50685 as EXHIBIT 5-GG.1b). 6. Guaranty Agreement between Interstate Power Company and Commerce Union Bank as Trustee dated as of December 1, 1973 (Town of Lansing, Iowa $3,700,000 Pollution Control Revenue Bonds) (physically filed in Registration Statement No. 2-50685 as EXHIBIT 5-GG.2a). 7. Security Agreement dated as of December 1, 1973 between Interstate Power Company (Guarantor) and Commerce Union Bank (Trustee) (Town of Lansing, Iowa $3,700,000 Pollution Control Revenue Bonds) (physically filed in Registration Statement No. 2-50685 as EXHIBIT 5-GG.2b). 8. Guaranty Agreement between Interstate Power Company and Commerce Union Bank as Trustee dated as of December 1, 1973 (City of Clinton, Iowa $900,000 Pollution Control Revenue Bonds) (physically filed in Registration Statement No. 2-50685 as EXHIBIT 5-GG.3a). 9. Security Agreement dated as of December 1, 1973 between Interstate Power Company (Guarantor) and Commerce Union Bank (Trustee) (City of Clinton, Iowa $900,000 Pollution Control Revenue Bonds) (physically filed in Registration Statement No. 2-50685 as EXHIBIT 5-GG.3b). 10. Registration Statement No. 33-32529 on Form S-8 covering the registration of $10,000,000 of participation interests, including the registration of up to 402,010 shares of Common Stock, par value $3.50 per share, of Interstate Power Company pursuant to its 401(k) Plan (filed with the Commission on December 12, 1989). 11. IPC Development Co. Articles of Incorporation, State of Iowa dated May 24, 1978 (physically filed in Form 10-K for the Year Ended December 31, 1978 as EXHIBIT G). 12. IPC Development Co. By-Laws adopted May 10, 1978 (physically filed in Form 10-K for the Year Ended December 31, 1978 as EXHIBIT H). 13. Restated Certificate of Incorporation of Interstate Power Company as originally filed April 18, 1925 and as amended effective through October 21, 1993 (filed in Form 10-K for the Year Ended December 31, 1993 as EX-3.a). 14. Summary Plan Description for the Interstate Power Company 401(k) Plan dated November 30, 1993 (filed in Form 10-K for the Year Ended December 31, 1993 as EX-99.c). 15. Interstate Power Company Irrevocable Trust Agreement dated April 30, 1990 (filed in Form 10-K for the Year Ended December 31, 1993 as EX-99.f). 16. Interstate Power Company Amended Deferred Compensation Plan as amended through January 30, 1990 (filed in Form 10-K for the Year Ended December 31, 1993 as EX-99.e). 17. Participation Power and Block Energy Agreement between United Power Association and Interstate Power Company, dated August 7, 1991 (physically filed in Form 10-K for the Year Ended December 31, 1991 as EXHIBIT F). 18. Unit Participation Power Agreement between Iowa Public Service Company and Interstate Power Company, dated August 12, 1991 (physically filed in Form 10-K for the Year Ended December 31, 1991 as EXHIBIT G). 19. Unit Participation Power Agreement between Minnesota Power and Interstate Power Company, dated August 14, 1991 (physically filed in Form 10-K for the Year Ended December 31, 1991 as EXHIBIT H). 20. Mid-Continent Area Power Pool Agreement Amendment dated January 1, 1991 (physically filed in Form 10-K for the Year Ended December 31, 1991 as EXHIBIT I). 21. Mid-Continent Area Power Pool Coordination Center Agreement dated September 18, 1990 (physically filed in Form 10-K for the Year Ended December 31, 1991 as EXHIBIT J). 22. Statement regarding availability upon request of Loan Agreement and Pollution Control Indenture (filed in Form 10-K for the Year Ended December 31, 1994 as EX-4). 23. Coal Transportation Agreement ICC-BN-C-2536 between Interstate Power Company and Burlington Northern Railroad Company dated February 21, 1990 (physically filed in Form 10-K for the Year Ended December 31, 1990 as EXHIBIT D). 24. Third Amended and Restated Coal Supply Agreement between Interstate Power Company and AMAX Coal Company and a fully executed Release and Discharge Agreement for the previous Agreement and Amendments. Both dated April 9, 1990 (physically filed in Form 10-K for the Year Ended December 31, 1990 as EXHIBIT E). 25. Indemnity Agreement between Orba-Johnson Transshipment Company and Interstate Power Company dated October 3, 1979 (physically filed in Form 10-K for the Year Ended December 31, 1979 as EXHIBIT E). 