PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Income for the three
months ended March 31, 1995 and 1994. . . . . . . . . . . 2
Consolidated Balance Sheets as of March 31, 1995,
and December 31, 1994 . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Cash Flows for
the three months ended March 31, 1995 and 1994. . . . . . 5
Notes to Consolidated Financial Statements. . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . 17
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PART I. FINANCIAL INFORMATION
PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1995* 1994*
(Thousands of Dollars)
<S> <C> <C>
OPERATING REVENUES $ 68,237 $ 80,233
Cost of gas 41,407 50,460
OPERATING MARGIN 26,830 29,773
OTHER OPERATING EXPENSES:
Operation 5,824 6,320
Maintenance 968 1,150
Depreciation 1,792 1,670
Income taxes 4,462 5,690
Taxes other than income taxes 3,879 4,059
Total other operating expenses 16,925 18,889
OPERATING INCOME 9,905 10,884
OTHER INCOME, NET 254 209
INCOME BEFORE INTEREST CHARGES 10,159 11,093
INTEREST CHARGES:
Interest on long-term debt 3,486 2,925
Allowance for borrowed funds used
during construction (9) (13)
Other interest 322 329
Total interest charges 3,799 3,241
INCOME FROM CONTINUING OPERATIONS 6,360 7,852
DISCONTINUED OPERATIONS:
Income from discontinued operations
(net of related income taxes of $1,403,000
and $1,485,000, respectively) 2,127 2,079
Estimated loss on disposal of discontinued
operations, net of anticipated income
during the phase-out period of $6,855,000
(net of related income taxes of $5,316,000) (5,831) -
Income (loss) with respect to discontinued
operations (3,704) 2,079
INCOME BEFORE SUBSIDIARY'S PREFERRED
STOCK DIVIDENDS 2,656 9,931
SUBSIDIARY'S PREFERRED STOCK DIVIDENDS 691 1,383
NET INCOME $ 1,965 $ 8,548
COMMON STOCK
Earnings per share of common stock:
Continuing operations $ 1.00 $ 1.20
Discontinued operations (.65) .38
Net income $ .35 $ 1.58
Weighted average shares outstanding 5,653,003 5,415,842
Cash dividends per share $ .55 $ .55
*See Note 2 regarding discontinued operations and restatement of prior period
consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
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PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1995* 1994*
(Thousands of Dollars)
<S> <C> <C>
ASSETS
UTILITY PLANT:
At original cost, less acquisition
adjustments of $386,000 $ 286,144 $ 284,080
Accumulated depreciation (76,421) (74,408)
209,723 209,672
OTHER PROPERTY AND INVESTMENTS 4,138 3,481
CURRENT ASSETS:
Cash 923 330
Restricted cash - common stock subscribed
(Note 4) 1,866 2,532
Accounts receivable -
Customers 22,554 16,883
Others 1,416 1,474
Reserve for uncollectible accounts (1,186) (937)
Accrued utility revenues 7,004 9,004
Materials and supplies, at average cost 2,831 2,797
Gas held by suppliers, at average cost 9,306 20,025
Deferred cost of gas and supplier refunds, net - 8,475
Prepaid expenses and other 4,776 1,483
49,490 62,066
DEFERRED CHARGES:
Deferred taxes collectible 30,600 31,696
Unamortized debt expense 3,345 3,539
Natural gas transition costs collectible 2,571 4,099
Other 6,633 6,683
43,149 46,017
NET ASSETS OF DISCONTINUED OPERATIONS 196,798 203,196
TOTAL ASSETS $ 503,298 $ 524,432
*See Note 2 regarding discontinued operations and restatement of prior period
consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
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PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1995* 1994*
(Thousands of Dollars)
<S> <C> <C>
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common shareholders' investment (Notes 4 and 5) $ 173,215 $ 172,012
Preferred stock -
Not subject to mandatory redemption, net 33,615 33,615
Subject to mandatory redemption 1,760 1,760
Long-term debt 199,211 220,705
407,801 428,092
CURRENT LIABILITIES:
Current portion of long-term debt and
preferred stock subject to mandatory
redemption 290 3,290
Accounts payable 11,397 17,781
Deferred cost of gas and supplier refunds, net 6,132 -
Accrued general business and realty taxes 2,308 3,315
Accrued income taxes 8,427 3,136
Accrued interest 1,801 2,850
Accrued natural gas transition costs 2,158 2,356
Other 3,198 2,398
35,711 35,126
DEFERRED CREDITS:
Deferred income taxes 45,833 46,600
Accrued natural gas transition costs 2,710 3,250
Unamortized investment tax credits 5,068 5,110
Operating reserves 2,234 2,383
Other 3,941 3,871
59,786 61,214
COMMITMENTS AND CONTINGENCIES (Note 6)
TOTAL CAPITALIZATION AND LIABILITIES $ 503,298 $ 524,432
*See Note 2 regarding discontinued operations and restatement of prior period
consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
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PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1995* 1994*
(Thousands of Dollars)
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Income from continuing operations, net of
subsidiary's preferred stock dividends $ 5,669 $ 6,469
Effects of noncash charges to income -
Depreciation 1,799 1,677
Deferred income taxes, net 1,109 394
Provisions for self insurance 163 405
Other, net 1,012 1,102
Changes in working capital, exclusive of cash
and current portion of long-term debt -
Receivables and accrued utility revenues (3,364) (7,998)
Gas held by suppliers 10,719 23,749
Accounts payable (5,648) (7,346)
Deferred cost of gas and supplier refunds, net 15,397 4,170
Other current assets and liabilities, net (892) 1,556
Other operating items, net 168 (846)
Net cash provided by continuing operations 26,132 23,332
Net cash provided (used) by discontinued operations 3,764 (2,622)
Net cash provided by operating activities 29,896 20,710
CASH FLOW FROM INVESTING ACTIVITIES:
Additions to utility plant (net of allowance for
equity funds used during construction) (3,770) (2,232)
Other, net 158 7
Net cash used for investing activities (3,612) (2,225)
CASH FLOW FROM FINANCING ACTIVITIES:
Issuance of common stock 496 232
Common stock subscribed (Note 4) 1,851 -
Dividends on common stock (3,109) (2,978)
Repayment of long-term debt - (845)
Net decrease in bank borrowings (24,925) (15,555)
Other, net (4) 6
Net cash used for financing activities (25,691) (19,140)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 593 (655)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 330 2,749
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 923 $ 2,094
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $ 6,204 $ 4,573
Income taxes $ 453 $ 527
*See Note 2 regarding discontinued operations and restatement of prior period
consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
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PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) GENERAL
The interim consolidated financial statements included herein for
Pennsylvania Enterprises, Inc. (the "Company") and its subsidiaries:
Pennsylvania Gas and Water Company, Pennsylvania Energy Marketing Company,
Pennsylvania Energy Resources, Inc. and Theta Land Corporation, have been
prepared by the Company without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading.
The results for the interim periods are not indicative of the results to be
expected for the year, primarily due to the effect of seasonal variations in
weather on the Company's operating utility, Pennsylvania Gas and Water Company
("PG&W"). However, in the opinion of management, all adjustments, consisting of
only normal recurring accruals, necessary to present fairly the results for the
interim periods have been reflected in the consolidated financial statements.
It is suggested that these consolidated financial statements be read in
conjunction with the consolidated financial statements and the notes thereto
included in the Company's latest annual report on Form 10-K.
(2) DISCONTINUED OPERATIONS
On April 26, 1995, the Company and PG&W signed a definitive agreement (the
"Agreement") with American Water Works Company, Inc. ("American") and
Pennsylvania-American Water Company ("Pennsylvania-American"), a wholly-owned
subsidiary of American, providing for the sale to Pennsylvania-American of
substantially all of the assets, properties and rights of PG&W's water utility
operations.
Under the terms of the Agreement, Pennsylvania-American will pay
approximately $409 million consisting of $254 million in cash and the assumption
of $155 million of PG&W's liabilities, including $141 million of its long-term
debt. This price is subject to adjustment for changes in the assets of PG&W's
water utility operations and the liabilities to be assumed by Pennsylvania-
American between December 31, 1994, and the date of closing, which is expected
to be in the fourth quarter of 1995. Until the closing, PG&W will continue to
operate its water utility business.
The sale price reflects a $6.5 million premium over the book value of the
assets being sold. However, after transaction costs and the write-off of
certain deferred regulatory assets and deferred credits, the sale will result in
an estimated after tax loss of $5 to 8 million, net of the expected income from
the water operations during the phase-out period to the date of closing (which
has been assumed to be December 31, 1995). The sale will involve a gain for
income tax purposes, primarily because of the accelerated depreciation that has
been claimed by PG&W with respect to the water utility plant that is being sold.
It is currently estimated that the income taxes payable on the sale, for which
deferred income taxes have previously been provided, will be approximately $55
million.
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The net cash proceeds from the sale of approximately $199 million, after the
payment of income taxes, will be used by the Company and PG&W to retire debt, to
repurchase stock and for working capital for their continuing operations. After
the sale, the principal assets of the Company and PG&W will consist of PG&W's
gas utility operations and approximately 46,000 acres of land.
The sale of PG&W's water utility operations to Pennsylvania-American is
subject to approval by the Pennsylvania Public Utility Commission ("PPUC"),
approval of the stockholders and certain debt holders of both the Company and
PG&W, termination of the waiting period under federal antitrust laws, and
various other regulatory approvals and certain other conditions.
The accompanying consolidated financial statements reflect PG&W's water
utility operations as "discontinued operations." Interest charges of PG&W have
been allocated to the discontinued operations based on the relationship of the
gross water utility plant that is being sold to the total of PG&W's gross gas
and water utility plant. This is the same method as has been utilized by PG&W
and the PPUC in establishing the revenue requirements of both PG&W's gas and
water utility operations. None of the dividends on PG&W's preferred stock nor
any of the Company's interest expense has been allocated to the discontinued
operations.
Selected financial information for the discontinued operations as of March
31, 1995, and December 31, 1994, and for the three-month periods ended March 31,
1995, and March 31, 1994, is set forth below:
[CAPTION]
As of As of
March 31, December 31,
1995 1994
(Thousands of Dollars)
[S] [C] [C]
Net utility plant $ 359,223 $ 359,399
Current assets (primarily accounts
receivable and accrued revenues) 12,082 12,141
Deferred charges and other assets 29,724 31,103
Total assets being acquired by
Pennsylvania-American 401,029 402,643
Liabilities being assumed by
Pennsylvania-American
Long-term debt 141,293 141,420
Other 14,481 13,168
155,774 154,588
Net assets being acquired by
Pennsylvania-American 245,255 248,055
Estimated liability for income taxes on
sale of discontinued operations (55,312) (55,542)
Anticipated income from discontinued
operations during phase-out period 6,855 -
Other net assets of discontinued operations
(written off as of March 31, 1995) - 10,683
Total net assets of discontinued operations $ 196,798 $ 203,196
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[CAPTION]
Three months ended March 31,
1995 1994
(Thousands of Dollars)
[S] [C] [C]
Operating revenues $ 15,640 $ 16,052
Operating expenses, excluding income taxes
Depreciation 1,946 1,982
Other operating expenses 6,929 7,299
8,875 9,281
Operating income before income taxes 6,765 6,771
Income taxes 1,403 1,485
Operating income 5,362 5,286
Allocated interest charges 3,235 3,207
Income from discontinued operations $ 2,127 $ 2,079
(3) RECOVERY OF ORDER 636 TRANSITION COSTS
On October 15, 1993, the PPUC adopted an annual purchased gas cost ("PGC")
order (the "PGC Order") regarding recovery of Federal Energy Regulatory
Commission ("FERC") Order 636 transition costs. The PGC Order stated that Gas
Transition Costs are subject to recovery through the annual PGC rate filing.
PG&W was billed a total of $1.1 million of Gas Transition Costs by its
interstate pipelines over a nineteen-month period extending through March 31,
1995. Of this amount, $858,000 was recovered by PG&W over a twelve-month period
ended January 31, 1995, through an increase in its PGC rate. PG&W will seek
recovery of the remaining $249,000 of Gas Transition Costs in its annual PGC
rate that is effective December 1, 1995.
The PGC Order also indicated that while Non-Gas Transition Costs are not
natural gas costs eligible for recovery under the PGC rate filing mechanism,
such costs are subject to full recovery by local distribution companies through
the filing of a tariff pursuant to either the existing surcharge or base rate
provisions of the Code. By Order of the PPUC entered August 26, 1994, PG&W
began recovering the Non-Gas Transition Costs that it estimates it will
ultimately be billed pursuant to FERC Order 636 through the billing of a
surcharge to its customers effective September 12, 1994. It is currently
estimated that $9.4 million of Non-Gas Transition Costs will be billed to PG&W,
generally over a four-year period extending through the fourth quarter of 1997,
of which $4.5 million had been billed to PG&W and $2.4 million had been
recovered from its customers as of March 31, 1995. PG&W has recorded the
estimated Non-Gas Transition Costs that remain to be billed to it and the
amounts remaining to be recovered from its customers.
(4) RESTRICTED CASH - COMMON STOCK SUBSCRIBED
On July 28, 1994, the Company implemented a Customer Stock Purchase Plan
(the "Customer Plan") which provides the residential customers of PG&W with a
method of purchasing newly-issued shares of the Company's common stock at a 5%
discount from the market price. On January 3, 1995, the Company issued 45,360
shares of its common stock for an aggregate consideration of $1.2 million with
respect to payments received pursuant to the Customer Plan during the December,
1994, subscription period. Additionally, on April 3, 1995, the Company issued
42,871 shares of its common stock for an aggregate consideration of $1.2 million
with respect to payments received pursuant to the Customer Plan during the
March, 1995, subscription period. Such payments are reflected under captions
"Restricted cash - common stock subscribed" and "Common shareholders'
investment" in these consolidated financial statements as of the respective
balance sheet dates.
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Through the Company's Dividend Reinvestment and Stock Purchase Plan (the
"DRP"), holders of shares of the Company's common stock may reinvest cash
dividends and/or make cash investments in the common stock of the Company. On
January 3, 1995, the Company issued 51,565 shares of its common stock for an
aggregate consideration of $1.3 million with respect to cash investments made
pursuant to the DRP during the fourth quarter of 1994. Additionally, on April
3, 1995, the Company issued 23,206 shares of its common stock for an aggregate
consideration of $650,000 with respect to cash investments made pursuant to the
DRP during the first quarter of 1995. Such investments are reflected under the
captions "Restricted cash - common stock subscribed" and "Common shareholders'
investment" in these consolidated financial statements as of the respective
balance sheet dates.
(5) COMMON STOCK
On April 26, 1995, the Company adopted a Shareholder Rights Plan under the
terms of which each shareholder of record at the close of business on May 16,
1995, will receive a dividend distribution of one right ("Right" or "Rights")
for each share of common stock held.
Each Right will entitle shareholders to purchase from the Company one-half
of a share of common stock. No less than two Rights, and only integral
multiples of two Rights, may be exercised by holders of Rights at an exercise
price of $100 per share of common stock (equivalent to $50 for each one-half
share of common stock), subject to certain adjustments. The Rights will become
exercisable only if a person or group acquires 15% or more of the Company's
common stock, or commences a tender or exchange offer which, if consummated,
would result in that person or group owning at least 15% of the common stock.
Prior to that time, the Rights will not trade separately from the common stock.
If a person or group acquires 15% or more of the Company's common stock, all
other holders of Rights will then be entitled to purchase, by payment of the
$100 exercise price upon the exercise of two Rights, the Company's common stock
(or a common stock equivalent) with a value of twice the exercise price. In
addition, at any time after a 15% position is acquired and prior to the
acquisition by any person or group of 50% or more of the outstanding common
stock, the Company's Board of Directors may, at its option, require each
outstanding Right (other than Rights held by the acquiring person or group) to
be exchanged for one share of common stock (or one common stock equivalent).
If, following an acquisition of 15% or more of the Company's common stock,
the Company is acquired by any person in a merger or other business combination
transaction or sells more than 50% of its assets or earning power to any person
(other than the currently-pending sale of PG&W's water utility operations to
Pennsylvania-American or, if such sale is not consummated, any other sale of
PG&W's water utility operations, if and as approved by the Company's Board of
Directors), all other holders of Rights will then be entitled to purchase, by
payment of the $100 exercise price upon the exercise of two Rights, common stock
of the acquiring company with a value of twice the exercise price.
The Company may redeem the Rights at $.005 per Right at any time prior to
the time that a person or group has acquired 15% or more of its common stock.
The Rights, which expire on May 16, 2005, do not have voting or dividend rights
and, until they become exercisable, have no dilutive effect on the earnings per
share of the Company.
