PART I
ITEM l. BUSINESS
GENERAL
PG Energy Inc. ("PGE"), formerly known as Pennsylvania Gas and Water
Company, is a subsidiary of Pennsylvania Enterprises, Inc. ("PEI"). PGE,
incorporated in Pennsylvania in 1867 as Dunmore Gas & Water Company, is engaged
in the distribution of natural gas. Until February 16, 1996, when its water
utility operations were sold, PGE was also engaged in the distribution of water
(See "-Sale of Water Utility Operations."). PGE is regulated by the
Pennsylvania Public Utility Commission ("PPUC"). As of December 31, 1995, PGE
had approximately 141,800 gas customers and 133,400 water customers.
PGE's gas operating revenues are highly seasonal and depend on certain
factors that are beyond its control, such as the price of natural gas and the
availability of markets for natural gas. Other factors include the weather, the
effect of federal and state regulation, the effect of competition from other
forms of energy, including electricity and oil, and the switching of customers
from sales to transportation service. See "GAS BUSINESS-Transportation and
Storage Service."
As of December 31, 1995, PGE employed approximately 950 persons. However,
as a result of the sale of its water operations on February 16, 1996 (See "-Sale
of Water Utility Operations"), and the related transfer, early retirement and
displacement of certain employees, PGE employed only approximately 550 persons
as of March 1, 1996.
Sale of Water Utility Operations
On February 16, 1996, PGE sold its regulated water operations and certain
related assets to Pennsylvania-American Water Company ("Pennsylvania-American"),
a wholly-owned subsidiary of American Water Works Company, Inc. ("American"),
for approximately $413.5 million, consisting of $266.4 million in cash and the
assumption of $147.1 million of PGE's liabilities, including $141.1 million of
its long-term debt, subject to certain post-closing adjustments. (See Note 2,
Discontinued Operations, of the Notes to Financial Statements in Item 8 of this
Form 10-K). Until February 16, 1996, PGE continued to operate the water utility
business.
PEI and PGE are using the $209.1 million of cash proceeds from the sale,
after the payment of an estimated $56.7 million of federal and state income
taxes, to retire debt, to repurchase stock and for working capital purposes.
(See "Management's Discussion and Analysis of Financial Conditions and Results
of Operations-Liquidity and Capital Resources-Sale of Water Utility Operations"
in Item 7 of this Form 10-K). With the sale of PGE's water utility operations,
the principal assets of PGE now consist of its gas utility operations and
approximately 46,000 acres of land.
GAS BUSINESS
PGE distributes natural gas to an area in northeastern Pennsylvania lying
within the Counties of Lackawanna, Luzerne, Wyoming, Susquehanna, Columbia,
Montour, Northumberland, Lycoming, Union and Snyder, a territory that includes
116 municipalities, in addition to the cities of Scranton, Wilkes-Barre and
Williamsport. The total estimated population of PGE's natural gas service area,
based on the 1990 U.S. Census, is 561,000.
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Number and Type of Customers. At December 31, 1995, PGE had approximately
141,800 natural gas customers, from which it derived total natural gas revenues
of $152.8 million during 1995. The following chart shows a breakdown of the
types of customers and the percentages of gas revenues generated by each type of
customer in 1995:
[CAPTION]
Type of Customer % of Customers % of Revenues
[S] [C] [C]
Residential 91.4% 63.0%
Commercial 8.2 24.0*
Industrial 0.2 11.6*
Other Users 0.2 1.4
Total 100.0% 100.0%
* Includes the 4.6% of total gas revenues derived from interruptible
customers.
During 1995, PGE delivered an estimated total of 44,800,000 thousand cubic
feet ("MCF") of natural gas to its customers, of which 54.9% was sold at normal
tariff rates, 43.8% represented gas transported for customers and 1.3% was sold
under the Alternate Fuel Rate (as described below).
PGE sells gas to "firm" customers with the understanding that it will not
interrupt their supply except during periods of supply deficiency or emergency
conditions. "Interruptible" gas customers are required to have equipment
installed capable of using an alternate energy form. Interruptible customers,
therefore, do not require a continuous supply of gas and their supply can be
interrupted by PGE at any time under the conditions set forth in their contracts
for gas service. In 1995, a total of 1,142,000 MCF of natural gas was sold by
PGE to interruptible customers and 4,168,000 MCF was transported for such
customers, which together represented 11.9% of the total deliveries of natural
gas by PGE to its customers during 1995.
PGE's largest natural gas customer accounted for approximately 2.0% of its
operating revenues in 1995. No other customer accounted for as much as 2.0% of
such revenues in 1995.
Transportation and Storage Service. PGE provides transportation service to
natural gas customers who consume at least 5,000 MCF of natural gas per year,
meet certain other conditions and execute a transportation agreement. In
addition, groups of up to ten customers, with a combined consumption of at least
5,000 MCF per year, are eligible for transportation service. Prior to March 25,
1993, transportation service was only provided to individual customers, or
groups of not more than three customers, who consumed at least 50,000 MCF of
natural gas per year. Transportation service is provided on both a firm and an
interruptible basis and includes provisions regarding over and under deliveries
of gas on behalf of the respective customer. In addition, PGE offers firm
transportation customers a "storage service" pursuant to which such customers
may have gas delivered to PGE during the period from April through October for
storage and redelivery during the winter period. PGE also offers firm
transportation customers a "standby service" under the terms of which PGE will
supply the customer with gas in the event the customer's transportation service
is interrupted or curtailed by its broker, supplier or other third party.
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Since April, 1995, PGE has also offered a Market Sensitive Sales Service
("MSSS") in conjunction with its transportation service. The MSSS, which was
approved by Order of the PPUC entered January 11, 1995, provides for the sale of
natural gas at contracted rates based on market prices and other specified terms
and conditions. The MSSS results in additional sales of natural gas by PGE and
less transportation of natural gas by it on behalf of third parties. PGE sold
1,388,000 MCF under the MSSS during 1995, and expects to sell approximately
2,344,000 MCF under MSSS in 1996.
Set forth below is a summary of the gas transported by PGE and the number of
its customers using transportation service from 1993 to 1995:
[CAPTION]
Number Volume of Gas Transported (MCF)
of Interstate Pennsylvania
Year Customers Gas Gas Total
[S] [C] [C] [C] [C]
1995 480 14,543,000 5,054,000 19,597,000
1994 574 13,411,000 4,744,000 18,155,000
1993 569 10,078,000 4,627,000 14,705,000
During 1996, PGE expects to transport approximately 20,000,000 MCF of
natural gas, of which it anticipates approximately 5,100,000 MCF will be
Pennsylvania gas.
The decrease in 1995 in the number of customers using transportation service
was the result of PGE requiring such customers to install telemetering equipment
so that PGE could monitor the usage by those customers on a daily basis and
thereby determine if the appropriate quantities of natural gas were being
delivered for them. This requirement for telemetering equipment caused a number
of customers, for whom relatively small quantities of natural gas were being
transported, to revert to sales service.
The rates charged by PGE for the transportation of interstate gas are
essentially equal to its tariff rates for the sale of gas with all gas costs
removed. As a result, the transportation of interstate gas has had no
significant adverse effect on earnings. However, the rate charged for the
transportation of gas produced in Pennsylvania yields considerably less revenue
than the gross margin (gas operating revenues less the cost of gas) that would
be realized from sales under normal tariff rates. This lower rate for the
transportation of Pennsylvania gas is the result of regulations adopted by the
PPUC to encourage the production of natural gas within the state.
Alternate Fuel Sales. In order to be more competitive in terms of price
with certain alternate fuels, PGE offers an Alternate Fuel Rate for eligible
customers. This rate applies to large commercial and industrial accounts that
have the capability of using No. 2, 4 or 6 fuel oil or propane as an alternate
source of energy. Whenever the cost of such alternate fuel drops below the cost
of natural gas at PGE's normal tariff rates, PGE is permitted by the PPUC to
lower its price to these customers so that PGE can remain competitive with the
alternate fuel. However, in no instance may PGE sell gas under this special
arrangement for less than its average commodity cost of gas purchased during the
month. PGE's revenues under the Alternate Fuel Rate amounted to $2.0 million in
1995, $3.7 million in 1994 and $4.6 million in 1993. These revenues reflected
the sale of 603,000 MCF, 1,223,000 MCF and 1,541,000 MCF in 1995, 1994 and 1993,
respectively. It is anticipated that approximately 1,445,000 MCF will be sold
under the Alternate Fuel Rate in 1996. The change in volumes sold under the
Alternate Fuel Rate reflects the switching by certain customers between
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alternate fuel service and transportation service as a result of periodic
changes in the relative cost of natural gas and alternate fuels.
FERC Order 636. On April 8, 1992, the Federal Energy Regulatory Commission
("FERC") issued Order No. 636 ("Order 636"), requiring interstate pipeline
suppliers to restructure their services and operations in an attempt to enhance
competition and maximize the benefits of wellhead price decontrol. The
objectives of Order 636 were to be accomplished primarily by unbundling the
services (i.e., the sale, transportation and storage of gas) provided by the
interstate pipeline suppliers and by making those services available to end
users on the same terms as local gas distribution companies, such as PGE.
Pursuant to Order 636, the interstate pipelines have been required to: (1)
unbundle transportation service from sales service; (2) allocate sufficient
storage capacity, together with firm transportation, to replicate previous sales
services; (3) provide a no-notice transportation service; (4) provide open
access storage service; (5) reallocate upstream pipeline capacity and upstream
storage for the benefit of downstream interstate pipeline suppliers; and (6)
implement a straight fixed-variable rate design to replace all modified fixed-
variable rate designs. The interstate pipelines have been granted a blanket
sales certificate to make unbundled sales in competition with non-pipeline
merchants and are being permitted recovery of all reasonable and prudent
transition costs incurred in order to comply with Order 636. Such transition
costs include: (1) the cost of renegotiating existing gas supply contracts with
producers ("Gas Supply Realignment Costs"); (2) recovery of gas costs included
in the interstate pipelines' purchased gas adjustment accounts at the time they
adopted market-based pricing for gas sales ("Account 191 Costs"); (3)
unrecovered costs of assets that cannot be assigned to customers of unbundled
services ("Stranded Costs"); and (4) costs of new facilities to physically
implement Order 636 ("New Facility Costs"). Additionally, the interstate
pipelines have been allowed pre-granted abandonment of sales and transportation
services to customers upon expiration of applicable contracts, subject to
customers' rights of first refusal.
On October 15, 1993, the PPUC adopted an annual purchased gas cost ("PGC")
order (the "PGC Order") regarding the recovery of 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 filing
made with the PPUC by PGE and other larger local gas distribution companies.
As of February 1, 1994, PGE began to recover the Gas Transition Costs that
are being billed to PGE by its interstate pipelines through an increase in its
PGC rate. As of December 31, 1995, PGE had been billed a total of $1.3 million
of Gas Transition Costs by its interstate pipelines, which is the entire amount
of such billings that PGE expects. Of this amount, $858,000 was recovered by
PGE over a twelve-month period ended January 31, 1995, through an increase in
its PGC rate, $252,000 are being recovered by PGE in its annual PGC rate that
the PPUC has approved effective December 1, 1995, and the recovery of the
remaining $217,000 will be sought by PGE in its PGC rate that is effective
December 1, 1996.
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 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 Pennsylvania
Public Utility Code (the "Code"). By Order of the PPUC entered August 26, 1994,
PGE began recovering the Non-Gas Transition Costs that it estimates it will
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ultimately be billed pursuant to Order 636 through the billing of a surcharge to
its customers effective September 12, 1994. It is currently estimated that $9.6
million of Non-Gas Transition Costs will be billed to PGE, generally over a
four-year period extending through the fourth quarter of 1997, of which $6.1
million had been billed to PGE and $4.4 million had been recovered from its
customers as of December 31, 1995. PGE has recorded the estimated transition
costs that remained to be billed to it and the amounts remaining to be recovered
from its customers.
Sources of Supply. PGE purchases natural gas from marketers, producers, and
integrated energy companies, generally under the terms of supply arrangements
that extend for the heating season (i.e., November through March) or for periods
of one year or longer. These contracts typically provide for an adjustment each
month in the cost of gas purchased pursuant thereto based on the then current
market prices for natural gas. The largest individual supplier, an integrated
energy company, accounted for 20.8% of PGE's total purchases of natural gas in
1995. Two other suppliers accounted for 17.2% and 15.7% of PGE's total
purchases of natural gas in 1995. No other suppliers accounted for more than 7%
of PGE's purchases during 1995.
The purchases of natural gas by PGE during each of the years 1995, 1994 and
1993 are summarized below:
[CAPTION]
Volume Average
Year Purchased (MCF) Cost per MCF
[S] [C] [C]
1995 24,173,000 $2.62
1994 28,364,000 $2.82
1993 26,200,000 $2.98
During 1996, PGE expects to purchase a total of approximately 28,113,000 MCF
of natural gas under seasonal or longer-term contracts at a currently projected
average cost of $2.71 per MCF.
PGE presently has adequate supplies of natural gas to meet the demands of
existing customers through October, 1996, and PEI believes that PGE will be able
to obtain sufficient supplies to meet the demands of its existing customers and
to serve new customers (of which approximately 4,000 are expected to be added in
1996) beyond October, 1996.
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Pipeline Transportation and Storage Entitlements. Pursuant to the terms of
Order 636, PGE has entered into agreements with its former interstate pipeline
suppliers providing for the firm transportation by those pipelines on a daily
basis of the following quantities of gas:
[CAPTION]
Daily Percentage of Total
Expiration Transportation Transportation
Pipeline Date (a) Entitlement (MCF) Entitlement
[S] [C] [C] [C]
Transco Various through 2015 74,100 (b) 55.5%
Tennessee 1999 and 2000 48,252 36.2
Columbia 2004 11,016 8.3
133,368 100.0%
(a) Agreements are automatically extended from month-to-month or year-
to-year after their expiration unless notice of termination is given
by one of the parties and PGE agrees to such termination. In no
event may any of the agreements be unilaterally terminated by the
pipelines without the approval of the FERC.
(b) Includes 3,300 MCF per day that PGE can transport during the period
December through February pursuant to an agreement with Transco that
extends through 2011.
PGE has also contracted with its former interstate pipeline suppliers for
the following volumes of gas storage and storage withdrawals:
[CAPTION]
Maximum
Expiration Total Storage Daily Withdrawal
Pipeline Date (a) (MCF) (b) From Storage (MCF)
[S] [C] [C] [C]
Transco Various through 2013 6,500,000 131,044
Tennessee November 1, 2000 3,500,000 23,031
Columbia October 31, 2004 1,100,000 16,036
11,100,000 170,111
(a) Agreements are automatically extended from month-to-month or year-
to-year after their expiration unless notice of termination is given
by one of the parties and PGE agrees to such termination. In no
event may any of the agreements be unilaterally terminated by the
pipelines without the approval of the FERC.
(b) Storage is utilized in order to meet peak day and seasonal demands.
Based on its present pipeline transportation and storage entitlements, PGE
is entitled to a maximum daily delivery of the following quantities of gas:
[CAPTION]
Firm Pipeline Withdrawals
Transportation From Storage Percentage
Pipeline (MCF) (MCF) Total (MCF) of Total
[S] [C] [C] [C] [C]
Transco 74,100 (a) 131,044 205,144 67.6%
Tennessee 48,252 23,031 71,283 23.5
Columbia 11,016 16,036 27,052 8.9
133,368 170,111 303,479 100.0%
(a) Includes 3,300 MCF that may be transported during the period
December through February.
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In accordance with the provisions of Order 636, PGE may release to its
customers and other parties the portions of its firm pipeline transportation and
storage entitlements which are in excess of its requirements. Such releases may
be made upon notice in accordance with the provisions of Order 636 and for a
consideration not in excess of PGE's cost of the respective entitlement.
Releases may be made for periods ranging from one day to the remaining term of
the entitlement.
Since September 1, 1993, PGE has released portions of its firm pipeline
transportation capacity to certain of its customers and third parties for
varying periods extending up to three years. The maximum capacity so released
on any one day in 1995 was 65,213 MCF. Through March 1, 1996, PGE had not,
however, released any of its storage capacity.
PGE believes that it has sufficient firm pipeline transportation and storage
entitlements to meet the demands of its existing customers and to supply new
customers.
Peak Day Requirements. PGE plans for peak day demand on the basis of a
daily mean temperature of 0 degrees Fahrenheit. Requirements for such a design
peak day, assuming the curtailment of service to interruptible customers, are
currently estimated to be 302,906 MCF. Based upon present pipeline
transportation and storage contracts, and assuming no curtailments by its
suppliers, PGE could meet a peak day requirement of 303,479 MCF. PGE's historic
maximum daily sendout is 293,683 MCF, which occurred on January 19, 1994, when
service to interruptible customers and select industrial users was curtailed.
The mean temperature in its gas service area on that day was -8 degrees
Fahrenheit.
Construction Expenditures. PGE's construction expenditures for gas utility
plant in 1995 totaled $21.1 million and are estimated to be $28.9 million for
1996. The higher level of expenditures estimated for 1996 reflects various
system improvements to permit PGE to meet future customer demands, as well as an
increased emphasis on new business development.
Regulation. PGE's natural gas utility operations are regulated by the PPUC,
particularly as to utility rates, service and facilities, accounts, issuance of
certain securities, the encumbering or disposition of public utility properties,
the design, installation, testing, construction, and maintenance of PGE's
pipeline facilities and various other matters associated with broad regulatory
authority.
In addition to those regulations promulgated by the PPUC, PGE must also
comply with federal, state and local regulations relating generally to the
discharge of materials into the environment or otherwise relating to the
protection of the environment. Compliance with such regulations has not had any
material effect upon the capital expenditures, earnings or competitive position
of PGE's gas business. Although it cannot predict the future impact of these
regulations, PGE believes that any additional expenditures and costs made
necessary by them would be fully recoverable through rates.
PGE, like many gas distribution companies, once utilized manufactured gas
plants in connection with providing gas service to its customers. None of these
plants have been in operation since 1960, and several of the plant sites are no
longer owned by PGE. Pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), PGE filed notices with the
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
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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
laws, PGE does not believe that additional costs, if any, related to these
manufactured gas plant sites will be material to its financial position or
results of operations.
PGE's gas distribution and transportation activities are not subject to the
Natural Gas Act, as amended.
Valve Maintenance. On November 16, 1993, the PPUC staff issued an Emergency
Order, subsequently ratified by the PPUC (the "Emergency Order"), requiring PGE
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 PGE for complying with the
Emergency Order. PGE 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.
Rates. As required by the Code, PGE files an annual purchased gas cost rate
with the PPUC. This rate is designed to recover purchased gas costs for the
period it will be in effect. The procedure includes a process for the
reconciliation of actual gas costs incurred and actual revenues received and
also provides for the refund of any overcollections, plus interest thereon, or
the recoupment of any undercollections of gas costs. The procedure is limited
to purchased gas costs, to the exclusion of other rate matters, and requires a
formal evidentiary proceeding conducted by the PPUC, the submission of specific
information regarding gas procurement practices and specific findings of fact by
the PPUC regarding the "least cost fuel procurement" policies of the utility.
In accordance with this procedure, PGE placed a purchased gas cost rate of $2.75
per MCF in effect on December 1, 1995, and is required to file a proposed annual
purchased gas cost rate on or before June 1, 1996, to be effective December 1,
1996. It is not presently possible to estimate how this proposed rate will
compare to the current purchased gas cost rate of $2.75 per MCF, which is
scheduled to remain in effect through November 30, 1996. The annual changes in
gas rates on account of purchased gas costs have no effect on PGE's earnings
since the change in revenues is offset by a corresponding change in the cost of
gas.
Effective September 14, 1995, the PPUC adopted regulations that provide for
the quarterly adjustment of the annual purchased gas cost rate of larger gas
distribution companies, including PGE. Such adjustments are allowed when the
actual costs vary from the costs reflected in the respective company's tariffs
by 2% or more. Except for reducing the amount of any over or undercollections
of gas costs, these regulations will not have any material effect on PGE's
financial position or results of operations, and PGE will still be required to
file an annual purchased gas cost rate. As of March 1, 1996, no such quarterly
gas cost adjustments had been made to PGE's tariffs.
FERC Order 636, among other matters, requires that PGE contract for
sufficient gas supplies, pipeline capacity and storage for its annual needs.
These added responsibilities may result in increased scrutiny by the PPUC as to
the prudence of PGE's gas procurement and supply activities. Depending upon how
the PPUC views the cost effectiveness of such activities, PGE may not be
permitted to recover all of its gas supply costs in the rates charged to
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customers. However, although it cannot be certain, PGE believes that it will be
able to demonstrate to the PPUC the prudence of its gas supply costs and,
therefore, will be allowed to recover all such costs in its purchased gas cost
rate.
Tax Surcharge Adjustments. Regulations of the PPUC provide for PGE to apply
a state tax adjustment surcharge tariff to its bills for gas service to recoup
any increased taxes or passthrough any decreased taxes resulting from changes in
the law with respect to the Pennsylvania Capital Stock Tax, Corporate Net Income
Tax, Gross Receipts Tax or Public Utility Realty Tax. In accordance with such
procedure, PGE filed a revised state tax adjustment surcharge tariff with the
PPUC which became effective August 1, 1995, to reflect the effect of tax
legislation enacted by the Commonwealth of Pennsylvania on June 30, 1995,
decreasing the Corporate Net Income Tax rate.
WATER BUSINESS
Prior to the sale of its water operations to Pennsylvania-American on
February 16, 1996, PGE distributed water to an area lying within the Counties of
Lackawanna, Luzerne, Susquehanna and Wayne, which included the Cities of
Scranton and Wilkes-Barre and 63 other municipalities. The total estimated
population of the water service area, based on the 1990 U.S. Census, was
373,000.
Number and Type of Customers. At December 31, 1995, PGE had approximately
133,400 water customers from which it derived total water revenues of $66.3
million during 1995. The following chart shows a breakdown of the types of
customers and the percentages of water revenues they generated in 1995:
[CAPTION]
Type of Customer % of Customers % of Revenues
[S] [C] [C]
Residential 91.5% 63.0%
Commercial 7.2 18.6
Industrial 0.3 8.5
Municipal and Other Users 1.0 9.9
Total 100.0% 100.0%
Filtration of Water Supplies. All of PGE's water customers were supplied
with filtered water (except for several hundred who were supplied with ground
water from wells) which met all federal and state drinking water regulations.
The filtration of PGE's water supplies was performed at ten water treatment
plants, located throughout PGE's water service area, which had an aggregate
daily capacity of 101.1 million gallons.
Treatment and Testing of Water. All water entering PGE's distribution
system was filtered (except for the small quantity of ground water pumped from
wells), disinfected, and treated with chemicals to minimize corrosion of the
distribution system and customers' piping. Water samples were taken at each of
the intake stations and at selected locations in PGE's service area, and
turbidity was monitored at each location at which the water entered the
distribution system.
Construction Expenditures. PGE's construction expenditures for water
utility plant in 1995 totaled $15.3 million.
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ITEM 2. PROPERTIES
Gas. PGE's gas system consists of approximately 2,221 miles of distribution
lines, nine city gate and 67 major regulating stations and miscellaneous related
and additional property. PGE believes that its gas utility properties are
adequately maintained and in good operating condition in all material respects.
Continued expenditures will, however, be required with regard to PGE's on-going
valve maintenance program. See "Business-Gas Business-Valve Maintenance."
Most of PGE's gas utility properties are subject to a first mortgage lien
pursuant to the Indenture of Mortgage and Deed of Trust dated as of March 15,
1946, as supplemented by thirty supplemental indentures (collectively, the
"Indenture") from PGE to First Trust of New York, National Association, as
Trustee.