26. Consent and Clarification Agreement between Orba-Johnson Transshipment Company, Orba Corporation, Johnson Bros. Corporation Travelers Insurance Company and Interstate Power Company dated December 20, 1979 (physically filed in Form 10-K for the Year Ended December 31, 1979 as EXHIBIT G). 27. Consent and Agreement to Amend Security Agreement and Mortgage Agreement between Orba-Johnson Transshipment Co., Travelers Insurance Co., and Interstate Power Co., dated September 1, 1981 (physically filed in Form 10-K for the Year Ended December 31, 1981 as EXHIBIT K). 28. Barge Transportation Agreement dated March 1, 1990 between Orgulf Transport Company and Interstate Power Company for the shipment of coal from the Orba-Johnson Transshipment Terminal near Keokuk, Iowa to the Unit 4 power-generating facility at Lansing, Iowa (physically filed in Form 10-K for the Year Ended December 31, 1990 as EXHIBIT J). 29. Coal Supply Agreement between Interstate Power Company and Powderhorn Coal Company filed under Form SE as confidential and non-public (filed in Form 10-K for the Year Ended December 31, 1994 as EX-10.a). EX-99 12 EX-99.b INTERSTATE POWER COMPANY SUPPLEMENTAL RETIREMENT PLAN AS AMENDED AND RESTATED NOVEMBER 10, 1995 Table of Contents Page ARTICLE I - INTRODUCTION . . . . . . . . . . . . . . . . . . . .1 1.1 Purpose. . . . . . . . . . . . . . . . . . . . . . . .1 ARTICLE II - DEFINITIONS . . . . . . . . . . . . . . . . . . . .2 2.1 Accrued Benefit . . . . . . . . . . . . . . . . .2 2.2 Board or Board of Directors . . . . . . . . . . .2 2.2.5 Change in Control . . . . . . . . . . . . . . . .2 2.3 Code. . . . . . . . . . . . . . . . . . . . . . .3 2.4 Compensation. . . . . . . . . . . . . . . . . . .3 2.5 Early Retirement Date . . . . . . . . . . . . . .3 2.6 Effective Date. . . . . . . . . . . . . . . . . .3 2.7 Employer. . . . . . . . . . . . . . . . . . . . .4 2.8 Normal Retirement Date. . . . . . . . . . . . . .4 2.9 Officer . . . . . . . . . . . . . . . . . . . . .4 2.9.5 Participant . . . . . . . . . . . . . . . . . . .4 2.10 Plan. . . . . . . . . . . . . . . . . . . . . . .4 2.11 Plan Administrator. . . . . . . . . . . . . . . .4 2.12 Plan Year . . . . . . . . . . . . . . . . . . . .4 2.12.5 Re-entry Date . . . . . . . . . . . . . . . . . .4 2.13 Retirement Plan . . . . . . . . . . . . . . . . .4 2.14 Social Security Benefit . . . . . . . . . . . . .4 2.15 Spouse. . . . . . . . . . . . . . . . . . . . . .5 2.16 Trust . . . . . . . . . . . . . . . . . . . . . .5 2.17 Trust Fund. . . . . . . . . . . . . . . . . . . .5 2.18 Trustee . . . . . . . . . . . . . . . . . . . . .5 2.19 Year(s) of Benefit Service. . . . . . . . . . . .5 ARTICLE III - PARTICIPATION. . . . . . . . . . . . . . . . . . .6 3.1 Participation . . . . . . . . . . . . . . . . . .6 3.2 Death . . . . . . . . . . . . . . . . . . . . . .6 ARTICLE IV - CONTRIBUTIONS . . . . . . . . . . . . . . . . . . .7 4.1 Employer Contributions. . . . . . . . . . . . . .7 4.2 Change in Control . . . . . . . . . . . . . . . .7 4.3 Binding Effect on Successor . . . . . . . . . . .7 ARTICLE V - BENEFITS . . . . . . . . . . . . . . . . . . . . . .8 5.1 Normal Retirement Pension . . . . . . . . . . . .8 5.2 Early Retirement Pension. . . . . . . . . . . . .8 5.3 Prior Employer's Plan . . . . . . . . . . . . . .9 5.4 Form of Payment . . . . . . . . . . . . . . . . .9 5.5 Suspension of Benefits. . . . . . . . . . . . . 10 5.6 Termination for Cause . . . . . . . . . . . . . 10 5.7 Surviving Spouse Benefits . . . . . . . . . . . 11 5.8 Claims Procedure. . . . . . . . . . . . . . . . 11 5.9 Forfeiture of Benefits. . . . . . . . . . . . . 13 ARTICLE VI - ADMINISTRATION OF PLAN. . . . . . . . . . . . . . 14 6.1 Administration. . . . . . . . . . . . . . . . . 14 6.2 Records . . . . . . . . . . . . . . . . . . . . 15 6.3 Information Available . . . . . . . . . . . . . 15 6.4 Expenses. . . . . . . . . . . . . . . . . . . . 15 ARTICLE VII - AMENDMENT AND TERMINATION. . . . . . . . . . . . 16 7.1 Right to amend or Terminate Plan. . . . . . . . 16 7.2 Amendments. . . . . . . . . . . . . . . . . . . 16 ARTICLE VIII - MISCELLANEOUS PROVISIONS. . . . . . . . . . . . 17 8.1 No Employment Rights. . . . . . . . . . . . . . 17 8.2 Non-alienability. . . . . . . . . . . . . . . . 17 8.3 Facility of Payment . . . . . . . . . . . . . . 