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(6) COMMITMENTS AND CONTINGENCIES
Valve Maintenance
On November 16, 1993, the PPUC staff issued an Emergency Order, subsequently
ratified by the PPUC (the "Emergency Order"), requiring PG&W to survey its gas
distribution system to verify the location and spacing of its gas shut off
valves, to add or repair valves where needed and to establish programs for the
periodic inspection and maintenance of all such valves and the verification of
all gas service line information. On March 31, 1995, the PPUC adopted an Order
approving a plan submitted by PG&W for complying with the Emergency Order. PG&W
does not believe that compliance with the terms of such Order will have a
material adverse effect on its financial position or results of operations.
Environmental Matters
PG&W, like many gas distribution companies, once utilized manufactured gas
plants in connection with providing gas service to its customers. None of these
plants has been in operation since 1960, and several of the plant sites are no
longer owned by PG&W. Pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), PG&W filed notices with the
United States Environmental Protection Agency (the "EPA") with respect to the
former plant sites. None of the sites is or was formerly on the proposed or
final National Priorities List. The EPA has conducted site inspections and made
preliminary assessments of each site and has concluded that no further remedial
action is planned. While this conclusion does not constitute a legal
prohibition against further regulatory action under CERCLA or other applicable
federal or state law, the Company does not believe that additional costs, if
any, related to these manufactured gas plant sites would be material to its
financial position or results of operations since environmental remediation
costs generally are recoverable through rates over a period of time.
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PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
DISCONTINUED OPERATIONS
On April 26, 1995, the Company and PG&W signed a definitive agreement (the
"Agreement") with American Water Works Company, Inc. ("American") and
Pennsylvania-American Water Company ("Pennsylvania-American"), a wholly-owned
subsidiary of American, providing for the sale to Pennsylvania-American of
substantially all of the assets, properties and rights of PG&W's water utility
operations.
Under the terms of the Agreement, Pennsylvania-American will pay
approximately $409 million consisting of $254 million in cash and the assumption
of $155 million of PG&W's liabilities, including $141 million of its long-term
debt. This price is subject to adjustment for changes in the assets of PG&W's
water utility operations and the liabilities to be assumed by Pennsylvania-
American between December 31, 1994, and the date of closing, which is expected
to be in the fourth quarter of 1995. Until the closing, PG&W will continue to
operate its water utility business.
The sale price reflects a $6.5 million premium over the book value of the
assets being sold. However, after transaction costs and the write-off of
certain deferred regulatory assets and deferred credits, the sale will result in
an estimated after tax loss of $5 to 8 million, net of the expected income from
the water operations during the phase-out period to the date of closing (which
has been assumed to be December 31, 1995).
The net cash proceeds from the sale of approximately $199 million, after the
payment of an estimated $55 million of income taxes, will be used by the Company
and PG&W to retire debt, to repurchase stock and for working capital for their
continuing operations. After the sale, the principal assets of the Company and
PG&W will consist of PG&W's gas utility operations and approximately 46,000
acres of land.
The sale of PG&W's water utility operations to Pennsylvania-American is
subject to approval by the Pennsylvania Public Utility Commission ("PPUC"),
approval of the stockholders and certain debt holders of both the Company and
PG&W, termination of the waiting period under federal antitrust laws, and
various other regulatory approvals and certain other conditions. Until the
closing, PG&W intends to utilize its existing bank lines of credit for the
external financing requirements of the water utility operations, which the
Company believes will be adequate for such purposes.
Operating revenues from PG&W's water utility operations decreased by
$412,000 (2.6%) from $16.1 million for the three-month period ended March 31,
1994, to $15.6 million for the three-month period ended March 31, 1995. This
decrease in revenues was principally the result of a 5.4% decrease in customer
consumption. Operating expenses related to the water utility operations,
excluding income taxes, decreased $406,000 (4.4%) from $9.3 million for the
three-month period ended March 31, 1994, to $8.9 million for the three-month
period ended March 31, 1995. The major reason for this decrease was a $213,000
(4.8%) decrease in other operation expenses, primarily as a result of decreases
in the provision for injuries and damages and the amortization of rate case
expense, the effects of which were partially offset by an increase in payroll
costs. Income taxes with respect to the water utility operations decreased by
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$82,000 (5.5%) from $1.5 million in the first quarter of 1994 to $1.4 million in
the first quarter of 1995 due to a lower level of income before income taxes
(for this purpose, operating income net of interest charges) and a decrease in
the Pennsylvania Corporate Net Income Tax rate. As a result of the foregoing,
operating income of the water utility operations increased $76,000 (1.4%) from
$5.3 million for the three-month period ended March 31, 1994, to $5.4 million
for the three-month period ended March 31, 1995. After interest charges, the
income from the water utility operations increased $48,000 (2.3%) from
$2,079,000 for the three-month period ended March 31, 1994, to $2,127,000 for
the three-month period ended March 31, 1995.
In accordance with generally accepted accounting principles, the Company's
consolidated financial statements have been restated to reflect PG&W's water
utility operations as "discontinued operations," and the following sections of
Management's Discussion and Analysis relate exclusively to the Company's
continuing operations, which consist primarily of PG&W's gas utility operations.
For additional information regarding the discontinued operations, see Note 2 of
the accompanying Notes to Consolidated Financial Statements.
RESULTS OF CONTINUING OPERATIONS
The following table expresses certain items in the Company's consolidated
statements of income as percentages of total operating revenues for each of the
three-month periods ended March 31, 1995, and March 31, 1994:
[CAPTION]
Percentage of
Operating Revenues
Three Months Ended
March 31,
1995 1994
[S] [C] [C]
OPERATING REVENUES........................... 100.0% 100.0%
Cost of gas................................ 60.7 62.9
OPERATING MARGIN............................. 39.3 37.1
OTHER OPERATING EXPENSES:
Operation.................................. 8.6 7.9
Maintenance................................ 1.4 1.4
Depreciation............................... 2.6 2.1
Income taxes............................... 6.5 7.0
Taxes other than income taxes.............. 5.7 5.1
Total other operating expenses........... 24.8 23.5
OPERATING INCOME............................. 14.5 13.6
OTHER INCOME, NET............................ 0.4 0.3
INTEREST CHARGES(1).......................... 5.6 4.1
INCOME FROM CONTINUING OPERATIONS............ 9.3 9.8
INCOME (LOSS) FROM DISCONTINUED OPERATIONS... (5.4) 2.6
INCOME BEFORE SUBSIDIARY'S PREFERRED STOCK
DIVIDENDS.................................. 3.9 12.4
SUBSIDIARY'S PREFERRED STOCK DIVIDENDS(1).... 1.0 1.7
NET INCOME................................... 2.9 10.7
(1) None of the Company's interest expense nor any of the subsidiary's
preferred stock dividends has been allocated to the discontinued operations.
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Operating Revenues. Operating revenues decreased $12.0 million (15.0%) from
$80.2 million for the three-month period ended March 31, 1994, to $68.2 million
for the three-month period ended March 31, 1995. This decrease was primarily
the result of a 1.7 billion cubic feet (14.2%) decrease in sales to residential
and commercial heating customers, caused by a 655 (18.9%) decrease in heating
degree days.
Cost of Gas. The cost of gas decreased $9.1 million (17.9%) from $50.5
million for the three-month period ended March 31, 1994, to $41.4 million for
the three-month period ended March 31, 1995, primarily because of the reduced
consumption by residential and commercial heating customers.
Operating Margin. The operating margin decreased $2.9 million (9.9%) from
$29.8 million in the first quarter of 1994 to $26.8 million in the first quarter
of 1995. However, as a percentage of operating revenues, the margin increased
from 37.1% in the first quarter of 1994 to 39.3% in the first quarter of 1995
primarily as a result of a higher average charge per cubic foot to residential
and commercial heating customers because of their lower consumption due to the
warmer weather.
Other Operating Expenses. Other operating expenses decreased $2.0 million
(10.4%) from $18.9 million for the three-month period ended March 31, 1994, to
$16.9 million for the three-month period ended March 31, 1995, primarily as a
result of a $678,000 (9.1%) decrease in operation and maintenance expenses and a
lower level of income taxes. The principal reason for the lower level of
operation and maintenance expenses was a reduction in payroll and related costs
due to the warmer weather in January and February, 1995, compared to the similar
period in 1994. Income taxes decreased by $1.2 million (21.6%) from $5.7
million in the first quarter of 1994 to $4.5 million in the first quarter of
1995 due to a decrease in income before income taxes (for this purpose,
operating income net of interest charges). Notwithstanding the decrease in
other operating expenses, such expenses increased as a percentage of operating
revenues from 23.5% during the first quarter of 1994 to 24.8% during the first
quarter of 1995 because of the relatively greater decrease in revenues.
Operating Income. As a result of the above, total operating income
decreased by $1.0 million (9.0%) from $10.9 million for the three-month period
ended March 31, 1994, to $9.9 million for the three-month period ended March 31,
1995. Nonetheless, operating income increased as a percentage of total
operating revenues for such periods from 13.6% in 1994 to 14.5% in 1995,
primarily because of the decrease in the cost of gas as a percentage of
operating revenues, the effect of which was partially offset by the lower levels
of operation and maintenance expenses and income taxes.
Interest Charges. Interest charges increased by $558,000 (17.2%) from $3.2
million for the three-month period ended March 31, 1994, to $3.8 million for the
three-month period ended March 31, 1995, as a result of a $561,000 (19.2%)
increase in interest on long-term debt from $2.9 million during the three-month
period ended March 31, 1994, to $3.5 million during the three-month period ended
March 31, 1995. This increase was principally the result of interest on
borrowings under the Company's May 31, 1994, term loan agreement. None of the
interest expense on borrowings under the Company's term loan agreement or the
Company's senior notes have been allocated to the discontinued operations.
Income From Continuing Operations. Income from continuing operations
decreased $1.5 million (19.0%) from $7.9 million for the quarter ended March 31,
1994, to $6.4 million for the quarter ended March 31, 1995. This decrease was
largely the result of the matters discussed above, principally the decrease in
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operating margin resulting from the lower level of sales to residential and
commercial heating customers. The effect of the decreased operating margin was
partially offset by lower operating expenses.
Subsidiary's Preferred Stock Dividends. Dividends on preferred stock
decreased $692,000 (50.0%) from $1.4 million for the three-month period ended
March 31, 1994, to $691,000 for the three-month period ended March 31, 1995, as
a result of the redemption by PG&W on May 31, 1994, of 150,000 shares ($15.0
million), of its 9.50% cumulative preferred stock, $100 par value, and on
December 16, 1994, of 150,000 shares ($15.0 million) of its 8.90% cumulative
preferred stock, $100 par value. No dividends on preferred stock have been
allocated to the discontinued operations.
Net Income. The decrease in net income of $6.6 million (77.0%) from $8.5
million for the three-month period ended March 31, 1994, to $2.0 million for the
three-month period ended March 31, 1995, as well as the decrease in earnings per
share of common stock of $1.23 from $1.58 per share for the quarter ended March
31, 1994, to $.35 per share for the quarter ended March 31, 1995, were largely
the result of the estimated loss (equivalent to $1.03 per share) on the disposal
of discontinued operations, as discussed above. Also contributing to the
decreases in net income and earnings per share was the lower income from
continuing operations. The effects of these factors were partially offset by
the reduced dividends on subsidiary's preferred stock.
RATE MATTERS
Pursuant to the provisions of the Pennsylvania Public Utility Code (the
"Code") which require that the tariffs of larger gas distribution companies,
such as PG&W, be adjusted on an annual basis to reflect changes in their
purchased gas costs, the PPUC, by Order adopted November 10, 1994, authorized
PG&W to decrease the gas costs contained in its gas tariff rates from $3.74 to
$3.68 per thousand cubic feet effective December 1, 1994. This change in gas
rates on account of purchased gas costs was designed to produce a decrease in
annual revenue of $1.8 million. In accordance with the same provisions of the
Code, PG&W is presently seeking the approval of the PPUC to implement a
purchased gas cost rate of $2.42 per thousand cubic feet effective May 15, 1995,
in order to refund overcollections from customers caused by lower than
anticipated purchased gas costs and the receipt of supplier refunds during the
first quarter of 1995. The changes in gas rates on account of purchased gas
costs have no effect on the Company's earnings since the changes in revenue are
offset by corresponding changes in the cost of gas.
The PPUC has adopted regulations effective June 14, 1995, that provide for
the quarterly adjustment of the annual purchased gas cost rate of larger gas
distribution companies, including PG&W. Except for reducing the amount of any
over or undercollections of gas costs, the adoption of these regulations will
not have any material effect on PG&W's financial position or results of
operations, and PG&W will still be required to file an annual purchased gas cost
rate.
On October 15, 1993, the PPUC adopted an annual purchased gas cost ("PGC")
order (the "PGC Order") regarding recovery of Federal Energy Regulatory
Commission ("FERC") Order 636 transition costs. The PGC Order stated that
Account 191 and New Facility Costs (the "Gas Transition Costs") are subject to
recovery through the annual PGC rate filings made with the PPUC by PG&W and
other larger local gas distribution companies. The PGC Order also indicated
that while Gas Supply Realignment and Stranded Costs (the "Non-Gas Transition
Costs") are not natural gas costs eligible for recovery under the PGC rate
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<PAGE>
filing mechanism, such costs are subject to full recovery by local distribution
companies through the filing of a tariff pursuant to either the existing
surcharge or base rate provisions of the Code. The PGC Order further stated
that all such filings would be evaluated on a case-by-case basis.
PG&W was billed a total of $1.1 million of Gas Transition Costs by its
interstate pipelines over a nineteen-month period extending through March 31,
1995. Of this amount, $858,000 was recovered by PG&W over a twelve-month period
ended January 31, 1995, through an increase in its PGC rate. PG&W will seek
recovery of the remaining $249,000 of Gas Transition Costs in its annual PGC
rate that is effective December 1, 1995.
By Order of the PPUC entered August 26, 1994, PG&W began recovering the Non-
Gas Transition Costs that it estimates it will ultimately be billed pursuant to
FERC Order 636 through the billing of a surcharge to its customers effective
September 12, 1994. It is currently estimated that $9.4 million of Non-Gas
Transition Costs will be billed to PG&W, generally over a four-year period
extending through the fourth quarter of 1997, of which $4.5 million had been
billed to PG&W and $2.4 million had been recovered from its customers as of
March 31, 1995. PG&W has recorded the estimated Non-Gas Transition Costs that
remain to be billed to it and the amounts remaining to be recovered from its
customers.
LIQUIDITY AND CAPITAL RESOURCES
The primary capital needs of the Company are the funding of PG&W's
construction program and the seasonal funding of PG&W's gas purchases and
increases in its customer accounts receivable. PG&W's revenues are highly
seasonal and weather-sensitive, with approximately 75% of its revenues being
realized in the first and fourth quarters of the calendar year when the
temperatures in its service area are the coldest.
The cash flow from PG&W's operations is generally sufficient to fund a
portion of its construction expenditures. However, to the extent external
financing is required, it is the practice of PG&W to use bank borrowings to fund
such expenditures, pending the periodic issuance of stock and long-term debt.
Bank borrowings are also used by PG&W for the seasonal funding of its gas
purchases and increases in customer accounts receivable.
In order to so finance construction expenditures and to meet its seasonal
borrowing requirements, and also to provide funding required for its
discontinued operations, PG&W has made arrangements for a total of $67.5 million
of unsecured revolving bank credit. Specifically, PG&W has entered into a
revolving bank credit agreement (the "Credit Agreement") with a group of six
banks under the terms of which $60.0 million is available for borrowing by PG&W.
The Credit Agreement terminates on May 31, 1996, at which time any borrowings
outstanding thereunder are due and payable. The interest rate on borrowings
under the Credit Agreement is generally less than prime. The Credit Agreement
also requires the payment of a commitment fee of 0.195% per annum on the average
daily amount of the unused portion of the available funds. As of May 5, 1995,
$29.0 million of borrowings were outstanding under the Credit Agreement.
PG&W currently has three additional bank lines of credit with an aggregate
borrowing capacity of $7.5 million which provide for borrowings at interest
rates generally less than prime. Borrowings outstanding under two of these bank
lines of credit with borrowing capacities of $2.0 million and $3.0 million
mature on May 31, 1995, and June 30, 1995, respectively. Borrowings outstanding
under the third bank line of credit with a borrowing capacity of $2.5 million
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<PAGE>
mature on May 31, 1996. As of May 5, 1995, PG&W had $5.5 million of borrowings
outstanding under these additional bank lines of credit. Prior to their
respective maturities, PG&W intends to renew the $7.5 million of these bank
lines of credit.
Both the Company and PG&W periodically engage in long-term debt and capital
stock financings in order to obtain funds required for construction
expenditures, the refinancing of existing debt and various working capital
purposes. No long-term debt or capital stock financings were consummated by
either the Company or PG&W during the three-month period ended March 31, 1995.