Water. Prior to the sale of its water operations to Pennsylvania-American
on February 16, 1996, PGE's water system consisted principally of 36 active and
standby reservoirs and stream intakes, ten water treatment plants, five wells,
various distribution system storage tanks, approximately 1,730 miles of
aqueducts and pipelines, related watershed land and miscellaneous other
property. Approximately 8,000 acres of land representing reservoir sites and
land adjacent to such reservoirs, as well as the location of various water
facilities, were also sold by PGE to Pennsylvania-American on February 16, 1996,
as part of the sale of its water operations.
Land. As of March 1, 1996, PGE owned approximately 46,000 acres of
undeveloped land situated in northeastern Pennsylvania.
ITEM 3. LEGAL PROCEEDINGS
There are no legal proceedings other than ordinary routine litigation
incidental to the business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At a special meeting held on October 11, 1995, PGE's preferred shareholders
approved the Asset Purchase Agreement among PEI, PGE, Pennsylvania-American and
American dated as of April 26, 1995, providing for the sale by PEI and PGE of
PGE's regulated water operations and certain related assets to Pennsylvania-
American for $413.5 million (including debt assumed), subject to certain
post-closing adjustments. The preferred shareholders cast 188,508 votes for
this proposal, 8,187 votes against it, and 5,541 abstained from voting on the
proposal. PGE's common shareholder, PEI, by executing a consent in lieu of a
special meeting, also approved the Asset Purchase Agreement on October 11, 1995.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Registrant's common stock is owned entirely by PEI and is not traded.
The dividends per share of common stock paid by PGE during the years ended
December 31, 1995 and 1994, were as follows:
[CAPTION]
1995 1994
[S] [C] [C]
First quarter $ .7050 $ .350
Second quarter .7075 .355
Third quarter .6400 .425
Fourth quarter .6900 .680
Total $2.7425 $ 1.810
Information relating to restriction on the payment of dividends by PGE is
set forth in Note 8 of the Notes to Financial Statements in Item 8 of this Form
10-K.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
DISCONTINUED OPERATIONS
On April 26, 1995, PEI and PGE 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 PGE's water utility
operations.
Under the terms of the agreement, Pennsylvania-American paid approximately
$413.5 million consisting of $266.4 million in cash and the assumption of $147.1
million of PGE's liabilities, including $141.1 million of its long-term debt, to
PGE on the February 16, 1996, closing date for the sale. This price is subject
to certain post-closing adjustments. PGE continued to operate the water utility
business until the closing date.
The sale price reflected a $6.5 million premium over the book value of the
assets being sold. However, after transaction costs and the net effect of other
items, principally the write-off of certain deferred regulatory assets and
deferred credits and the impact of pension and other postretirement benefit
expenses relative to the early retirement plan (see Note 10 of the Notes to
Financial Statements in Item 8 of this Form 10-K), the sale resulted in an
estimated after tax loss of $6.0 million, net of the expected income from the
water operations during the phase-out period (which for financial reporting
purposes was April 1, 1995, through February 15, 1996.)
The net cash proceeds from the sale of approximately $209.1 million, net of
an estimated $56.7 million payable for income taxes, are being used by PEI and
PGE to retire debt, to repurchase stock and for working capital for their
continuing operations. After the sale, the principal assets of PGE consist of
its gas utility operations and approximately 46,000 acres of land.
Operating revenues from water utility operations decreased $425,000 (0.6%)
from $66.7 million for 1994 to $66.3 million for 1995, primarily as a result of
a 1.2% decrease in consumption. Operating expenses related to the water utility
operations, excluding income taxes, increased $2.4 million (6.4%) from $36.7
million for 1994 to $39.0 million for 1995. This increase was principally
attributable to an increase in operation and maintenance expenses as a result of
higher levels of leak repairs and sludge removal costs in 1995 compared to 1994.
Income taxes with respect to the water utility operations decreased by $983,000
(14.4%) from $6.9 million in 1994 to $5.9 million in 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 decreased $1.8 million (7.8%) from $23.2 million for 1994 to $21.4
million for 1995. After allocated interest and other charges (see Note 2 of the
Notes to Financial Statements in Item 8 of this Form 10-K), the income from the
water utility operations decreased $1.8 million (16.7%) from $10.5 million in
1994 to $8.7 million in 1995.
Operating revenues from water utility operations increased by $13.4 million
(25.1%) from $53.4 million in 1993 to $66.7 million in 1994. This increase in
revenues was principally the result of various rate increases allowed by the
PPUC during 1993. Operating expenses related to the water utility operations,
excluding income taxes, increased $3.6 million (11.0%) from $33.1 million in
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1993 to $36.7 million in 1994. The major reasons for this increase were a $1.8
million (29.8%) increase in depreciation expense (primarily because of capital
additions and the change in December, 1993, from a 4% compound interest to a
straight-line method of depreciation with respect to certain water plant) and a
$1.9 million increase in other operating expenses, largely as a result of
increased payroll and other postemployment benefit costs, the effects of which
were partially offset by a decrease in the amortization of rate case expense.
Income taxes with respect to the water utility operations increased by $3.9
million from $2.9 million in 1993 to $6.9 million in 1994 due to a higher level
of income before income taxes (for this purpose, operating income net of
interest charges). As a result of the foregoing, operating income of the water
utility operations increased $5.8 million (33.6%) from $17.4 million in 1993 to
$23.2 million in 1994. After allocated interest charges (see Note 2 of the
Notes to Financial Statements in Item 8 of this Form 10-K), the income from the
water utility operations increased $2.6 million (32.8%) from $7.9 million in
1993 to $10.5 million in 1994.
In accordance with generally accepted accounting principles, PGE's financial
statements for the periods prior to 1995 were restated to reflect PGE's water
utility operations as "discontinued operations" effective March 31, 1995, and
the following sections of Management's Discussion and Analysis generally relate
only to PGE's continuing gas utility operations. For additional information
regarding the discontinued operations, see Note 2 of the Notes to Financial
Statements in Item 8 of this Form 10-K.
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RESULTS OF CONTINUING OPERATIONS
The following table expresses certain items in PGE's statements of income as
percentages of operating revenues for each of the calendar years ended December
31, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
Percentage of Operating Revenues
Year Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
OPERATING REVENUES........................... 100.0% 100.0% 100.0%
Cost of gas................................ 55.3 58.7 56.5
OPERATING MARGIN............................. 44.7 41.3 43.5
OTHER OPERATING EXPENSES:
Operation.................................. 14.7 13.5 14.2
Maintenance................................ 3.2 2.6 2.4
Depreciation............................... 4.6 4.0 4.2
Income taxes............................... 3.4 3.4 3.9
Taxes other than income taxes.............. 6.5 6.4 6.5
Total other operating expenses........... 32.4 29.9 31.2
OPERATING INCOME............................. 12.3 11.4 12.3
OTHER INCOME (DEDUCTIONS), NET............... 0.2 - (0.4)
INTEREST CHARGES............................. (7.0) (5.9) (6.4)
INCOME FROM CONTINUING OPERATIONS............ 5.5 5.5 5.5
INCOME (LOSS) WITH RESPECT TO DISCONTINUED
OPERATIONS................................. (2.5) 6.3 5.1
NET INCOME................................... 3.0 11.8 10.6
DIVIDENDS ON PREFERRED STOCK(1).............. 1.8 2.8 4.2
EARNINGS APPLICABLE TO COMMON STOCK.......... 1.2% 9.0% 6.4%
</TABLE>
(1) None of the dividends on preferred stock has been allocated to the
discontinued operations.
o Year Ended December 31, 1995, compared with year ended December 31, 1994
Operating Revenues. Operating revenues decreased $15.2 million (9.1%) from
$168.0 million for 1994 to $152.8 million for 1995. This decrease was primarily
the result of a reduction in the gas cost rate effective May 16, 1995. See "-
Rate Matters." Also contributing to the decrease in revenues was the switching
of certain commercial and industrial customers from sales to transportation
service and a 179 million cubic feet (0.8%) decrease in sales to residential and
commercial heating customers, caused by a 133 (2.2%) decrease in heating degree
days. There were 6,029 heating degree days (95.8% of normal) during 1995
compared to 6,162 (97.9% of normal) during 1994.
Cost of Gas. The cost of gas decreased $14.3 million (14.5%) from $98.7
million for 1994 to $84.4 million for 1995, primarily because of the
aforementioned reduction in the gas cost rate effective May 16, 1995. See "-
Rate Matters." Also contributing to the decrease was the reduced consumption by
residential and commercial heating customers.
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Operating Margin. The operating margin decreased $955,000 (1.4%) from $69.3
million in 1994 to $68.4 million in 1995, primarily because of the 179 million
cubic feet (0.8%) decrease in consumption by residential and commercial heating
customers. However, as a percentage of operating revenues, the margin increased
from 41.3% in 1994 to 44.7% in 1995 primarily as a result of the 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 $749,000
(1.5%) from $50.2 million for 1994 to $49.5 million for 1995. This decrease was
partially the result of a $481,000 (8.5%) decrease in income taxes from $5.6
million in 1994 to $5.2 million in 1995 due to a decrease in income before
income taxes (for this purpose, operating income net of interest charges) and a
reduction in the Pennsylvania corporate net income tax rate. Also contributing
to the decrease in other operating expenses was a slightly lower level of
operation expenses, which declined $214,000 (0.9%), and an $889,000 (8.2%)
decrease in taxes other than income taxes, primarily because of a decrease in
gross receipts tax as a result of the lower level of operating revenues. The
effect of the decreases in taxes and operation expenses was partially offset by
a $531,000 (12.0%) increase in maintenance expenses, principally as a result of
charges relative to the maintenance of gas valves, and a $304,000 (4.6%)
increase in depreciation expense as a result of additions to utility plant.
Notwithstanding the decrease in other operating expenses, such expenses
increased as a percentage of operating revenues from 29.9% during 1994 to 32.4%
during 1995 because of the relatively greater decrease in revenues.
Operating Income. As a result of the above, total operating income
decreased $206,000 (1.1%) from $19.1 million for 1994 to $18.9 million for 1995.
However, as a percentage of total operating revenues, operating income increased
from 11.4% in 1994 to 12.3% in 1995, primarily because of the decrease in the
cost of gas as a percentage of operating revenues.
Other Income (Deductions), Net. Other income (deductions), net increased
$229,000 from $72,000 in 1994 to $301,000 in 1995, primarily as a result of a
$227,000 write-off of expired advances related to income taxes and a $226,000
decrease in amortization of preferred stock issuance costs.
Interest Charges. Interest charges increased by $855,000 (8.6%) from $9.9
million for 1994 to $10.8 million for 1995. This increase was largely
attributable to interest on overcollections of purchased gas costs and increased
interest on long-term debt.
Income From Continuing Operations. Income from continuing operations
decreased $832,000 (8.9%) from $9.3 million for 1994 to $8.5 million for 1995.
This decrease was largely the result of the matters discussed above, principally
the decrease in 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 the lower levels of taxes.
Net Income. The decrease in net income of $15.2 million (76.6%) from $19.8
million for 1994 to $4.6 million for 1995 was largely the result of the
estimated loss (equivalent to $1.04 per share) on the disposal of PGE's water
utility operations, as discussed above. Also contributing to the decrease in
net income was the lower income from continuing operations.
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Dividends on Preferred Stock. Dividends on preferred stock decreased $1.9
million (40.4%) from $4.6 million for 1994 to $2.8 million for 1995, as a result
of the redemption by PGE 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 were allocated to the discontinued
operations.
Earnings Applicable to Common Stock. The decrease in earnings applicable to
common stock of $13.3 million from $15.2 million for 1994 to $1.9 million for
1995, as well as the decrease in earnings per share of common stock of $2.40
from $2.73 per share for 1994 (after a $.19 per share charge for the premium on
redemption of preferred stock) to $.33 per share for 1995, were largely the
result of the estimated loss (equivalent to $1.04 per share) on the disposal of
PGE's water utility operations, as discussed above. Also contributing to the
decreases in earnings applicable to common stock and earnings per share for 1995
was the lower income from continuing operations. The effects of these factors
were partially offset by the reduced dividends on preferred stock and, in the
case of earnings per share, the absence of any premium on the redemption of
subsidiary's preferred stock.
o Year ended December 31, 1994, compared with year ended December 31, 1993
Operating Revenues. Operating revenues increased by $14.7 million (9.6%)
from $153.3 million for 1993 to $168.0 million for 1994, primarily as a result
of a price increase averaging 19.0% (designed to total $28.8 million on an
annual basis) effective December 1, 1993, due to increased costs of purchased
gas. See "-Rate Matters-Rate Filings." Also contributing to the increase in
operating revenues in 1994 was a 224 million cubic feet (1.0%) increase in sales
to residential and commercial heating customers. This increase was attributable
to the addition of approximately 2,200 new customers and occurred despite
heating degree days that were 2.1% lower than normal and 0.3% less than in 1993.
Additionally, the implementation of surcharges to recover FERC Order 636
transition costs (as more fully discussed below under "-Rate Matters-Rate
Filings") acted to increase gas operating revenues by $1.8 million in 1994. The
effects of the price increase and the surcharges on operating revenues were
partially offset by the switching of certain commercial and industrial customers
from sales to transportation service and a price decrease averaging 1.1%
(designed to total $1.8 million on an annual basis) effective December 1, 1994,
due to decreased costs of purchased gas, see"-Rate Matters-Rate Filings."
Cost of Gas. The cost of gas increased $12.1 million (14.0%) from $86.6
million for 1993 to $98.7 million for 1994. The effect of this increase, which
was the result of higher costs for purchased gas and the implementation of
surcharges to recover FERC Order 636 transition costs, see "-Rate Matters-Rate
Filings", was partially offset by a 9.0% (2.6 billion cubic feet) decrease in
the volume of gas sold during 1994 compared to 1993. This decreased volume was
largely attributable to the aforementioned switching of certain customers from
sales to transportation service.
Operating Margin. The operating margin increased $2.6 million or 3.9% from
$66.8 million in 1993 to $69.3 million in 1994, primarily as a result of the
increased sales to residential and commercial heating customers. However, as a
percentage of operating revenues, the margin decreased from 43.5% in 1993 to
41.3% in 1994 primarily because of the increased cost of purchased gas.
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Other Operating Expenses. Other operating expenses increased $2.2 million
(4.7%) from $48.0 million for 1993 to $50.2 million for 1994. This increase was
largely attributable to a $729,000 increase in gross receipts tax as a result of
the higher level of gas revenues, an $855,000 increase in operation expenses
(primarily because of a $285,000 increase in payroll costs and increased
provisions for uncollectible accounts of $603,000) and a $741,000 increase in
maintenance expenses (principally as a result of a $319,000 increase in payroll
costs and a $146,000 increase in maintenance of gas mains and services
attributable to the extremely cold weather experienced in January and February,
1994). Income taxes decreased by $392,000 (6.5%) from $6.0 million in 1993 to
$5.6 million in 1994 due to a lower level of income before income taxes (for
this purpose, operating income net of interest charges). Notwithstanding the
increase in other operating expenses, such expenses decreased as a percentage of
operating revenues, from 31.2% during 1993 to 29.9% during 1994 because of the
relatively greater increase in operating revenues.
Operating Income. As a result of the above, total operating income
increased by $336,000 (1.8%) from $18.8 million for 1993 to $19.1 million for
1994. However, as a percentage of operating revenues, operating income
decreased from 12.3% in 1993 to 11.4% in 1994 primarily as a result of the
increase in the cost of gas as a percentage of operating revenues.
Other Income (Deductions), Net. Other income (deductions), net increased
$657,000 from a deduction of $585,000 in 1993 to income of $72,000 in 1994,
primarily as a result of a $409,000 gain ($268,000 net of related income taxes)
on the sale of PGE's interest in an oil and gas joint venture, a $254,000
increase ($145,000 net of related income taxes) in gains on the sale of land and
other property and a $239,000 decrease in the net interest expense associated
with the unexpended portion of the proceeds from the issuance of certain debt
held in a construction fund.
Income from Continuing Operations. Income from continuing operations
increased $910,000 (10.8%) from $8.4 million for 1993 to $9.3 million for 1994.
This increase was the result of the matters discussed above, principally the
increase in operating margin resulting from the higher level of sales to
residential and commercial heating customers, the effect of which was partially
offset by the increase in other operating expenses.
Net Income. Net income increased $3.5 million (21.5%) from $16.3 million
for 1993 to $19.8 million for 1994. The increased earnings in 1994 were the
result of a $2.6 million increase in income from discontinued operations and the
matters discussed above relating to the continuing operations, principally the
increase in operating margin resulting primarily from the higher level of sales
to residential and commercial heating customers and the increase in other income
(deductions), net. The effects of these factors were partially offset by the
increase in other operating expenses.
Dividends on Preferred Stock. Dividends on preferred stock decreased $1.8
million (28.2%) from $6.5 million for 1993 to $4.6 million for 1994, primarily
as a result of the redemption by PGE on December 23, 1993, of 100,000 shares
($10.0 million), and on May 31, 1994, of 150,000 shares ($15.0 million), of its
9.50% Cumulative Preferred Stock, $100 par value. No dividends on preferred
stock have been allocated to the discontinued operations.
Earnings Applicable to Common Stock. Earnings applicable to common stock
increased $5.3 million (54.2%) from $9.8 million for 1993 to $15.2 million for
1994. The increased earnings in 1994 were the result of a $2.6 million increase
in income from discontinued operations and the matters discussed above relating
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to the continuing operations, principally the increase in operating margin
resulting primarily from the higher level of sales to residential and commercial
heating customers, the increase in other income (deductions), net and the
decrease in preferred stock dividends. The effects of these factors were
partially offset by the increase in other operating expenses.
Before the $534,000 premium paid on the redemption of 150,000 shares of
PGE's 9.50% Cumulative Preferred Stock on May 31, 1994, and the $446,000 premium
paid on the redemption of 150,000 shares of PGE's 8.90% Cumulative Preferred
Stock on December 16, 1994, the earnings per share of common stock increased
$.56 (23.7%) from $2.36 per share for 1993 to $2.92 per share for 1994. This
improvement was the result of the 54.2% increase in earnings applicable to
common stock and occurred despite a 24.3% increase in the weighted average
number of shares outstanding during 1994 primarily as a result of PGE's sale of
834,000 shares of common stock to PEI on October 27, 1993. While premiums on
the redemption of preferred stock are charged to retained earnings and are not a
determinant of earnings applicable to common stock, the premiums associated with
any redemptions occurring subsequent to January 20, 1994, must be taken into
account in calculating the earnings per share of common stock. As a
consequence, the premiums on the redemption of the 150,000 shares of PGE's 9.50%
Cumulative Preferred Stock and the 150,000 shares of PGE's 8.90% Cumulative
Preferred Stock acted to reduce PGE's earnings per share for 1994 by $.19 per
share, resulting in earnings of $2.73 per share of common stock for the year, an
increase of $.37 per share (15.7%) over the earnings of $2.36 per share for the
year ended December 31, 1993.
RATE MATTERS
Annual Gas Cost Adjustment. Pursuant to the provisions of the Pennsylvania
Public Utility Code (the "Code") which require that the tariffs of larger gas
distribution companies, such as PGE, be adjusted on an annual basis to reflect
changes in their purchased gas costs, the PPUC, by Order adopted November 10,
1994, authorized PGE to decrease the gas costs contained in its tariffs 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, by Order adopted May 11, 1995, the PPUC authorized PGE
to decrease the gas costs contained in its gas tariffs to $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 1995. This change in gas rates on account of
purchased gas costs was designed to produce a decrease in revenue of $8.2
million from its effective date through December 1, 1995. Additionally, by
Order adopted November 9, 1995, the PPUC authorized PGE to increase its gas cost
rate to $2.75 per thousand cubic feet effective December 1, 1995. This change
in gas rates on account of purchased gas costs is designed to produce a $9.6
million increase in annual revenue. The changes in gas rates on account of
purchased gas costs have no effect on PGE's earnings since the changes in
revenue are offset by corresponding changes in the cost of gas.
Quarterly Gas Cost Adjustment. Effective September 14, 1995, the PPUC
adopted regulations that provide for the quarterly adjustment of the annual
purchased gas cost rate of larger gas distribution companies, including PGE.
Such adjustments are allowed when the actual purchased gas costs vary from the
estimated costs reflected in the respective company's tariffs by 2% or more.
Except for reducing the amount of any over or undercollections of gas costs,
these regulations will not have any material effect on PGE's financial position
or results of operations, and PGE will still be required to file an annual
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purchased gas cost rate with such regulations. As of March 1, 1996, no such
quarterly gas cost adjustments had been made to PGE's tariffs.
Recovery of FERC 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 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 PGE 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 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.
PGE was billed a total of $1.3 million of Gas Transition Costs by its
interstate pipelines. Of this amount, $858,000 was recovered by PGE over a
twelve-month period ended January 31, 1995, through an increase in its PGC rate,
$252,000 are being recovered by PGE in its annual PGC rate that the PPUC has
approved effective December 1, 1995, and the recovery of the remaining $217,000
will be sought by PGE in its PGC rate that is effective December 1, 1996.
By Order of the PPUC entered August 26, 1994, PGE 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 $9.6 million of Non-Gas
Transition Costs will be billed to PGE, generally over a four-year period
extending through the fourth quarter of 1997, of which $6.1 million had been
billed to PGE and $4.4 million had been recovered from its customers as of
December 31, 1995. PGE 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.
Effects of Inflation. When utility property reaches the end of its useful
life and must be replaced, PGE will incur replacement costs in amounts that due
to the effects of inflation would materially exceed either the original cost or
the accrued depreciation of such property as reflected on its books of account.
However, the cost of such replacement property would be includable in PGE's rate
base, and PGE would be entitled to recover depreciation expense and earn a
return thereon, to the extent that its investment in such property was prudently
incurred and the property is used and useful in furnishing public utility
service.
LIQUIDITY AND CAPITAL RESOURCES
Sale of Water Utility Operations
On February 16, 1996, PGE sold its regulated water operations and certain
related assets to Pennsylvania-American for approximately $413.5 million,
consisting of $266.4 million in cash and the assumption of $147.1 million of
PGE's liabilities, including $141.1 million of its long-term debt, subject to
certain adjustments.
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PGE is using the $209.1 million of cash proceeds from the sale, after the
payment of an estimated $56.7 million of federal and state income taxes, to
retire debt, to repurchase stock and for working capital purposes. In this
regard, PGE repurchased 2,297,297 shares of its common stock from PEI for an
aggregate consideration of $85.0 million, repaid its $50.0 million term loan due
1996 and repaid all of its outstanding bank borrowings on February 16, 1996.
Additionally, PGE temporarily invested $67.0 million of the proceeds from the
sale pending the use of such funds for (i) repayment on March 8, 1996, of PGE's
$30.0 million principal amount 10.125% promissory note (the "10.125% Promissory
Note") which was issued to PEI as a common stock dividend on February 16, 1996,
(proceeds from the repayment of the 10.125% Promissory Note will be used by PEI
for the defeasance of the $30.0 million principal amount of PEI's 10.125% Senior
Notes on June 17, 1996), (ii) the repurchase of an estimated 225,000 shares of
PGE's 9% cumulative preferred stock in April, 1996, for an estimated aggregate
consideration of $25.0 million including related expenses, (iii) the repurchase
of an estimated 80,000 shares of PGE's 4.10% cumulative preferred stock in
April, 1996, for an estimated aggregate consideration of $4.2 million including
related expenses and (iv) for other working capital purposes. Because the
repurchases of PGE's 9% and 4.10% cumulative preferred stock will involve
voluntary sales by the holders of the respective securities, the number and cost
of the shares actually purchased may vary from that estimated depending on
market conditions at the time of the repurchases.