17 8.4 Severability. . . . . . . . . . . . . . . . . . 17 8.5 Headings. . . . . . . . . . . . . . . . . . . . 17 8.6 Number and Gender . . . . . . . . . . . . . . . 18 8.7 Governing Law . . . . . . . . . . . . . . . . . 18 INTERSTATE POWER COMPANY SUPPLEMENTAL RETIREMENT PLAN AS AMENDED AND RESTATED ARTICLE I - INTRODUCTION 1.1 Purpose Interstate Power Company ("Employer"), is establishing the Supplemental Retirement Plan ("Plan") for the purpose of providing defined benefit retirement income supplement for the officers of the Employer. The Plan has been designed as, and is intended to be, an unfunded plan for purposes of the Employee Retirement Income Security Act of 1974, as amended, except as otherwise specifically provided under the terms of this Plan. The Plan has also been designed as, and is intended to be, a non-qualified plan for purposes of Section 401 of the Internal Revenue Code of 1986, as amended. The Plan shall be effective April 30, 1990 as amended and restated November 10, 1995. ARTICLE II - DEFINITIONS Capitalized terms as described in this Article II shall have the meanings as described herein unless a different meaning is clearly required by the context of the Plan. 2.1 Accrued Benefit shall mean the retirement benefit that the Officer would receive upon such Officer's Normal Retirement Date, as provided in Section 5.1. 2.2 Board or Board of Directors shall mean the Board of Directors of the Employer. 2.2.5 Change in Control of the Employer shall have the following meaning and shall be deemed to have occurred if: (i) any Person is or becomes the Beneficial Owner (as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934 (the "Exchange Act")), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company) representing twenty-five percent (25%) or more of the combined voting power of the Company's then outstanding securities; or (ii) during any period of twenty-four (24) consecutive months (not including any period prior to November 1, 1995), individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a Person who has entered into an agreement with the Company to effect a transaction described in clause (i), (iii) or (iv) of this definition or any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two- thirds (2/3) of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board; or (iii) the shareholders of the Company approve a reorganization, merger or consolidation, other than a reorganization, merger or consolidation with respect to which all or substantially all of the individuals and entities who were Beneficial Owners, immediately prior to such reorganization, merger or consolidation, of the combined voting owner of the Company's then outstanding securities beneficially own, directly or indirectly, immediately after such reorganization, merger or consolidation, more then seventy-five percent (75%) of the combined voting power of the securities of the corporation resulting from such reorganization, merger or consolidation in substantially the same proportions as their respective ownership, immediately prior to such reorganization, merger or consolidation, of the combined voting owner of the Company's securities; or (iv) the shareholders of the Company approve (a) the sale or disposition by the Company (other than to a subsidiary of the Company) of all or substantially all of the assets of the Company (or any such sale or disposition is effected through condemnation proceedings), or (b) a complete liquidation or dissolution of the Company. Notwithstanding the foregoing, a Change in Control shall not include any event, circumstance or transaction which results from the action (excluding the Executive's employment activities with the Company or any of its affiliates) of any Person or group of Persons which includes, is directly affiliated with or is wholly or partly controlled by one or more executive officers of the Company and in which the Executive actively participates. 2.3 Code shall mean the Internal Revenue Code of 1986, as amended, and the regulations thereunder. 2.4 Compensation shall mean the Officer's highest consecutive twelve (12) months of compensation, consisting of amounts which are actually paid to the Officer during the calendar year, including any nonqualified plan deferrals, expense reimbursements and taxable employee benefits. 