The Company also obtains external funds from the sale of its common stock
through its Dividend Reinvestment and Stock Purchase Plan (the "DRP"), Customer
Stock Purchase Plan (the "Customer Plan") and Employees' Savings Plan. During
1995 (through May 5) the Company realized $2.3 million, $2.4 million and
$191,000 from the issuance of common stock under the DRP, Customer Plan and
Employees' Savings Plan, respectively.
Expenditures for the construction of utility plant totaled $3.5 million
during the first three months of 1995 and are currently estimated to be $21.3
million during the remainder of the year. PG&W's construction expenditures are
being financed with internally-generated funds and bank borrowings, pending the
periodic issuance of stock and long-term debt.
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<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2-1 Asset Purchase Agreement dated as of April 26, 1995, among the
Company, PG&W, American Water Works Company, Inc., and Pennsylvania-
American Water Company -- filed as Exhibit 2-1 to PG&W's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1995, File No.
1-3490.
4-1 Rights Agreement dated as of April 26, 1995, between the Company and
Chemical Bank, as Rights Agent -- filed herewith.
10-1 Service Agreement for transportation service under Rate Schedule FT,
dated April 1, 1995, by and between PG&W and Transcontinental Gas
Pipe Line Corporation -- filed as Exhibit 10-1 to PG&W's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1995, File No.
1-3490.
11-1 Statement Re Computation of Per Share Earnings -- filed herewith.
27-1 Financial Data Schedule -- filed herewith.
(b) No reports on Form 8-K have been filed during the quarter for which this
report is filed.
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<PAGE>
PENNSYLVANIA ENTERPRISES, INC.
SIGNATURES
Pursuant to the requirements 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.
PENNSYLVANIA ENTERPRISES, INC.
(Registrant)
Date: May 9, 1995 By: /s/ Thomas J. Ward
Thomas J. Ward
Secretary
Date: May 9, 1995 By: /s/ John F. Kell, Jr.
John F. Kell, Jr.
Vice President, Finance
(Principal Financial Officer and
Principal Accounting Officer)
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<PAGE>
PENNSYLVANIA ENTERPRISES, INC.
SIGNATURES
Pursuant to the requirements 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.
PENNSYLVANIA ENTERPRISES, INC.
(Registrant)
Date: May 9, 1995 By:
Thomas J. Ward
Secretary
Date: May 9, 1995 By:
John F. Kell, Jr.
Vice President, Finance
(Principal Financial Officer and
Principal Accounting Officer)
<PAGE>
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of April 26, 1995
(the "Agreement"), between Pennsylvania Enterprises, Inc., a
Pennsylvania corporation (the "Company"), and Chemical Bank, a New
York banking corporation (the "Rights Agent").
The Board of Directors of the Company has authorized and
declared a dividend of one Right (as such term is hereinafter
defined) for each share of common stock, no par value (stated
value $10 per share), of the Company (the "Common Shares")
outstanding as of the close of business on May 16, 1995 (the
"Record Date"), and has authorized the issuance of one Right with
respect to each Common Share that shall become outstanding
between the Record Date and the earliest of the Distribution
Date, the Redemption Date, the Exchange Date and the Final
Expiration Date (as such terms are hereinafter defined), each
Right representing the right to purchase one-half of a Common
Share, upon the terms and subject to the conditions hereinafter
set forth (the "Rights").
Accordingly, in consideration of the premises and the
mutual agreements herein set forth, the parties hereby agree as
follows:
Section 1. Certain Definitions. For purposes of this
Agreement, the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as
such term is hereinafter defined) who or which, together with all
Affiliates and Associates (as such terms are hereinafter defined)
of such Person, shall be the Beneficial Owner (as such term is
hereinafter defined) of 15% or more of the Common Shares then
outstanding, but shall not include (i) the Company, (ii) any
Subsidiary (as such term is hereinafter defined) of the Company,
or (iii) any employee benefit plan of the Company or of any
Subsidiary of the Company or any entity organized, appointed or
established by the Company for or pursuant to the terms of any
such plan. Notwithstanding the foregoing, no Person shall become
an "Acquiring Person" solely as the result of an acquisition of
Common Shares by the Company which, by reducing the number of
shares outstanding, increases the proportionate number of shares
beneficially owned by such Person to 15% or more of the Common
Shares then outstanding; provided, however, that if a Person
becomes the Beneficial Owner of 15% or more of the Common Shares
then outstanding by reason of share acquisitions by the Company
and shall, after such share acquisitions, become the Beneficial
Owner of any additional Common Shares, then such Person shall be
deemed to be an "Acquiring Person".
(b) "Affiliate", "Associate" and "control" shall
have the respective meanings ascribed to such terms in Rule 12b-2
of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as in
effect on the date of this Agreement.
W2-NY950580.180
<PAGE>
2
(c) A Person shall be deemed the "Beneficial
Owner" of and shall be deemed to "beneficially own" any
securities:
(i) which such Person or any of such
Person's Affiliates or Associates beneficially owns,
directly or indirectly, within the meaning of Rule 13d-
3 or Rule 13d-5 of the General Rules and Regulations
under the Exchange Act, as in effect on the date of
this Agreement;
(ii) which such Person or any of such
Person's Affiliates or Associates, directly or
indirectly, has the right to acquire (whether such
right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement
or understanding (other than customary agreements with
and between underwriters and selling group members with
respect to a bona fide public offering of securities),
or upon the exercise of conversion rights, exchange
rights, rights, warrants or options, or otherwise;
provided, however, that a Person shall not be deemed
the "Beneficial Owner" of, or to "beneficially own",
(A) securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or
any of such Person's Affiliates or Associates until
such tendered securities are accepted for purchase or
exchange, (B) securities issuable upon exercise of
Rights at any time prior to the occurrence of any event
described in Section 11(a)(ii) hereof or clause (x),
(y) or (z) of Section 13(a) hereof or (C) securities
issuable upon exercise of Rights from and after the
occurrence of any event described in clause (B) of this
proviso which Rights were acquired by such Person or
any of such Person's Affiliates or Associates prior to
the Distribution Date (as such term is hereinafter
defined) or pursuant to Section 3(a) or Section 23
hereof (the "Original Rights") or pursuant to Section
11(i) hereof in connection with an adjustment made with
respect to any Original Rights;
(iii) which such Person or any of such
Person's Affiliates or Associates, directly or
indirectly, has the right to vote or dispose of
pursuant to any agreement, arrangement or
understanding; provided, however, that a Person shall
not be deemed the "Beneficial Owner" of, or to
"beneficially own", any security under this
subparagraph (iii) as a result of an agreement,
arrangement or understanding to vote such security if
such agreement, arrangement or understanding (1) arises
solely from a revocable proxy given to such Person in
response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable
rules and regulations of the Exchange Act and (2) is
not also then reportable on Schedule 13D under the
Exchange Act (or any comparable or successor report);
or
(iv) which are beneficially owned, directly
or indirectly, by any other Person (or any Affiliate or
W2-NY950580.180
<PAGE>
3
Associate thereof) with which such Person or any of
such Person's Affiliates or Associates has any
agreement, arrangement or understanding (other than
customary agreements with and between underwriters and
selling group members with respect to a bona fide
public offering of securities) for the purpose of
acquiring, holding, voting (except pursuant to a
revocable proxy as described in the proviso to
subparagraph (iii) of this paragraph (c)) or disposing
of any securities of the Company.
If a Person shall be deemed to be the Beneficial Owner of any
securities which are not outstanding, such securities shall be
deemed to be outstanding for purposes of determining the
percentage of Common Shares beneficially owned by such Person.
(d) "Business Day" shall mean any day other than
a Saturday, Sunday or a day on which banking institutions in the
State of New York or Commonwealth of Pennsylvania are authorized
or obligated by law or executive order to close.
(e) "Close of business" on any given date shall
mean 5:00 P.M., New York City time, on such date; provided,
however, that if such date is not a Business Day it shall mean
5:00 P.M., New York City time, on the next succeeding Business
Day.
(f) "Company Restructuring" shall mean a sale of
the water business of Pennsylvania Gas and Water Company, a
wholly-owned Subsidiary (as hereinafter defined) of the Company
("PG&W") pursuant to an Asset Purchase Agreement dated as of
April 26, 1995 among the Company, PG&W, American Water Works Company,
Inc. and Pennsylvania-American Water Company, as amended from time to
time.
(g) "Common Shares" when used with reference to
the Company (or without express reference to another Person)
shall mean the shares of common stock, no par value (stated value
$10 per share), of the Company or any other shares of capital
stock of the Company into which the Common Shares are
reclassified or changed. "Common Shares" when used with
reference to any Person other than the Company shall mean the
capital stock or other equity securities or equity or other
beneficial interests of such Person with the greatest aggregate
voting power.
(h) "Common Stock Equivalent" shall mean a share,
or fraction of a share, of any authorized class of preferred
stock of the Company having dividend, voting, liquidation and
other rights which result, in the judgment of the Board of
Directors, in such share, or fraction of a share, being
approximately equivalent in value to one Common Share as of the
Event Date (as such term is hereinafter defined); provided,
however, that, if in the judgment of the Board of Directors there
are not sufficient authorized but unissued shares of preferred
stock available for the creation of Common Stock Equivalents,
"Common Stock Equivalent" shall mean such cash, reduction in
Purchase Price (as such term is hereinafter defined), other
equity securities, debt securities, other assets or any
combination of the foregoing, that the Board of Directors shall
determine to be approximately equivalent in value to one Common
Share as of the Event Date. As used herein, "Event Date" shall
mean (i) for purposes of any determination made pursuant to
Section 11(a)(iii) hereof, the date of occurrence of the event
described in Section 11(a)(ii) hereof and (ii) for purposes of
W2-NY950580.180
<PAGE>
4
any determination made pursuant to Section 25(c) hereof, the
Exchange Date (as such term is hereinafter defined).
(i) "Distribution Date" shall have the meaning
set forth in Section 3(a) hereof.
(j) "Exchange" shall have the meaning set forth
in Section 25 hereof.
(k) "Exchange Date" shall have the meaning set
forth in Section 7(a) hereof.
(l) "Exchange Ratio" shall have the meaning set
forth in Section 25 hereof.
(m) "Final Expiration Date" shall have the
meaning set forth in Section 7(a) hereof.
(n) "Person" shall mean any individual, firm,
corporation, partnership or other entity and shall include any
successor by merger or otherwise of such Person.
(o) "Principal Party" shall have the meaning set
forth in Section 13(b) hereof.
(p) "Purchase Price" shall have the meaning set
forth in Section 4 hereof.
(q) "Record Date" shall have the meaning set
forth in the recital of this Agreement.
(r) "Redemption Date" shall have the meaning set
forth in Section 7(a) hereof.
(s) "Redemption Price" shall have the meaning set
forth in Section 24(a) hereof.
(t) "Registered Common Shares" shall have the
meaning set forth in Section 13(b) hereof.
(u) "Right Certificates" shall have the meaning
set forth in Section 3(a) hereof.
(v) "Rights" shall have the meaning set forth in
the recital of this Agreement.
(w) "Securities Act" shall mean the Securities
Act of 1933, as amended.
(x) "Share Acquisition Date" shall mean the first
date of public announcement by the Company or an Acquiring Person
that an Acquiring Person has become such.
(y) "Subsidiary" shall mean, with reference to
any Person, any corporation or other entity of which a majority
of the voting power of the voting equity securities or equity or
other beneficial interests is owned, directly or indirectly, by
such Person, or which is otherwise controlled by such Person.
(z) "Summary of Rights" shall have the meaning
set forth in Section 3(b) hereof.
(aa) "Trading Day" shall have the meaning set
forth in Section 11(d) hereof.
Section 2. Appointment of Rights Agent. The Company
hereby appoints the Rights Agent to act as agent for the Company
in accordance with the terms and conditions hereof, and the
Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such Co-Rights Agents as it may deem
necessary or desirable.
Section 3. Issue of Right Certificates.
(a) Until the earlier of (i) the close of
business on the tenth day after the Share Acquisition Date or
(ii) the close of business on the tenth business day (or such
later day as may be determined by action of the Board of
Directors prior to such time as any Person becomes an Acquiring
W2-NY950580.180
<PAGE>
5
Person) after the date that a tender or exchange offer by any
Person is first published, sent or given within the meaning of
Rule 14d-2(a) of the General Rules and Regulations under the
Exchange Act if, upon consummation thereof, such Person would be
an Acquiring Person (the earlier of such dates, including any
such date which is after the date of this Agreement and prior to
the issuance of the Rights, being herein referred to as the
"Distribution Date"), (x) the Rights will be evidenced (subject
to the provisions of paragraph (b) of this Section 3) by the
certificates for Common Shares registered in the names of the
holders thereof (which certificates shall also be deemed to be
certificates for Rights) and not by separate certificates, and
(y) the Rights will be transferable only in connection with the
transfer of the underlying Common Shares. As soon as practicable
after the Distribution Date, the Rights Agent will send, by
first-class, insured, postage prepaid mail, to each record holder
of Common Shares as of the close of business on the Distribution
Date, at the address of such holder shown on the records of the
Company, one or more Right certificates, in substantially the
form of Exhibit A hereto (the "Right Certificates"), evidencing
one Right for each Common Share so held, subject to adjustment as
provided herein. As of the Distribution Date, the Rights will be
evidenced solely by such Right Certificates.
(b) As promptly as practicable after the Record
Date, the Company will send a copy of a Summary of Rights in
substantially the form attached hereto as Exhibit B (the "Summary
of Rights"), by first-class, postage prepaid mail, to each record
holder of Common Shares as of the close of business on the Record
Date, at the address of such holder shown on the records of the
Company. With respect to certificates for Common Shares
outstanding as of the Record Date, until the Distribution Date,
the Rights will be evidenced by such certificates for Common
Shares together with a copy of the Summary of Rights, and the
registered holders of Common Shares shall also be the registered
holders of the associated Rights. Until the Distribution Date
(or the earliest of the Redemption Date, Exchange Date or Final
Expiration Date), the surrender for transfer of any certificate
for Common Shares outstanding on the Record Date, with or without
a copy of the Summary of Rights attached thereto, shall also
constitute the transfer of the Rights associated with the Common
Shares represented by such certificate.
(c) Rights shall be issued in respect of all
Common Shares which become outstanding (including, without
limitation, reacquired Common Shares referred to in the last
sentence of this paragraph (c)) after the Record Date but prior
to the earliest of the Distribution Date, the Redemption Date,
the Exchange Date or the Final Expiration Date. Certificates
representing such Common Shares shall also be deemed to be
certificates for Rights, and shall bear the following legend:
This certificate also evidences and entitles the holder
hereof to certain Rights as set forth in the Rights
Agreement between Pennsylvania Enterprises, Inc. (the
"Company") and Chemical Bank, dated as of April 26,
1995 (the "Rights Agreement"), the terms of which are
hereby incorporated herein by reference and a copy of
which is on file at the principal executive offices of
the Company. Under certain circumstances, as set forth
W2-NY950580.180
<PAGE>
6
in the Rights Agreement, such Rights will be evidenced
by separate certificates and will no longer be
evidenced by this certificate. The Company will mail
to the holder of this certificate a copy of the Rights
Agreement without charge promptly after receipt of a
written request therefor. As described in the Rights
Agreement, Rights beneficially owned by (i) an
Acquiring Person or any Associate or Affiliate thereof
(as such terms are defined in the Rights Agreement),
(ii) a transferee of an Acquiring Person (or of any
such Associate or Affiliate) who becomes a transferee
after the Acquiring Person becomes such or (iii) under
certain circumstances, a transferee of an Acquiring
Person (or of any such Associate or Affiliate) who
becomes a transferee before or concurrently with the
Acquiring Person becoming such, shall become null and
void.
With respect to such certificates containing the foregoing
legend, until the earliest of the Distribution Date, the
Redemption Date, the Exchange Date or the Final Expiration Date,
the Rights associated with the Common Shares represented by such
certificates shall be evidenced by such certificates alone and
the registered holders of Common Shares shall also be the holders
of the associated Rights, and the surrender for transfer of any
such certificates shall also constitute the transfer of the
Rights associated with the Common Shares represented thereby. In
the event that the Company purchases or acquires any Common
Shares after the Record Date but prior to the Distribution Date,
any Rights associated with such Common Shares shall be deemed
canceled and retired so that the Company shall not be entitled to
exercise any Rights associated with the Common Shares which are
no longer outstanding.
Section 4. Form of Right Certificates. The Right
Certificates (and the forms of election to purchase shares and of
assignment to be printed on the reverse thereof) shall be
substantially in the form set forth in Exhibit A hereto and may
have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company
may deem appropriate and as are not inconsistent with the
provisions of this Agreement, or as may be required to comply
with any applicable law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock
exchange on which the Rights may from time to time be listed, or
to conform to usage. Subject to the provisions of Section 11 and
Section 23 hereof, the Right Certificates shall entitle the
holders thereof to purchase such number of Common Shares as shall
be set forth therein at the price per Common Share set forth
therein (the "Purchase Price"), but the number of such shares and
the Purchase Price shall be subject to adjustment as provided
herein.