With the repayment of its term loan and all its bank borrowings on February
16, 1996, and the availability of the cash proceeds from the sale of its
regulated water operations that have been temporarily invested, PGE terminated
its $60.0 million bank credit agreement and one additional bank line of credit
under which $3.0 million was available for borrowing by PGE. PGE has retained
and currently has four bank lines of credit with an aggregate borrowing capacity
of $17.5 million (See "-Liquidity"), which is deemed adequate for its immediate
needs. However, PGE plans to arrange additional bank lines of credit as the
proceeds from the sale of its water utility operations are fully utilized and as
it requires further borrowing capacity.
Liquidity
The primary capital needs of PGE are the funding of its construction program
and the seasonal funding of its gas purchases and increases in customer accounts
receivable. PGE's revenues are highly seasonal and weather-sensitive, with
approximately 75% of its revenues normally 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 PGE'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 PGE to use bank borrowings to fund
such expenditures, pending the periodic issuance of stock and long-term debt.
Bank borrowings are also used by PGE 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, PGE has made arrangements for a total of $17.5 million
of unsecured revolving bank credit and plans to arrange additional bank lines of
credit as its needs require (See "-Sale of Water Utility Operations").
Specifically, PGE currently has four bank lines of credit with an aggregate
borrowing capacity of $17.5 million which provide for borrowings at interest
rates generally less than prime. Borrowings outstanding under these bank lines
of credit are due and payable at various dates during 1996, the earliest of
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which is March 31, 1996. As of March 1, 1996, PGE had no borrowings outstanding
under these bank lines of credit.
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PGE believes that it will be able to raise in a timely manner such funds as
are required for its future construction expenditures, refinancings and other
working capital requirements.
Long-Term Debt and Capital Stock Financings
PGE periodically engages 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. Set forth below is a
summary of such financings, exclusive of interim bank borrowings, the 10.125%
Promissory Note and indebtedness that was assumed by Pennsylvania-American in
connection with its purchase of PGE's water utility operations, consummated by
PGE since the beginning of 1994.
On May 31, 1994, PGE issued 500,000 shares of its common stock to PEI for
aggregate net proceeds of $20.0 million. PGE used a portion of the proceeds it
so received to redeem $15.0 million of its 9.50% Cumulative Preferred Stock and
to fund the $534,375 premium in connection with such redemption. The remaining
$4.5 million of proceeds were used by PGE to repay a portion of its bank
borrowings and for working capital purposes.
On July 28, 1994, PEI implemented a Customer Stock Purchase Plan (the
"Customer Plan") which provided the residential customers of PGE with a method
of purchasing newly-issued shares of PEI's common stock at a 5% discount from
the market price. The proceeds from the issuance of shares through the Customer
Plan were used by PEI to purchase PGE common stock. PGE realized $2.4 million
and $1.7 million from the issuance of common stock to PEI in connection with the
Customer Plan during 1995 and 1994, respectively. Effective May 9, 1995, PEI
suspended the Customer Plan because of the significant reduction in PEI's and
PGE's capital requirements resulting from the sale of PGE's water utility
operations to Pennsylvania-American.
Through PEI's Dividend Reinvestment and Stock Purchase Plan (the "DRP"),
holders of shares of PEI's common stock may reinvest cash dividends and/or make
cash investments in common stock of PEI. The DRP was amended on May 5, 1994, to
provide PEI's shareholders with a method of reinvesting cash dividends and
making cash investments to purchase newly-issued shares of PEI's common stock at
a 5% discount from the market price. Prior to such amendment, cash dividends
were reinvested at 100% of the market price in newly-issued shares and cash
investments were used to purchase shares of PEI's common stock on the open
market. PEI uses the proceeds from the DRP to purchase PGE common stock.
During 1995, 1994 and 1993, PGE realized $3.3 million, $1.8 million and
$465,000, respectively, from the issuance of common stock to PEI in connection
with the DRP. Effective May 9, 1995, PEI suspended the cash investment feature
of the DRP and the 5% discount from the market price on the reinvestment of
dividends under the DRP because of the significant reduction in PEI's and PGE's
capital requirements resulting from the sale of PGE's water utility operations
to Pennsylvania-American.
On October 12, 1995, PGE borrowed $50.0 million under a term loan agreement.
The proceeds from the term loan, along with other funds provided by PGE, were
utilized on October 13, 1995, to redeem the $50.0 million principal amount of
PGE's 9.57% Series First Mortgage Bonds due September 1, 1996, in connection
with the then-pending sale of PGE's water utility operations to Pennsylvania-
American.
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<PAGE>
Construction Expenditures and Related Financings
Expenditures for the construction of utility plant totaled $21.1 million,
$19.6 million and $15.1 million in 1995, 1994 and 1993, respectively. Such
expenditures were financed with internally-generated funds and bank borrowings,
pending the periodic issuance of stock and long-term debt.
PGE currently estimates that its capital expenditures will total $28.9
million, $24.8 million and $25.3 million, respectively, for 1996, 1997 and 1998.
It is anticipated that such expenditures will be financed with internally
generated funds and bank borrowings, pending the periodic issuance of stock and
long-term debt.
Current Maturities of Long-Term Debt and Preferred Stock
As of December 31, 1995, $115.8 million of PGE's long-term debt and
preferred stock was required to be repaid within twelve months. The entire
$115.8 million of PGE's long-term debt, which consisted of borrowings of $60.0
million under its revolving bank credit agreement, $5.8 million under three
additional bank lines of credit and $50.0 under its term loan, had been repaid
by February 16, 1996, primarily with proceeds from the sale of PGE's water
utility operations (See "Sale of Water Utility Operations").
Forward-Looking Statements
Certain statements made above relating to plans, conditions, objectives and
economic performance go beyond historical information and may provide an
indication of future results. To that extent, they are forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934, and each is subject to factors that could cause actual results to differ
from those in the forward-looking statement.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements of PGE and the report of independent public
accountants thereon are presented on pages 23 through 47 of this Form 10-K.
-23-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To PG Energy Inc.:
We have audited the accompanying balance sheets and statements of capitalization
of PG Energy Inc. ("PGE"), formerly known as Pennsylvania Gas and Water Company
(a Pennsylvania corporation and a wholly-owned subsidiary of Pennsylvania
Enterprises, Inc.) as of December 31, 1995 and 1994, and the related statements
of income, common shareholder's investment, and cash flows for each of the three
years in the period ended December 31, 1995. These financial statements are the
responsibility of PGE's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of PG Energy Inc. as of December
31, 1995 and 1994, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. Supplemental Schedule II, Valuation and Qualifying
Accounts for the three-year period ended December 31, 1995 (see index of
financial statements) is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subject to the auditing procedures applied
in the audit of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
New York, N.Y.
February 23, 1996
-24-
<PAGE>
PG ENERGY INC.
BALANCE SHEETS
December 31,
1995* 1994*
[CAPTION]
(Thousands of Dollars)
ASSETS
[S] [C] [C]
UTILITY PLANT:
At original cost, less acquisition
adjustments of $386,000 $295,895 $284,080
Accumulated depreciation (76,882) (74,408)
219,013 209,672
OTHER PROPERTY AND INVESTMENTS 5,089 2,872
CURRENT ASSETS:
Cash 328 304
Accounts receivable -
Customers 18,189 15,676
Others 815 1,474
Reserve for uncollectible accounts (781) (921)
Accrued utility revenues 10,319 9,004
Materials and supplies, at average cost 2,609 2,743
Gas held by suppliers, at average cost 15,140 20,025
Natural gas transition costs collectible 4,612 4,708
Deferred cost of gas and supplier refunds, net - 3,767
Prepaid expenses and other 3,281 1,470
54,512 58,250
DEFERRED CHARGES:
Regulatory assets
Deferred taxes collectible 30,015 31,696
Natural gas transition costs collectible 497 4,099
Other 2,516 3,131
Unamortized debt expense 1,340 1,867
Other - 3,552
34,368 44,345
NET ASSETS OF DISCONTINUED OPERATIONS 204,250 203,196
TOTAL ASSETS $517,232 $518,335
* See Note 2 regarding discontinued operations and restatement of financial
statements.
The accompanying notes are an integral part of the financial statements.
-25-
<PAGE>
PG ENERGY INC.
BALANCE SHEETS
[CAPTION]
December 31,
1995* 1994*
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
[S] [C] [C]
CAPITALIZATION (see accompanying statements):
Common shareholder's investment (Notes 5 and 8) $208,356 $216,032
Preferred stock of PGE (Note 6) -
Not subject to mandatory redemption, net 33,615 33,615
Subject to mandatory redemption 1,680 1,760
Long-term debt (Note 7) 55,000 170,825
298,651 422,232
CURRENT LIABILITIES:
Current portion of long-term debt and
preferred stock subject to mandatory
redemption (Notes 6, 7 and 9) 115,881 3,290
Note payable (Note 9) 10,000 -
Accounts payable -
Suppliers 17,781 16,762
Affiliates, net 826 788
Deferred cost of gas and supplier refunds, net 434 -
Accrued general business and realty taxes 1,542 3,381
Accrued income taxes 516 3,185
Accrued interest 2,062 2,713
Accrued natural gas transition costs (Note 3) 2,278 2,356
Other 3,162 2,395
154,482 34,870
DEFERRED CREDITS:
Deferred income taxes 48,848 46,627
Accrued natural gas transition costs (Note 3) 1,144 3,250
Unamortized investment tax credits 4,938 5,110
Operating reserves 3,709 2,383
Other 5,460 3,863
64,099 61,233
COMMITMENTS AND CONTINGENCIES (Notes 11 and 12)
TOTAL CAPITALIZATION AND LIABILITIES $517,232 $518,335
* See Note 2 regarding discontinued operations and restatement of financial
statements.
The accompanying notes are an integral part of the financial statements.
-26-
<PAGE>
PG ENERGY INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
1995* 1994* 1993*
(Thousands of Dollars)
<S> <C> <C> <C>
OPERATING REVENUES $ 152,756 $ 167,992 $ 153,325
Cost of gas 84,372 98,653 86,557
OPERATING MARGIN 68,384 69,339 66,768
OTHER OPERATING EXPENSES:
Operation 22,438 22,652 21,797
Maintenance 4,967 4,436 3,695
Depreciation 6,971 6,667 6,388
Income taxes 5,168 5,649 6,041
Taxes other than income taxes 9,918 10,807 10,055
Total other operating expenses 49,462 50,211 47,976
OPERATING INCOME 18,922 19,128 18,792
OTHER INCOME (DEDUCTIONS), NET (Note 4) 301 72 (585)
INCOME BEFORE INTEREST CHARGES 19,223 19,200 18,207
INTEREST CHARGES:
Interest on long-term debt 9,304 8,914 8,615
Other interest 1,543 1,005 1,247
Allowance for borrowed funds used
during construction (94) (21) (47)
Total interest charges 10,753 9,898 9,815
INCOME FROM CONTINUING OPERATIONS 8,470 9,302 8,392
DISCONTINUED OPERATIONS (Note 2):
Income from discontinued operations 2,127 10,504 7,909
Estimated loss on disposal of discontinued
operations, net of anticipated income
during the phase-out period of $7,409,000
(net of related income taxes of $4,800,000) (5,961) - -
Income (loss) with respect to discontinued
operations (3,834) 10,504 7,909
NET INCOME 4,636 19,806 16,301
DIVIDENDS ON PREFERRED STOCK 2,763 4,639 6,462
EARNINGS APPLICABLE TO COMMON STOCK $ 1,873 $ 15,167 $ 9,839
COMMON STOCK:
Earnings (loss) per share of common stock:
Continuing operations $ 1.02 $ .90 $ .46
Discontinued operations (.69) 2.02 1.90
Income before premium on redemption of
preferred stock .33 2.92 2.36
Premium on redemption of preferred stock - (.19) -
Earnings per share of common stock $ .33 $ 2.73 $ 2.36
-27-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 5,569,765 5,189,108 4,176,087
</TABLE>
* See Note 2 regarding discontinued operations and restatement of financial
statements.
The accompanying notes are an integral part of the financial statements.
-28-
<PAGE>
PG ENERGY INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
1995* 1994* 1993*
(Thousands of Dollars)
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Income from continuing operations $ 8,470 $ 9,302 $ 8,392
Effects of noncash charges to income -
Depreciation 7,018 6,693 6,413
Deferred income taxes, net (265) 725 (2,492)
Provisions for self insurance 2,652 1,030 1,510
Other, net 5,190 2,755 2,185
Changes in working capital, exclusive of cash
and current portion of long-term debt -
Receivables and accrued utility revenues (3,309) 1,546 (1,495)
Gas held by suppliers 4,885 6,625 (5,038)
Accounts payable 839 (5,609) (515)
Deferred cost of gas and supplier refunds, net 5,715 5,784 (13,307)
Other current assets and liabilities, net (6,622) (658) 1,293
Other operating items, net 2,675 (4,020) (3,988)
Net cash provided (used) by continuing
operations 27,248 24,173 (7,042)
Net cash provided (used) by discontinued
operations 3,764 552 (837)
Net cash provided (used) by operating
activities 31,012 24,725 (7,879)
CASH FLOW FROM INVESTING ACTIVITIES:
Additions to utility plant (20,615) (16,960) (14,011)
Other, net (4,934) 1,098 201
Net cash used for investing activities (25,549) (15,862) (13,810)
CASH FLOW FROM FINANCING ACTIVITIES:
Issuance of common stock 5,720 23,439 32,366
Redemption of preferred stock (80) (30,080) (10,080)
Dividends on common and preferred stock (18,032) (14,244) (18,398)
Issuance of long-term debt 50,000 30,000 19,000
Repayment of long-term debt (53,535) (31,055) (30,678)
Repayment of note payable to parent - (3,680) -
Net increase in bank borrowings 10,519 15,370 32,247
Other, net (31) (1,023) (624)
Net cash provided (used) for financing
activities (5,439) (11,273) 23,833
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 24 (2,410) 2,144
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 304 2,714 570
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 328 $ 304 $ 2,714
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest (net of amount capitalized) $ 23,802 $ 21,001 $ 21,092
Income taxes $ 8,694 $ 7,353 $ 6,790
* See Note 2 regarding discontinued operations and restatement of financial
statements.
</TABLE>
-29-
<PAGE>
The accompanying notes are an integral part of the financial statements.
-30-
<PAGE>
PG ENERGY INC.
STATEMENTS OF CAPITALIZATION
<TABLE>
<CAPTION>
December 31,
1995* 1994*
(Thousands of Dollars)
<S> <C> <C>
COMMON SHAREHOLDER'S INVESTMENT (Notes 5 and 8):
Common stock, no par value
(stated value $10 per share)
Authorized - 15,000,000 shares
Outstanding - 5,602,480 shares and
5,456,665 shares, respectively $ 56,025 $ 54,567
Additional paid-in capital 94,463 90,201
Retained earnings 57,868 71,264
Total common shareholders' investment 208,356 69.8% 216,032 51.2%
PREFERRED STOCK of PGE, par value $100 per share
Authorized - 997,500 shares (Note 6):
Not subject to mandatory redemption, net -
4.10% cumulative preferred,
100,000 shares issued 10,000 10,000
9% cumulative preferred,
250,000 shares outstanding, net of
issuance costs 23,615 23,615
Total preferred stock not subject to
mandatory redemption, net 33,615 11.2% 33,615 8.0%
Subject to mandatory redemption -
5.75% cumulative preferred, 17,600 and
18,400 shares outstanding, respectively 1,760 1,840
Less current redemption requirements (80) (80)
Total preferred stock subject to
mandatory redemption 1,680 0.6% 1,760 0.4%
LONG-TERM DEBT (Note 7):
First mortgage bonds 55,000 108,535
Notes 115,801 65,500
Less current maturities and sinking
fund requirements (115,801) (3,210)
Total long-term debt 55,000 18.4% 170,825 40.4%
TOTAL CAPITALIZATION $ 298,651 100.0% $ 422,232 100.0%
* See Note 2 regarding discontinued operations and restatement of financial
statements.
The accompanying notes are an integral part of the financial statements.
-31-
</TABLE>
<PAGE>
PG ENERGY INC.
STATEMENTS OF COMMON SHAREHOLDER'S INVESTMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
[CAPTION]
Additional
Common Paid-In Retained
Stock Capital Earnings Total
(Thousands of Dollars)
[S] [C] [C] [C] [C]
Balance at December 31, 1992 $40,187 $ 48,776 $ 69,135 $158,098
Net income for 1993 - - 16,301 16,301
Issuance of common stock 8,500 23,866 - 32,366
Premium on redemption of
preferred stock - - (356) (356)
Dividends on:
Preferred stock (Note 6) - - (6,462) (6,462)
Common stock ($2.8225 per share) - - (11,936) (11,936)
Balance at December 31, 1993 48,687 72,642 66,682 188,011
Net income for 1994 - - 19,806 19,806
Issuance of common stock 5,880 17,559 - 23,439
Premium on redemption of preferred
stock - - (980) (980)
Dividends on:
Preferred stock (Note 6) - - (4,639) (4,639)
Common stock ($1.81 per share) - - (9,605) (9,605)
Balance at December 31, 1994 54,567 90,201 71,264 216,032
Net income for 1995 - - 4,636 4,636
Issuance of common stock 1,458 4,262 - 5,720
Dividends on:
Preferred stock (Note 6) - - (2,763) (2,763)
Common stock ($2.7425 per share) - - (15,269) (15,269)
Balance at December 31, 1995 $56,025 $ 94,463 $ 57,868 $208,356
The accompanying notes are an integral part of the financial statements.
-32-
<PAGE>
PG ENERGY INC.
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of the Business. PG Energy Inc. ("PGE"), formerly known as
Pennsylvania Gas and Water Company, a wholly-owned subsidiary of Pennsylvania
Enterprises, Inc. ("PEI"), is a regulated public utility subject to the
jurisdiction of the Pennsylvania Public Utility Commission ("PPUC") for rate and
accounting purposes. PGE distributes natural gas to a ten-county area in
northeastern Pennsylvania, a territory that includes 116 municipalities, in
addition to the cities of Scranton, Wilkes-Barre and Williamsport. The
financial statements of PGE have been prepared in accordance with generally
accepted accounting principles, including the provisions of Financial Accounting
Standards Board ("FASB") Statement 71, "Accounting for the Effects of Certain
Types of Regulation," which give recognition to the rate and accounting
practices of regulatory agencies such as the PPUC.
Use of Accounting Estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. These estimates involve judgments with respect to,
among other things, various future economic factors which are difficult to
predict and are beyond the control of PEI. Therefore, actual amounts could
differ from these estimates.
Utility Plant and Depreciation. Utility plant is stated at cost, which
represents the original cost of construction, including payroll, administrative
and general costs, and an allowance for funds used during construction.
The allowance for funds used during construction ("AFUDC") is defined as the
net cost during the period of construction of borrowed funds used and a
reasonable rate upon other funds when so used. Such allowance is charged to
utility plant and reported as a reduction of interest expense (with respect to
the cost of borrowed funds) in the accompanying statements of income. AFUDC
varies according to changes in the level of construction work in progress and in
the sources and costs of capital. The weighted average rate for such allowance
was approximately 8% in 1995, 7% in 1994 and 8% in 1993.
PGE provides for depreciation on a straight-line basis. Exclusive of
transportation and work equipment, the annual provision for depreciation, as
related to the average depreciable original cost of utility plant, was 2.75% in
1995, 2.77% in 1994 and 2.81% in 1993, respectively.
When depreciable property is retired, the original cost of such property is
removed from the utility plant accounts and is charged, together with the cost
of removal less salvage, to accumulated depreciation. No gain or loss is
recognized in connection with retirements of depreciable property, other than in
the case of significant involuntary conversions or extraordinary retirements.
Revenues and Cost of Gas. PGE bills its customers monthly based on
estimated or actual meter readings on cycles that extend throughout the month.
The estimated unbilled amounts from the most recent meter reading dates through
the end of the period being reported on are recorded as accrued revenues.
-33-
<PAGE>
PGE generally passes on to its customers increases or decreases in gas costs
from those reflected in its tariff charges. In accordance with this procedure,
PGE defers any current under or over-recoveries of gas costs and collects or
refunds such amounts in subsequent periods.
Deferred Charges (Regulatory Assets). PGE generally accounts for and
reports its costs in accordance with the economic effect of rate actions by the
PPUC. To this extent, certain costs are recorded as deferred charges pending
their recovery in rates. These amounts relate to previously-issued orders of
the PPUC and are of a nature which, in the opinion of PEI, will be recoverable
in future rates, based on such rate orders. In addition to deferred taxes
collectible, which represent the probable future rate recovery of the previously
unrecorded deferred taxes primarily relating to certain temporary differences in
the basis of utility plant not previously recorded because of the regulatory
rate practices of the PPUC, and natural gas transition costs collectible, the
following deferred charges are included as "Other" regulatory assets:
[CAPTION]
1995 1994
[S] [C] [C]
Early retirement plan charges $ 710 $ 756
Low income usage reduction program 429 441
Computer software costs 415 1,006
Corrosion control costs 341 489
Customer assistance program 109 5
Other 512 434
Total $ 2,516 $ 3,131
PGE also records, as deferred charges, the direct financing costs incurred
in connection with the issuance of long-term debt and redeemable preferred stock
and equitably amortizes such amounts over the life of such securities.
Cash and Cash Equivalents. For the purposes of the statements of cash
flows, PGE considers all highly liquid debt instruments purchased, which
generally have a maturity of three months or less, to be cash equivalents. Such
instruments are carried at cost, which approximates market value.
-34-
<PAGE>
Income Taxes. PGE provides for deferred taxes in accordance with the
provisions of FASB Statement 109. The components of PGE's net deferred income
tax liability relative to continuing operations as of December 31, 1995 and
1994, are shown below:
[CAPTION]
1995 1994
(Thousands of Dollars)
[S] [C] [C]
Utility plant basis differences $51,822 $49,638
FERC Order 636 transition costs 700 1,371
Alternative minimum tax (1,947) (2,213)
Operating reserves (1,300) (1,020)
Other (427) (1,149)
Net deferred income tax liability $48,848 $46,627
The provision for income taxes relative to continuing operations consists of
the following components:
[CAPTION]
1995 1994 1993
(Thousands of Dollars)
[S] [C] [C] [C]
Included in operating expenses:
Currently payable -
Federal $ 4,457 $ 3,013 $ 5,641
State 1,169 1,128 2,021
Total currently payable 5,626 4,141 7,662
Deferred, net -
Federal 198 1,785 (515)
State (463) (105) (934)
Total deferred, net (265) 1,680 (1,449)
Amortization of investment tax credits (193) (172) (172)
Total included in operating expenses 5,168 5,649 6,041
Included in other income, net:
Currently payable -
Federal 135 213 (44)
State 43 85 (28)
Total currently payable 178 298 (72)
Deferred, net -
Federal - (5) (6)
State - - -
Total deferred, net - (5) (6)
Total included in other income, net 178 293 (78)
Total provision for income taxes $ 5,346 $ 5,942 $ 5,963
-35-
<PAGE>
The components of deferred income taxes relative to continuing operations,
which are recorded consistent with the treatment allowed by the PPUC for
ratemaking purposes, are as follows:
[CAPTION]
1995 1994 1993
(Thousands of Dollars)
[S] [C] [C] [C]
Excess of tax depreciation over
depreciation for accounting purposes $ 1,587 $ 1,197 $ 1,023
FERC Order 636 transition costs (670) 1,371 -
Take-or-pay costs, net (281) (652) (1,126)
Other, net (901) (241) (1,352)
Total deferred taxes, net $ (265) $ 1,675 $(1,455)
Included in:
Operating expenses $ (265) $ 1,680 $(1,449)
Other income, net - (5) (6)
Total deferred taxes, net $ (265) $ 1,675 $(1,455)
The total provision for income taxes relative to continuing operations shown
in the accompanying statements of income differs from the amount which would be
computed by applying the statutory federal income tax rate to income before
income taxes. The following table summarizes the major reasons for this
difference:
[CAPTION]
1995 1994 1993
(Thousands of Dollars)
[S] [C] [C] [C]
Income before income taxes $13,816 $15,293 $14,428
Tax expense at statutory federal
income tax rate $ 4,836 $ 5,353 $ 5,050
Increases (reductions) in taxes
resulting from -
State income taxes, net of
federal income tax benefit 487 879 878
Amortization of investment tax
credits (193) (172) (172)
Other, net 216 (118) 207
Total provision for income taxes $ 5,346 $ 5,942 $ 5,963
Long Lived Assets. In March 1995, FASB Statement 121, "Accounting for the
Impairment of Long-Lived Assets", was issued. The provisions of this statement,
which are effective for fiscal years beginning after September 15, 1995, require
that long-lived assets, identifiable intangibles, capital leases and goodwill be
reviewed for impairment whenever events occur or changes in circumstances
indicate that the carrying amount of the assets may not be recoverable. In
addition, FASB Statement 121 requires that regulatory assets meet the recovery
criteria of FASB Statement 71, "Accounting for Effects of Certain Types of
Regulation", on an ongoing basis in order to avoid a writedown. The
implementation of FASB Statement 121 in 1996 is not expected to have any
significant impact on PGE since the carrying amount of all assets, including
regulatory assets, is considered recoverable.