2.5 Early Retirement Date shall mean the first day of the month on or after the Officer reaches age fifty-five (55). 2.6 Effective Date shall mean April 30, 1990 as amended and restated November 10, 1995. 2.7 Employer shall mean Interstate Power Company. This will also include any successor corporation or firm of the Employer which shall, by written agreement, assume the obligations of this Plan. 2.8 Normal Retirement Date shall mean the date that the Officer reaches age sixty-five (65). 2.9 Officer shall mean an employee of the Employer who is determined by the Employer to be eligible to participate in this Plan. Notwithstanding anything contained herein to the contrary, the term "Officer" shall include any employee who is an assistant officer. 2.9.5 Participant shall mean an officer or former Officer of Employer who has been determined by the Employer eligible to participate in the Plan or who has entered into the Plan. See 3.1. 2.10 Plan shall mean this Interstate Power Company Supplemental Retirement Plan, as set forth herein or in any amendments hereto. 2.11 Plan Administrator shall mean the Employer or the individual or committee duly appointed or duly authorized by the Employer or by the Board of Directors to administer the terms of the Plan. 2.12 Plan Year shall mean the twelve (12) consecutive month period beginning with January 1 and ending December 31. 2.12.5 Re-entry Date shall mean the date a former active Officer re-enters the plan. 2.13 Retirement Plan shall mean the plan sponsored by the Employer, known as the Interstate Power Company Retirement Income Plan, which is qualified under Section 401 and 501 of the Code. 2.14 Social Security Benefit shall mean the maximum benefit that the Officer is eligible to receive from Social Security: (a) at age sixty-two (62), if the Officer retires at age Sixty-two (62); or (b) on the date that the Officer retires, if the Officer retires after age sixty-two (62); or (c) at age sixty-two (62), assuming that the Officer continues to earn zero Compensation from the date of Retirement until the Officer reaches age sixty- two (62), if the Officer retires before age sixty- two (62). 2.15 Spouse shall mean a person to whom the Officer was legally married on the date of the Officer's death. 2.16 Trust shall mean the agreement of trust, called Interstate Power Company Irrevocable Trust Agreement, 1990, between the Interstate Power Company and the trustee established for the purpose of holding the assets of the Trust Fund under the provisions of this Plan. 2.17 Trust Fund shall mean the total funds held under the Trust for purpose of providing benefits for the Participants. These funds result from a transfer of general assets of the Employer made under the Plan which are forwarded to the Trustee to be deposited in the Trust Fund. In the event of the Employer's insolvency, assets in the trust Fund are subject to the claims of the Employer's general creditors. 2.18 Trustee shall mean the trustee or trustees under the Trust. The term Trustee as it is used in this Plan is deemed to include the plural unless the context clearly indicates otherwise. 2.19 Year(s) of Benefit Service shall mean an Officer's total period of service as an employee of the Employer, beginning with such Officer's employment commencement date expressed in years and months, including fractions of years, and ending on the date that the employee's employment with the Employer is terminated. For purposes of this Section 2.19 any part of a month shall be deemed to be a whole month. ARTICLE III - PARTICIPATION 3.1 Participation. The only employees eligible to participate in this plan are Officers. Participation in the Plan shall commence upon the notification to the Officer by the Employer of such Officer's eligibility to participate in this Plan and upon the Officer's entry into this Plan. The Employer shall determine the Officer's entry date into this Plan. See 5.5 Suspension of Benefits. 3.2 Death. If an Officer dies while actively employed by the Employer, a benefit shall be payable under this Plan. The benefit shall be payable as provided in Section 5.7. See 5.5 Suspension of Benefits. ARTICLE IV - CONTRIBUTIONS 4.1 Employer Contributions. (a) All contributions under this Plan are made by the Employer. (b) In establishing this Plan and the Trust, the Employer agrees and undertakes to make the Trust Fund subject to the claims of the Employer's general creditors. The right of any Participant to payment of benefits from the Employer's general assets shall be no greater than that of any other general unsecured creditor of the Employer. 