Section 5. Countersignature and Registration.
(a) The Right Certificates shall be executed on
behalf of the Company by its Chairman or Vice Chairman of the
Board, its President or any Vice President, either manually or by
facsimile signature, and shall have affixed thereto the Company's
seal or a facsimile thereof which shall be attested by the
Secretary or an Assistant Secretary or the Treasurer or an
W2-NY950580.180
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7
Assistant Treasurer of the Company, either manually or by
facsimile signature. The Right Certificates shall be manually
countersigned by the Rights Agent and shall not be valid for any
purpose unless so countersigned. In case any officer of the
Company who shall have signed any of the Right Certificates shall
cease to be such officer of the Company before countersignature
by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by
the Rights Agent, and issued and delivered by the Company with
the same force and effect as though the person who signed such
Right Certificates had not ceased to be such officer of the
Company; and any Right Certificate may be signed on behalf of the
Company by any person who, at the actual date of the execution of
such Right Certificate, shall be a proper officer of the Company
to sign such Right Certificate, although at the date of the
execution of this Agreement any such person was not such an
officer.
(b) Following the Distribution Date, the Rights
Agent will keep or cause to be kept, at one of its offices in New
York, New York, books for registration and transfer of the Right
Certificates issued hereunder. Such books shall show the names
and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each
of the Right Certificates, the Certificate Number of each such
Right Certificate and the date of each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange
of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right
Certificates.
(a) Subject to the provisions of Section 7(e) and
Section 15 hereof, at any time after the close of business on the
Distribution Date, and at or prior to the close of business on
the earliest of the Redemption Date, the Exchange Date or the
Final Expiration Date, any Right Certificate or Certificates may
be transferred, split up, combined or exchanged for another Right
Certificate or Right Certificates, entitling the registered
holder to purchase a like number of Common Shares as the Right
Certificate or Right Certificates surrendered then entitled such
holder to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Right Certificate shall make
such request in writing delivered to the Rights Agent, and shall
surrender the Right Certificate or Right Certificates to be
transferred, split up, combined or exchanged at the principal
office or offices of the Rights Agent designated for such
purpose. Neither the Rights Agent nor the Company shall be
obligated to take any action whatsoever with respect to the
transfer of any such surrendered Right Certificate or
Certificates until the registered holder shall have completed and
signed the certificate contained in the form of assignment set
forth on the reverse side of each such Right Certificate and
shall have provided such additional evidence of the identity of
the Beneficial Owner (or former Beneficial Owner) or Affiliates
or Associates thereof as the Company shall reasonably request.
Thereupon the Rights Agent shall, subject to Section 7(e) and
Section 15 hereof, countersign and deliver to the person entitled
thereto a Right Certificate or Right Certificates, as the case
may be, as so requested. The Company may require payment of a
sum sufficient to cover any tax or governmental charge that may
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8
be imposed in connection with any transfer, split up, combination
or exchange of Right Certificates.
(b) Upon receipt by the Company and the Rights
Agent of evidence reasonably satisfactory to them of the loss,
theft, destruction or mutilation of a Right Certificate, and, in
case of loss, theft or destruction, of indemnity or security
reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all
reasonable expenses incidental thereto, and upon surrender to the
Rights Agent and cancellation of the Right Certificate if
mutilated, the Company will execute and deliver a new Right
Certificate of like tenor to the Rights Agent for delivery to the
registered owner in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration
Date of Rights.
(a) The Rights shall not be exercisable prior to
the Distribution Date. The registered holder of any Right
Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein) in whole or in part at any time after
the Distribution Date upon surrender of the Right Certificate,
with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the principal office or
offices of the Rights Agent designated for such purpose, together
with payment of the Purchase Price for each Common Share as to
which the Rights are exercised, at or prior to the earliest of
(i) the close of business on May 16, 2005 (the "Final Expiration
Date"), (ii) the time at which the Rights are redeemed as
provided in Section 24 hereof (the "Redemption Date") or (iii)
the time at which the Rights are exchanged as provided in Section
25 hereof (the "Exchange Date"); provided, however, that no less
than two Rights, and only integral multiples of two Rights, may
be exercised at any time by such registered holders; and provided
further, that if the number of Rights exercised would entitle the
holder thereof to receive any fraction of a Common Share greater
than one-half of a share, the holder thereof shall not be
entitled to exercise such rights unless such holder concurrently
purchases from the Company (and in such event the Company shall
sell to such holder), at a price in proportion to the Purchase
Price, an additional fraction of a Common Share which, when added
to the number of Common Shares to be received upon such exercise,
will equal an integral number of Common Shares.
(b) The Purchase Price for each Common Share
pursuant to the exercise of the Rights shall initially be $100
(equivalent to $50 for each one-half of a Common Share). The
Purchase Price shall be subject to adjustment from time to time
as provided in Sections 11 and 13 hereof and shall be payable in
lawful money of the United States of America in accordance with
paragraph (c) below.
(c) Upon receipt of a Right Certificate
representing exercisable Rights, with the form of election to
purchase duly executed, accompanied by payment of the Purchase
Price for the shares to be purchased as set forth below and an
amount equal to any applicable transfer tax required to be paid
by the holder of such Right Certificate in accordance with
Section 9(e) hereof, the Rights Agent shall, subject to Section
21(j) hereof, thereupon promptly (i) requisition from any
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9
transfer agent of the Common Shares (or make available, if the
Rights Agent is the transfer agent for such shares) certificates
for the number of Common Shares to be purchased and the Company
hereby irrevocably authorizes its transfer agent to comply with
all such requests, (ii) requisition from the Company the amount
of cash, if any, to be paid in lieu of issuance of fractional
shares in accordance with Section 15 hereof, (iii) after receipt
of such certificates, cause the same to be delivered to or upon
the order of the registered holder of such Right Certificate,
registered in such name or names as may be designated by such
holder, and (iv) after receipt thereof, deliver such cash, if
any, to or upon the order of the registered holder of such Right
Certificate. The payment of the Purchase Price shall be made in
cash or by certified or bank official check or money order
payable to the order of the Company. In the event that the
Company is obligated to issue other securities of the Company
pursuant to Section 11(a) hereof, the Company will make all
arrangements necessary so that such other securities are
available for distribution by the Rights Agent, if and when
appropriate.
(d) In case the registered holder of any Right
Certificate shall exercise less than all the Rights evidenced
thereby, a new Right Certificate evidencing Rights equivalent to
the Rights remaining unexercised shall be issued by the Rights
Agent and delivered to the registered holder of such Right
Certificate or to his duly authorized assigns, subject to the
provisions of Section 15 hereof.
(e) Notwithstanding anything in this Agreement to
the contrary, from and after the occurrence of the event
described in Section 11(a)(ii) hereof, any Rights beneficially
owned by (i) an Acquiring Person or any Associate or Affiliate of
an Acquiring Person, (ii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) who becomes a transferee
after the Acquiring Person becomes such, or (iii) a transferee of
an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring
Person becoming such and receives such Rights pursuant to either
(A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring
Person or to any Person with whom the Acquiring Person has any
continuing agreement, arrangement or understanding regarding the
transferred Rights or (B) a transfer which the Board of Directors
has determined is part of a plan, arrangement or understanding
which has as a primary purpose or effect the avoidance of this
Section 7(e), shall become null and void without any further
action and no holder of such Rights shall have any rights
whatsoever with respect to such Rights, whether under any
provision of this Agreement or otherwise. No Right Certificate
shall be issued pursuant to Section 3 hereof that represents
Rights beneficially owned by an Acquiring Person whose Rights
would be void pursuant to the preceding sentence or any Associate
or Affiliate thereof and no Right Certificate shall be issued at
any time upon the transfer of any Rights to an Acquiring Person
whose Rights would be void pursuant to the preceding sentence or
any Associate or Affiliate thereof or to any nominee of such
Acquiring Person, Associate or Affiliate. Any Right Certificate
delivered to the Rights Agent for transfer to any of the
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<PAGE>
10
foregoing Persons, or which represents void Rights, shall be
canceled. The Company shall use reasonable efforts to effect
compliance with the provisions of this Section 7(e), but shall
have no liability to any holder of Right Certificates or other
Person as a result of its failure to make any determinations with
respect to an Acquiring Person or its Affiliates, Associates or
transferees hereunder.
(f) Notwithstanding anything in this Agreement to
the contrary, neither the Rights Agent nor the Company shall be
obligated to undertake any action with respect to a registered
holder upon the occurrence of any purported transfer as set forth
in Section 6 hereof or exercise as set forth in this Section 7
unless such registered holder shall have (i) completed and signed
the certificate contained in the form of assignment or election
to purchase set forth on the reverse side of the Right
Certificate surrendered for such assignment or exercise and (ii)
provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Right
Certificates. All Right Certificates surrendered for the purpose
of exercise, transfer, split up, combination or exchange shall,
if surrendered to the Company or to any of its agents, be
delivered to the Rights Agent for cancellation or in canceled
form, or, if surrendered to the Rights Agent, shall be canceled
by it, and no Right Certificates shall be issued in lieu thereof
except as expressly permitted by any of the provisions of this
Agreement. The Company shall deliver to the Rights Agent for
cancellation and retirement, and the Rights Agent shall so cancel
and retire, any other Right Certificate purchased or acquired by
the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all canceled Right Certificates to the
Company, or shall, at the written request of the Company, destroy
such canceled Right Certificates, and in such case shall deliver
a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Common Shares.
(a) The Company covenants and agrees that it will
cause to be reserved and kept available out of its authorized and
unissued Common Shares and/or any authorized and issued Common
Shares held in its treasury, the number of Common Shares that
will be sufficient to permit the exercise in full of all
outstanding Rights.
(b) So long as the Common Shares issuable upon
the exercise of Rights may be listed on any national securities
exchange, the Company shall use its best efforts to cause, from
and after such time as the Rights become exercisable, all shares
reserved for such issuance to be listed on such exchange upon
official notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i)
file, as soon as practicable following the earliest date after
the occurrence of the event described in Section 11(a)(ii) hereof
on which the consideration to be delivered by the Company has
been determined in accordance with Section 11(a)(ii) or
11(a)(iii) hereof, as the case may be, a registration statement
under the Securities Act with respect to the securities
purchasable upon exercise of the Rights on an appropriate form,
(ii) cause such registration statement to become effective as
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<PAGE>
11
soon as practicable after such filing, and (iii) subject to
Section 25 hereof, cause such registration statement to remain
effective (with a prospectus at all times meeting the
requirements of the Securities Act) until the earlier of (A) the
date as of which the Rights are no longer exercisable for such
securities and (B) the Final Expiration Date. The Company will
also take such action as may be appropriate under, or to ensure
compliance with, the securities or "blue sky" laws of the various
states in connection with the exercisability of the Rights. The
Company may temporarily suspend, for a period of time not to
exceed ninety (90) days after the date set forth in clause (i) of
the first sentence of this Section 9(c), the exercisability of
the Rights in order to prepare and file such registration
statement and permit it to become effective. Upon any such
suspension, the Company shall issue a public announcement stating
that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the
suspension is no longer in effect. In addition, if the Company
shall determine that a registration statement is required
following the Distribution Date but prior to the occurrence of
the event described in Section 11(a)(ii) hereof, the Company may
temporarily suspend the exercisability of the Rights until such
time as a registration statement has been declared effective.
Notwithstanding any provision of this Agreement to the contrary,
the Rights shall not be exercisable in any jurisdiction if the
requisite qualification in such jurisdiction shall not have been
obtained, the exercise thereof shall not be permitted under
applicable law or a registration statement shall not have been
declared effective.
(d) The Company covenants and agrees that it will
take all such action as may be necessary to ensure that all
Common Shares delivered upon exercise of Rights shall, at the
time of delivery of the certificates for such shares (subject to
payment of the Purchase Price), be duly and validly authorized
and issued and fully paid and nonassessable shares.
(e) The Company further covenants and agrees that
it will pay when due and payable any and all federal and state
transfer taxes and charges which may be payable in respect of the
issuance or delivery of the Right Certificates and of any
certificates for Common Shares upon the exercise of Rights. The
Company shall not, however, be required to pay any transfer tax
which may be payable in respect of any transfer or delivery of
Right Certificates to a person other than, or the issuance or
delivery of certificates for Common Shares in a name other than
that of, the registered holder of the Right Certificates
evidencing Rights surrendered for exercise or to issue or deliver
any certificates for Common Shares in a name other than that of
the registered holder upon the exercise of any Rights until any
such tax shall have been paid (any such tax being payable by the
holder of such Right Certificate at the time of surrender) or
until it has been established to the Company's satisfaction that
no such tax is due.
Section 10. Common Shares Record Date. Each person in
whose name any certificate for Common Shares is issued upon the
exercise of Rights shall for all purposes be deemed to have
become the holder of record of the Common Shares represented
thereby on, and such certificate shall be dated, the date upon
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<PAGE>
12
which the Right Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and all applicable
transfer taxes) was made; provided, however, that if the date of
such surrender and payment is a date upon which the transfer
books of the Company with respect to the Common Shares are
closed, such person shall be deemed to have become the record
holder of such shares on, and such certificate shall be dated,
the next succeeding Business Day on which the transfer books of
the Company for the Common Shares are open.
Section 11. Adjustment of Purchase Price, Number and Kind
of Shares or Number of Rights. The Purchase Price, the number
and kind of shares covered by each Right and the number of Rights
outstanding are subject to adjustment from time to time as
provided in this Section 11.
(a)(i) In the event the Company shall, at any
time after the date of this Agreement, (A) declare a
dividend on the Common Shares payable in Common Shares,
(B) subdivide the outstanding Common Shares into a
greater number of shares, (C) combine the outstanding
Common Shares into a smaller number of shares or (D)
issue any shares of its capital stock in a
reclassification of the Common Shares (including any
such reclassification in connection with a
consolidation or merger in which the Company is the
continuing or surviving corporation), except as
otherwise provided in this Section 11(a) and in Section
7(e) hereof, the Purchase Price in effect at the time
of the record date for such dividend or of the
effective date of such subdivision, combination or
reclassification, and the number and kind of Common
Shares or shares of capital stock, as the case may be,
issuable on such date, shall be proportionately
adjusted so that the holder of any Right exercised
after such time shall be entitled to receive the
aggregate number and kind of Common Shares or shares of
capital stock, as the case may be, which, if such Right
had been exercised immediately prior to such date and
at a time when the transfer books of the Company for
the Common Shares were open, he would have owned upon
such exercise and been entitled to receive by virtue of
such dividend, subdivision, combination or
reclassification.
(ii) Subject to Sections 11(a)(iii) and 25
hereof, in the event that any Person shall become an
Acquiring Person, then proper provision shall be made
so that each holder of two Rights, except as provided
in Section 7(e) hereof, shall thereafter have a right
to receive, upon exercise thereof at a price equal to
the then-current Purchase Price multiplied by the
number of Common Shares for which two Rights are then
exercisable, in accordance with the terms of this
Agreement such number of Common Shares as shall equal
the result obtained by (x) multiplying the then-current
Purchase Price by the number of Common Shares for which
two Rights are then exercisable and (y) dividing that
product by 50% of the current market price (determined
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13
pursuant to Section 11(d)(i) hereof) per Common Share
on the date such Person became an Acquiring Person.
(iii) Subject to Section 25 hereof, in the
event that the number of Common Shares which are
authorized by the Company's Certificate of
Incorporation but not outstanding or reserved for
issuance for purposes other than upon exercise of the
Rights are not sufficient to permit the exercise in
full of the Rights in accordance with the foregoing
subparagraph (ii), the Rights shall not be exercisable
for Common Shares, but proper provision shall be made
so that each holder of a Right, except as provided in
Section 7(e) hereof, shall thereafter have a right to
receive, upon exercise thereof in accordance with the
terms of this Agreement at the price determined
pursuant to subparagraph (ii), such number of Common
Stock Equivalents (or, in the judgment of the Board of
Directors, such combination of Common Stock Equivalents
and Common Shares) as shall equal the number of Common
Shares determined pursuant to subparagraph (ii).
(b) In case the Company shall fix a record date
for the issuance of rights, options or warrants to all holders of
Common Shares entitling them to subscribe for or purchase (for a
period expiring within 45 calendar days after such record date)
Common Shares or securities convertible into Common Shares at a
price per Common Share (or having a conversion price per share,
if a security convertible into Common Shares) less than the
current market price (as determined pursuant to Section 11(d)
hereof) per Common Share on such record date, the Purchase Price
to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to
such record date by a fraction, the numerator of which shall be
the number of Common Shares outstanding on such record date, plus
the number of Common Shares which the aggregate offering price of
the total number of Common Shares so to be offered (and/or the
aggregate initial conversion price of the convertible securities
so to be offered) would purchase at such current market price and
the denominator of which shall be the number of Common Shares
outstanding on such record date, plus the number of additional
Common Shares to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially
convertible). In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than
cash, the value of such consideration shall be as determined in
good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the
Rights Agent and shall be conclusive for all purposes. Common
Shares owned by or held for the account of the Company shall not
be deemed outstanding for the purpose of any such computation.