-36-
<PAGE>
(2) DISCONTINUED OPERATIONS
On April 26, 1995, PEI and PGE 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 PGE's water utility
operations.
Under the terms of the Agreement, Pennsylvania-American paid approximately
$413.5 million consisting of $266.4 million in cash and the assumption of $147.1
million of PGE's liabilities, including $141.1 million of its long-term debt, to
PGE on the February 16, 1996, closing date for the transaction. This price is
subject to certain post-closing adjustments. PGE continued to operate the water
utility business until the closing date.
The sale price reflects a $6.5 million premium over the book value of the
assets sold. However, after transaction costs and the net effect of other
items, principally the write-off of certain deferred regulatory assets and
deferred credits and the impact of pension and other postretirement benefit
expenses relative to the early retirement plan (see Note 10 of the Notes to
Financial Statements), the sale resulted in an estimated after tax loss of $6.0
million, net of the expected income from the water operations during the phase-
out period (which for financial reporting purposes was April 1, 1995, through
February 15, 1996). The sale involved a gain for income tax purposes, primarily
because of the accelerated depreciation that had been claimed by PGE with
respect to the water utility plant that was sold. It is estimated that the
income taxes payable on the sale, for which deferred income taxes had previously
been provided, will be approximately $56.7 million.
The net cash proceeds from the sale of approximately $209.1 million, net of
the estimated $56.7 million payable for income taxes, are being used by PEI and
PGE to retire debt, to repurchase stock and for working capital for their
continuing operations. With the sale of PGE's water utility operations, the
principal assets of PGE consist of its gas utility operations and approximately
46,000 acres of land.
The accompanying financial statements reflect PGE's water utility operations
as "discontinued operations" effective March 31, 1995. Interest charges
relating to indebtedness of PGE have been allocated to the discontinued
operations based on the relationship of the gross water utility plant that was
sold to the total of PGE's gross gas and water utility plant. This is the same
method as was utilized by PGE and the PPUC in establishing the revenue
requirements of both PGE's gas and water utility operations. None of the
dividends on PGE's preferred stock nor any of PEI's interest expense has been
allocated to the discontinued operations.
-37-
<PAGE>
Selected financial information for the discontinued operations as of
December 31, 1995 and 1994, and for the years ended December 31, 1995, 1994 and
1993 is set forth below:
Net Assets of Discontinued Operations
[CAPTION]
As of December 31,
1995 1994
(Thousands of Dollars)
[S] [C] [C]
Net utility plant $ 368,742 $ 359,399
Current assets (primarily accounts
receivable and accrued revenues) 12,756 12,141
Deferred charges and other assets 25,752 31,103
Total assets being acquired by
Pennsylvania-American 407,250 402,643
Liabilities being assumed by
Pennsylvania-American
Long-term debt 141,097 141,420
Other 5,983 13,168
147,080 154,588
Net assets being acquired by
Pennsylvania-American 260,170 248,055
Estimated liability for income taxes on
sale of discontinued operations (56,710) (55,542)
Estimated net income of discontinued operations
during the remainder of the phase-out period 790 -
Other net assets of discontinued operations
(written off as of March 31, 1995) - 10,683
Total net assets of discontinued operations $ 204,250 $ 203,196
Income From Discontinued Operations
[CAPTION]
Years ended December 31,
1995* 1994 1993
(Thousands of Dollars)
[S] [C] [C] [C]
Operating revenues $ 15,640 $ 66,731 $ 53,363
Operating expenses, excluding income taxes
Depreciation 1,946 7,672 5,911
Other operating expenses 6,929 29,005 27,140
8,875 36,677 33,051
Operating income before income taxes 6,765 30,054 20,312
Income taxes 1,403 6,850 2,948
Operating income 5,362 23,204 17,364
Other income 9 49 71
Allocated interest charges (3,244) (12,749) (9,526)
Income from discontinued operations $ 2,127 $ 10,504 $ 7,909
* Reflects amounts only through March 31, 1995, the effective date of the
discontinuance of PGE's water utility operations for financial statement
purposes.
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Net Cash Provided (Used) by Discontinued Operations
[CAPTION]
Years ended December 31,
1995* 1994 1993
(Thousands of Dollars)
[S] [C] [C] [C]
Income from discontinued operations $ 2,127 $ 10,504 $ 7,909
Noncash charges (credits) to income:
Depreciation 1,946 7,672 5,911
Deferred treatment plant costs, net 145 581 (3,560)
Deferred income taxes 447 5,146 4,170
Deferred water utility billings - (5,574) (582)
Changes in working capital, exclusive
of long-term debt 1,648 353 (2,041)
Additions to utility plant (2,276) (20,980) (32,515)
Utilization of restricted funds - 9,753 15,868
Net increase (decrease) in long-term
debt 1,010 (6,834) 1,640
Other, net (1,283) (69) 2,363
Net cash provided (used) for discontinued
operations $ 3,764 $ 552 $ (837)
* Reflects amounts only through March 31, 1995, the effective date of the
discontinuance of PGE's water utility operations for financial statement
purposes.
(3) RATE MATTERS
Annual Gas Cost Adjustment. Pursuant to the provisions of the Pennsylvania
Public Utility Code, which require that the tariffs of gas distribution
companies, such as PGE, be adjusted on an annual basis, and on an interim basis
when circumstances dictate, to reflect changes in their purchased gas costs, the
PPUC ordered PGE to make the following changes during 1995, 1994 and 1993 to the
gas costs contained in its gas tariff rates:
[CAPTION]
Change in Calculated
Effective Rate per MCF Increase (Decrease)
Date From To in Annual Revenue
[S] [C] [C] [C]
December 1, 1995 $2.42 $2.75 $ 9,600,000
May 15, 1995 3.68 2.42 (8,200,000)
December 1, 1994 3.74 3.68 (1,800,000)
December 1, 1993 2.79 3.74 28,800,000
The changes in gas rates on account of purchased gas costs have no effect on
PGE's earnings since the change in revenue is offset by a corresponding change
in the cost of gas.
Quarterly Gas Cost Adjustment. Effective September 14, 1995, the PPUC
adopted regulations that provide for the quarterly adjustment of the annual
purchased gas cost rate of larger gas distribution companies, including PGE.
Such adjustments are allowed when the actual purchased gas costs vary from the
estimated costs reflected in the respective company's tariffs by 2% or more.
Except for reducing the amount of any over or undercollections of gas costs,
these regulations will not have any material effect on PGE's financial position
or results of operations, and PGE will still be required to file an annual
purchased gas cost rate. As of March 1, 1996, no such quarterly gas cost
adjustments had been made to PGE's tariffs.
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Recovery of FERC 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 Account 191 and New Facility Costs (the "Gas
Transition Costs") are subject to recovery through the annual PGC rate filing.
PGE was billed a total of $1.3 million of Gas Transition Costs by its interstate
pipelines. Of this amount, $858,000 was recovered by PGE over a twelve-month
period ended January 31, 1995, through an increase in its PGC rate, $252,000 are
being recovered by PGE in its annual PGC rate that the PPUC approved effective
December 1, 1995, and the recovery of the remaining $217,000 will be sought by
PGE in its PGC rate that is effective December 1, 1996.
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 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 Pennsylvania
Public Utility Code. By Order of the PPUC entered August 26, 1994, PGE 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 $9.6
million of Non-Gas Transition Costs will be billed to PGE, generally over a
four-year period extending through the fourth quarter of 1997, of which $6.1
million had been billed to PGE and $4.4 million had been recovered from its
customers as of December 31, 1995. PGE 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) OTHER INCOME (DEDUCTIONS), NET
Other income (deductions), net was comprised of the following elements:
[CAPTION]
1995 1994 1993
(Thousands of Dollars)
[S] [C] [C] [C]
Write-off of expired advances relating
to income taxes, net of related
income taxes $ 227 $ - $ -
Net interest income (expense) with respect
to proceeds from the issuance of debt
held in a construction fund 30 (91) (330)
Gain on sale of investment in joint
venture, net of related income taxes - 268 -
Gain on sale of land and other property,
net of related income taxes - 165 20
Premium on retirement/defeasance of debt (7) (40) (81)
Amortization of preferred stock issuance
costs, net of related income tax
benefits (1) (227) (126)
Other 52 (3) (68)
Total $ 301 $ 72 $ (585)
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(5) COMMON STOCK
Since January 1, 1993, PGE has issued the following amounts of common stock
to PEI, its parent company, in addition to shares issued in connection with
PEI's Dividend Reinvestment and Stock Purchase Plan and Customer Stock Purchase
Plan:
[CAPTION]
Issuance Price
Date Issued Number of Shares Per Share* Aggregate
[S] [C] [C] [C]
October 27, 1993 834,000 $ 38.25 $31.9 million
May 31, 1994 500,000 $ 40.00 $20.0
Total 1,334,000 $51.9 million
* Approximately equal to the book value of PGE's common stock at the date of
issuance.
The proceeds from the shares issued on October 27, 1993, were used to repay
bank borrowings which had been incurred primarily to finance construction
expenditures. The proceeds from the shares issued on May 31, 1994, were used by
PGE to redeem $15.0 million of its 9.50% 1988 series cumulative preferred stock,
to fund the $534,375 premium in connection with such redemption, to repay a
portion of its bank borrowings and for working capital purposes.
On July 28, 1994, PEI implemented a Customer Stock Purchase Plan (the
"Customer Plan") which provides the residential customers of PGE with a method
of purchasing newly-issued shares of PEI common stock at a 5% discount from the
market price. PEI uses proceeds from the issuance of shares through the
Customer Plan to purchase common stock of PGE. PGE realized $2.4 million and
$1.7 million from the issuance of common stock to PEI in connection with the
Customer Plan during 1995 and 1994, respectively. Effective May 9, 1995, the
Customer Plan was suspended because of the significant reduction in PEI's and
PGE's capital requirements resulting from the sale of PGE's water utility
operations to Pennsylvania-American.
Through PEI's Dividend Reinvestment and Stock Purchase Plan ("DRP"), holders
of shares of PEI common stock may reinvest cash dividends and/or make cash
investments in the common stock of PEI. The DRP was amended on May 5, 1994, to
provide PEI's shareholders with a method of reinvesting cash dividends and
making cash investments to purchase newly-issued shares of PEI's common stock at
a 5% discount from the market price. Prior to such amendment, cash dividends
were reinvested at 100% of the market price in newly-issued shares and cash
investments were used to purchase shares of PEI common stock on the open market.
PEI uses the proceeds from the DRP to purchase common stock of PGE. During
1995, 1994 and 1993, PGE realized $3.3 million, $1.8 million and $465,000,
respectively, from the issuance of common stock to PEI in connection with the
DRP. Effective May 9, 1995, the cash investment feature of the DRP and the 5%
discount from the market price on the reinvestment of dividends under the DRP
were suspended because of the significant reduction in PEI's and PGE's capital
requirements resulting from the sale of PGE's water utility operations to
Pennsylvania-American.
(6) PREFERRED STOCK
Preferred Stock Subject to Mandatory Redemption
On December 23, 1993, PGE redeemed 100,000 shares of its 9.50% 1988 series
cumulative preferred stock at a price of $103.5625 per share (plus accrued
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dividends to the redemption date), which included a voluntary redemption premium
of $3.5625 per share ($356,250 in the aggregate). On May 31, 1994, PGE redeemed
the remaining 150,000 outstanding shares of its 9.50% 1988 series cumulative
preferred stock, $100 par value, at a price of $103.5625 per share, which
included a voluntary redemption premium of $3.5625 per share ($534,375 in the
aggregate), plus accrued dividends.
On December 16, 1994, PGE redeemed all 150,000 shares of its 8.90%
cumulative preferred stock at a price of $102.97 per share, which included a
voluntary redemption premium of $2.97 per share ($445,500 in the aggregate).
The holders of the 5.75% cumulative preferred stock have a noncumulative
right each year to tender to PGE and to require it to purchase at a per share
price not exceeding $100, up to (a) that number of shares of the 5.75%
cumulative preferred stock which can be acquired for an aggregate purchase price
of $80,000 less (b) the number of such shares which PGE may already have
purchased during the year at a per share price of not more than $100. Eight
hundred such shares were acquired and cancelled by PGE in each of the three
years in the period ended December 31, 1995, for an aggregate purchase price in
each year of $80,000.
As of December 31, 1995, the sinking fund requirements relative to PGE's
5.75% cumulative preferred stock (the only series of preferred stock subject to
mandatory redemption that was outstanding as of such date) were $80,000 for each
of the years 1996 through 2000.
At PGE's option, the 5.75% cumulative preferred stock may currently be
redeemed at a price of $102.00 per share ($1,795,200 in the aggregate).
Preferred Stock Not Subject to Mandatory Redemption
On August 18, 1992, PGE issued 250,000 shares of its 9% cumulative preferred
stock, par value $100 per share, for aggregate net proceeds of approximately
$23.6 million. The 9% cumulative preferred stock is not redeemable by PGE prior
to September 15, 1997. Thereafter, it is redeemable at the option of PGE, in
whole or in part, upon not less than 30 days' notice, at $100 per share plus
accrued dividends to the date of redemption and at a premium of $8 per share if
redeemed from September 15, 1997, to September 14, 1998, and a premium of $4 per
share if redeemed from September 15, 1998, to September 14, 1999.
At PGE's option, the 4.10% cumulative preferred stock may currently be
redeemed at a redemption price of $105.50 per share or for an aggregate
redemption price of $10,550,000.
Dividend Information
The dividends on the preferred stock of PGE in each of the three years in
the period ended December 31, 1995, were as follows:
[CAPTION]
Series 1995 1994 1993
(Thousands of Dollars)
[S] [C] [C] [C]
4.10% $ 410 $ 410 $ 410
5.75% 103 108 113
8.90% - 1,280 1,335
9.00% 2,250 2,250 2,250
9.50% 1988 series - 591 2,354
Total $2,763 $4,639 $6,462
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Dividends on all series of PGE's preferred stock are cumulative, and if
dividends in an amount equivalent to four full quarterly dividends on all shares
of preferred stock then outstanding are in default and until all such dividends
have been paid, the holders of the preferred stock, voting separately as one
class, shall be entitled to elect a majority of the Board of Directors of PGE.
Additionally, PGE may not declare dividends on its common stock if any dividends
on shares of preferred stock then outstanding are in default.
(7) LONG-TERM DEBT
Long-term debt consisted of the following components at December 31, 1995
and 1994:
[CAPTION]
1995 1994
(Thousands of Dollars)
[S] [C] [C]
First mortgage bonds -
8 % Series, due 1997 $ - $ 3,535
8.375% Series, due 2002 30,000 30,000
9.23 % Series, due 1999 10,000 10,000
9.34 % Series, due 2019 15,000 15,000
9.57 % Series, due 1996 - 50,000
55,000 108,535
Notes -
Term loan, due 1996 50,000 -
Bank borrowings, at weighted average interest
rates of 6.62% and 5.28%, respectively (Note 9) 65,801 65,500
115,801 65,500
Less current maturities and sinking
fund requirements (115,801) (3,210)
Total long-term debt $ 55,000 $ 170,825
On October 12, 1995, PGE borrowed $50.0 million pursuant to a term loan
agreement, which matures on November 1, 1996. Proceeds from the loan, along
with other funds provided by PGE, were utilized on October 13, 1995, to redeem
the $50.0 million principal amount of PGE's 9.57% Series First Mortgage Bonds
due September 1, 1996.
Maturities and Sinking Fund Requirements. As of December 31, 1995, the
aggregate annual maturities and sinking fund requirements of long-term debt for
each of the next five years ending December 31, were:
[CAPTION]
Year Amount
[S] [C]
1996 $115,801,000 (a)
1997 $ -
1998 $ -
1999 $ 10,000,000 (b)
2000 $ -
(a) Includes $65.8 million of bank borrowings outstanding as of December 31,
1995, and PGE's term loan in the principal amount of $50.0 million.
Such amounts were repaid by February 16, 1996, primarily with proceeds
from the sale of PGE's water operations to Pennsylvania-American.
(b) Includes PGE's 9.23% Series First Mortgage Bonds in the principal amount
of $10.0 million due September 1, 1999.
(8) DIVIDEND RESTRICTIONS
The preferred stock provisions of PGE's Restated Articles of Incorporation
and certain of the agreements under which PGE has issued long-term debt provide
for certain dividend restrictions. As of December 31, 1995, $5,416,000 of the
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retained earnings of PGE were restricted against the payment of cash dividends
on common stock under the most restrictive of these covenants.
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(9) BANK NOTES PAYABLE
As of April 19, 1993, PGE entered into a revolving bank credit agreement, as
subsequently amended (the "Credit Agreement") with a group of six banks under
the terms of which $60.0 million was available for borrowing by PGE through May
31, 1996. The Credit Agreement was terminated on February 26, 1996, following
the sale of PGE's water operations to Pennsylvania-American on February 16,
1996, and repayment of all borrowings outstanding under the Credit Agreement
with proceeds from such sale. The interest rate on borrowings under the Credit
Agreement was generally less than prime. The Credit Agreement also required the
payment of a commitment fee of .195% per annum on the average daily amount of
the unused portion of the available funds. PGE currently has four additional
bank lines of credit with an aggregate borrowing capacity of $17.5 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
$2.5 million and $5.0 million mature on May 31, 1996, and June 30, 1996,
respectively. Borrowings outstanding under the other two bank lines of credit
with borrowing capacities of $3.0 million and $7.0 million mature on March 31,
1996, and May 31, 1996, respectively. As of March 1, 1996, PGE had no
borrowings outstanding under these additional bank lines of credit.
Additionally, PGE had one other bank line of credit outstanding as of December
31, 1995, with a borrowing capacity of $3.0 million, which was terminated
following the sale of PGE's water operations. The commitment fees paid by PGE
with respect to its revolving bank credit agreements totaled $26,000 in 1995,
$97,000 in 1994 and $113,000 in 1993.
Because of limitations imposed by the terms of its preferred stock, PGE is
prohibited, without the consent of the holders of a majority of the outstanding
shares of its preferred stock, from issuing more than $12.0 million of unsecured
debt due on demand or within one year from issuance. PGE had $10.0 million due
on demand or within one year from issuance outstanding as of December 31, 1995.
Information relating to PGE's bank lines of credit and borrowings under
those lines of credit is set forth below:
[CAPTION]
As of December 31,
1995 1994 1993
(Thousands of Dollars)
[S] [C] [C] [C]
Borrowings under lines of credit
Short-term $ 10,000 $ - $ 2,000
Long-term 65,801 65,500 47,000
$ 75,801 $ 65,500 $ 49,000
Unused lines of credit
Short-term $ - $ - $ 5,000
Long-term 4,699 2,000 13,000
$ 4,699 $ 2,000 $ 18,000
Total lines of credit
Prime rate $ - $ - $ 2,000
Other than prime rate 80,500 67,500 65,000
$ 80,500 $ 67,500 $ 67,000
Short-term bank borrowings (a)
Maximum amount outstanding $ 10,000 $ 5,692 $ 5,666
Daily average amount outstanding $ 2,581 $ 441 $ 637
Weighted daily average interest
rate 6.513% 3.984% 4.046%
Weighted average interest rate at
year-end 6.334% - 4.208%
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Range of interest rates 6.290- 3.700- 3.750-
6.660% 6.000% 6.000%
(a) PGE had no short-term bank borrowings outstanding as of December 31,
1994.
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(10) POSTEMPLOYMENT BENEFITS
Pension Benefits
Substantially all employees of PGE are covered by PEI's trusteed,
noncontributory, defined benefit pension plan. Pension benefits are based on
years of service and average final salary. PGE's funding policy is to
contribute an amount necessary to provide for benefits based on service to date,
as well as for benefits expected to be earned in the future by current
participants. To the extent that the present value of these obligations is
fully covered by assets in the trust, a contribution may not be made for a
particular year.
Under the terms of the agreement regarding the sale of PGE's water utility
operations to Pennsylvania-American, on February 16, 1996, Pennsylvania-American
assumed the accumulated benefit obligations relating to employees of PGE who
accepted employment with Pennsylvania-American (the "Transferred Employees").
In this regard, plan assets in an amount equal to the actuarial present value of
accumulated plan benefits relative to the Transferred Employees will be
transferred to the American pension plan. In February, 1996, PGE began
terminating additional employees as a result of the sale of its water operations
and the transfer of fewer employees to Pennsylvania-American than originally
expected. As a result of these actions, PGE recognized an estimated settlement
loss of $200,000 ($117,000 net of the related income tax benefit) and
curtailment gain of $2.7 million ($1.6 million net of related income taxes) in
its determination of the estimated loss on the disposal of water utility
operations.
In December, 1995, as a result of the agreement to transfer fewer employees
to Pennsylvania-American in connection with the sale of PGE's water utility
operations than originally expected, PGE offered an Early Retirement Plan
("ERP") to its employees who would be 59 years of age or older and have a
minimum of five years of service as of December 31, 1995. Of the 63 eligible
employees, 50 elected to accept this offer and retire as of December 31, 1995,
resulting in the recording, as of December 31, 1995, of an additional pension
liability of $1.6 million reflecting the increased costs associated with the
ERP. Such amount was charged to the estimated loss on the disposal of water
utility operations.