4.2 Change in Control, Funding. In the event that a change in control of the Employer occurs or in the event of a change in the ownership of all or substantially all of the assets of the Employer occurs as defined in Section 2.2.5 this Plan shall become funded upon the date that the Securities and Exchange Commission is notified of such change. The amount of such funding shall be equal to the present value of the Officer's Accrued Benefit (See Definition 2.1) based upon 7% interest per annum and the 1983 Group Annuity Mortality Table for males. All Plan participants shall become one hundred percent (100%) vested in their Accrued Benefit. 4.3 Binding Effect on Successor. The Plan shall be binding upon and inure to the benefit of any successor to the Employer or its business as the result of merger, consolidation, reorganization, transfer of assets or otherwise and any subsequent successor thereto. In no event shall such merger, consolidation, reorganization, transfer of assets or other similar transaction suspend or delay the rights of any Participant to receive benefits hereunder. ARTICLE V - BENEFITS 5.1 Normal Retirement Pension. (a) An Officer shall be eligible for a normal retirement pension under this Section 5.1 if the Officer terminates service with the Employer on or after such Officer's Normal Retirement Date. (b) An Officer's monthly normal retirement pension is based upon one twelfth (1/12th) of the following formula, based on a single life annuity: three and three-fourths percent (3-3/4%) multiplied by Years of Benefit Service (not in excess of 20) multiplied by Compensation minus the Officer's annual accrued benefit from the Retirement Plan payable as a single life annuity, any other employer's annual retirement pension and the Officer's annual Social Security Benefit. 5.2 Early Retirement Pension. (a) If the Officer terminates service with the Employer on or after such Officer's Early Retirement Date, the Officer shall receive an early retirement pension or a normal retirement pension as provided under this Section 5.2. If the Officer terminates service with the Employer before such Officer's Early Retirement Date, no benefits will be payable to such Officer under this Plan. (b) An Officer's monthly early retirement pension is based upon one twelfth (1/12th) of the following formula, based upon a single life annuity: three and three-fourths percent (3-3/4%) multiplied by Years of Benefit Service (not in excess of 20 and determined on the date that the Officer terminates service with the Employer) multiplied by Compensation (determined on the date that the Officer terminates service with the Employer) minus the Officer's annual accrued benefit from the Retirement Plan payable as a single life annuity, any other employer's annual retirement pension and the Officer's annual Social Security Benefit. (c) If the Officer commences benefit on his Early Retirement Date, the Officer will receive the following percentage of such Officer's pension: Age When Benefits Begin Percentage of Benefit Received 65 100.00% 64 97.50%* 63 95.00%* 62 92.50%* 61 90.00% 60 80.00% 59 70.00% 58 60.00% 57 50.00% 56 40.00% 55 30.00% * These percentages are subject to subsection (d) below. (d) Notwithstanding anything contained in this Plan to the contrary, if the Officer commences benefits on or after age sixty-two (62) with thirty-five (35) or more Years of Benefit Service with the Employer, the Officer may retire and qualify for 100% of the Officer's benefit under this Plan. 5.3 Prior Employer's Plan. If the Officer is eligible to receive a benefit from a previous employer's defined benefit retirement plan, the Officer's benefit under this Plan shall be reduced. The amount of the reduction is equal to the monthly pension benefit the Officer earned from the prior employer's plan payable as a single life annuity at such Officer's retirement date. 5.4 Form of Payment. (a) Benefits under this Plan shall be paid on the Officer's Normal Retirement Date or