Such adjustment shall be made successively whenever such a record
date is fixed; and in the event that such rights or warrants are
not so issued, the Purchase Price shall be adjusted to be the
Purchase Price which would then be in effect if such record date
had not been fixed. The provisions of this Section 11(b) shall
not apply to issuances of Common Shares pursuant to the Company's
Dividend Reinvestment and Stock Purchase Plan or Customer Stock
Purchase Plan or any successor to either such Plan.
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14
(c) In case the Company shall fix a record date
for a distribution to all holders of Common Shares (including any
such distribution made in connection with a consolidation or
merger in which the Company is the continuing or surviving
corporation) of evidences of indebtedness, cash (other than a
regular quarterly cash dividend), assets, stock (other than a
dividend payable in Common Shares) or subscription rights,
options or warrants (excluding those referred to in or excluded
pursuant to Section 11(b) hereof), the Purchase Price to be in
effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record
date by a fraction, the numerator of which shall be the current
market price (as determined pursuant to Section 11(d) hereof) per
one Common Share on such record date, less the fair market value
(as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be conclusive for all
purposes) of the portion of the cash, assets, stock or evidences
of indebtedness so to be distributed or of such subscription
rights, options or warrants applicable to one Common Share and
the denominator of which shall be such current market price (as
determined pursuant to Section 11(d) hereof) per one Common
Share. Such adjustments shall be made successively whenever such
a record date is fixed; and in the event that such distribution
is not so made, the Purchase Price shall again be adjusted to be
the Purchase Price which would then be in effect if such record
date had not been fixed.
(d) For the purposes of any computation
hereunder, the "current market price" per Common Share on any
date shall be deemed to be the average of the daily closing
prices per Common Share for the 30 consecutive Trading Days (as
such term is hereinafter defined) immediately prior to such date;
provided, however, that in the event that the current market
price per Common Share is determined during a period following
the announcement by the issuer of such Common Shares of (i) a
dividend or distribution on such Common Shares payable in such
Common Shares or securities convertible into such Common Shares
(other than the Rights) or (ii) any subdivision, combination or
reclassification of such Common Shares and prior to the
expiration of 30 Trading Days after the ex-dividend date for such
dividend or distribution, or the record date for such
subdivision, combination or reclassification, then, and in each
such case, the "current market price" shall be appropriately
adjusted to take into account ex-dividend trading. The closing
price for each day shall be the last sale price, regular way, or,
in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading
on the New York Stock Exchange or, if the Common Shares are not
listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal
national securities exchange on which the Common Shares are
listed or admitted to trading or, if the Common Shares are not
listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average
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<PAGE>
15
of the high bid and low asked prices in the over-the-counter
market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System ("NASDAQ") or such other
system then in use, or, if on any such date the Common Shares are
not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker
making a market in the Common Shares selected by the Board of
Directors of the Company. If on any such date no market maker is
making a market in the Common Shares, the fair value of such
shares on such date as determined in good faith by the Board of
Directors of the Company shall be used and shall be conclusive
for all purposes. The term "Trading Day" shall mean a day on
which the principal national securities exchange on which the
Common Shares are listed or admitted to trading is open for the
transaction of business or, if the Common Shares are not listed
or admitted to trading on any national securities exchange, a
Business Day. If the Common Shares are not publicly held or not
so listed or traded, "current market price" per share shall mean
the fair value per share as determined in good faith by the Board
of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent and shall be
conclusive for all purposes.
(e) Anything herein to the contrary
notwithstanding, no adjustment in the Purchase Price shall be
required unless such adjustment would require an increase or
decrease of at least 1% in such price; provided, however, that
any adjustments which by reason of this Section 11(e) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under
this Section 11 shall be made to the nearest cent or to the
nearest ten-thousandth of a Common Share or other share.
Notwithstanding the first sentence of this Section 11(e), any
adjustment required by this Section 11 shall be made no later
than the earlier of (i) three years from the date of the
transaction which requires such adjustment or (ii) the date of
the expiration of the right to exercise any Rights.
(f) If as a result of an adjustment made pursuant
to Section 11(a) or Section 13(a) hereof, the holder of any Right
thereafter exercised shall become entitled to receive any shares
of capital stock other than Common Shares, thereafter the number
of such other shares so receivable upon exercise of any Right
shall be subject to adjustment from time to time in a manner and
on terms as nearly equivalent as practicable to the provisions
with respect to the Common Shares contained in this Section 11
and the provisions of Sections 6, 7, 9, 10, 13 and 15 with
respect to the Common Shares shall apply on like terms to any
such other shares.
(g) All Rights issued by the Company subsequent
to any adjustment made to the Purchase Price hereunder shall
evidence the right to purchase, at the adjusted Purchase Price,
the number of Common Shares purchasable from time to time
hereunder upon exercise of the Rights, all subject to further
adjustment as provided herein.
(h) Unless the Company shall have exercised its
election as provided in Section 11(i), upon each adjustment of
the Purchase Price as a result of the calculations made in
Sections 11(b) and (c), each two Rights outstanding immediately
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<PAGE>
16
prior to the making of such adjustment shall thereafter evidence
the right to purchase, at the adjusted Purchase Price, that
number of Common Shares (calculated to the nearest ten-
thousandth) obtained by (i) multiplying (x) the number of Common
Shares covered by two Rights immediately prior to this
adjustment, by (y) the Purchase Price in effect immediately prior
to such adjustment of the Purchase Price, and (ii) dividing the
product so obtained by the Purchase Price in effect immediately
after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of
any adjustment of the Purchase Price to adjust the number of
Rights, in substitution for any adjustment in the number of
Common Shares purchasable upon the exercise of a Right. Each of
the Rights outstanding after such adjustment in the number of
Rights shall be exercisable for the number of Common Shares for
which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment
of the number of Rights shall become that number of Rights
(calculated to the nearest one ten-thousandth) obtained by
dividing the Purchase Price in effect immediately prior to
adjustment of the Purchase Price by the Purchase Price in effect
immediately after adjustment of the Purchase Price. The Company
shall make a public announcement of its election to adjust the
number of Rights, indicating the record date for the adjustment,
and, if known at the time, the amount of the adjustment to be
made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Right
Certificates have been issued, shall be at least 10 days later
than the date of the public announcement.
If Right Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section
11(i), the Company shall, as promptly as practicable, cause to be
distributed to holders of record of Right Certificates on such
record date Right Certificates evidencing, subject to Section 15
hereof, the additional Rights to which such holders shall be
entitled as a result of such adjustment, or, at the option of the
Company, shall cause to be distributed to such holders of record
in substitution and replacement for the Right Certificates held
by such holders prior to the date of adjustment, and upon
surrender thereof, if required by the Company, new Right
Certificates evidencing all the Rights to which such holder shall
be entitled after such adjustment. Right Certificates so to be
distributed shall be issued, executed and countersigned in the
manner provided for herein (and may bear, at the option of the
Company, the adjusted Purchase Price) and shall be registered in
the names of the holders of record of Right Certificates on the
record date specified in the public announcement.
(j) Irrespective of any adjustment or change in
the Purchase Price or the number of Common Shares issuable upon
the exercise of the Rights, the Right Certificates theretofore
and thereafter issued may continue to express the Purchase Price
and the number of shares which were expressed in the initial
Right Certificates issued hereunder.
(k) Before taking any action that would cause an
adjustment reducing the Purchase Price below the then par value,
if any, of the Common Shares issuable upon exercise of the
Rights, the Company shall take any corporate action which may, in
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17
the opinion of its counsel, be necessary in order that the
Company may validly and legally issue fully paid and
nonassessable Common Shares at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall
require that an adjustment in the Purchase Price be made
effective as of a record date for a specified event, the Company
may elect to defer until the occurrence of such event the issuing
to the holder of any Right exercised after such record date of
the Common Shares and other capital stock or securities of the
Company, if any, issuable upon such exercise over and above the
Common Shares and other capital stock or securities of the
Company, if any, issuable upon such exercise on the basis of the
Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill
or other appropriate instrument evidencing such holder's right to
receive such additional shares upon the occurrence of the event
requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such
reductions in the Purchase Price, in addition to those
adjustments expressly required by this Section 11, as and to the
extent that it in its sole discretion shall determine to be
advisable in order that any consolidation or subdivision of the
Common Shares, issuance wholly for cash of any of the Common
Shares at less than the current market price, issuance wholly for
cash of securities which by their terms are convertible into or
exchangeable for Common Shares, stock dividends or issuance of
rights, options or warrants referred to hereinabove in this
Section 11, hereafter made by the Company to holders of its
Common Shares shall not be taxable to such stockholders.
Section 12. Certificate of Adjusted Purchase Price or
Number of Shares. Whenever an adjustment is made as provided in
Sections 11 and 13 hereof, the Company shall (a) promptly prepare
a certificate setting forth such adjustment, and a brief
statement of the facts accounting for such adjustment, (b)
promptly file with the Rights Agent and with each transfer agent
for the Common Shares a copy of such certificate and (c) mail a
brief summary thereof to each holder of a Right Certificate (or,
if prior to the Distribution Date, to each holder of a
certificate representing Common Shares) in accordance with
Section 27 hereof. The Rights Agent shall be fully protected in
relying on any such certificate and on any adjustment therein
contained.
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power.
(a) In the event that, following the earlier of
the Distribution Date and the Share Acquisition Date, (x) the
Company, directly or indirectly, shall consolidate with, or merge
with and into, any other Person, and the Company shall not be the
continuing or surviving corporation of such consolidation or
merger, (y) any Person, directly or indirectly, shall consolidate
with, or merge with and into, the Company, and the Company shall
be the continuing or surviving corporation of such consolidation
or merger and, in connection with such consolidation or merger,
all or part of the outstanding Common Shares shall be changed
into or exchanged for stock or other securities of any other
Person (or of the Company) or cash or any other property, or (z)
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18
the Company, directly or indirectly, shall sell or otherwise
transfer (or one or more of its Subsidiaries, directly or
indirectly, shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating more than 50%
of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any Person or Persons (other
than the Company or one or more wholly owned Subsidiaries of the
Company and other than the Company Restructuring), then, and in
each such case, proper provision shall be made so that (i) each
holder of two Rights (except as otherwise provided herein) shall
thereafter have the right to receive, upon the exercise thereof
at a price equal to the then current Purchase Price multiplied by
the number of Common Shares for which two Rights are then
exercisable (without taking into account any adjustment
previously made pursuant to Section 11(a)(ii) or 11(a)(iii)
hereof), in accordance with the terms of this Agreement, such
number of validly authorized and issued, fully paid,
nonassessable and freely tradable Common Shares of the Principal
Party (as hereinafter defined), free and clear of any liens,
encumbrances and other adverse claims and not subject to any
rights of call or first refusal, as shall be equal to the result
obtained by (1) multiplying the then-current Purchase Price by
the number of Common Shares for which two Rights are then
exercisable (without taking into account any adjustment
previously made pursuant to Section 11(a)(ii) or 11(a)(iii)
hereof) and (2) dividing that product by 50% of the current
market price (determined pursuant to Section 11(d)(i) hereof) per
Common Share of the Principal Party on the date of consummation
of such consolidation, merger, sale or transfer; (ii) such
Principal Party shall thereafter be liable for, and shall assume,
by virtue of such consolidation, merger, sale or transfer, all
the obligations and duties of the Company pursuant to this
Agreement; (iii) except for purposes of Section 1(g) hereof, the
term "Company" shall thereafter be deemed to refer to such
Principal Party; (iv) such Principal Party shall take such steps
(including, but not limited to, the reservation of a sufficient
number of its Common Shares) in connection with the consummation
of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to its Common Shares thereafter
deliverable upon the exercise of the Rights; provided, however,
that, upon the subsequent occurrence of any merger,
consolidation, sale of all or substantially all of the assets,
recapitalization, reclassification of shares, reorganization or
other extraordinary transaction in respect of such Principal
Party, each holder of two Rights (except as otherwise provided
herein) shall thereupon be entitled to receive, upon exercise of
such Rights and payment of the Purchase Price, such cash, shares,
rights, warrants and other property which such holder would have
been entitled to receive had he, at the time of such transaction,
owned the Common Shares of the Principal Party purchasable upon
the exercise of such Rights (after giving effect to the foregoing
provisions of this Section 13(a)), and such Principal Party shall
take such steps (including, but not limited to, reservation of
shares of stock) as may be necessary to permit the subsequent
exercise of the Rights in accordance with the terms hereof for
such cash, shares, rights, warrants and other property and (v)
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19
the provisions of Sections 11(a)(ii) and 11(a)(iii) hereof shall
be of no effect following the occurrence of any event described
in clauses (x), (y) and (z) of this Section 13(a).
(b) "Principal Party" shall mean
(i) in the case of any merger described in
clause (x) or (y) of Section 13(a), any Person that is
the issuer of any securities into which Common Shares
of the Company are converted in such merger, and if no
securities are so issued, any Person that is a party to
such merger that survives the merger;
(ii) in the case of any consolidation
described in clause (x) or (y) of Section 13(a), any
Person that directly controls, alone or with other
Persons, a corporation that is consolidating with the
Company; and
(iii) in the case of any transaction or
transactions described in clause (z) of Section 13(a),
any Person that receives any assets or earning power
transferred pursuant to such transaction or
transactions;
provided, however, that with respect to such Person (or, if there
is more than one such Person, with respect to each such Person),
(1) if the Common Shares of such Person are not at such time and
have not been continuously over the preceding twelve (12) month
period registered under Section 12 of the Exchange Act
("Registered Common Shares"), or such Person is not a
corporation, and such Person is a direct or indirect Subsidiary
of another Person which has Registered Common Shares outstanding,
"Principal Party" shall refer to such other Person; (2) if the
Common Shares of such Person are not Registered Common Shares or
such Person is not a corporation, and such Person is a direct or
indirect Subsidiary of another Person but is not a direct or
indirect Subsidiary of another Person which has Registered Common
Shares outstanding, "Principal Party" shall refer to the ultimate
parent entity of such first-mentioned Person; (3) if the Common
Shares of such Person are not Registered Common Shares or such
Person is not a corporation, and such Person is directly or
indirectly controlled by more than one Person, and one or more of
such latter Persons have Registered Common Shares outstanding,
"Principal Party" shall refer to whichever of such latter Persons
is the issuer of outstanding Registered Common Shares having the
greatest aggregate current market value (determined pursuant to
Section 11(d)(i) hereof); or (4) if the Common Shares of such
Person are not Registered Common Shares or such Person is not a
corporation, and such Person is directly or indirectly controlled
by more than one Person, and none of such latter Persons have
Registered Common Shares outstanding, "Principal Party" shall
refer to whichever ultimate parent entity is the entity having
the greatest net assets;
provided, further, however, that if under the foregoing
provisions of this Section 13(b) there shall for any reason be
more than one Principal Party, "Principal Party" shall refer to
whichever of such Persons is the issuer of outstanding Registered
Common Shares having the greatest aggregate current market value
(determined pursuant to Section 11(d) hereof) or, if none of such
Persons has Registered Common Shares outstanding, whichever of
such Persons is the entity having the greatest net assets.
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<PAGE>
20
(c) Notwithstanding anything herein to the
contrary, if the Principal Party as determined pursuant to
paragraph (b) above is not a corporation, proper provision shall
be made so that such Principal Party shall create or otherwise
make available for purposes of the exercise of the Rights in
accordance with the terms of this Agreement, a type or types of
securities having a fair market value (as determined by a
nationally recognized investment banking firm selected by the
Board of Directors of the Company) equal to at least the value of
the Common Shares which each holder of a Right would have been
entitled to receive if such Principal Party had been a
corporation.
(d) The Company shall not consummate any such
consolidation, merger, sale or transfer unless (1) at the time of
and after such consummation the Principal Party shall have a
sufficient number of authorized Common Shares which have not been
issued or reserved for issuance to permit the exercise in full of
the Rights in accordance with this Section 13 and (2) prior to
such consummation the Company and such Principal Party shall have
executed and delivered to the Rights Agent a supplemental
agreement providing for the terms set forth in this Section 13
and further providing that, as soon as practicable after the date
of any consolidation, merger or sale or transfer of assets
mentioned in paragraph (a) of this Section 13, the Principal
Party will
(i) prepare and file a registration
statement under the Securities Act with respect to the
Rights and the securities purchasable upon exercise of
the Rights on an appropriate form, and will use its
best efforts to cause such registration statement to
(A) become effective as soon as practicable after such
filing and (B) remain effective (with a prospectus at
all times meeting the requirements of the Securities
Act) until the Final Expiration Date, and similarly
comply with applicable state securities or "blue sky"
laws; and
(ii) deliver to holders of the Rights
historical financial statements for the Principal Party
and each of its Affiliates which comply in all respects
with the requirements for registration on Form 10 under
the Exchange Act.