Net pension costs relative to continuing operations, including amounts
capitalized, were $353,000, $309,000 and $244,000 in 1995, 1994 and 1993,
respectively. The following items were the components of such net pension
costs:
[CAPTION]
1995 1994 1993
(Thousands of Dollars)
[S] [C] [C] [C]
Present value of benefits earned
during the year $ 430 $ 549 $ 470
Interest cost on projected benefit
obligations 1,459 1,400 1,321
Return on plan assets (1,502) 535 (1,720)
Net amortization and deferral (34) (55) (53)
Deferral of investment (loss) gain - (2,120) 226
Net pension cost $ 353 $ 309 $ 244
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The funded status of the plan as of December 31, 1995 and 1994, was as
follows:
[CAPTION]
1995 1994
(Thousands of Dollars)
[S] [C] [C]
Actuarial present value of the projected
benefit obligations:
Accumulated benefit obligations
Vested $ 29,100 $ 21,592
Nonvested 47 77
Total 29,147 21,669
Provision for future salary increases 7,841 7,565
Projected benefit obligations 36,988 29,234
Market value of plan assets, primarily
invested in equities and bonds 34,000 30,457
Plan assets in excess of (less than) projected
benefit obligations (2,988) 1,223
Unrecognized net transition asset as of
January 1, 1986, being amortized over 20 years (2,155) (2,528)
Unrecognized prior service costs 1,507 2,150
Unrecognized net (gain) loss 2,155 (1,644)
Accrued pension cost at year-end $ (1,481) $ (799)
The assumptions used in determining pension obligations were:
[CAPTION]
1995 1994 1993
[S] [C] [C] [C]
Discount rate 7.00 % 8.75 % 8.00 %
Expected long-term rate of return
on plan assets 9.00 % 9.00 % 9.00 %
Projected increase in future
compensation levels 5.00 % 5.50 % 5.50 %
Other Postretirement Benefits
In addition to pension benefits, PGE provides certain health care and life
insurance benefits for retired employees. Substantially all of PGE's employees
may become eligible for those benefits if they reach retirement age while
working for PGE. PGE records the cost of retiree health care and life insurance
benefits as a liability over the employees' active service periods instead of on
a benefits-paid basis.
Under the terms of the agreement regarding the sale of PGE's water utility
operations to Pennsylvania-American, on February 16, 1996, Pennsylvania-American
assumed the accumulated benefit obligation relating to the Transferred
Employees, as well as 45% of PGE's retired employees as of that date. In this
regard, plan assets in an amount equal to the actuarial present value of
accumulated plan benefits relative to the Transferred Employees and 45% of the
retired employees as of February 16, 1996, will be transferred to trusts
established by Pennsylvania-American. In February, 1996, PGE began terminating
additional employees as a result of the sale of its water operations and the
transfer of fewer employees to Pennsylvania-American than originally expected.
As a result of the transfer, early retirement and displacement of employees, PGE
recognized an estimated settlement and curtailment loss of $385,000 ($225,000
net of the related income tax benefit) as part of the loss on the disposal of
its water utility operations.
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As a result of the ERP offered by PGE to certain of its employees, PGE
recorded, as of December 31, 1995, an additional liability of $805,000,
($471,000 net of the related income tax benefit) reflecting the cost of future
health care benefits required to be recognized under FASB Statement 88 in
conjunction with the ERP. Such amount was charged to the estimated loss on
disposal of water utility operations.
The following items were the components of the net cost of postretirement
benefits other than pensions relative to continuing operations for the years
1995, 1994 and 1993:
[CAPTION]
1995 1994 1993
(Thousands of Dollars)
[S] [C] [C] [C]
Present value of benefits earned during
the year $ 127 $ 148 $ 124
Interest cost on accumulated benefit
obligation 577 532 532
Return on plan assets (69) (4) -
Net amortization and deferral 391 360 339
Net cost of postretirement benefits other
than pensions 1,026 1,036 995
Less disbursements for benefits (555) (543) (540)
Increase in liability for postretirement
benefits other than pensions $ 471 $ 493 $ 455
Reconciliations of the accumulated benefit obligation to the accrued
liability for postretirement benefits other than pensions as of December 31,
1995 and 1994, follow:
[CAPTION]
1995 1994
(Thousands of Dollars)
[S] [C] [C]
Accumulated benefit obligation:
Retirees $ 6,514 $ 9,021
Fully eligible active employees 850 1,628
Other active employees 1,074 1,305
8,438 11,954
Plan assets at fair value - 839
Accumulated benefit obligation
in excess of plan assets 8,438 11,115
Unrecognized transition obligation
being amortized over 20 years (5,438) (11,108)
Unrecognized net gain (loss) (703) 885
Accrued liability for postretirement
benefits other than pensions $ 2,297 $ 892
The assumptions used in determining other postretirement benefit obligations
were:
[CAPTION]
1995 1994 1993
[S] [C] [C] [C]
Discount rate 7.00 % 8.75 % 8.00 %
Expected long-term rate of return
on plan assets 9.00 % 9.00 % 9.00 %
Projected increase in future
compensation levels 5.00 % 5.50 % 5.50 %
It was also assumed that the per capita cost of covered health care benefits
would increase at an annual rate of 9% in 1996 and that this rate would decrease
gradually to 5-1/2% for the year 2003 and remain at that level thereafter. The
health care cost trend rate assumption had a significant effect on the amounts
accrued. To illustrate, increasing the assumed health care cost trend rate by 1
percentage point in each year would increase the transition obligation as of
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January 1, 1995, by approximately $394,000 and the aggregate of the service and
interest cost components of the net cost of postretirement benefits other than
pensions for the year 1995 by approximately $50,000.
Since PGE has not sought to increase its base gas rates, the $441,000
($258,000 net of related income taxes), $447,000 ($256,000 net of related income
taxes) and $407,000 ($232,000 net of related income taxes) of additional cost
incurred in 1995, 1994 and 1993, respectively, as a result of the adoption of
the provisions of FASB Statement 106 were expensed without any adjustment being
made to its gas rates.
Other Postemployment Benefits
In December, 1992, FASB Statement 112, "Employers' Accounting for
Postemployment Benefits," was issued. The provisions of this statement require
the recording of a liability for postemployment benefits (such as disability
benefits, including workers' compensation, salary continuation and the
continuation of benefits such as health care and life insurance) provided to
former or inactive employees, their beneficiaries and covered dependents. PGE
consistently recorded liabilities for benefits of this nature prior to the
effectiveness of FASB Statement 112, and included liabilities for employees
scheduled to be terminated in 1996 as a result of the sale of water operations
in its estimate of accrued costs relative to such sale as of December 31, 1995.
The provisions of FASB Statement 112, which PGE adopted effective January 1,
1994, did not have a material impact on its financial position or results of
operations.
(11) CONSTRUCTION EXPENDITURES
PGE estimates the cost of its 1996 construction program will be $28.9
million. It is anticipated that such expenditures will be financed with
internally generated funds and bank borrowings, pending the periodic issuance of
stock and long-term debt.
(12) 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 PGE 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 PGE for complying with the Emergency Order. PGE
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
PGE, 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 PGE. Pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), PGE 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
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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, PGE 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.
(13) QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
March 31, June 30, September 30, December 31,
1995 1995 1995 1995
(Thousands of Dollars, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Operating revenues $ 68,237 $ 25,184 $ 12,119 $ 47,216
Operating income 9,500 1,867 (3) 7,558
Income (loss) from continuing
operations 6,413 (1,581) (3,520) 4,395
Loss with respect to
discontinued operations (3,704) - - (130)
Net income (loss) 2,709 (1,581) (3,520) 4,265
Earnings (loss) per share
of common stock: (a)
Continuing operations 1.16 (.28) (.63) .78
Discontinued operations (.67) - - (.02)
Earnings (loss) per share of
common stock (a) .49 (.28) (.63) .76
QUARTER ENDED
March 31, June 30, September 30, December 31,
1994 1994 1994 1994
(Thousands of Dollars, Except Per Share Amounts)
Operating revenues $ 80,233 $ 26,568 $ 14,356 $ 46,835
Operating income 10,606 1,881 134 6,395
Income (loss) from continuing
operations 6,958 (1,875) (3,435) 2,903
Income from discontinued
operations 2,079 2,757 2,915 2,865
Net income (loss) 9,037 882 (520) 5,768
Earnings (loss) per share
of common stock:
Continuing operations 1.43 (.37) (.64) .53
Discontinued operations .43 .54 .54 .53
Net income (loss) before
premium on redemption of
preferred stock 1.86 .17 (.10) 1.06
Premium on redemption of
preferred stock - (.11) - (.08)
Earnings (loss) per share of
common stock 1.86 .06 (.10) .98
(a) The total of the earnings per share for the quarters does not equal the
earnings per share for the year, as shown elsewhere in the financial
statements and supplementary data of this report, as a result of PGE's
issuance of additional shares of common stock at various dates during the
year.
</TABLE>
-51-
<PAGE>
Because of the seasonal nature of PGE's gas heating business, there are
substantial variations in operations reported on a quarterly basis.
-52-
<PAGE>
(14) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
o Long-term debt. The fair value of PGE's long-term debt has been estimated
based on the quoted market price as of the respective dates for the portion
of such debt which is publicly traded and, with respect to the portion of
such debt which is not publicly traded, on the estimated borrowing rate as
of the respective dates for long-term debt of comparable credit quality with
similar terms and maturities.
o Preferred stock subject to mandatory redemption. The fair value of PGE's
preferred stock subject to mandatory redemption has been estimated based on
the market value as of the respective dates for preferred stock of
comparable credit quality with similar terms and maturities.
The carrying amounts and estimated fair values of PGE's financial
instruments at December 31, 1995 and 1994, were as follows:
[CAPTION]
1995 1994
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
(Thousands of Dollars)
[S] [C] [C] [C] [C]
Long-term debt (including current
portion) $170,801 $ 175,431 $174,035 $ 177,027
Preferred stock subject to
mandatory redemption (including
current portion) 1,760 1,795 1,840 1,877
PGE believes that the regulatory treatment of any excess or deficiency of
fair value relative to the carrying amounts of these items, if such items were
settled at amounts approximating those above, would dictate that these amounts
be used to increase or reduce its rates over a prescribed amortization period.
Accordingly, any settlement would not result in a material impact on PGE's
financial position or the results of operations of either PEI or PGE.
-53-
<PAGE>
ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
-54-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following financial statements, notes to financial statements
and report of independent public accountants for PGE are presented in
Item 8 of this Form 10-K.
Page
Report of Independent Public Accountants . . . . . . . . . . . . 23
Balance Sheets as of December 31, 1995 and 1994. . . . . . . . . 24
Statements of Income for each of the three years in the
period ended December 31, 1995 . . . . . . . . . . . . . . . . 26
Statements of Cash Flows for each of the three years in the
period ended December 31, 1995 . . . . . . . . . . . . . . . . 27
Statements of Capitalization as of December 31, 1995 and 1994. . 28
Statements of Common Shareholder's Investment for each of
the three years in the period ended December 31, 1995. . . . . 29
Notes to Financial Statements. . . . . . . . . . . . . . . . . . 30
2. Financial Statement Schedules
The following financial statement schedule for PGE is filed as a
part of this Form 10-K. Schedules not included have been omitted
because they are not applicable or the required information is shown in
the financial statements or notes thereto.
Schedule Number Page
II Valuation and Qualifying Accounts for the three-year
period ended December 31, 1995 . . . . . . . . . . . . . 51
3. Exhibits
See "Index to Exhibits" located on page 53 for a listing of all
exhibits filed herein or incorporated by reference to a previously
filed registration statement or report with the Securities and Exchange
Commission.
-55-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K - continued
</TABLE>
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of 1995.
(c) Executive Compensation Plans and Arrangements
The following listing includes PGE's executive compensation plans and
arrangements in effect as of December 31, 1995.
Exhibit
10-27 Form of Change in Control Agreement between PEI and certain of its
Officers -- filed as Exhibit 10-34 to PGE's Annual Report on Form
10-K for 1989, File No. 1-3490.
10-28 First Amendment to Form of Change in Control Agreement, dated as of
May 24, 1995, between PEI and certain of its Officers -- filed as
Exhibit 10-29 to PEI's Annual Report on Form 10-K for 1995, File No.
0-7812.
10-29 Agreement dated as of March 15, 1991, by and between PEI, PGE and
Robert L. Jones -- filed as Exhibit No. 10-38 to PGE's Annual Report
on Form 10-K for 1990, File No. 1-3490.
10-30 Employment Agreement effective September 1, 1995, between PEI and
Dean T. Casaday -- filed as Exhibit 10-2 to PEI's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1995, File No.
0-7812.
10-31 Supplemental Retirement Agreement, dated as of December 23, 1991,
between PEI and Dean T. Casaday -- filed as Exhibit 10-17 to PEI's
Common Stock Form S-2, Registration No. 33-43382.
10-32 First Amendment to the Supplemental Retirement Agreement, dated as
of September 1, 1994, between PEI and Dean T. Casaday -- filed as
Exhibit 10-37 to PEI's Annual Report on Form 10-K for 1994, File No.
0-7812.
10-33 Pennsylvania Enterprises, Inc. 1992 Stock Option Plan, effective
June 3, 1992 -- filed as Exhibit A to PEI's 1993 definitive Proxy
Statement, File No. 0-7812.
(d) Statements Excluded from Annual Report to Shareholders
Not applicable.
-56-
<PAGE>
Schedule II
-57-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<CAPTION>
PG ENERGY INC.
(Registrant)
<S> <C> <C>
Date: March 8, 1996 By: /s/ Dean T. Casaday
Dean T. Casaday
President and Chief Executive Officer
(Principal Executive Officer)
Date: March 8, 1996 By: /s/ John F. Kell, Jr.
John F. Kell, Jr.
Vice President, Financial Services
(Principal Financial Officer
and Principal Accounting Officer)
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Capacity Date
/s/ Kenneth L. Pollock Chairman of the Board of March 8, 1996
Kenneth L. Pollock Directors
/s/ William D. Davis Vice Chairman of the Board March 8, 1996
William D. Davis of Directors
/s/ Dean T. Casaday Director, President and March 8, 1996
Dean T. Casaday Chief Executive Officer
/s/ Paul R. Freeman Director March 8, 1996
Paul R. Freeman
Director March 8, 1996
Robert J. Keating
/s/ John D. McCarthy Director March 8, 1996
John D. McCarthy
/s/ John D. McCarthy, Jr. Director March 8, 1996
John D. McCarthy, Jr.
Director March 8, 1996
Kenneth M. Pollock
Director March 8, 1996
Richard A. Rose, Jr.
/s/ James A. Ross Director March 8, 1996
James A. Ross
/s/ Ronald W. Simms Director March 8, 1996
Ronald W. Simms
-58-
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number
(2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession:
2-1 Asset Purchase Agreement dated as of April 26, 1995, among PEI, PGE,
American Water Works Company, Inc., and Pennsylvania-American Water
Company -- filed as Exhibit 2-1 to PGE's Quarterly Report on Form
10-Q for the quarter ended March 31, 1995, File No. 1-3490.
(3) Articles of Incorporation and By Laws:
3-1 Restated Articles of Incorporation -- filed herewith.
3-2 By-Laws of PGE, as amended and restated -- filed herewith.
(4) Instruments Defining the Rights of Security Holders, Including Debentures:
4-1 Indenture of Mortgage and Deed of Trust, dated as of March 15, 1946,
between Scranton-Spring Brook Water Service Company (now PGE) and
First Trust of New York, National Association, as Successor Trustee
to Morgan Guaranty Trust Company of New York -- filed as Exhibit
2(c) to PGE's Bond Form S-7, Registration No. 2-55419.
4-2 Fourth Supplemental Indenture, dated as of March 15, 1952 -- filed
as Exhibit 2(d) to PGE's Bond Form S-7, Registration No. 2-55419.
4-3 Ninth Supplemental Indenture, dated as of March 15, 1957 -- filed as
Exhibit 2(e) to PGE's Bond Form S-7, Registration No. 2-55419.
4-4 Tenth Supplemental Indenture, dated as of September 1, 1958 -- filed
as Exhibit 2(f) to PGE's Bond Form S-7, Registration No. 2-55419.
4-5 Twelfth Supplemental Indenture, dated as of July 15, 1960 -- filed
as Exhibit 2(g) to PGE's Bond Form S-7, Registration No. 2-55419.
4-6 Fourteenth Supplemental Indenture, dated as of December 15, 1961 --
filed as Exhibit 2(h) to PGE's Bond Form S-7, Registration No. 2-
55419.
4-7 Fifteenth Supplemental Indenture, dated as of December 15, 1963 --
filed as Exhibit 2(i) to PGE's Bond Form S-7, Registration No. 2-
55419.
4-8 Sixteenth Supplemental Indenture, dated as of June 15, 1966 -- filed
as Exhibit 2(j) to PGE's Bond Form S-7, Registration No. 2-55419.
4-9 Seventeenth Supplemental Indenture, dated as of October 15, 1967 --
filed as Exhibit 2(k) to PGE's Bond Form S-7, Registration No. 2-
55419.
4-10 Eighteenth Supplemental Indenture, dated as of May 1, 1970 -- filed
as Exhibit 2(1) to PGE's Bond Form S-7, Registration No. 2-55419.
-59-
<PAGE>
Exhibit
Number
4-11 Nineteenth Supplemental Indenture, dated as of June 1, 1972 -- filed
as Exhibit 2(m) to PGE's Bond Form S-7, Registration No. 2-55419.
4-12 Twentieth Supplemental Indenture, dated as of March 1, 1976 -- filed
as Exhibit 2(n) to PGE's Bond Form S-7, Registration No. 2-55419.
4-13 Twenty-first Supplemental Indenture, dated as of December 1, 1976 --
filed as Exhibit 4-16 to PGE's Annual Report on Form 10-K for 1982,
File No. 1-3490.
4-14 Twenty-second Supplemental Indenture, dated as of August 15, 1989 --
filed as Exhibit 4-22 to PGE's Annual Report on Form 10-K for 1989,
File No. 1-3490.
4-15 Twenty-third Supplemental Indenture, dated as of August 15, 1989 --
filed as Exhibit 4-23 to PGE's Annual Report on Form 10-K for 1989,
File No. 1-3490.
4-16 Twenty-fourth Supplemental Indenture, dated as of September 1, 1991,
-- filed as Exhibit 4-3 to PEI's Common Stock Form S-2, Registration
No. 33-43382.
4-17 Twenty-fifth Supplemental Indenture, dated as of September 1, 1992,
-- filed as Exhibit 4-1 to PGE's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1992, File No. 1-3490.
4-18 Twenty-sixth Supplemental Indenture, dated as of December 1, 1992,
-- filed as Exhibit 4-20 to PGE's Bond Form S-2, Registration No.
33-54278.
4-19 Twenty-seventh Supplemental Indenture, dated as of December 1, 1992,
-- filed as Exhibit 4-19 to PGE's Annual Report on Form 10-K for
1992, File No. 0-7812.
4-20 Twenty-eighth Supplemental Indenture, dated as of December 1, 1993,
-- filed as Exhibit 4-20 to PGE's Annual Report on Form 10-K for
1993, File No. 1-3490.
4-21 Twenty-ninth Supplemental Indenture, dated as of November 1, 1994,
-- filed as Exhibit 4-21 to PGE's Annual Report on Form 10-K for
1994, File No. 1-3490.
4-22 Thirtieth Supplemental Indenture, dated as of December 1, 1995, from
PGE to First Trust of New York, National Association, as Successor
Trustee to Morgan Guaranty Trust Company of New York -- filed
herewith.
NOTE: The First, Second, Third, Fifth, Sixth, Seventh, Eighth,
Eleventh and Thirteenth Supplemental Indentures merely convey
additional properties to the Trustee.
-60-
<PAGE>
Exhibit
Number
(10) Material Contracts:
10-1 Service Agreement for storage service under Rate Schedule LGA, dated
August 6, 1974, between PGE and Transcontinental Gas Pipe Line
Corporation -- filed as Exhibit 10-3 to PGE's Annual Report on Form
10-K for 1984, File No. 1-3490.
10-2 Service Agreement for transportation service under Rate Schedule FT,
dated February 1, 1992, by and between PGE and Transcontinental Gas
Pipe Line Corporation -- filed as Exhibit 10-4 to PGE's Annual
Report on Form 10-K for 1991, File No. 1-3490.
10-3 Service Agreement for storage service under Rate Schedule SS-2,
dated April 1, 1990, between PGE and Transcontinental Gas Pipe Line
Corporation -- filed as Exhibit 10-8 to PEI's Common Stock Form S-2,
Registration No. 33-43382.
10-4 Service Agreement for sales service under Rate Schedule FS, dated
August 1, 1991, between PGE and Transcontinental Gas Pipe Line
Corporation -- filed as Exhibit 10-6 to PGE's Annual Report on Form
10-K for 1991, File No. 1-3490.
10-5 Service Agreement for transportation service under Rate Schedule FT,
dated August 1, 1991, between PGE and Transcontinental Gas Pipe Line
Corporation -- filed as Exhibit 10-10 to PEI's Common Stock Form S-
2, Registration No. 33-43382.
10-6 Service Agreement for transportation service under Rate Schedule IT,
dated January 31, 1992, between PGE and Transcontinental Gas Pipe
Line Corporation -- filed as Exhibit 10-8 to PGE's Annual Report on
Form 10-K for 1991, File No. 1-3490.
10-7 Service Agreement for storage service under Rate Schedule LSS, dated
October 1, 1993, by and between PGE and Transcontinental Gas Pipe
Line Corporation -- filed as Exhibit 10-7 to PGE's Annual Report on
Form 10-K for 1993, File No. 1-3490.
10-8 Service Agreement for storage service under Rate Schedule GSS, dated
October 1, 1993, by and between PGE and Transcontinental Gas
Pipeline Corporation Company -- filed as Exhibit 10-8 to PGE's
Annual Report on Form 10-K for 1993, File No. 1-3490.
10-9 Service Agreement for transportation service under Rate Schedule
FTS, dated November 1, 1993, by and between PGE and Columbia Gas
Transmission Corporation -- filed as Exhibit 10-9 to PGE's Annual
Report on Form 10-K for 1993, File No. 1-3490.
10-10 Service Agreement for transportation service under Rate Schedule
SST, dated November 1, 1993, by and between PGE and Columbia Gas
Transmission Corporation -- filed as Exhibit 10-10 to PGE's Annual
Report on Form 10-K for 1993, File No. 1-3490.
-61-
<PAGE>
Exhibit
Number
10-11 Service Agreement for storage service under Rate Schedule FSS, dated
November 1, 1993, by and between PGE and Columbia Gas Transmission
Corporation -- filed as Exhibit 10-11 to PGE's Annual Report on Form
10-K for 1993, File No. 1-3490.
10-12 Service Agreement for transportation service under Rate Schedule
FTS-1, dated November 1, 1993, by and between PGE and Columbia Gulf
Transmission Company -- filed as Exhibit 10-12 to PGE's Annual
Report on Form 10-K for 1993, File No. 1-3490.
10-13 Service Agreement for transportation service under Rate Schedule
ITS-1, dated November 1, 1993, by and between PGE and Columbia Gulf
Transmission Company -- filed as Exhibit 10-13 to PGE's Annual
Report on Form 10-K for 1993, File No. 1-3490.
10-14 Service Agreement for transportation service under Rate Schedule
ITS, dated November 1, 1993, by and between PGE and Columbia Gas
Transmission Corporation -- filed as Exhibit 10-14 to PGE's Annual
Report on Form 10-K for 1993, File No. 1-3490.
10-15 Service Agreement (Contract No. 946) for transportation service
under Rate Schedule FT-A, dated September 1, 1993, by and between
PGE and Tennessee Gas Pipeline Company -- filed as Exhibit 10-1 to
PGE's Quarterly Report on Form 10-Q for the quarter ended September
30, 1993, File No. 1-3490.
10-16 Service Agreement (Service Package No. 171) for transportation
service under Rate Schedule FT-A, dated September 1, 1993, by and
between PGE and Tennessee Gas Pipeline Company -- filed as Exhibit
10-2 to PGE's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993, File No. 1-3490.
10-17 Service Agreement (Service Package No. 187) for transportation
service under Rate Schedule FT-A, dated September 1, 1993, by and
between PGE and Tennessee Gas Pipeline Company -- filed as Exhibit
10-3 to PGE's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993, File No. 1-3490.
10-18 Service Agreement (Service Package No. 190) for transportation
service under Rate Schedule FT-A, dated September 1, 1993, by and
between PGE and Tennessee Gas Pipeline -- filed as Exhibit 10-4 to
PGE's Quarterly Report on Form 10-Q for the quarter ended September
30, 1993, File No. 1-3490.