Early Retirement Date in the form selected by the Officer. The forms of payments which are available for selection under this Plan are the same options which are available under the Retirement Plan, as provided in subsection (b) below. The Officer may choose a different form of payment under this Plan from the form selected under the Retirement Plan. (b) The optional forms of retirement benefit for the benefit derived from the Officer's Accrued Benefit shall be the following: (i) a straight life annuity; (ii) a straight life annuity with Social Security adjustment option; (iii) single life annuities with period certain of five (5), ten (10) or fifteen (15) years; and (iv) survivorship life annuities with survivorship percentages of 50, 66 2/3 or 100. The benefit payable under any optional annuity form (except for subsection (ii) and the normal form of payment under the retirement Plan) shall be the actuarial equivalent (as defined in the Retirement Plan) of the normal form of payment under the Retirement Plan. 5.5 Suspension of Benefits. If the Officer terminates service with the Employer and is rehired after commencement of benefits but prior to attaining age sixty-five (65), payment of benefits under this Plan shall cease. Payment of benefits under this Plan shall resume when the Officer again terminates service with the Employer. 5.6 Termination for Cause. If the Officer is terminated for cause, the Officer will not receive any benefits under this Plan. Termination for cause shall be determined by the Board of Directors and will include, but shall not be limited to: (a) embezzlement of Employer funds; (b) fraud; and (c) acts which cause harm to the Employer or its reputation. 5.7 Surviving Spouse Benefits. (a) If the Officer is unmarried and dies prior to retirement, no benefits are payable under this Plan. If the Officer is married and dies prior to retirement, the Officer's Spouse will receive a pre-retirement survivor annuity. (b) The Spouse shall receive a lifetime monthly pension equal to the percent from the table below of the Officer's Accrued Benefit: Percentage of Benefit Age at Time of Death Spouses Receives 64 48% 63 46% 62 44% 61 42% 60 40% 59 38% 58 36% 57 34% 56 32% 55 and under 30% (c) If the Officer dies after such Officer's Early Retirement Date, the pension amount is determined as if the Officer retired on such Officer's date of death. The Spouse commences payments as of the Officer's date of death. (d) If the Officer dies before such Officer's Early Retirement Date, the pension amount is determined as if the Officer terminated service with the Employer on the date of death. The Spouse shall commence payments on the earliest date that the Officer was eligible to retire. (e) If the Officer dies after the Officer retired and commenced payments, the death benefit payable will be based on the form of payment selected by the Officer. 5.8 Claims Procedure. (a) Filing a Claim. Any Officer or Spouse may file a written claim for a Plan benefit with the Plan Administrator. (b) Notice of Denial of Claim. In the event of a denial or limitation of any benefit or payment due to a claimant, the claimant shall be given a written notification containing specific reasons for the denial or limitation of such claimant's benefit. The written notification shall contain specific reference to the pertinent Plan provisions on which the denial or limitation of his benefit is based. In addition, it shall contain a description of any other material or information necessary for the claimant to perfect a claim and an explanation of why such material or information is necessary. The notification shall further provide appropriate information as to the steps to be taken if the claimant wishes to submit the claim for review. This written notification shall be given to a claimant within ninety (90) days after receipt of the claim by the Plan Administrator unless special circumstances require an extension of time for processing the claim. If such an extension of time is required, written notice of the extension shall be furnished to the claimant prior to the termination of said ninety (90) day period, and such notice shall indicate the special circumstances which make the postponement appropriate. (c) Right of Review. In the event of a denial or limitation of