Section 14. Additional Covenants.
(a) Except as expressly provided herein, no
adjustment to the Purchase Price, the number of Common Shares or
other securities for which a Right is exercisable or the number
of Rights outstanding (except as permitted by Section 24 or
Section 25 hereof) or any similar adjustment shall be made or be
effective if such adjustment would have the effect of reducing or
limiting the benefits the holders of the Rights would have had
absent such adjustment, including, without limitation, the
benefits under Section 11(a)(ii) and Section 13 hereof, unless
the terms of this Agreement are amended so as to preserve such
benefits.
(b) The Company covenants and agrees that,
following the earlier of the Share Acquisition Date and the
Distribution Date, except as permitted by Sections 24, 25 and 28
hereof, it shall not, directly or indirectly, take any action the
W2-NY950580.180
<PAGE>
21
purpose or effect of which is to eliminate or otherwise diminish
in any material respect the benefits intended to be afforded by
the Rights.
(c) The Company covenants and agrees that it
shall not consummate any of the transactions described in clauses
(x), (y) and (z) of Section 13(a) hereof if (i) at the time of or
after such consummation there are or would be any charter or by-
law provisions or any rights, warrants or other instruments or
securities outstanding or agreements in effect (whether of the
Company or any other Person) or any other action taken (whether
by the Company or any other Person) the purpose or effect of
which is to eliminate or otherwise diminish in any material
respect the benefits intended to be afforded by the Rights or
(ii) the stockholders of the Principal Party shall have received,
either prior to, simultaneously with, or after the consummation
of such transaction, a distribution of Rights previously owned by
the Principal Party or any of its Affiliates and Associates.
(d) The Company further covenants and agrees that
it shall not consummate any of the transactions described in
clauses (x), (y) and (z) of Section 13(a) hereof unless prior
thereto the Company and the Principal Party shall have executed
and delivered to the Rights Agent a supplemental agreement
evidencing compliance with paragraph (c) above and further
providing that the Principal Party covenants and agrees that it
shall not, directly or indirectly, take any action the purpose or
effect of which is to eliminate or otherwise diminish in any
material respect the benefits intended to be afforded by the
Rights. The provisions of this paragraph (d) and paragraph (c)
above shall similarly apply to successive mergers,
consolidations, sales or other transfers.
Section 15. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue
fractions of Rights or to distribute Right Certificates which
evidence fractional Rights. In lieu of such fractional Rights,
there shall be paid to the registered holders of the Right
Certificates with regard to which such fractional Rights would
otherwise be issuable, an amount in cash equal to the same
fraction of the current market value of a whole Right. For the
purposes of this Section 15(a), the current market value of a
whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable. The
closing price of the Rights for any day shall be the last sale
price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the
Rights are not listed or admitted to trading on the New York
Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Rights
are listed or admitted to trading or, if the Rights are not
listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average
of the high bid and low asked prices in the over-the-counter
market, as reported by NASDAQ or such other system then in use
W2-NY950580.180
<PAGE>
22
or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the
Rights selected by the Board of Directors of the Company. If on
any such date no such market maker is making a market in the
Rights the fair value of the Rights on such date as determined in
good faith by the Board of Directors of the Company shall be used
and shall be conclusive for all purposes.
(b) The Company shall not be required to issue
fractions of Common Shares upon exercise of the Rights or to
distribute certificates which evidence fractional Common Shares.
In lieu of fractional Common Shares equal to one-half of a share
or less, the Company may pay to the registered holders of Right
Certificates at the time such Rights are exercised as herein
provided an amount in cash equal to the same fraction of the
current market value of one Common Share. Any exercise of Rights
that would entitle the holder thereof to receive any fraction of
a share greater than one-half of a share shall be governed by
Section 7(a) hereof. For purposes of this Section 15(b), the
current market value of one Common Share shall be the closing
price of a Common Share (as determined pursuant to Section 11(d)
hereof) for the Trading Day immediately prior to the date of such
exercise.
(c) The holder of a Right by the acceptance of
the Right expressly waives his right to receive any fractional
Rights or any fractional shares upon exercise of a Right, except
as permitted by this Section 15.
Section 16. Rights of Action. All rights of action in
respect of this Agreement are vested in the respective registered
holders of the Right Certificates (and, prior to the Distribution
Date, the registered holders of the Common Shares); and any
registered holder of any Right Certificate (or, prior to the
Distribution Date, of the Common Shares), without the consent of
the Rights Agent or of the holder of any other Right Certificate
(or, prior to the Distribution Date, of the Common Shares), may,
in his own behalf and for his own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the
Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Right Certificate in the
manner provided in such Right Certificate and in this Agreement.
Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the
holders of Rights would not have an adequate remedy at law for
any breach of this Agreement and will be entitled to specific
performance of the obligations under, and injunctive relief
against actual or threatened violations of the obligations of any
Person subject to, this Agreement.
Section 17. Agreement of Rights Holders. Every holder of
a Right by accepting the same consents and agrees with the
Company and the Rights Agent and with every other holder of a
Right that:
(a) prior to the Distribution Date, the Rights
will be transferable only in connection with the transfer of the
Common Shares;
(b) after the Distribution Date, the Right
Certificates will be transferable only on the registry books of
the Rights Agent if surrendered at the office or offices of the
W2-NY950580.180
<PAGE>
23
Rights Agent designated for such purposes, duly endorsed or
accompanied by a proper instrument of transfer;
(c) subject to Sections 6(a) and 7(f) hereof, the
Company and the Rights Agent may deem and treat the Person in
whose name the Right Certificate (or, prior to the Distribution
Date, the associated Common Shares certificate) is registered as
the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the
Right Certificate or the associated Common Shares certificate
made by anyone other than the Company or the Rights Agent) for
all purposes whatsoever, and neither the Company nor the Rights
Agent, subject to the last sentence of Section 7(e) hereof, shall
be required to be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to
the contrary, neither the Company nor the Rights Agent shall have
any liability to any holder of a Right or other Person as a
result of its inability to perform any of its obligations under
this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or
administrative agency or commission, or any statute, rule,
regulation or executive order promulgated or enacted by any
governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company
must use its best efforts to have any such order, decree or
ruling lifted or otherwise overturned as soon as possible.
Section 18. Right Certificate Holder Not Deemed a
Stockholder. No holder, as such, of any Right Certificate shall
be entitled to vote, receive dividends or be deemed for any
purpose the holder of the Common Shares or any other securities
of the Company which may at any time be issuable on the exercise
of the Rights represented thereby, nor shall anything contained
herein or in any Right Certificate be construed to confer upon
the holder of any Right Certificate, as such, any of the rights
of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings
or other actions affecting stockholders (except as provided in
Section 26 hereof), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by such
Right Certificate shall have been exercised in accordance with
the provisions hereof.
Section 19. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent
reasonable compensation for all services rendered by it hereunder
and, from time to time, on demand of the Rights Agent, its
reasonable expenses and counsel fees and other disbursements
incurred in the administration and execution of this Agreement
and the exercise and performance of its duties hereunder. The
Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense,
incurred without negligence, bad faith or willful misconduct on
the part of the Rights Agent, for anything done or omitted by the
Rights Agent in connection with the acceptance and administration
of this Agreement, including the costs and expenses of defending
against any claim of liability in the premises. Anything in this
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<PAGE>
24
Agreement to the contrary notwithstanding, in no event shall the
Rights Agent be liable for special, indirect or consequential
loss or damage of any kind whatsoever (including but not limited
to lost profits), even if the Rights Agent has been advised of
the likelihood of such loss or damage and regardless of the form
of the action.
(b) The Rights Agent shall be protected and shall
incur no liability for or in respect of any action taken,
suffered or omitted by it in connection with its administration
of this Agreement in reliance upon any Right Certificate or
certificate for the Common Shares or for other securities of the
Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, instruction,
consent, certificate, statement, or other paper or document
believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper person
or persons.
Section 20. Merger or Consolidation or Change of Name of
Rights Agent.
(a) Any corporation into which the Rights Agent
or any successor Rights Agent may be merged with or with which it
may be consolidated, or any corporation resulting from any merger
or consolidation to which the Rights Agent or any successor
Rights Agent shall be a party, or any corporation succeeding to
the corporate trust business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under
this Agreement without the execution or filing of any paper or
any further act on the part of any of the parties hereto,
provided that such corporation would be eligible for appointment
as a successor Rights Agent under the provisions of Section 22
hereof. In case at the time such successor Rights Agent shall
succeed to the agency created by this Agreement, any of the Right
Certificates shall have been countersigned but not delivered, any
such successor Rights Agent may adopt the countersignature of the
predecessor Rights Agent and deliver such Right Certificates so
countersigned; and in case at such time any of the Right
Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Right Certificates either in
the name of the predecessor Rights Agent or in the name of the
successor Rights Agent; and in all such cases such Right
Certificates shall have the full force provided in the Right
Certificates and in this Agreement.
(b) In case at any time the name of the Rights
Agent shall be changed and at such time any of the Right
Certificates shall have been countersigned but not delivered, the
Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at
such time any of the Right Certificates shall not have been
countersigned, the Rights Agent may countersign such Right
Certificates either in its prior name or in its changed name; and
in all such cases such Right Certificates shall have the full
force provided in the Right Certificates and in this Agreement.
Section 21. Duties of Rights Agent. The Rights Agent
undertakes the duties and obligations imposed by this Agreement
upon the following terms and conditions, by all of which the
Company and the holders of Right Certificates, by their
acceptance thereof, shall be bound:
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25
(a) The Rights Agent may consult with legal
counsel (who may be legal counsel for the Company), and the
opinion of such counsel shall be full and complete authorization
and protection to the Rights Agent as to any action taken or
omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties
under this Agreement the Rights Agent shall deem it necessary or
desirable that any fact or matter be proved or established by the
Company prior to taking or suffering any action hereunder, such
fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by any one of the
Chairman or Vice Chairman of the Board, the President, a Vice
President, the Treasurer or the Secretary of the Company and
delivered to the Rights Agent; and such certificate shall be full
authorization to the Rights Agent for any action taken or
suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder
only for its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or
by reason of any of the statements of fact or recitals contained
in this Agreement or in the Right Certificates or be required to
verify the same (except as to its countersignature thereof), but
all such statements and recitals are and shall be deemed to have
been made by the Company only.
(e) The Rights Agent shall not be under any
responsibility in respect of the validity of this Agreement or
the execution and delivery hereof (except the due execution
hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement
or in any Right Certificate; nor shall it be responsible for any
adjustment required under the provisions of Sections 11 or 13
hereof or responsible for the manner, method or amount of any
such adjustment or the ascertaining of the existence of facts
that would require any such adjustment (except with respect to
the exercise of Rights evidenced by Right Certificates after
actual notice of any such adjustment); nor shall it by any act
hereunder be deemed to make any representation or warranty as to
the authorization or reservation of any Common Shares to be
issued pursuant to this Agreement or any Right Certificate or as
to whether any Common Shares will, when so issued, be validly
authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform,
execute, acknowledge and deliver or cause to be performed,
executed, acknowledged and delivered all such further and other
acts, instruments and assurances as may reasonably be required by
the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and
directed to accept instructions with respect to the performance
of its duties hereunder from any one of the Chairman or Vice
Chairman of the Board, the President, a Vice President, the
Secretary or the Treasurer of the Company, and to apply to such
officers for advice or instructions in connection with its
W2-NY950580.180
<PAGE>
26
duties, and it shall not be liable for any action taken or
suffered to be taken by it in good faith in accordance with
instructions of any such officer.
(h) The Rights Agent and any stockholder,
director, officer or employee of the Rights Agent may buy, sell
or deal in any of the Rights or other securities of the Company
or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were
not Rights Agent under this Agreement. Nothing herein shall
preclude the Rights Agent from acting in any other capacity for
the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any
of the rights or powers hereby vested in it or perform any duty
hereunder either itself or by or through its attorneys or agents,
and the Rights Agent shall not be answerable or accountable for
any act, default, neglect or misconduct of any such attorneys or
agents for any loss to the Company resulting from any such act,
default, neglect or misconduct, provided reasonable care was
exercised in the selection and continued employment thereof.
(j) If, with respect to any Right Certificate
surrendered to the Rights Agent for exercise or transfer, the
certificate attached to the form of assignment or form of
election to purchase, as the case may be, has either not been
completed or indicates an affirmative response to any item
therein, the Rights Agent shall not take any further action with
respect to such requested exercise or transfer without first
consulting with the Company.
Section 22. Change of Rights Agent. The Rights Agent or
any successor Rights Agent may resign and be discharged from its
duties under this Agreement upon 30 days' notice in writing
mailed to the Company and, if instructed by the Company, to each
transfer agent of the Common Shares by registered or certified
mail, and, at the expense of the Company, to the holders of the
Right Certificates by first-class mail. The Company may remove
the Rights Agent or any successor Rights Agent upon 30 days'
notice in writing, mailed to the Rights Agent or successor Rights
Agent, as the case may be, and to each transfer agent of the
Common Shares by registered or certified mail, and to the holders
of the Right Certificates by first-class mail. If the Rights
Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the
Rights Agent. If the Company shall fail to make such appointment
within a period of 30 days after giving notice of such removal or
after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by
the holder of a Right Certificate (who shall, with such notice,
submit his Right Certificate for inspection by the Company), then
the registered holder of any Right Certificate may apply to any
court of competent jurisdiction for the appointment of a new
Rights Agent. Any successor Rights Agent, whether appointed by
the Company or by such a court, shall be a corporation organized
and doing business under the laws of the United States or of the
State of New York (or of any other State of the United States so
long as such corporation is authorized to do business as a
banking institution in the State of New York), in good standing,
having a principal office in the State of New York, which is
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<PAGE>
27
authorized under such laws to exercise corporate trust powers and
is subject to supervision or examination by federal or state
authority and which has at the time of its appointment as Rights
Agent a combined capital and surplus of at least $100 million.
After appointment, the successor Rights Agent shall be vested
with the same powers, rights, duties and responsibilities as if
it had been originally named as Rights Agent without further act
or deed; but the predecessor Rights Agent shall deliver and
transfer to the successor Rights Agent any property at the time
held by it hereunder, and execute and deliver any further
assurance, conveyance, act or deed necessary for the purpose.
Not later than the effective date of any such appointment the
Company shall file notice thereof in writing with the predecessor
Rights Agent and each transfer agent of the Common Shares, and
mail a notice thereof in writing to the registered holders of the
Right Certificates. Failure to give any notice provided for in
this Section 22, however, or any defect therein, shall not affect
the legality or validity of the resignation or removal of the
Rights Agent or the appointment of the successor Rights Agent, as
the case may be.
Section 23. Issuance of New Right Certificates.
Notwithstanding any of the provisions of this Agreement or of the
Rights to the contrary, the Company may, at its option, issue new
Right Certificates evidencing Rights in such form as may be
approved by its Board of Directors to reflect any adjustment or
change in the Purchase Price and the number or kind or class of
shares or other securities or property purchasable under the
Right Certificates made in accordance with the provisions of this
Agreement. In addition, in connection with the issuance or sale
of Common Shares following the Distribution Date and prior to the
earliest of the Redemption Date, the Exchange Date and the Final
Expiration Date, the Company (a) shall, with respect to Common
Shares so issued or sold pursuant to the exercise of employee
stock options or under any employee plan or arrangement
outstanding, granted or awarded as of the Distribution Date, or
upon the exercise, conversion or exchange of securities issued by
the Company prior to such date, and (b) may, in any other case,
if deemed necessary or appropriate by the Board of Directors,
issue Right Certificates representing the appropriate number of
Rights in connection with such issuance or sale; provided,
however, that (i) no such Right Certificate shall be issued if,
and to the extent that, the Company shall be advised by counsel
that such issuance would create a significant risk of material
adverse tax consequences to the Company or the Person to whom
such Right Certificates would be issued and (ii) no such Right
Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of
the issuance thereof.
Section 24. Redemption.
(a) The Board of Directors of the Company may, at
its option, at any time prior to such time as any Person becomes
an Acquiring Person, redeem all but not less than all the then
outstanding Rights at a redemption price of $.005 per Right,
appropriately adjusted to reflect any stock split, stock
dividend, reclassification or similar transaction occurring after
the date hereof (such redemption price being hereinafter referred
to as the "Redemption Price"). The redemption of the Rights may
W2-NY950580.180
<PAGE>
28
be made effective at such time, on such basis and with such
conditions as the Board of Directors in its sole discretion may
establish. Without limiting the generality of the foregoing, the
Company may, at its option, pay the Redemption Price in cash,
Common Shares (based on the "current market price," as defined in
Section 11(d) hereof, of the Common Shares at the time of
redemption) or any other form of consideration deemed appropriate
by the Board of Directors.