10-19 Service Agreement (Contract No. 2289) for storage service under Rate
Schedule FS, dated September 1, 1993, by and between PGE and
Tennessee Gas Pipeline -- filed as Exhibit 10-5 to PGE's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1993, File
No. 1-3490.
10-20 Service Agreement for transportation service under Rate Schedule FT,
dated April 1, 1995, by and between PGE and Transcontinental Gas
Pipe Line Corporation -- filed as Exhibit 10-1 to PGE's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1995, File No.
1-3490.
-62-
<PAGE>
Exhibit
Number
10-21 Service Agreement for storage service dated October 13, 1995, by and
between PGE and Avoca Natural Gas Storage -- filed as Exhibit 10-1
to PGE's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995, File No. 1-3490.
10-22 Bond Purchase Agreement, dated September 1, 1989, relating to PGE's
First Mortgage Bonds 9.23% Series due 1999 and First Mortgage Bonds
9.34% Series due 2019 among Allstate Life Insurance Company,
Allstate Life Insurance Company of New York and PGE -- filed as
Exhibit 10-33 to PGE's Annual Report on Form 10-K for 1989, File No.
1-3490.
10-23 7% Bond Purchase Agreement, dated November 1, 1994, among the
Luzerne County Industrial Development Authority, PGE and Wheat First
Butcher Singer, as representative on behalf of itself and Legg Mason
Wood Walker Incorporated -- filed as Exhibit 10-28 to PGE's Annual
Report on Form 10-K for 1994, File No. 1-3490.
10-24 Amended and Restated Project Facilities Agreement, dated as of
November 1, 1994, between PGE and the Luzerne County Industrial
Development Authority -- filed as Exhibit 10-29 to PGE's Annual
Report on Form 10-K for 1994, File No. 1-3490.
10-25 Credit Agreement, dated as of April 19, 1993, by and among PGE, the
Banks parties thereto and PNC Bank, Northeast PA, as Agent, and
CoreStates Bank, N.A. and NBD Bank, N.A. as Co-Agents -- filed as
Exhibit 10-1 to PGE's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1993, File No. 1-3490.
10-26 First Amendment to Credit Agreement and Notes, dated as of December
16, 1994, by and among PGE, the Banks parties thereto and PNC Bank,
Northeast PA, as Agent, and CoreStates Bank, N.A. and NBD Bank, N.A.
as Co-Agents -- filed as Exhibit 10-31 to PGE's Annual Report on
Form 10-K for 1994, File No. 1-3490.
10-27 Form of Change in Control Agreement between PEI and certain of its
Officers -- filed as Exhibit 10-34 to PGE's Annual Report on Form
10-K for 1989, File No. 1-3490.
10-28 First Amendment to Form of Change in Control Agreement, dated as of
May 24, 1995, between PEI and certain of its Officers -- filed as
Exhibit 10-29 to PEI's Annual Report on Form 10-K for 1995, File No.
0-7812.
10-29 Agreement, dated as of March 15, 1991, by and between PEI, PGE and
Robert L. Jones -- filed as Exhibit 10-38 to PGE's Annual Report on
Form 10-K for 1990, File No. 1-3490.
10-30 Employment Agreement, effective September 1, 1995, between PEI and
Dean T. Casaday -- filed as Exhibit 10-2 to PEI's Quarterly Report
on Form 10-Q for the Quarter ended September 30, 1995, File No.
0-7812.
-63-
<PAGE>
Exhibit
Number
10-31 Supplemental Retirement Agreement, dated as of December 23, 1991,
between PEI and Dean T. Casaday -- filed as Exhibit 10-17 to PEI's
Common Stock Form S-2, Registration No. 33-43382.
10-32 First Amendment to the Supplemental Retirement Agreement, dated as
of September 1, 1994, between PEI and Dean T. Casaday -- filed as
Exhibit 10-37 to PEI's Annual Report on Form 10-K for 1994, File No.
0-7812.
10-33 Pennsylvania Enterprises, Inc. 1992 Stock Option Plan, effective
June 3, 1992 -- filed as Exhibit A to PEI's 1993 definitive Proxy
Statement, File No. 0-7812.
-64-
<PAGE>
TABLE OF CONTENTS
PART I PAGE
Item l. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . 10
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . 10
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . . . . 11
Item 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . *
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . 12
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . 22
Item 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . . 48
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . *
Item 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . *
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT . . . . . . . . . . . . . . . . . . *
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . *
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . 49**
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . 52
________________________
* These items have been omitted from this Form 10-K as Registrant meets the
conditions set forth in General Instructions J(1)(a) and (b) of Form 10-K
and is therefore filing this form with the reduced disclosure format.
** The "Index to Exhibits" is located on page 53.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PG ENERGY INC.
(Registrant)
Date: March 8, 1996 By:
Dean T. Casaday
President and Chief Executive Officer
(Principal Executive Officer)
Date: March 8, 1996 By:
John F. Kell, Jr.
Vice President, Financial Services
(Principal Financial Officer
and Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Capacity Date
Chairman of the Board of March 8, 1996
Kenneth L. Pollock Directors
Vice Chairman of the Board March 8, 1996
William D. Davis of Directors
Director, President and March 8, 1996
Dean T. Casaday Chief Executive Officer
Director March 8, 1996
Paul R. Freeman
Director March 8, 1996
Robert J. Keating
Director March 8, 1996
John D. McCarthy
Director March 8, 1996
John D. McCarthy, Jr.
Director March 8, 1996
Kenneth M. Pollock
Director March 8, 1996
Richard A. Rose, Jr.
Director March 8, 1996
James A. Ross
Director March 8, 1996
Ronald W. Simms
<PAGE>
<TABLE>
<CAPTION>
PG ENERGY INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE-YEAR PERIOD ENDED DECEMBER 31, 1995
Balance at Charged Charged Balance
beginning to to other at end
Description of year income accounts Deductions of year
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Deducted from the asset to which it applies:
Reserve for uncollectible accounts-
Year ended December 31, 1995 $ 921 $ 1,541 $ - $ 1,681(a) $ 781
Year ended December 31, 1994 $ 811 $ 1,756 $ - $ 1,646(a) $ 921
Year ended December 31, 1993 $ 1,098 $ 1,101 $ - $ 1,388(a) $ 811
Shown as operating reserves on the balance sheets:
Insurance -
Year ended December 31, 1995 $ 2,383 $ 2,652 $ - $ 1,326(b) $ 3,709
Year ended December 31, 1994 $ 1,863 $ 1,695 $ - $ 1,175(b) $ 2,383
Year ended December 31, 1993 $ 1,565 $ 1,823 $ 75 $ 1,600(b) $ 1,863
NOTES:
(a) Deductions represent uncollectible balances of accounts receivable written off, net of recoveries.
(b) Deductions are principally payments made in settlement of claims.
</TABLE>
<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> 0000077242
<NAME> PG ENERGY INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 219,013,000
<OTHER-PROPERTY-AND-INVEST> 5,089,000
<TOTAL-CURRENT-ASSETS> 54,512,000
<TOTAL-DEFERRED-CHARGES> 34,368,000
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 517,232,000
<COMMON> 56,025,000
<CAPITAL-SURPLUS-PAID-IN> 94,463,000
<RETAINED-EARNINGS> 57,868,000
<TOTAL-COMMON-STOCKHOLDERS-EQ> 208,356,000
1,680,000
33,615,000
<LONG-TERM-DEBT-NET> 55,000,000
<SHORT-TERM-NOTES> 10,000,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 115,801,000
80,000
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 92,700,000
<TOT-CAPITALIZATION-AND-LIAB> 517,232,000
<GROSS-OPERATING-REVENUE> 152,756,000
<INCOME-TAX-EXPENSE> 5,168,000
<OTHER-OPERATING-EXPENSES> 128,666,000
<TOTAL-OPERATING-EXPENSES> 133,834,000
<OPERATING-INCOME-LOSS> 18,922,000
<OTHER-INCOME-NET> 301,000
<INCOME-BEFORE-INTEREST-EXPEN> 19,223,000
<TOTAL-INTEREST-EXPENSE> 10,753,000
<NET-INCOME> 4,636,000
2,763,000
<EARNINGS-AVAILABLE-FOR-COMM> 1,873,000
<COMMON-STOCK-DIVIDENDS> 15,249,000
<TOTAL-INTEREST-ON-BONDS> 13,824,000
<CASH-FLOW-OPERATIONS> 31,012,000
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</TABLE>
PG ENERGY INC.
B Y L A W S
ARTICLE I
STOCKHOLDERS
Section 1. Place of Holding Meetings. Meetings of stockholders
shall be held within the State of Pennsylvania, and, unless otherwise
determined by the Board of Directors, all meetings of the stockholders
shall be held at the office of the Company.
Section 2. Voting.
(a) Voting Rights of Stockholders. - Unless otherwise provided in
the articles, every stockholder of the Company shall be
entitled to one vote for every share standing in the name of
the stockholder on the books of the Company; provided,
however, that in all elections for directors such
stockholders may cast the whole number of his votes for one
candidate or distribute them upon two or more candidates as
he may prefer.
(b) Voting and Other Action by Proxy.
(1) Every stockholder entitled to vote at a meeting of
stockholders may authorize another person to act for the
stockholder by proxy.
(2) The presence of, or vote or other action at a meeting of
stockholders by a proxy of a stockholder shall
constitute the presence of, or vote or action by the
stockholder.
(3) Where two or more proxies of a stockholder are present,
the Company shall, unless otherwise expressly provided
in the proxy, accept, as the vote of all shares
represented thereby the vote cast by a majority of them
and, if a majority of the proxies cannot agree whether
the shares represented shall be voted or upon the manner
of voting the shares, the voting of the shares shall be
divided equally among those persons.
(c) Execution and Filing. - Every proxy shall be executed in
writing by the stockholder or by the duly authorized
attorney-in-fact of stockholder and filed with the Secretary
of the Company. A telegram, telex, cablegram, datagram or
similar transmission from a stockholder or attorney-in-fact,
or a photographic, facsimile or similar reproduction of a
writing executed by a stockholder or attorney-in-fact:
(1) may be treated as properly executed for purposes of this
subsection; and
(2) shall be so treated if it sets forth a confidential and
unique identification number or other mark furnished by
the Company to the stockholder for the purposes of a
particular meeting or transaction.
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(d) Revocation. A proxy, unless coupled with an interest, shall
be revocable at will, notwithstanding any other agreement or
any provision in the proxy to the contrary, but the
revocation of a proxy shall not be effective until written
notice thereof has been given to the Secretary of the
Company. An unrevoked proxy shall not be valid after three
years from the date of its execution unless a longer time is
expressly provided therein.
A proxy shall not be revoked by the death or incapacity of
the maker unless, before the vote is counted or the authority
is exercised, written notice of the death or incapacity is
given to the Secretary of the Company.
(e) Expenses. The Company shall pay the reasonable expenses of
solicitation of votes, proxies or consents of stockholders by
or on behalf of the Board of Directors or its nominees for
election to the Board, including solicitation by professional
proxy solicitors and otherwise.
(f) Voting by Fiduciaries and Pledgees. Shares of the Company
standing in the name of a trustee or other fiduciary and
shares held by an assignee for the benefit of creditors or by
a receiver may be voted by the trustee, fiduciary, assignee
or receiver. A stockholder whose shares are pledged shall be
entitled to vote the shares until the shares have been
transferred into the name of the pledgee, or a nominee of the
pledgee, but nothing in this section shall affect the
validity of a proxy given to a pledgee or nominee.
(g) Voting by Joint Holders of Shares. Where shares of the
Company are held jointly or as tenants in common by two or
more persons, as fiduciaries or otherwise:
(1) if only one or more of such persons is present in person
or by proxy, all of the shares standing in the names of
such persons shall be deemed to be represented for the
purpose of determining a quorum and the Company shall
accept as the vote of all the shares the vote cast by a
joint owner or a majority of them; and
(2) if the persons are equally divided upon whether the
shares held by them shall be voted or upon the manner of
voting the shares, the voting of the shares shall be
divided equally among the persons without prejudice to
the rights of the joint owners or the beneficial owners
thereof among themselves.
(3) However, if there has been filed with the Secretary of
the Company a copy, certified by an attorney at law to
be correct, of the relevant portions of the agreement
under which the shares are held or the instrument by
which the trust or estate was created or the order of
court appointing them or of an order of court directing
the voting of the shares, the persons specified as
having such voting power in the document latest in date
of operative effect so filed, and only those persons,
shall be entitled to vote the shares but only in
accordance therewith.
(h) Voting by Corporations. Any corporation that is a
stockholder of the Company may vote at meetings of
stockholders of this Company by any of its officers or
agents, or by proxy appointed by any officer or agent, unless
some other person, by resolution of the Board of Directors of
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the other corporation or a provision of its articles or
bylaws, a copy of which resolution or provision certified to
be correct by one of its officers has been filed with the
Secretary of this Company, is appointed its general or
special proxy in which case that person shall be entitled to
vote the shares.
Section 3. Quorum. Any number of stockholders together holding
at least a majority of the stock issued and outstanding of the class or
classes entitled to vote, who shall be present in person or represented by
proxy at any meeting (other than an adjourned meeting as specified in
Article I, Section 8, herein) duly called, shall constitute a quorum for
the transaction of business, except as may be otherwise provided by law.
The stockholders present at a duly organized meeting can continue to do
business until adjournment notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
Section 4. Adjournment of Meetings. If less than a quorum shall
be in attendance at the time for which the meeting shall have been called,
the meeting may be adjourned from time to time by a majority vote of the
stockholders present or represented, without any notice other than an
announcement at the meeting, until a quorum shall attend. Any meeting at
which a quorum is present may also be adjourned, in like manner, for such
time, or upon such call, as may be determined by vote.
Section 5. Annual Election of Directors. The Board of Directors
may fix and designate the date and time of the Annual Meeting of
Stockholders for the election of directors and the transaction of other
business. If no such date and time is fixed and designated by the
Board,the meeting for any calendar year shall be held on the second
Wednesday in May at an hour to be named in the notice. At each Annual
Meeting, the stockholders entitled to vote shall, as provided in Section 2
of this Article, by ballot, elect a Board of Directors, and they may
transact such other corporate business as shall come before the meeting.
The candidates receiving the highest number of votes from each class or
group of classes, if any, entitled to elect directors separately up to the
number of directors to be elected by the class or group of classes shall be
elected. If at any meeting of stockholders, directors of more than one
class are to be elected, each class of directors shall be elected in a
separate election.
Section 6: Special Meetings. How Called. Special meetings of
the stockholders for any purpose or purposes, may be called at any time by
the Board, upon written request delivered to the Secretary of the Company.
In addition, an "interested stockholder" (as defined in section 2553 of the
Pennsylvania Business Corporation Law as it may from time to time be
amended) may, upon written request delivered to the Secretary of the
Company, call a special meeting for the purpose of approving a business
combination under either subsection (3) or (4) of section 2555. Any
request for a special meeting of stockholders shall state the purpose or
purposes of the proposed meeting. Upon receipt of any such request, it
shall be the duty of the Secretary to give notice, in a manner consistent
with these Bylaws, of a special meeting of the stockholders to be held at
such time as the Secretary may fix, which time may not be, if the meeting
is called pursuant to a statutory right, more than sixty (60) days after
receipt of the request. If the Secretary shall neglect or refuse to fix
the date of the meeting and give notice thereof, the person or persons
calling the meeting may do so. Business transacted at any special meeting
shall be confined to the business stated in the notice.
Section 7. Manner of Voting at Stockholders' Meetings. At all
meetings of stockholders, all questions, except the question of an
amendment to the Bylaws, and the election of directors, and all such other
questions, the manner of deciding which is especially regulated by statute,
shall be determined by a majority vote of the stockholders entitled to vote
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present in person or represented by proxy; provided, however, that any
qualified voter may demand a stock vote, and in that case, such stock vote
shall immediately be taken.
Section 8. Notice of Stockholders' Meetings. Written notice of
every meeting of the stockholders stating the place, the date and hour
thereof and the matters to be acted on at such meeting, shall be given in a
manner consistent with the applicable provisions of section 14 of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder, or any successor act or regulation (the "Exchange Act"), by, or
at the direction of, the Secretary of the Company or, in the absence of the
Secretary of the Company any Assistant Secretary of the Company, at least
twenty (20) days prior to the day named for a meeting, to each stockholder
entitled to vote thereat on the date fixed as a record date in accordance
with these Bylaws or, if no record date be fixed, then of record at the
close of business on the 50th day next preceding the day of the meeting, at
such address as appears on the transfer books of the Company. Any notice
of any meeting of stockholders shall state that, for purposes of any
meeting that has been previously adjourned for one or more periods
aggregating at least fifteen (15) days because of an absence of a quorum,
the stockholders entitled to vote who attend such a meeting, although less
than a quorum pursuant to Article 1, Section 3 of these Bylaws, shall
nevertheless constitute a quorum for the purpose of acting upon any matter
set forth in the original notice of the meeting that was so adjourned.
Notice or other communications need not be sent to any stockholder with
whom the Company has been unable to communicate for more than twenty-four
(24) consecutive months because communications to the stockholder are
returned unclaimed or the stockholder has otherwise failed to provide the
Company with a current address. Whenever the stockholder provides the
Company with a current address, the Company shall commence sending notices
and other communications to the stockholder in the same manner as to the
other stockholders.
Section 9. Unanimous Written Consent. Any action required or
permitted to be taken at a meeting of the stockholders or of a class of
stockholders may be taken without a meeting if, prior or subsequent to the
action, a consent or consents thereto in writing, setting forth the action
so taken, shall be signed by all of the stockholders who would be entitled
to vote at a meeting for such purpose and filed with the Secretary.
Except as otherwise provided in Article V, Section 5 of these
Bylaws, the record date for determining stockholders entitled to express
consent or dissent to action in writing without a meeting, when prior
action by the Board of Directors is not necessary, shall be at the close of
business on the day on which the first written consent or dissent is filed
with the Secretary. If prior action by the Board of Directors is
necessary, the record date for determining such stockholders shall be at
the close of business on the day on which the Board adopts the resolution
relating to such action.
ARTICLE II
DIRECTORS
Section 1. First Meeting. The newly elected directors may hold
their first meeting for the purpose of organization and the transaction of
business, if a quorum be present, immediately after the Annual Meeting of
Stockholders, or the time and place of such meeting may be fixed by consent
in writing of all the directors.
Section 2. Election of Officers. At such meeting the directors
shall elect a President, one or more Vice Presidents, a Treasurer and a
Secretary, who need not be directors. The directors may also elect such
other officers as provided in Article III, Section 1. of these Bylaws.
Such officers shall hold office until the next annual election of officers
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and until their successors are elected and qualify, unless removed by the
Board of Directors as provided in Section 8 of Article III of these Bylaws.
Section 3. Regular Meetings. Regular meetings of the directors
may be held without notice at such places and times as shall be determined
from time to time by resolution of the directors.
Section 4. Special Meetings. How called. Notice. Special
meetings of the Board may be called by either the President, the Secretary,
the Chairman of the Executive Committee or by the Secretary pursuant to the
written request of any two directors, upon forty-eight (48) hours' notice
afforded by either telephone, telegraph, facsimile or personal notice, or
upon three (3) days' notice afforded by mail.
Section 5. Number and Quorum. The number of directors shall be
not less than three (3) nor more than fifteen (15). Within such limits,
the number of directors may be increased or decreased by the Board of
Directors from time to time without a vote of the stockholders. The
directors shall be elected by the stockholders, at the Annual Meeting of
stockholders, in each year, to hold office for the term of one year and
until their successors are chosen. A majority of the directors in office
shall constitute a quorum for the transaction of business. Directors need
not be stockholders.
Section 6. Place of Meeting. The directors may hold their
meetings and have one or more offices, and keep the books of the Company,
outside the State of Pennsylvania, at any office or offices of the Company,
or at any other place, as they may from time to time by resolution
determine.
Section 7. Powers of Directors. The Board of Directors shall
have all the necessary powers for the management of the business of the
Company, and subject to the restrictions imposed by law, or by these
Bylaws, may exercise all the powers of the Corporation.
Section 8. Vacancies. Vacancies occurring in the membership of
the Board of Directors, from whatever cause arising, shall be filled by a
majority vote of the remaining directors, and in case of any increase in
the number of directors, the additional directors authorized by such
increase shall be elected by a majority vote of the directors in office,
although less than a quorum.
Section 9. Removal of Directors. Any one or more of the
directors may be removed, either with or without cause, at any time, by a
majority vote of the stockholders entitled to vote at any regular or
special meeting. The successor or successors of any director or directors
so removed shall be elected by the remaining directors.
Section 10. Compensation of Directors. Directors and members of
any committee of the Board of Directors, except full-time officers and
employees of the Company, shall be entitled to such reasonable compensation
for their services as directors and members of any such committee as shall
be fixed from time to time by resolution of the Board of Directors, and
shall also be entitled to reimbursement for any reasonable expenses
incurred in attending such meetings. The compensation of directors may be
paid on such basis as is determined in the resolution of the Board of
Directors.
Section 11. Executive Committee and Other Committees. How
Appointed. The directors may by a resolution adopted by a majority of the
directors in office appoint from their number an Executive Committee of
three or more members and other Committees of one or more members. The
Committees may make their own rules of procedure and shall meet where and
as provided by such rules, or by a resolution of the directors. A majority
shall constitute a quorum, but in every case the affirmative vote of a
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majority of all the members of the committee shall be necessary to the
adoption of any resolution.
Section 12. Executive Committee. Powers. During the intervals
between the meetings of the directors, the Executive Committee shall have
and may exercise all the powers of the directors in the management of the
business and affairs of the Company, including power to authorize the seal
of the Company to be affixed to all papers which may require it, in such
manner as such committee shall deem best for the interests of the Company,
in all cases in which specific directions shall not have been given by the
directors. Neither the Executive Committee or any other committee of the
Board of Directors created by these Bylaws nor the Board of Directors shall
have any power or authority as to the following:
(i) the submission to stockholders of any action requiring
approval of stockholders under the Pennsylvania Business Corporation Law.
(ii) the creation or filling of vacancies in the Board of
Directors.
(iii) the adoption, amendment or repeal of the Bylaws.
(iv) the amendment or repeal of any resolution of the Board that
by its terms is amendable or repealable only by the Board.
(v) action on matters committed by the Bylaws or resolution of
the Board of Directors to another committee of the Board.
Section 13. Meeting by Telephonic Conference. Any meeting of the
Board of Directors or of a committee thereof, including the Executive
Committee, may be held in which any one or more or all of the directors or
participants may participate as if present in person, by means of
conference telephone or similar communication equipment in a manner by
which all persons participating in the meeting can hear each other.
Section 14. Substitute Committee Members. The Board may
designate one or more directors as alternate members of any committee who
may replace any absent or disqualified member at any meeting of the
committee or for the purposes of any written action by the committee. In
the absence or disqualification of a member and alternate member or members
of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another director to act at the meeting in
the place of the absent or disqualified member.
Section 15. Personal Liability of Directors. To the fullest
extent that the laws of the Commonwealth of Pennsylvania, as now in effect
or as hereafter amended, permit elimination or limitation of the liability
of directors, no director of the Company shall be personally liable for
monetary damages as such for any action taken, or any failure to take any
action, as a director. Further, any amendment or repeal of this Section 15
which has the effect of increasing director liability shall operate
prospectively only, and shall not affect any action taken, or any failure
to act, prior to its adoption.
Section 16. Action by Consent of Directors. Any action required
or permitted to be taken at a meeting of the Board or of a committee of the
Board may be taken without a meeting if, prior or subsequent to the action,
a consent or consents in writing setting forth the action so taken shall be
signed by all of the directors in office or the members of the committee,
as the case may be, and filed with the Secretary of the Company.