his benefit, the claimant shall be permitted to review pertinent documents and to submit to the Plan Administrator issues and comments in writing. In addition, the claimant may make a written request for a full and fair review of the claim and its denial by the Plan Administrator, provided, however, that such written request is received by the Plan Administrator within sixty (60) days after receipt by the claimant of written notification of the denial or limitation of the claim. The sixty (60) day requirement may be waived by the Plan Administrator in appropriate cases. (d) Decision on Review. A decision shall be rendered by the Plan Administrator within sixty (60) days after the receipt of the request for review, provided that where special circumstances require an extension of time for processing the decision, it may be postponed with written notice to the claimant (prior to the expiration of the initial sixty (60) day period) for an additional sixty (60) days, but in no event shall the decision be rendered more than one hundred twenty (120) days after the receipt of such request for review. Any decision by the Plan Administrator shall be furnished to the claimant in writing and shall set forth the specific reason for the decision and the specific Plan provisions on which the decision is based. (e) Court Action. No Officer or Spouse shall have the right to seek judicial review of a denial of benefits or to bring any action in any court to enforce a claim for benefits prior to filing a claim for benefits or exhausting the rights to review under this Section 5.8. 5.9 Forfeiture of Benefits. Upon the occurrence of the following events, the Officer's benefits under this Plan shall be forfeited and no benefits shall be payable to the Officer under this Plan: (a) as provided in Sections 3.2, 5.2(a), 5.6, and 5.7(a); (b) if the Plan terminates, no further benefits shall be accrued under this Plan. The Officer's Accrued Benefit under this Plan shall be the benefit accrued as of the date the Plan is terminated; (c) if the Officer terminates service with the Employer and begins employment with an employer which the Board of Directors determines to be a competitor of the Employer or with any employer in the utility industry. This limitation does not, however, apply to successors and assigns of Employer. ARTICLE VI - ADMINISTRATION OF PLAN 6.1 Administration. (a) Subject to this Article VI, the Plan administrator has complete control of the administration of the Plan. The Plan Administrator has all the powers necessary to properly carry out its administrative duties. Not in limitation, but in amplification of the foregoing, the Plan Administrator has the power in its sole and complete discretion to construe the terms of the Plan, to interpret and resolve any ambiguity which may arise under the Plan and all questions which may arise under the Plan, including questions relating to the eligibility of officers to participate in the Plan and the amount of benefit to which any Participant may become entitled. The Plan Administrator's decisions upon all matters within the scope of its authority shall be final. (b) Unless otherwise set out in the Plan, the Plan Administrator may delegate recordkeeping and other duties which are necessary to assist it with the administration of the Plan to any person or firm which agrees to accept such duties. The Plan Administrator shall be entitled to rely upon all tables, valuations, certificates and reports furnished by the consultant or actuary appointed by the Plan Administrator and upon all opinions given by any counsel selected or approved by the Plan Administrator. (c) The Plan Administrator shall receive all claims for benefits by Participants or former Participants. The Plan Administrator shall determine all facts necessary to establish the right of any claimant to benefits and the amount of those benefits under the provisions of the Plan. The Plan Administrator may establish rules and procedures to be followed by claimants in filing claims for benefits, in furnishing and verifying proof necessary to determine age, and in any other matters required to administer the Plan. 6.2 Records. (a) All acts and determination of the Plan Administrator shall be duly recorded. All these records, together with other documents necessary for the administration of the Plan, shall be preserved in the Plan Administrator's custody. (b) Writing (handwriting, typing, printing), photo- stating, photographing, microfilming, magnetic impulse, mechanical or electrical recording or other forms of data compilation shall be acceptable means of keeping records. 