(b) Immediately upon the action of the Board of
Directors of the Company ordering the redemption of the Rights
(or at such later time as the Board of Directors may establish
for the effectiveness of such redemption), and without any
further action and without any notice, the right to exercise the
Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price. The
Company shall promptly give public notice of any such redemption;
provided, however, that the failure to give or any defect in such
notice shall not affect the validity of such redemption. Within
10 days after the action of the Board of Directors ordering the
redemption of the Rights, the Company shall give notice of such
redemption to the Rights Agent and the holders of the then
outstanding Rights by mailing such notice to the Rights Agent and
to all such holders at their last address as it appears upon the
registry books of the Rights Agent or, prior to the Distribution
Date, on the registry books of the transfer agent for the Common
Shares. Any notice which is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the
notice. Each such notice of redemption will state the method by
which the payment of the Redemption Price will be made.
(c) Neither the Company nor any of its
Subsidiaries may redeem, acquire or purchase for value any Rights
at any time in any manner except (i) pursuant to a redemption in
accordance with this Section 24 or an exchange pursuant to
Section 25 hereof or (ii) in connection with the purchase or
other acquisition of Common Shares prior to the Distribution
Date.
Section 25. Exchange.
(a) Subject to paragraph (c) of this Section 25,
the Board of Directors of the Company may, at its option, at any
time after the occurrence of the event described in Section
11(a)(ii) hereof, exchange all but not less than all of the then
outstanding and exercisable Rights (which shall not include
Rights that have become void pursuant to the provisions of
Section 7(e) hereof) for Common Shares at an exchange ratio of
one Common Share per Right, appropriately adjusted to reflect any
stock split, stock dividend, reclassification or similar
transaction occurring after the date hereof (such exchange being
hereinafter referred to as the "Exchange" and such exchange ratio
being hereinafter referred to as the "Exchange Ratio").
Notwithstanding the foregoing, the Board of Directors shall not
be empowered to effect such exchange at any time after any Person
(other than the Company, any Subsidiary of the Company, any
employee benefit plan of the Company or any such Subsidiary, or
any entity organized, appointed or established by the Company for
or pursuant to the terms of any such plan), together with all
Affiliates and Associates of such Person, becomes the Beneficial
W2-NY950580.180
<PAGE>
29
Owner of Common Shares aggregating 50% or more of the Common
Shares then outstanding.
(b) Immediately upon the action of the Board of
Directors of the Company authorizing the Exchange and without any
further action and without any notice, the right to exercise the
Rights shall terminate and the only right thereafter of a holder
of Rights included in the Exchange shall be to receive that
number of Common Shares equal to the number of Rights held by
such holder multiplied by the Exchange Ratio. The Company shall
promptly give public notice of the Exchange; provided, however,
that the failure to give or any defect in such notice shall not
affect the validity of the Exchange. Within 10 days after such
action of the Board of Directors ordering the Exchange, the
Company shall mail a notice of Exchange to the Rights Agent and
the holders of such Rights at their last addresses as they appear
upon the registry books of the Rights Agent. Any notice which is
mailed in the manner herein provided shall be deemed given
whether or not the holder receives the notice. Each such notice
of Exchange will state the method by which the Exchange will be
effected.
(c) In the event that the number of Common Shares
which are authorized by the Company's Certificate of
Incorporation but not outstanding or reserved for issuance for
purposes other than upon exercise of the Rights are not
sufficient to permit the Exchange in full, the Exchange Ratio
shall equal one Common Stock Equivalent (in lieu of one Common
Share) per Right. Alternatively, the Board of Directors of the
Company may, at its option, determine that the Company shall (i)
issue Common Shares in the Exchange to the extent Common Shares
are available and (ii) utilize Common Stock Equivalents in the
Exchange as provided above to the extent Common Shares are not
available, in which case such Common Shares shall be allocated on
such basis as the Board of Directors determines pursuant to
Section 30 hereof.
(d) After aggregating all the Common Shares to
which a holder of Rights is entitled upon the Exchange, the
Company shall not be required to issue a fraction of a Common
Share or to distribute a certificate which evidences a fraction
of a Common Share to such holder. In lieu of issuing fractional
shares, there shall be paid to the registered holders of the
Right Certificates with regard to which such fractional shares
would otherwise be issuable, an amount in cash equal to the same
fraction of the current market value of one Common Share. For
the purposes of this paragraph (d), the current market value of
one Common Share shall be the closing price of a Common Share (as
determined pursuant to Section 11(d) hereof) for the Trading Day
immediately prior to the Exchange Date.
Section 26. Notice of Certain Events. (a) In case the
Company shall propose, at any time after the Distribution Date,
(i) to pay any dividend payable in stock of any class to the
holders of Common Shares or to make any other distribution to the
holders of Common Shares (other than a regular quarterly cash
dividend), (ii) to offer to the holders of Common Shares rights,
options or warrants to subscribe for or to purchase any
additional Common Shares at less than the current market price of
the Common Shares, or shares of stock of any class or any other
securities, rights or options other than pursuant to the
W2-NY950580.180
<PAGE>
30
Company's Dividend Reinvestment and Stock Purchase Plan and
Customer Stock Purchase Plan (or any successor to either such
Plan), (iii) to effect any reclassification of its Common Shares
(other than a reclassification involving only the subdivision of
outstanding Common Shares), (iv) to effect any consolidation or
merger into or with, or to effect any sale or other transfer (or
to permit one or more of its Subsidiaries to effect any sale or
other transfer), in one or more transactions, of more than 50% of
the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to, any other Person or Persons (other than a
Company Restructuring), or (v) to effect the liquidation,
dissolution or winding up of the Company, then, in each such
case, the Company shall give to each holder of a Right
Certificate, in accordance with Section 27 hereof, a notice of
such proposed action, which shall specify the record date for the
purposes of such stock dividend, or distribution of rights,
options or warrants, or the date on which such reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution,
or winding up is to take place and the date of participation
therein by the holders of the Common Shares, if any such date is
to be fixed, and such notice shall be so given in the case of any
action covered by clause (i) or (ii) above at least 20 days prior
to the record date for determining holders of the Common Shares
for purposes of such action, and in the case of any such other
action, at least 20 days prior to the date of the taking of such
proposed action or the date of participation therein by the
holders of the Common Shares, whichever shall be the earlier.
(b) In case the event set forth in Section
11(a)(ii) of this Agreement shall occur, then (i) the Company
shall as soon as practicable thereafter give to each holder of a
Right Certificate, in accordance with Section 27 hereof, a notice
of the occurrence of such event, which shall specify the event
and the consequences of the event to holders of Rights under
Section 11(a)(ii) hereof and (ii) all references in the preceding
paragraph to Common Shares shall thereafter be deemed to refer
to, if appropriate, Common Stock Equivalents.
Section 27. Notices. Notices or demands authorized by
this Agreement to be given or made by the Rights Agent or by the
holder of any Right Certificate to or on the Company shall be
sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing
with the Rights Agent) as follows:
Pennsylvania Enterprises, Inc.
Wilkes-Barre Center
39 Public Square
Wilkes-Barre, PA 18711
Attention: Secretary
Subject to the provisions of Section 22 hereof, any notice
or demand authorized by this Agreement to be given or made by the
Company or by the holder of any Right Certificate to or on the
Rights Agent shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:
Chemical Bank
450 West 33rd Street
New York, New York 10001-2697
Attention: Shareholder Services
W2-NY950580.180
<PAGE>
31
Notices or demands authorized by this Agreement to be
given or made by the Company or the Rights Agent to the holder of
any Right Certificate shall be sufficiently given or made if sent
by first-class mail, postage prepaid, addressed to such holder at
the address of such holder as shown on the registry books of the
Company.
Section 28. Supplements and Amendments. Prior to the
earlier of the Share Acquisition Date and the Distribution Date,
and subject to the last sentence of this Section 28, the Company
and the Rights Agent shall, if the Company so directs, supplement
or amend any provision of this Agreement, whether or not adverse
to the holders of Rights, without any approval of the holders of
Rights. From and after the earlier of the Share Acquisition Date
and the Distribution Date, and subject to the last sentence of
this Section 28, the Company and the Rights Agent may from time
to time supplement or amend this Agreement without any approval
of the holders of Rights in order (i) to cure any ambiguity, (ii)
to correct or supplement any provision contained herein which may
be defective or inconsistent with any other provisions herein,
(iii) to extend the period during which the Rights may be
redeemed; provided, however, that such period may not be extended
if at the time of such supplement or amendment the Rights are not
then redeemable, or (iv) to change or supplement the provisions
herein to effectuate the purposes of this Agreement, or to make
any other provisions with respect to the Rights, which, in either
such case, shall not materially adversely affect the interests of
the holders of Rights (other than Acquiring Persons and
Affiliates or Associates thereof). Upon the delivery of a
certificate from an appropriate officer of the Company which
states that the proposed supplement or amendment is in compliance
with the terms of this Section 28, the Rights Agent shall execute
such supplement or amendment; provided, however, that the Rights
Agent may, but shall not be obligated to, enter into any such
supplement or amendment which affects the Rights Agent's own
rights, duties or immunities under this Agreement.
Notwithstanding anything contained in this Agreement to the
contrary, no supplement or amendment shall be made which
decreases the Redemption Price.
Section 29. Successors. All the covenants and provisions
of this Agreement by or for the benefit of the Company or the
Rights Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder.
Section 30. Determinations and Actions by the Board of
Directors, etc. The Board of Directors of the Company shall have
the exclusive power and authority to administer this Agreement
and to exercise all rights and powers specifically granted to the
Board of Directors or to the Company, or as may be necessary or
advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the
provisions of this Agreement, and (ii) make all determinations
deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not to redeem
the Rights pursuant to Section 24 hereof, to exchange or not to
exchange the Rights pursuant to Section 25 hereof or to
supplement or amend the Agreement). All such actions,
calculations, interpretations and determinations (including, for
purpose of clause (y) below, all omissions with respect to the
W2-NY950580.180
<PAGE>
32
foregoing) which are done or made by the Board of Directors in
good faith, shall (x) be final, conclusive and binding on the
Company, the Rights Agent, the holders of the Rights and all
other parties, and (y) not subject the Board of Directors to any
liability to the holders of the Rights.
Section 31. Benefits of this Agreement. Nothing in this
Agreement shall be construed to give to any Person other than the
Company, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the Common
Shares) any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive
benefit of the Company, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Distribution
Date, the Common Shares).
Section 32. Severability. If any term, provision,
covenant or restriction of this Agreement is held by a court of
competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants
and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this
Agreement to the contrary, if any such term, provision, covenant
or restriction is held by such court or authority to be invalid,
void or unenforceable and the Board of Directors of the Company
determines in its good faith judgment that severing the invalid
language from this Agreement would adversely affect the purpose
or effect of this Agreement, the right of redemption set forth in
Section 24 hereof shall be reinstated and shall not expire until
the close of business on the tenth day following the date of such
determination by the Board of Directors.
Section 33. Governing Law. This Agreement (other than
with respect to the rights and obligations of the Rights Agent
which shall be governed by the laws of the State of New York) and
each Right Certificate issued hereunder shall be deemed to be a
contract made under the laws of the Commonwealth of Pennsylvania
and for all purposes shall be governed by and construed in
accordance with the laws of such Commonwealth applicable to
contracts to be made and performed entirely within such
Commonwealth.
Section 34. Counterparts. This Agreement may be executed
in any number of counterparts and each of such counterparts shall
for all purposes be deemed to be an original, and all such
counterparts shall together constitute but one and the same
instrument.
Section 35. Descriptive Headings. Descriptive headings
of the several Sections of this Agreement are inserted for
convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.
W2-NY950580.180
<PAGE>
33
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and attested, all as of the date and year
first above written.
Attest: PENNSYLVANIA ENTERPRISES, INC.
By:
Name: Name:
Title: Title:
Attest: CHEMICAL BANK
By:
Name: Name:
Title: Title:
W2-NY950580.180
<PAGE>
PENNSYLVANIA ENTERPRISES, INC.
and
CHEMICAL BANK
Rights Agent
Rights Agreement
Dated as of April 26, 1995
W2-NY950580.180
<PAGE>
Table of Contents
Section Page
1 Certain Definitions .............. 1
2 Appointment of Rights Agent .............. 5
3 Issue of Right Certificates .............. 5
4 Form of Right Certificates .............. 6
5 Countersignature and Registration .............. 7
6 Transfer, Split Up, Combination and
Exchange of Right Certificates;
Mutilated, Destroyed, Lost or
Stolen Right Certificates .............. 7
7 Exercise of Rights; Purchase Price ;
Expiration Date of Right .............. 8
8 Cancellation and Destruction of
Right Certificates .............. 10
9 Reservation and Availability of
Common Shares .............. 10
10 Common Shares Record Date .............. 11
11 Adjustment of Purchase Price,
Number and Kind of Shares or Number
of Rights .............. 12
12 Certificate of Adjusted Purchase
Price or Number of Shares .............. 17
13 Consolidation, Merger or Sale or
Transfer of Assets or Earning Power.............. 17
14 Additional Covenants .............. 20
15 Fractional Rights and Fractional
Shares ..............21
16 Rights of Action .............. 21
17 Agreement of Rights Holders .............. 22
18 Right Certificate Holder Not Deemed
a Stockholder ..............22
19 Concerning the Rights Agent .............. 23
20 Merger or Consolidation or Change
of Name of Rights Agent ..............23
21 Duties of Rights Agent .............. 24
22 Change of Rights Agent .............. 25
23 Issuance of New Right Certificates .............. 26
24 Redemption .............. 27
25 Exchange .............. 27
26 Notice of Certain Events .............. 28
27 Notices .............. 29
28 Supplements and Amendments .............. 30
29 Successors .............. 30
30 Determinations and Actions by the
Board of Directors, etc ..............30
31 Benefits of this Agreement .............. 31
32 Severability .............. 31
33 Governing Law .............. 31
34 Counterparts .............. 31
35 Descriptive Headings .............. 31
Exhibit A -- Form of Right Certificate ......................A-1
Exhibit B -- Form of Summary of Rights ......................B-1
-35-
W2-NY950580.180
<PAGE>
Exhibit A
[Form of Right Certificate]
Certificate No. R- __________ Rights
NOT EXERCISABLE AFTER MAY 16, 2005 OR EARLIER IF REDEMPTION OR
EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT THE
OPTION OF THE COMPANY AT $.005 PER RIGHT, AND TO EXCHANGE AT THE
OPTION OF THE COMPANY, ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT. AS DESCRIBED IN THE RIGHTS AGREEMENT, RIGHTS
BENEFICIALLY OWNED BY (1) AN ACQUIRING PERSON OR ANY ASSOCIATE OR
AFFILIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT), (2) A TRANSFEREE OF AN ACQUIRING PERSON (OR OF ANY
SUCH ASSOCIATE OR AFFILIATE) WHO BECOMES A TRANSFEREE AFTER THE
ACQUIRING PERSON BECOMES SUCH OR (3) UNDER CERTAIN CIRCUMSTANCES,
A TRANSFEREE OF AN ACQUIRING PERSON (OR OF ANY SUCH ASSOCIATE OR
AFFILIATE) WHO BECOMES A TRANSFEREE BEFORE OR CONCURRENTLY WITH
THE ACQUIRING PERSON BECOMING SUCH, SHALL BECOME NULL AND VOID.
W2-NY950690.227
<PAGE>
2
Right Certificate
PENNSYLVANIA ENTERPRISES, INC.
This certifies that , or
registered assigns, is the registered owner of the number of
Rights set forth above, each of which entitles the owner thereof,
subject to the terms, provisions and conditions of the Rights
Agreement, dated as of April 26, 1995 (the "Rights Agreement"),
between Pennsylvania Enterprises, Inc., a Pennsylvania
corporation (the "Company"), and Chemical Bank (the "Rights
Agent"). Each Right entitles the registered holder to purchase
from the Company at any time after the Distribution Date (as such
term is defined in the Rights Agreement) and prior to 5:00 P.M.
(New York City time) on May 16, 2005 at the office or offices of
the Rights Agent designated for such purpose, or its successors
as Rights Agent, one-half of a fully paid, non-assessable share
of Common Stock (the "Common Shares") of the Company. No less
than two Rights and only integral multiples of two Rights may be
exercised at any time by holders of Rights at a purchase price of
$100 per Common Share (the "Purchase Price") (equivalent to $50
for each one-half of a Common Share), subject to adjustment, upon
presentation and surrender of this Right Certificate with the
Form of Election to Purchase duly executed. The number of Rights
evidenced by this Right Certificate (and the number of shares
which may be purchased upon exercise thereof) set forth above,
and the Purchase Price per share set forth above, are the number
and Purchase Price as of May 16, 1995, based on the Common Shares
as constituted at such date.