ARTICLE III
OFFICERS
Section 1. Required Officers of the Company. The officers of the
Company shall be a Chairman of the Board of Directors, a President, one or
more Vice Presidents, a Secretary and a Treasurer, one or more Assistant
Secretaries, and one or more Assistant Treasurers. One person may hold any
two offices except the office of President and Vice President. The Board
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of Directors may appoint such other officers as from time to time they may
determine. All officers of the Company, as between themselves and the
Company, shall have such authority and perform such duties in the
management of the Company as may be provided by or pursuant to the Board of
Directors, or as may be determined by or pursuant to these Bylaws.
Section 1A. Chairman of the Board of Directors. The Chairman of
the Board of Directors shall be a member of the Board of Directors. He
shall preside as Chairman at all meetings of the stockholders and of the
Board of Directors, and shall perform such other duties as are specified in
these Bylaws or as are usually performed by a Chairman of the Board of
Directors, or as from time to time shall be assigned to him by the Board of
Directors. In the absence of, or at the request of, the Chairman of the
Board of Directors, the Board of Directors is authorized to designate a
Chairman for the Annual Meeting or special meetings.
Section 2. President. The President shall be the Chief Executive
Officer of the Company and shall have general management and control of the
business and affairs of the Company, subject to the direction of the Board
of Directors, and he shall generally do and perform all acts incident to
the office of the President, or which are authorized or required by law.
The President shall have power to call special meetings of the stockholders
or directors for any purpose or purposes, and when authorized by the Board
of Directors or these Bylaws shall make and sign contracts and agreements
in the name of and on behalf of the Company.
Section 3. Vice Presidents. Each Vice President shall have such
powers and shall perform such duties as may be assigned to him by the
President or the Board of Directors. In case of the absence or disability
of the President, the duties of the office of the President shall be
performed by the Vice Presidents in the order of priority established by
the Board, and unless and until the Board of Directors shall otherwise
direct.
Section 4. Secretary. The Secretary shall give, or cause to be
given, notice of all meetings of stockholders and directors, and all other
notices required by law or by these Bylaws, and in case of his absence or
refusal or neglect so to do, any such notice may be given by any person
thereunto directed by the President, or by the directors or stockholders
upon whose request the meeting is called, as provided in these Bylaws. He
shall record all the proceedings of the meetings of the stockholders and of
the directors in a book to be kept for that purpose, and shall perform such
other duties as may be assigned to him by the directors or the President.
He shall have custody of the seal of the Company and shall affix the same
to all instruments requiring it, when authorized by the directors or the
President, and attest the same.
Section 5. Assistant Secretary. The Board of Directors may
appoint an Assistant Secretary or more than one Assistant Secretary. Each
Assistant Secretary shall have such powers and shall perform such duties as
may be assigned to him by the Board of Directors or the President.
Section 6. Treasurer. The Treasurer shall have the custody of
all funds, securities, evidences of indebtedness and other valuable
documents of the Company; he shall receive and give or cause to be given
receipts and acquittances for moneys paid in on account of the Company and
shall pay out of the fund on hand all just debts of the Company, of
whatever nature upon maturity of the same; he shall enter or cause to be
entered in books of the Company to be kept for that purpose full and
accurate accounts of all moneys received and paid out on account of the
Company, and he shall perform all the other duties incident to the office
of the Treasurer. If the Board of Directors so determine, he shall give
the Company a bond for the faithful discharge of his duties in such amount
and with such security as the Board shall prescribe.
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Section 7. Assistant Treasurer. The Board of Directors may
appoint an Assistant Treasurer or more than one Assistant Treasurer. Each
Assistant Treasurer shall have such powers and shall perform such duties as
may be assigned to him by the Board of Directors or the President.
Section 8. Removal of Officers and Agents.
Any officer or agent of the Company may be removed by the Board of
Directors with or without cause. The removal shall be without prejudice to
the contract rights, if any, of any person so removed. Election or
appointment of an officer or agent shall not of itself create contract
rights.
ARTICLE IV
CAPITAL STOCK
Section 1. Issue of Certificates of Stock. Certificates of the
shares of the capital stock of the Company shall be in such form as shall
be approved by the Board of Directors. Each stockholder shall be entitled
to a certificate of his stock under the seal of the Company, executed, by
facsimile or otherwise, by or on behalf of the Company, by the President or
a Vice President, and also by the Treasurer or an Assistant Treasurer. In
case any officer who has signed or whose facsimile signature has been
placed upon any share certificate shall have ceased to be such officer,
because of death, resignation or otherwise, before the certificate is
issued, it may be issued by the Company with the same effect as if the
officer had not ceased to be such at the time of issue. No stock
certificate shall be valid unless countersigned and registered in such
manner, if any, as the directors shall by resolution prescribe.
Section 2. Transfer of Shares. The shares of stock of the
Company shall be transferable upon its books by the holders thereof in
person or by their duly authorized attorneys or legal representatives, and
upon such transfer the old certificates shall be surrendered to the Company
by the delivery thereof to the person in charge of the stock and transfer
books and ledgers, or to such other person as the directors may designate,
by whom they shall be cancelled, and new certificates shall thereupon be
issued. A record shall be made of each transfer, and a duplicate thereof
mailed to the Pennsylvania office of the Company.
Section 3. Dividends. The directors may declare dividends from
the surplus or net profits arising from the business of the Company as and
when they deem expedient. Before declaring any dividend, there may be
reserved out of the accumulated profits such sum or sums as the directors
from time to time, in their discretion, think proper for working capital or
as a reserve fund to meet contingencies or for equalizing dividends, or for
such other purposes as the directors shall think conducive to the interest
of the Company.
Section 4. Lost Certificates. If the owner of a share
certificate claims that it has been lost, destroyed, or wrongfully taken,
the Company shall issue a new certificate in place of the original
certificate if the owner so requests before the Company has notice that the
certificate has been acquired by a bona fide purchaser and if the owner has
filed with the Company an indemnity bond and an affidavit of facts
satisfactory to the Board or its designated agent, and has complied with
such other reasonable requirements, if any, as the Board may deem
appropriate.
Section 5. Rules as to Issue of Certificates. The Board of
Directors may make such rules and regulations as it may deem expedient
concerning the issue, transfer and registration of certificates of stock of
the Company.
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Each and every person accepting from the Company certificates of
stock therein shall furnish the Corporation a written statement of his or
her residence or post office address.
Section 6. Holder of Record to be deemed Holder in Fact. The
Company shall be entitled to treat the holder of record of any share or
shares of stock as the holder in fact thereof, and accordingly shall not be
bound to recognize any equitable or other claim to, or interest in, such
share or shares on the part of any other person, whether or not it shall
have express or other notice thereof, save as expressly provided by law or
by Section 7 of this Article.
Section 7. Shares of Stock Held for Account of Another. The
Board of Directors is authorized to adopt a procedure whereby a stockholder
of the Corporation may certify in writing that all or part of the shares of
stock registered in the name of the stockholder are held for account of a
specified person or persons. The resolution of the Board of Directors that
adopts this certification procedure may include the following:
(1) The class of stockholder who may qualify.
(2) The purpose or purposes for which the certification may be
made.
(3) The form of certification and the information that it should
contain.
(4) The time after the record date within which the certification
must be received by the Corporation, if the certification
concerns a record date.
(5) Any other provisions regarding the certification procedure
that the Board of Directors deems necessary or desirable.
On receipt by the Corporation of a certification that complies
with the procedure adopted by the Board of Directors, the person specified
in the certification is deemed, for the purpose set forth in the
certification, to be the holder of record of the shares of stock indicated
in the certification in place of the stockholder making the certification.
ARTICLE V
MISCELLANEOUS PROVISIONS
Section 1. Fiscal Year. The fiscal year of the Company shall end
on the 31st day of December of each year.
Section 2. Checks, etc. All checks, drafts or orders for the
payment of money shall be signed by such officer(s) or agent(s) as the
directors may designate.
Section 3. Notice and Waiver of Notice. Except as provided in
Article 1 Section 8 of these Bylaws, whenever, under the provisions of the
Pennsylvania Business Corporation Law or of the Articles or of these Bylaws
or otherwise, written notice is required to be given to any person, it may
be given to such person either personally or by sending a copy thereof by
first class or express mail, postage prepaid, telegram (with messenger
service specified), telex, TWX (with answerback received), courier service
(with charges prepaid) or facsimile transmission to his or her address (or
to his or her telex, TWX, or facsimile number) appearing on the books of
the Company or, in the case of directors, supplied by the director to the
Company for the purpose of notice. If the notice is sent by mail,
telegraph or courier service, it shall be deemed to have been given to the
person entitled thereto when deposited in the United States mail or with a
telegraph office or courier service for delivery to that person. A notice
given by telex or TWX shall be deemed to have been given when dispatched.
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If mailed at least twenty (20) days prior to the meeting or corporate
action to be taken, notice may be sent by any class of postpaid mail
(including bulk mail). Whenever any notice is required to be given by the
Pennsylvania Business Corporation Law or by the Articles or these Bylaws, a
waiver thereof in writing, signed by the person or persons entitled to the
notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice. Neither the business to be
transacted nor the purpose of a meeting need be specified in the waiver of
notice of the meeting. Attendance of a person at any meeting shall
constitute a waiver of notice of the meeting, except where any person
attends a meeting for the express purpose of objecting to the transaction
of any business because the meeting was not lawfully called or convened,
and the person so objects at the beginning of the meeting.
Section 4. Inspection of Books. Every stockholder shall, upon
written verified demand stating the purpose thereof, have a right to
examine, in person or by agent or attorney, during the usual hours for
business for any proper purpose, the share register books and records of
account, and records of the proceedings of the incorporators, stockholders
and directors and to make copies or extracts therefrom. A proper purpose
shall mean a purpose reasonably related to the interest of the person as a
stockholder. In every instance where an attorney or other agent is the
person who seeks the right of inspection, the demand shall be accompanied
by a verified power of attorney or other writing that authorizes the
attorney or other agent to so act on behalf of the stockholder. The demand
shall be directed to the Company at its registered office in the
Commonwealth of Pennsylvania or at its principal place of business wherever
situated.
Section 5. Record date. The Board of Directors may fix a time
prior to the date of any meeting of stockholders as a record date for the
determination of the stockholders entitled to notice of, or to vote at, the
meeting, which time, except in the case of an adjourned meeting, shall be
not more than 90 days prior to the date of the meeting of stockholders.
Only stockholders of record on the date fixed shall be so entitled
notwithstanding any transfer of shares on the books of the Company after
any record date fixed as provided in this subsection. The Board of
Directors may similarly fix a record date for the determination of
stockholders of record for any other purpose. When a determination of
stockholders for a record date has been made as provided in this Section
for the purpose of a meeting, such determination shall apply to any
adjournments thereof unless the Board fixes a new record date for the
adjourned meeting.
ARTICLE VI
AMENDMENT AND REPEAL
Section 1. Amendment and Repeal of Bylaws. The stockholders by
the affirmative vote of the holders of a majority of the stock issued and
outstanding of the class or classes entitled to vote, may at any meeting,
provided the substance of the proposed amendment shall have been stated in
the notice of the meeting, amend, alter or repeal any of these Bylaws.
Section 2. Amendments By Directors. Except as prohibited by law,
the directors, by the affirmative vote of a majority of the Board, may at
any meeting amend, alter or repeal these Bylaws, in whole or in part.
ARTICLE VII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. Right to Indemnification. Except as prohibited by
law, every director and officer of the Company shall be entitled as of
right to be indemnified by the Company against reasonable expense and any
liability paid or incurred by such person in connection with any actual or
threatened claim, action, suit or proceeding, civil, criminal,
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<PAGE>
administrative, investigative or other, whether brought by or in the right
of the Company or otherwise, in which he or she may be involved, as a party
or otherwise, by reason of such person being or having been a director or
officer of the Company or by reason of the fact that such person is or was
serving at the request of the Company as a director, officer, employee,
fiduciary or other representative of another corporation, partnership,
joint venture, trust, employee benefit plan or other entity (such claim,
action, suit or proceeding hereinafter being referred to as "Action").
Such indemnification shall include the right to have expenses incurred by
such person in connection with an Action paid in advance by the Company
prior to final disposition of such Action, subject to such conditions as
may be prescribed by law. Persons who are not directors or officers of the
Company may be similarly indemnified in respect of service to the Company
or to another such entity at the request of the Company to the extent the
Board of Directors at any time designates such person as entitled to the
benefits of this Section. As used herein, "expense" shall include fees and
expenses of counsel selected by such person; and "liability" shall include
amounts of judgments, excise taxes, fines and penalties, and amounts paid
in settlement.
Section 2. Right of Claimant to Bring Suit. If a claim for
indemnification by any person eligible to be indemnified under Section 1 is
not paid in full by the Company within 30 days after a written claim has
been received by the Company, the claimant may at any time thereafter bring
suit against the Company to recover the unpaid amount of the claim, and, if
successful in whole or in part, the claimant shall also be entitled to be
paid the expense of prosecuting such claim. It shall be a defense to any
such suit that the conduct of the claimant was such that under Pennsylvania
law the Company would be prohibited from indemnifying the claimant for the
amount claimed, but the burden of proving such defense shall be on the
Company. Neither the failure of the Company (including its Board of
Directors, independent legal counsel and its stockholders) to have made a
determination prior to the commencement of such suit that indemnification
of the claimant is proper in the circumstances because the conduct of the
claimant was not such that indemnification would be prohibited by law, nor
an actual determination by the Company (including its Board of Directors,
independent legal counsel or its stockholders) that the conduct of the
claimant was such that indemnification would be prohibited by law, shall be
a defense to the suit or create a presumption that the conduct of the
claimant was such that indemnification would be prohibited by law.
Section 3. Insurance and Funding. The Company may purchase and
maintain insurance to protect itself and any person eligible to be
indemnified hereunder against any liability or expense asserted or incurred
by such person in connection with any Action, whether or not the Company
would have the power to indemnify such persons against such liability or
expense by law or under the provisions of this Article VII. The Company
may create a trust fund, grant a security interest, cause a letter of
credit to be issued or use other means (whether or not similar to the
foregoing) to ensure the payment of such sums as may become necessary to
effect indemnification as provided herein.
Section 4. Non-exclusivity; Nature and Extent of Rights. The
right of indemnification provided for herein (1) shall not be deemed
exclusive of any other rights, whether now existing or hereafter created,
to which those seeking indemnification hereunder may be entitled under any
agreement, by-law or charter provision, vote of stockholders or directors
or otherwise, (2) shall be deemed to create contractual rights in favor of
persons entitled to indemnification hereunder, (3) shall continue as to
persons who have ceased to have the status pursuant to which they were
entitled or were designated as entitled to indemnification hereunder and
shall inure to the benefit of the heirs and legal representatives of
persons entitled to indemnification hereunder and (4) shall be applicable
to Actions commenced after the adoption hereof, whether arising from acts
or omissions occurring before or after the adoption hereof. The right of
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<PAGE>
indemnification provided for herein may not be amended, modified or
repealed so as to limit in any way the indemnification provided for herein
with respect to any acts or omissions occurring prior to the effective date
of any such amendment, modification or repeal.
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<PAGE>
18
W6-NY960570.340
PG ENERGY INC.
RESTATED ARTICLES OF INCORPORATION
First: The name of the corporation is:
PG Energy Inc.
Second: The location and post office address of the
corporation's registered office in this Commonwealth is:
Wilkes-Barre Center
39 Public Square
Wilkes-Barre, Pennsylvania 18711
Third: The purposes of the corporation, which has
accepted the Pennsylvania Business Corporation Law, are as
follows:
(a) To divert, develop, transport, impound, pump,
distribute, and furnish water to or for the public;
(b) To produce, generate, manufacture, transmit,
transport, store, distribute, or furnish natural or
artificial gas to the public;
(c) To furnish service subject to the
jurisdiction of the Pennsylvania Public Utility Commission;
(d) To manufacture, process, own, use, and deal
in personal property of every class and description;
(e) To acquire, own, use, and dispose of real
property of every nature whatsoever;
(f) To engage in and to do any lawful act
concerning any and all lawful business for which
corporations may be incorporated under the provisions of the
Business Corporation Law.
Fourth: The term for which the corporation is to
exist is perpetual.
Fifth: The aggregate number of shares which the
corporation shall have authority to issue is (1) 10,000,000
shares of Common Stock without nominal or par value, with a
stated value of $10.00 per share and (2) 997,500 shares of
Preferred Stock with a par value of $100.00 per share.
Sixth: The designations, rights, privileges,
limitations, preferences, and voting powers, or prohibitions,
restrictions, or modifications of the voting and other rights and
powers, and the terms as to redemption of the Preferred Stock and
the Common Stock, shall be in accordance with the following
sections:
1. Subject to the restrictions and/or limitations
hereinafter set forth, the number of shares of Preferred Stock
which may be issued shall be such number thereof as shall from
time to time be authorized in the manner provided by law and
consented to, approved and adopted by a majority in interest of
the stockholders of the Company having voting powers, or such
other proportion in interest of such stockholders as may be
required by law.
2. The shares of the Preferred Stock shall be issued
from time to time in series, each of such series to be
distinctively designated.
3. The initial series of Preferred Stock shall
consist of 100,00 shares and shall be designated as 4.10%
Cumulative Preferred Stock. The Board of Directors is hereby
specifically authorized, in respect of said initial series of
Preferred Stock, to fix and determine
(a) the annual dividend rate (within such limits
as shall be permitted by law);
(b) the redemption price or prices, if any;
(c) the amount or amounts per share payable to
the holders thereof upon any voluntary or involuntary
dissolution, liquidation or winding up of the Company, which
may be different for voluntary and involuntary dissolution,
liquidation or winding up and which shall include an amount
equal to the accrued dividends on such shares to the date
fixed for the payment of said amount.
The second series of Preferred Stock shall consist of
40,000 shares and shall be designated as the 1966 Cumulative
Preferred Stock. The Board of Directors is hereby specifically
authorized, in respect of said 1966 Cumulative Preferred Stock,
to fix and determine
(a) the annual dividend rate (within such limits
as shall be permitted by law);
(b) the redemption price or prices, if any;
(c) the amount or amounts per share payable to
the holders thereof upon any voluntary or involuntary
dissolution, liquidation or winding up of the Company, which
may be different for voluntary or involuntary dissolution,
liquidation or winding up and which shall include an amount
equal to the accrued dividends on such shares to the date
fixed for the payment of said amount.
Subject to the provisions of section 6 hereof, holders of the
1966 Cumulative Preferred Stock shall have a non-cumulative right
(commencing at such time and exercisable for such period and in
such manner as the Board of Directors may determine) each year to
tender to the Company and to require it to purchase, to the
extent the Company shall have available funds which it may
legally use for the purpose, at a per share price not exceeding
$100, up to (a) that number of shares of the 1966 Cumulative
Preferred Stock which can be acquired for an aggregate purchase
price of $80,000, less (b) the number of such shares which the
Company may already have purchased during the year at a per share
price of not more than $100.
The third series of Preferred Stock shall consist of
250,000 shares and shall be designated as 9% Cumulative Preferred
Stock. The Board of Directors is hereby specifically authorized
in respect of said 9% Cumulative Preferred Stock to fix and
determine
(a) the annual dividend rate (within such limits
as shall be permitted by law);
(b) the redemption price or prices, if any;
(c) the amount or amounts per share payable to
the holders thereof upon any voluntary or involuntary
dissolution, liquidation or winding up and which shall
include an amount equal to the accrued dividends on such
shares to the date fixed for the payment of said amount.
As to the balance of the authorized Preferred Stock,
consisting of 607,500 shares, the Board of Directors is hereby
specifically authorized
(a) Subject to the provisions of section 11
hereof, to create and issue from time to time one or more
additional series of the Preferred Stock consisting of such
number or numbers of shares as it shall determine;
(b) To distinctively designate each additional
series so as to distinguish the shares thereof from the
shares of all other series and classes;
(c) To fix and determine, subject to those
provisions hereinafter stated which are applicable to all
Preferred Stock, the designations, rights and privileges of
such additional series, including, without limitation,
(1) the rate of dividend (within such limits
as shall be permitted by law);
(2) the price at and the terms and
conditions on which shares may be redeemed;
(3) the amounts payable upon shares in the
event of voluntary or involuntary dissolution,
liquidation or winding up of the Company, which
may be different for voluntary or involuntary
dissolution, liquidation or winding up and which
may include an amount equal to the accrued
dividends on such shares to the date fixed for the
payment of said amount;
(4) to the extent permitted by law, a
Sinking Fund or Purchase Fund for the redemption
or purchase of shares; and
(5) the terms and conditions on which shares
may be converted in the event shares of any series
are issued with the privilege of conversion.
4. Subject to the provisions of section 11 hereof one
or more additional series of Preferred Stock may be created and
issued from time to time, when so determined and authorized by
the Board of Directors and consented to, approved and adopted by
a majority in interest of the stockholders having voting power,
or such other proportion in interest of such stockholders as may
be required by law. The Preferred Stock of any such additional
series, subject to the provisions hereinafter stated as
applicable to all Preferred Stock, shall have such designations,
rights, privileges, limitations, preferences and voting powers,
or prohibitions, restrictions, or qualifications of the voting
and other rights and powers and shall be subject to redemption
and shall be convertible into any other class of series of stock,
common or preferred, and shall consist of such number of shares
or of such number of shares not less than and not greater than
numbers to be stated therefor, as may, in respect of any such
series, be authorized by the Board of Directors of this Company
and consented to, approved and adopted by a majority in interest
of its stockholders having voting power, or such other proportion
in interest as may be provided by law. All series of Preferred
Stock shall be of equal rank, and all shares of Preferred Stock
of any series shall be identical in all respects.
5. The holders of the Preferred Stock are entitled to
receive, in respect of each share held, cash dividends at the
annual rate specified in the designation thereof, payable quarter-
yearly on March 15, June 15, September 15 and December 15 in each
year, when and as declared by the Board of Directors, out of
funds legally available for the payment of dividends. Such
dividends shall be cumulative from the first day of the dividend
period in which such stock shall have been originally issued, and
shall be paid, or declared and set apart for payment, before any
dividends shall be declared or paid on or set apart for the
Common Stock, so that if, for any past dividend period or the
current dividend period, dividends on the Preferred Stock shall
not have been paid, or declared and set apart for payment, the
deficiency shall be fully paid or declared and funds set apart
for the payment thereof before any dividends shall be declared or
paid on or set apart for the Common Stock. Accruals of dividends
shall not bear interest. The holders of the Preferred Stock
shall not be entitled to receive any dividends thereon other than
dividends at the annual rate specified in the designation of such
shares. When full cumulative dividends upon the Preferred Stock
then outstanding for all past dividend periods and for the
current dividend period shall have been paid or declared and set
apart for payment, the Board of Directors may declare dividends
on the Common Stock of the Company.