6.3 Information Available. Any participant in the Plan may examine copies of this Plan. The Plan Administrator shall maintain the Plan in its office, or in such other place or places as it may designate. The Plan may be examined during reasonable business hours. Upon the written request of a Participant receiving benefits under the Plan, the Plan Administrator shall furnish such Participant with a copy of the Plan. 6.4 Expenses. The Employer shall pay all expenses of administering the Plan. ARTICLE VII - AMENDMENT AND TERMINATION 7.1 Right to Amend or Terminate Plan. While the Employer intends to maintain this Plan indefinitely, the Employer, through the action of the Board of Directors, reserves the right to amend and/or terminate this Plan at any time for whatever reason it may deem appropriate; provided, however, that any such amendment and/or termination adopted by the Board of Directors or otherwise after the occurrence of any Change in Control shall not be effective against any Participant participating in this Plan on the date of any such Change in Control if such amendment and/or termination would have any adverse effect on the benefit rights and/or entitlements, accrued or potential, of such Participant, when compared to any such benefit rights and/or entitlements as the same existed immediately prior to the adoption of any such amendment and/or termination of this Plan, without the prior express written consent of any such adversely effected Participant. 7.2 Amendments. No amendment to this Plan may be made except by action of a simple majority of the Board of Directors. ARTICLE VIII - MISCELLANEOUS PROVISIONS 8.1 No Employment Rights. Nothing contained in this Plan shall be construed as a contract of employment between the Employer and any Officer or as a right of any Officer to be continued in employment or as a limitation on the right of any Employer to discharge any of its Officers with or without cause. 8.2 Non-alienability. The rights of an Officer to the payment of benefits under this Plan shall not be assigned, transferred, pledged or encumbered, or be subject in any manner to alienation or anticipation. 8.3 Facility of Payment. Any amounts payable under this Plan to any person under a legal disability or who, in the judgement of the Employer, is unable to properly manage his financial affairs may be paid to the legal representative of such person or may be applied for the benefit of such person in any manner which the Employer may select. 8.4 Severability. Whenever possible, each provision of the Plan shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of the Plan shall be held to be prohibited by or invalid under applicable law, then such provision shall be deemed to be amended to accomplish the objectives of the provision as originally written to the fullest extent permitted by law and all other provisions of the Plan shall remain in full force and effect. Such provision shall be deemed to have been drafted in such manner on the Effective Date. 8.5 Headings. The headings are for convenience of reference only. In the event of a conflict between a heading and the content of a section, the content of the section shall control. 8.6 Number and Gender. The masculine pronoun used herein shall include the feminine pronoun and the singular number shall include the plural number unless the context of this Plan requires otherwise. 8.7 Governing Law. The provisions of this Plan shall be interpreted in accordance with the laws of the State of Delaware. IN WITNESS WHEREOF, the Employer has caused its corporate seal to be hereunto affixed and has caused its name to be signed hereto by the person duly authorized below, pursuant to the authority of the Board of Directors, to be effective as first above written, on this 10th day of November , 19 95 . INTERSTATE POWER COMPANY By: /s/ W. H. Stoppelmoor Title: Chairman, President & CEO (Corporate Seal) Attest: /s/ J. C. McGowan Secretary -----END PRIVACY-ENHANCED MESSAGE-----