From and after the occurrence of the event described in
Section 11(a)(ii) of the Rights Agreement, if the Rights
evidenced by this Right Certificate are beneficially owned by
(i) an Acquiring Person or any Associate or Affiliate thereof (as
such terms are defined in the Rights Agreement), (ii) a
transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person
becomes such or (iii) under certain circumstances, a transferee
of an Acquiring Person (or of any such Associate or Affiliate)
who becomes a transferee before or concurrently with the
Acquiring Person becoming such, such Rights shall become null and
void and no holder hereof shall have any rights with respect to
such Rights.
As provided in the Rights Agreement, the Purchase Price
and the number and kind of Common Shares or other securities
which may be purchased upon the exercise of the Rights evidenced
by this Right Certificate are subject to modification and
adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms,
provisions and conditions are hereby incorporated herein by
reference and made a part hereof and to which Rights Agreement
reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities
hereunder of the Rights Agent, the Company and the holders of the
Right Certificates. Copies of the Rights Agreement are on file
W2-NY950690.227
<PAGE>
3
at the principal executive office of the Company and are also
available upon written request to the Company.
This Right Certificate, with or without other Right
Certificates, upon surrender at the principal office or offices
of the Rights Agent designated for such purpose, may be exchanged
for another Right Certificate or Right Certificates of like tenor
and date evidencing Rights entitling the holder to purchase a
like aggregate number of Common Shares as the Rights evidenced by
the Right Certificate or Right Certificates surrendered shall
have entitled such holder to purchase. If this Right Certificate
shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Right Certificate or Right
Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the
Rights evidenced by this Certificate (i) may be redeemed by the
Company at its option at a redemption price of $.005 per Right or
(ii) may be exchanged by the Company at its option for shares of
the Company's Common Stock, no par value (stated value $10 per
share) (or, in certain circumstances, Common Stock Equivalents
(as such term is defined in the Rights Agreement)).
No fractional Common Shares will be issued upon the
exercise of any Right or Rights evidenced hereby. In lieu of
fractions of a share equal to one-half of a share or less, a cash
payment will be made, as provided in the Rights Agreement. No
Rights may be exercised that would entitle the holder to any
fraction of a Common Share greater than one-half of a share
unless concurrently therewith such holder purchases an additional
fraction of a Common Share which, when added to the number of
Common Shares to be received upon such exercise, equals an
integral number of Common Shares, as provided in the Rights
Agreement.
No holder of this Right Certificate shall be entitled
to vote or receive dividends or be deemed for any purpose the
holder of Common Shares or of any other securities of the Company
which may at any time be issuable on the exercise hereof, nor
shall anything contained in the Rights Agreement or herein be
construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings
or other actions affecting stockholders (except as provided in
the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this
Right Certificate shall have been exercised as provided in the
Rights Agreement.
This Right Certificate shall not be valid or obligatory
for any purpose until it shall have been countersigned by the
Rights Agent.
W2-NY950690.227
<PAGE>
4
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal.
Dated as of __________, ___
ATTEST: PENNSYLVANIA ENTERPRISES, INC.
By
Secretary Title:
Countersigned:
CHEMICAL BANK
By
Authorized Signature
W2-NY950690.227
<PAGE>
5
[Form of Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED
hereby sells, assigns and transfers unto
(Please print name and address of transferee)
this Right Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and
appoint ________________ Attorney, to transfer the within Right
Certificate on the books of the within-named Company, with full
power of substitution.
Dated: ______________, _____
Signature
Signature Guaranteed:
W2-NY950690.227
<PAGE>
6
Certificate
The undersigned hereby certifies by checking the
appropriate boxes that:
(1) the Rights evidenced by this Right Certificate
[ ] are [ ] are not being sold, assigned and transferred by or
on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, the Rights evidenced by this Right Certificate [ ]
are [ ] are not being sold, assigned and transferred to a Person
who is an Acquiring Person, an Affiliate or Associate of an
Acquiring Person or a nominee of any such Acquiring Person,
Associate or Affiliate;
(3) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced
by this Right Certificate from any Person who is, was or
subsequently became an Acquiring Person or an Affiliate or Associate
of an Acquiring Person.
Dated:
Signature
W2-NY950690.227
<PAGE>
7
NOTICE
The signatures to the foregoing Assignment and
Certificate must correspond to the name as written upon the face
of this Right Certificate in every particular, without alteration
or enlargement or any change whatsoever.
W2-NY950690.227
<PAGE>
8
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights
represented by the Right Certificate.)
To PENNSYLVANIA ENTERPRISES, INC.:
The undersigned hereby irrevocably elects to exercise
__________ Rights represented by this Right Certificate to
purchase the Common Shares issuable upon the exercise of the
Rights (or such other securities of the Company or of any other
person which may be issuable upon the exercise of the Rights) and
requests that certificates for such shares be issued in the name
of:
Please insert social security
or other identifying number
_________________________________________________________________
____________
(Please print name and address)
_________________________________________________________________
____________
If such number of Rights shall not be all the Rights
evidenced by this Right Certificate, a new Right Certificate for
the balance of such Rights shall be registered in the name and
delivered to:
Please insert social security
or other identifying number
_________________________________________________________________
____________
(Please print name and address)
_________________________________________________________________
____________
_________________________________________________________________
____________
Dated: ______________, _____
Signature
Signature Guaranteed:
W2-NY950690.227
<PAGE>
9
Certificate
The undersigned hereby certifies by checking the
appropriate boxes that:
(1) the Rights evidenced by this Right Certificate
[ ] are [ ] are not being exercised by or on behalf of a Person
who is or was an Acquiring Person or an Affiliate or Associate of
an Acquiring Person (as such terms are defined in the Rights
Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced
by this Right Certificate from any Person who is, was or
subsequently became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: ______________, _____
Signature
W2-NY950690.227
<PAGE>
10
NOTICE
The signatures to the foregoing Election to Purchase
and Certificate must correspond to the name as written upon the
face of this Right Certificate in every particular, without
alteration or enlargement or any change whatsoever.
W2-NY950690.227
<PAGE>
EXHIBIT B
SUMMARY OF RIGHTS TO PURCHASE
COMMON STOCK
On April 26, 1995, the Board of Directors of
Pennsylvania Enterprises, Inc. (the "Company") declared a
dividend distribution of one Right for each outstanding share of
Common Stock, no par value (stated value $10 per share), of the
Company (the "Common Shares") to stockholders of record on
May 16, 1995 (the "Record Date"). Each Right entitles the
registered holder to purchase from the Company one-half of a
Common Share. No less than two Rights, and only integral
multiples of two Rights may be exercised at any time by holders
of Rights at a price of $100 per Common Share (the "Purchase
Price") (equivalent to $50 for each one-half of a Common Share),
subject to adjustment. The description and terms of the Rights
are set forth in a Rights Agreement (the "Rights Agreement")
between the Company and Chemical Bank, as Rights Agent.
Initially, the Rights will be attached to all Common
Share certificates representing Common Shares then outstanding,
and no separate Right certificates will be distributed. Until
the earlier to occur of (i) 10 days following a public
announcement that a person or group of affiliated or associated
persons has acquired, or obtained the right to acquire,
beneficial ownership of 15% or more of the outstanding Common
Shares (an "Acquiring Person"), or (ii) 10 business days (or such
later day as may be determined by action of the Board of
Directors prior to such time as any person or group becomes an
Acquiring Person) following the commencement of a tender offer or
exchange offer if, upon consummation thereof, any person or group
would be an Acquiring Person (the earlier of such dates being
called the "Distribution Date"), the Rights will be evidenced,
with respect to any of the Common Share certificates outstanding
as of the Record Date, by such certificate together with a copy
of this Summary of Rights. The date of announcement of the
existence of an Acquiring Person referred to in clause (i) above
is hereinafter referred to as the "Share Acquisition Date."
The Rights Agreement provides that, until the
Distribution Date, the Rights will be transferred with and only
with the Common Share certificates. Until the Distribution Date
(or earlier redemption, exchange or expiration of the Rights),
new Common Share certificates issued after the Record Date upon
transfer or new issuance of the Common Shares will contain a
notation incorporating the Rights Agreement by reference. Until
the Distribution Date (or earlier redemption, exchange or
expiration of the Rights), the surrender for transfer of any
certificates for Common Shares outstanding as of the Record Date,
with or without a copy of this Summary of Rights attached
thereto, will also constitute the transfer of the Rights
associated with the Common Shares represented by such
certificate. As soon as practicable following the Distribution
Date, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of the Common
Shares on the Distribution Date and, thereafter, such separate
Right Certificates alone will evidence the Rights.
B-1
W2-NY950580.191
<PAGE>
EXHIBIT B
The Rights are not exercisable until the Distribution
Date and will expire at the close of business on May 16, 2005,
unless earlier redeemed or exchanged by the Company as described
below.
W2-NY950580.191
<PAGE>
In the event that any person or group of affiliated or
associated persons becomes an Acquiring Person, the Rights
Agreement provides that proper provision shall be made so that
each holder of a Right, except as provided below, shall
thereafter have the right to receive, upon exercise, Common
Shares (or, in certain circumstances, Common Stock Equivalents
(as such term is defined in the Rights Agreement)) having a value
equal to two (2) times the exercise price of the Right. Upon the
occurrence of the event described in the preceding sentence, any
Rights beneficially owned by (i) an Acquiring Person or an
Associate or Affiliate (as such terms are defined in the Rights
Agreement) of an Acquiring Person, (ii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee after the Acquiring Person becomes such, or
(iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and receives
such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity
interests in such Acquiring Person or to any person with whom the
Acquiring Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer
which the Board of Directors of the Company has determined is
part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of the Rights Agreement,
shall become null and void without any further action and no
holder of such Rights shall have any rights whatsoever with
respect to such Rights, whether under any provision of the Rights
Agreement or otherwise.
At any time after the occurrence of the event described
in the first sentence of the preceding paragraph and prior to the
acquisition by any Person of 50% or more of the outstanding
Common Shares, the Board of Directors of the Company may exchange
the Rights (except Rights which previously have been voided as
described above), in whole, but not in part, at an exchange ratio
of one Common Share (or, in certain circumstances, one Common
Stock Equivalent) per Right.
In the event that, following the earlier of the
Distribution Date and the Share Acquisition Date, (i) the Company
engages in a merger or other business combination transaction in
which the Company is not the surviving corporation, (ii) the
Company engages in a merger or other business combination
transaction with another person in which the Company is the
surviving corporation, but in which its Common Shares are changed
or exchanged, or (iii) more than 50% of the Company's assets or
earning power is sold or transferred (other than a sale of the
water business of Pennsylvania Gas and Water Company ("PG&W") pursuant
to an Asset Purchase Agreement dated as of April 26, 1995, among the
Company, PG&W, Pennsylvania-American Water Company and American Water
Works Company, Inc., the Rights Agreement provides that proper provision
shall be made so that each holder of a Right (except Rights which
previously have been voided as described above) shall thereafter have
the right to receive, upon the exercise thereof at the then current exercise
price of the Right, common stock of the acquiring company having
a value equal to two (2) times the exercise price of the Right.
The Purchase Price payable, and the number of Common
Shares or other securities issuable, upon exercise of the Rights
are subject to adjustment from time to time to prevent dilution
B-3
W2-NY950580.191
<PAGE>
(i) in the event of a stock dividend on, or a subdivision,
combination or reclassification of, the Common Shares, (ii) upon
the grant to holders of the Common Shares of certain rights,
options or warrants to subscribe for Common Shares or convertible
securities at less than the current market price of the Common
Shares (except for rights under the Company's Dividend
Reinvestment and Stock Purchase Plan or Customer Stock Purchase
Plan), or (iii) upon the distribution to holders of the Common
Shares of evidences of indebtedness, stock (other than a dividend
payable in Common Shares), assets or cash (excluding regular
quarterly cash dividends) or of subscription rights, options or
warrants (other than those referred to above).
The number of outstanding Rights and the number of
Common Shares issuable upon exercise of each Right are also
subject to adjustment in the event of a stock split of the Common
Shares or a stock dividend on the Common Shares payable in Common
Shares or subdivisions, consolidations or combinations of the
Common Shares occurring, in any such case, prior to the
Distribution Date.
With certain exceptions, no adjustment in the Purchase
Price will be required until cumulative adjustments require an
adjustment of at least 1% in such Purchase Price. No fractional
Common Shares will be issued upon the exercise of any Right or
Rights. In lieu of fractions of a share equal to one-half of a
share or less, a cash payment will be made, as provided in the
Rights Agreement. No Rights may be exercised that would entitle
the holders to any fraction of a Common Share greater than one-
half of a share unless concurrently therewith such holder
purchases an additional fraction of a Common Share which, when
added to the number of Common Shares to be received upon such
exercise, equals an integral number of Common Shares, as provided
in the Rights Agreement.
At any time prior to such time as any Person becomes an
Acquiring Person, the Board of Directors of the Company may
redeem the Rights in whole, but not in part, at a price of $.005
per Right, subject to adjustment (the "Redemption Price").
Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights (or at such later
time as the Board of Directors may establish for the
effectiveness of such redemption), the Rights will terminate and
the only right of the holders of Rights will be to receive the
Redemption Price.
Until a Right is exercised, the holder thereof, as
such, will have no rights as a stockholder of the Company,
including, without limitation, the right to vote or to receive
dividends.
The terms of the Rights may be amended by the Company
and the Rights Agent, provided that following the Distribution
Date the amendment does not materially adversely affect the
interests of holders of Rights (other than an Acquiring Person)
and provided that no amendment shall be made which decreases the
Redemption Price.
A copy of the Rights Agreement is being filed with the
Securities and Exchange Commission as an Exhibit to a
Registration Statement on Form 8-A. A copy of the Rights
Agreement will be available free of charge from the Company. This
summary description of the Rights does not purport to be complete
B-4
W2-NY950580.191
<PAGE>
and is qualified in its entirety by reference to the Rights
Agreement, which is incorporated herein by reference.
B-5
W2-NY950580.191
<PAGE>
EXHIBIT 11-1
PENNSYLVANIA ENTERPRISES, INC.
Statement Re Computation of Per Share Earnings
for the Three-Month Period Ended March 31, 1995
[CAPTION]
[S] [C]
Income before subsidiary's preferred
stock dividends $ 2,656,000
Subsidiary's preferred stock dividends 691,000
Net income $ 1,965,000
Earnings per share of common stock $ .35
Computations of additional common shares
outstanding
Average shares of common stock 5,653,003
Incremental common shares applicable to
options, based on the daily average
market price -
Average common shares as adjusted 5,653,003
Average shares of common stock 5,653,003
Incremental common shares applicable to
options, based on the more dilutive of
daily average or ending market price 1,961
Average common shares fully diluted 5,654,964
Earnings per share of common stock
Average common shares as adjusted $ .35
Average common shares fully diluted $ .35
<PAGE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS STATEMENT CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET, STATEMENT OF INCOME AND CASH FLOW, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000077231
<NAME> PENNSYLVANIA ENTERPRISES INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 209,723,000
<OTHER-PROPERTY-AND-INVEST> 4,138,000
<TOTAL-CURRENT-ASSETS> 49,490,000
<TOTAL-DEFERRED-CHARGES> 43,149,000
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 503,298,000
<COMMON> 56,687,000
<CAPITAL-SURPLUS-PAID-IN> 49,207,000
<RETAINED-EARNINGS> 67,321,000
<TOTAL-COMMON-STOCKHOLDERS-EQ> 173,215,000
1,760,000
33,615,000
<LONG-TERM-DEBT-NET> 199,211,000
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 210,000
80,000
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 95,207,000
<TOT-CAPITALIZATION-AND-LIAB> 503,298,000
<GROSS-OPERATING-REVENUE> 68,237,000
<INCOME-TAX-EXPENSE> 4,462,000
<OTHER-OPERATING-EXPENSES> 53,870,000
<TOTAL-OPERATING-EXPENSES> 58,332,000
<OPERATING-INCOME-LOSS> 9,905,000
<OTHER-INCOME-NET> 254,000
<INCOME-BEFORE-INTEREST-EXPEN> 10,159,000
<TOTAL-INTEREST-EXPENSE> 3,799,000
<NET-INCOME> 2,656,000
691,000
<EARNINGS-AVAILABLE-FOR-COMM> 1,965,000
<COMMON-STOCK-DIVIDENDS> 3,109,000
<TOTAL-INTEREST-ON-BONDS> 18,891,000
<CASH-FLOW-OPERATIONS> 29,896,000
<EPS-PRIMARY> .35
<EPS-DILUTED> .35
</TABLE>