6. The Company, on the sole authority of its Board of
Directors, shall have the right at any time or from time to time
to redeem and retire all or any part of any series of Preferred
Stock which has been made redeemable, at the redemption price
determined for such series, upon not less than thirty (30) days'
previous notice mailed to the holders of record thereof upon the
date of mailing or on such date within ten (10) days prior
thereto as the Board of Directors may fix for the purpose, (and
by such publication, if any, made in such manner and at such time
or times, as the Board of Directors may prescribe). In case of
the redemption of a part only of any series of Preferred Stock,
the shares thereof so to be redeemed shall be selected by lot, in
such manner as the Board of Directors shall determine, by a bank
or trust company selected for that purpose by the Board of
Directors. At any time after notice of redemption has been
mailed to the holders of stock to be redeemed, the Company may
deposit in trust, for the account of the holders of the shares to
be redeemed, funds necessary for such redemption with a bank or
trust company in good standing, organized under the laws of the
United Stated of America or of the State of New York, doing
business in the Borough of Manhattan the City of New York, or
organized under the laws of the Commonwealth of Pennsylvania,
having capital, surplus and undivided profits aggregating at
least $5,000,000 and designated in such notice of redemption, and
upon such deposit, or if no such deposit is made, upon the date
fixed for redemption (unless the Company defaults in making
payment of the redemption price), such holders shall cease to be
stockholders with respect to said shares, and from and after the
making of such deposit, or, if no such deposit is made, from and
after the date fixed for redemption (the Company not having
defaulted in making payment of the redemption price) said shares
shall not be deemed to be outstanding and such holders shall have
no interest in or claim against the Company with respect to the
said shares, but shall be entitled only to receive said
redemption price on the date fixed for redemption, without
interest. Any interest accrued on any funds so deposited shall
belong to the Company. Any moneys so deposited and remaining
unclaimed at the end of six (6) years from the date fixed for
redemption shall, if thereafter requested by resolution of the
Board of Directors, be repaid to the Company, and in the event of
such repayment, such holders of the shares so to be redeemed as
shall not have made claim to such moneys prior to such repayment,
shall be deemed to be unsecured creditors of the Company for an
amount equivalent to the sum deposited as aforesaid for the
redemption of such shares and so repaid to the Company but shall
not be entitled to interest upon said amount. If at any time the
Company has failed to pay dividends in full on any outstanding
shares of Preferred Stock, thereafter and until dividends in full
on all shares of outstanding Preferred Stock have been paid, or
declared and set apart for payment, for all past dividend periods
but without interest on accumulated dividends, and for the
current quarter-yearly dividend period, the Company may not
redeem any Preferred Stock unless all outstanding shares of
Preferred Stock are redeemed and may not purchase or otherwise
acquire for value any shares of Preferred Stock except in
accordance with an offer (which may vary with respect to shares
of different series) made to all holders of shares of Preferred
Stock. Except as above set forth, nothing contained in these
Articles limits any legal right of the Company to purchase any
shares of the Preferred Stock.
7. Upon any dissolution, liquidation or winding up of
the Company, whether voluntary or involuntary, the holders of the
Preferred Stock of each and every series then outstanding shall
be entitled to receive out of the net assets of the Company, the
amounts per share fixed for the shares of the respective series
and payable upon such dissolution, liquidation or winding up,
plus an amount equal to the accrued dividends on such shares,
before any distribution of the assets of the Company shall be
made to the holders of the Common Stock.
8. If the assets distributable on such dissolution,
liquidation or winding up shall be insufficient to permit the
payment to the holders of Preferred Stock of the full amounts to
which they are entitled as aforesaid, then said assets shall be
distributed ratably among the holders of the respective series of
Preferred Stock in proportion to the sums which would be payable
on such dissolution, liquidation or winding up is all sums
payable were discharged in full in preference and priority over
the shares of the Common Stock.
9. The sale, lease, conveyance, exchange or transfer
of all or substantially all of the property and/or franchises of
the Company, or the merger or consolidation of the Company into
or with any other corporation, are not to be deemed a
dissolution, liquidation or winding up as such terms are used in
this and the two preceding paragraphs.
10. No holder of the Preferred Stock shall be entitled
to vote for the election of directors or in respect of any
matter, except as otherwise provided in the following paragraphs
of this section and in sections 11 and 12 hereof, or as may be
required by law. In such excepted cases, each record holder of
the Preferred Stock shall have one vote for each share of
Preferred Stock held by him.
(a) If and when dividends payable on the
Preferred Stock shall be in default in an amount equivalent
to four full quarter-yearly dividends on all shares of the
Preferred Stock then outstanding and until all dividends
then in default on the Preferred Stock shall have been paid,
the record holders of the shares of the Preferred Stock,
voting separately as one class, shall be entitled, at each
meeting of the shareholders at which directors are elected,
to elect the smallest number of directors necessary to
constitute a majority of the full Board of Directors, and
the record holders of the shares of the Common Stock, voting
separately as a class, shall be entitled at any such meeting
to elect the remaining directors of the Company. The term
of office of each director of the Company shall terminate
upon the election of his successor. At each election of
directors by a class vote pursuant to the provisions of this
paragraph, the class first electing the directors which it
is entitled to elect shall name the directors who are to be
succeeded by the directors then elected by such class,
whereupon the term of office of the directors so named shall
terminate. The term of office of the directors not so named
shall terminate upon the election by the other class of the
directors which it is entitled to elect.
(b) If and when all dividends then in default on
the Preferred Stock then outstanding shall be paid (and such
dividends shall be paid, or declared and set apart for
payment, out of funds legally available therefor, as soon as
reasonably practicable), the holders of the shares of the
Preferred Stock shall thereupon be divested of the special
right with respect to the election of directors provided in
the preceding paragraph (a), and the voting power of holders
of shares of the Preferred Stock and the Common Stock shall
revert to the status existing before the occurrence of such
default, but always subject to the same provisions for
vesting such special right in the Preferred Stock in case of
further like default or defaults in dividends thereon.
Dividends shall be deemed to have been paid, as that term is
used in this paragraph (b), whenever such dividends shall
have been declared and paid, or declared and set aside for
payment.
(c) In case of any vacancy in the Board of
Directors occurring among the directors elected by the
holders of the shares of the Preferred Stock, as a class,
pursuant to the preceding paragraph (a), the remaining
directors elected by the holders of the Preferred Stock, by
affirmative vote of a majority thereof, or the remaining
director so elected if there be but one, may elect a
successor to hold office for the unexpired term of the
director whose place shall be vacant. In case of a vacancy
in the Board of Directors occurring among the directors
elected by the holders of the shares of the Common Stock as
a class, the remaining director elected by the holders of
the Common Stock, by affirmative vote of a majority thereof,
or the remaining director so elected if there be but one,
may elect a successor to hold office for the unexpired term
of the director whose place shall be vacant. In all other
cases, any vacancy occurring among the directors shall be
filled by the vote of a majority of the remaining directors.
(d) Whenever the holders of the shares of the
Preferred Stock, as a class, become entitled to elect
directors of the Company pursuant to the preceding
provisions, or whenever the holders of the shares of the
Common Stock, as a class, become entitled to elect directors
of the Company pursuant to such provisions, a special
meeting of the holders of the shares of the Preferred Stock
or of the holders of the shares of the Common Stock, as the
case may be, for the election of such directors, shall be
held at any time thereafter upon call by the holders of not
less than 1,000 shares of the Preferred Stock or of the
Common Stock, as the case may be, or upon call by the
Secretary of the Company at the request in writing of
holders of not less than 1,000 shares of the Preferred Stock
or the Common Stock, as the case may be, addressed to him at
the principal office of the Company. If no such special
meeting be called or be requested to be called, the election
of the directors to be elected by the holders of the shares
of the Preferred Stock, voting as a class, and of those to
be elected by the holders of the shares of the Common Stock,
voting as a class, shall take place at the annual meeting of
the stockholders of the Company next succeeding the accrual
of such special voting right. At all meetings of
stockholders at which director are elected during such times
as the holders of shares of the Preferred Stock shall have
the special right, voting separately as one class, to elect
directors, the presence in person or by proxy of the holders
of a majority of the outstanding shares of the Common Stock
shall be required to constitute a quorum of such class for
the election of directors, and the presence in person or by
proxy of the holders of a majority of the outstanding shares
of all series of the Preferred Stock shall be required to
constitute a quorum of such class for the election of
directors, provided, however, that the absence of a quorum
of the holders of stock of either such class shall not
prevent the election at any such meeting or adjournment
thereof of directors by the other such class if the
necessary quorum of the holders of stock of such class is
present in person or by proxy at such meeting, and provided
further that in the absence of a quorum of the holders of
stock of either such class, a majority of those holders of
the stock of such class who are present in person or by
proxy shall have power to adjourn the election of the
directors to be elected by such class from time to time
without notice other than announcement at the meeting until
the requitable amount of holders of such class shall be
present in person or by proxy.
(e) Every record holder of outstanding shares of
the Common Stock shall, at all meetings of stockholders of
the Company, have one vote for each share of the Common
Stock held by him, except as otherwise provided in the
preceding paragraphs of section 10 hereof or as may be
provided by law.
(f) In all elections for directors each
stockholder may cast the whole number of his votes for one
candidate or distribute them upon two or more candidates, as
he may prefer.
11. So long as any shares of the Preferred Stock of
any series are outstanding, the Company shall not, without the
affirmative vote or written consent of the record holders of at
least two-thirds of the outstanding shares of Preferred Stock of
all series, voting separately as one class:
(a) Create or authorize any stock ranking prior
in any respect to the Preferred Stock or any security
convertible into shares of such stock, or issue any such
stock or convertible security; or
(b) Change the terms and provisions of the
Preferred Stock so as to affect adversely the rights,
preferences or privileges of the holders thereof; provided,
however, that if any such change will affect adversely the
rights, preferences or privileges of the holders of one or
more, but less than all, of the series of Preferred Stock at
the time outstanding, the vote or consent only of the record
holders of at least two-thirds of the total number of shares
of each series so adversely affected shall be required; or
(c) Issue any shares of the Preferred Stock or
shares of any stock ranking on a parity in any respect with
the Preferred Stock, or any securities convertible into
shares of such stock other than in exchange for, or for the
purpose of effecting the redemption or other retirement of,
not less than an equal number of shares of the Preferred
Stock, or shares of any stock ranking on any such parity, at
the time outstanding, unless
(1) The gross income (determined in
accordance with accepted accounting principles) of
the Company available for the payment of interest
charges shall, for a period of twelve consecutive
calendar months within the fifteen calendar months
next preceding the issue of such shares, have been
at least one and one-half times the sum of
(i) the interest for one year, adjusted by
provision for amortization of debt discount and
expense, or of premium, as the case may be, on all
funded indebtedness, and on all notes payable of
the Company maturing more than twelve months after
the date of issue of such shares, which shall be
outstanding at the date of the issue of such
shares, and (ii) an amount equal to be the
dividend requirement for one year on all shares of
the Preferred Stock of all series and on all other
shares of stock, if any, ranking in any respect
prior to or on a parity with the Preferred Stock,
which shall be outstanding after the issue of the
shares or convertible securities proposed to be
issued; and
(2) The capital represented by the Common
Stock and any other class of stock ranking junior
to the Preferred Stock to be outstanding
immediately after such issue, plus the surplus
accounts of the Company, shall be not less than
the aggregate amount payable on the involuntary
dissolution, liquidation or winding up of the
Company, in respect of all shares of the Preferred
Stock and all shares of stock, if any, ranking in
any respect prior thereto or on a parity
therewith, which shall be outstanding after the
issue of the shares or convertible securities
proposed to be issued, and provided that no
portion of the surplus of the Company utilized to
satisfy the foregoing requirements shall be
available for dividends on the Common Stock.
In case, within or after the period for which the calculation of
such gross income is made pursuant to the preceding clause (1),
the Company shall have acquired, or will acquire concurrently
with the issue of the shares or convertible securities proposed
to be issued, all or substantially all of the properties of
another corporation or any properties, the earnings of which
during such period are separately ascertainable, then, in
computing such gross income for such period, there shall be
included, to the extent that the same may not have been otherwise
included, the earnings or losses of such other corporation or of
such properties for the whole of such period, and there shall be
excluded the earnings or losses of any properties (except
securities of the Company ) given by the Company in payment or
part payment therefor. If, during the period for which any
calculation of gross income is made pursuant to the preceding
clause (1) or at the time of any calculation pursuant to the
preceding clause (2), the Company has any subsidiary or
subsidiaries whose accounts, in the ordinary practice of the
Company, are consolidated with the Company's accounts, the gross
income, interest charges, indebtedness and surplus accounts for
the purposes of this paragraph (c) shall be the consolidated
gross income, interest charges, indebtedness and surplus accounts
of the Company and such subsidiary or subsidiaries, and the
acquisition and/or disposition of any properties by each such
subsidiary within or after the period for which the calculation
of gross income is made shall be taken into account the same as
in the case of the Company; or
(d) Pay any dividends on its Common Stock (other
than dividends payable in Common Stock) or make any
distribution on, or purchase, or otherwise acquire for value
any of its Common Stock (each and all of these actions being
hereinafter embraced in the term "payment of common stock
dividends"), except as follows:
(i) If and so long as the ratio of the
Common Stock equity to the total capital of the
Company at the end of the second calendar month
immediately preceding the date of the proposed
payment of a Common Stock dividend, adjusted to
reflect the proposed payment (which ratio is
hereinafter referred to as "capitalization ratio")
is 25% or more, then no restriction is imposed in
this paragraph (d).
(ii) If and so long as the capitalization
ratio is less than 25% but not less than 20%, then
the payment of Common Stock dividends, including
the proposed payment, during the twelve months
ending with and including the date of the proposed
payment, shall not exceed 75% of the net income of
the Company available for dividends on its Common
Stock during the twelve calendar months ending
with and including the second calendar month
immediately preceding the date of the proposed
payment.
(iii) If and so long as the
capitalization ratio is less than 20%, then the
payment of Common Stock dividends, including the
proposed payment, during the twelve months' period
ending with and including the date of the proposed
payment, shall not exceed 50% of the net income of
the Company available for dividends on its Common
Stock during the twelve calendar months, ending
with and including the second calendar month
immediately preceding the date of the proposed
payment.
For the purpose of this paragraph (d):
"Common Stock equity" shall consist of the sum of
(1) the capital represented by the issued and
outstanding shares of Common Stock (including
premiums on Common Stock) and (2) the surplus
accounts of the Company, less any excess of the
aggregate amount payable on the involuntary
dissolution, liquidation, or winding up of the
Company, in respect of all its outstanding shares
of preferred stock over the aggregate par value of
such preferred stock. "Total capital of the
Company" shall consist of the sum of (1) the
principal amount of all outstanding indebtedness
of the Company maturing one year or more after the
date of the issue thereof, exclusive of all such
indebtedness owned by the Company, and (2) the par
or stated value of all outstanding capital stock
(including premiums on capital stock) of all
classes of the Company, exclusive of all such
stock owned by the Company, and (3) the surplus
accounts of the Company. "Net income of the
Company available for dividends on its Common
Stock" shall be determined in accordance with
accepted accounting practice, provided that there
shall be included in operating expenses an amount
for maintenance and repairs to, and as provision
for reserves for renewals and replacements,
retirements or depreciation of the Company's
properties equivalent to the Standard of
Expenditure as set forth in 4.10 of the Mortgage
and Deed of Trust dated as of March 15, 1946 of
the Company to Guaranty Trust Company of New York,
Trustee.
or
(e) Make any payment or distribution out of
capital or capital surplus (other than dividends payable in
stock junior to the Preferred Stock) to any holder of any
stock ranking junior to the Preferred Stock.
No vote or consent of the holders of the Preferred Stock shall be
required in respect of any transaction enumerated in the
preceding paragraphs (a), (b), (c), (d) and (e) if at or prior to
the time when such transaction is to take effect provision is
made for the redemption or other retirement of all shares of the
Preferred Stock at the time outstanding, the consent of which
would otherwise be required. There shall be excluded from the
calculations made pursuant to clauses (1) and (2) of the
preceding paragraph (c) interest charges on all indebtedness and
dividends and liquidation preferences on all stock which are to
be retired in connection with the issue of the shares or
convertible securities proposed to be issued.
12. So long as any shares of Preferred Stock of any
series are outstanding , the Company shall not, without the
affirmative vote or written consent of the record holders of a
majority of the outstanding shares of Preferred Stock of all
series, voting separately as one class:
(a) Issue or assume any unsecured note, debenture
or other security evidencing unsecured indebtedness for
borrowed money which by its terms matures on demand or
within one year from the date of the issue thereof, for any
purpose other than the refunding of an equal or lesser
principal amount of secured or unsecured indebtedness
theretofore issued or assumed by the Company and then
outstanding, or the retiring, by redemption or otherwise, of
an equal or lesser amount of shares of the Preferred Stock
or shares of any stock ranking prior thereto or on a parity
therewith, if immediately after such issue or assumption,
the principal amount of all such unsecured notes, debentures
or other securities evidencing unsecured indebtedness for
borrowed money issued or assumed by the Company and then
outstanding and maturing on demand or within one year from
the date of issue thereof would exceed $12,000,000, or
(b) Issue or assume any secured debt, provided,
however, that this restriction shall not prevent, or require
any such vote or written consent of the holders of Preferred
Stock for,
(i) the issuance of bonds of any series
under the Indenture of Mortgage and Deed of Trust,
dated as of March 15, 1946, from the Company to
Guaranty Trust Company of New York, Trustee, or
any indenture, supplemental thereto, or the
issuance of bonds under any other mortgage
providing for the refunding of bonds issued under
said Indenture dated as of March 15, 1946, or
(ii) the giving of purchase money mortgages
or other purchase money liens or purchase money
obligations in respect of property which may be
acquired after March 15, 1946 by the Company or
any subsidiary (including any mortgage given or
lien created on such property to provide any part
of the purchase price of such property) or the
assumption of indebtedness secured by mortgages or
other liens then existing on such after-acquired
property, or the extension, renewal or refunding
of any funded debt given, created, issued or
assumed as permitted under the provisions of this
subdivision (ii); or
(iii) issue or assumption of secured debt
which if unsecured would be permitted under the
preceding paragraph (a); or
(c) Merge or consolidate with any other
corporation or corporations, or sell all or substantially
all of the assets of the Company, provided that the
provisions of this paragraph (c) shall not apply to a merger
or consolidation with any subsidiary of the Company which is
wholly-owned (except for directors' qualifying shares), or a
purchase or other acquisition by the Company of the
franchises (including franchises and rights granted by
corporate charter) or assets of another corporation, or
otherwise apply to any transaction which does not involve a
merger or consolidation; or
(d) Permit any subsidiary to merge or consolidate
with or into any other corporation or corporations, except
(i) with one or more wholly-owned subsidiaries of the
Company or (ii) with the Company; or
(e) Itself, or permit any subsidiary to, sell,
transfer or dispose of any stock whatsoever issued by any
subsidiary, except to the Company and/or one or more of its
wholly-owned subsidiaries and except such number of shares
as may be necessary to qualify persons to act as directors
of any such subsidiary, unless prior thereto or at the same
time all stock and all other securities and obligations of
such subsidiary owned directly or indirectly by the Company
and its subsidiaries are sole, transferred or disposed of;
or
(f) Permit any subsidiary to issue (except to the
Company and/or one of its wholly-owned subsidiaries) any
shares of stock ranking prior to the stock owned directly or
indirectly by the Company or any stock or obligations
convertible into or evidencing the right to purchase shares
of such prior stock, or to issue shares of stock of any
other class unless effective provisions shall be made that
such additional stock (or such part thereof as shall be
proportionate to the part of the entire stock of such class
owned by the Company, directly or indirectly, immediately
prior to the issue of such stock) shall forthwith upon the
issuance thereof be acquired by the Company and/or one of
its wholly-owned subsidiaries.
No vote or consent of the holders of the Preferred Stock shall be
required in respect of any transaction enumerated in the
preceding paragraphs (a) to (f) both inclusive, if at or prior to
the time when such transaction is to take effect provision is
made for the redemption or other retirement of all shares of the
Preferred Stock then outstanding, the consent of which would
otherwise be required.
13. As used herein the term "subsidiary" or
"subsidiaries" shall be deemed to mean and include any
corporation substantially all of whose properties are located
within the limits of the State of Pennsylvania, not less than a
majority of the voting stock of which (not including stock having
voting power only upon the happening of an event of default) is
at any time owned directly or indirectly by the Company.
14. No provision set forth herein is intended or shall
be construed to relieve the Company from compliance with any
applicable constitutional or statutory provisions requiring the
vote or written consent of a greater number of the outstanding
shares of the Preferred Stock.
15. No holder of shares of Preferred Stock, of any
series, has any preemptive, conversion or other subscription
rights, and no holder of the Common Stock has any preemptive or
other subscription rights.
16. The Company reserves the right to increase or
decrease its authorized capital stock, or any class or series
thereof, or to reclassify the same, and to amend, alter, change
or repeal any provision contained in these Articles, or in any
amendment thereto, in the manner now or hereafter prescribed by
law, but subject to such conditions and limitations as are above
prescribed and all rights conferred upon stockholders in these
Articles, or in any amendment thereto, are granted subject to
this reservation.
17. The Company may from time to time issue and
dispose of its shares of Common Stock without nominal or par
value, for such consideration payable in money, property or
otherwise, and upon such terms and in such manner, or as
dividends payable therein, as may be fixed or determined from
time to time by the Board of Directors, and authority is hereby
granted to the Board of Directors so to fix and determine such
consideration, terms and manner.
On May 1, 1946, at a special meeting held after due
notice thereof, the Board of Directors of the Company duly
adopted resolutions fixing the annual dividend rate, the
redemption price or prices, and the amounts per share payable
upon voluntary or involuntary dissolution, liquidation or winding
up of the Company for the 4.10% Cumulative Preferred Stock as
follows:
"RESOLVED, that pursuant to authorization by the
stockholders of the Company, the annual dividend rate for the
4.10% Cumulative Preferred Stock of the Company, the redemption
price thereof, and the amounts per share payable to the holders
thereof upon any voluntary or involuntary dissolution,
liquidation or winding up of the Company, are as follows:
(1) The annual dividend rate shall be 4.10%.
(2) The redemption prices shall be $107.50
per share, if redeemed on or prior to January 1,
1951, and $105.50 per share if redeemed after
January 1, 1951, together in each case with an
amount equal to the accrued dividends on said
shares to the date fixed for redemption.
(3) The amount per share payable in the
event of voluntary dissolution, liquidation or
winding up, in case such event shall occur on or
prior to January 1, 1951, shall be $107.50 per
share, and no more, and in case such event shall
occur after January 1, 1951, shall be $105.50 per
share, and no more; and the amount per share
payable in the event of involuntary dissolution,
liquidation or winding up shall be $100, and no
more, together in each case with an amount equal
to the accrued dividends on said shares to the
date fixed for the payment of said amount."
On June 1, 1966, at a special meeting held after due
notice thereof, the Board of Directors of the Company duly
adopted resolutions fixing the annual dividend rate, the
redemption price or prices, the amounts per share payable upon
voluntary or involuntary dissolution, liquidation or winding up
of the Company and the time, period and manner of the exercise of
the annual non-cumulative tender right for the 1966 Cumulative
Preferred Stock of the Company as follows:
"RESOLVED, that the annual dividend rate for the
1966 Cumulative Preferred Stock of the Company, the
redemption price or prices thereof, and the amount or
amounts per share payable to holders thereof upon any
voluntary or involuntary dissolution, liquidation or
winding up of the Company, are hereby fixed and
determined as follows:
(1) The annual dividend rate shall be 5.75%.
(2) The redemption price shall be $107.00
per share if redeemed on or prior to June 30,
1971, $105.75 per share if redeemed after June 30,
1971, but on or before June 30, 1976, and $102.00
per share if redeemed after June 30, 1976,
together in each case with an amount equal to the
accrued dividends on said shares to the date fixed
for redemption.
(3) The amount per share payable in the
event of voluntary dissolution, liquidation or
winding up of the Company, in case such event
shall occur on or prior to June 30, 1971 shall be
$107.00 per share, and no more, and in case such
event shall occur after June 30, 1971, but on or
before June 30, 1976, shall be $105.75 per share,
and no more, and in case such event shall occur
after June 30, 1976, shall be $102.00 per share,
and no more, and the amount per share payable in
the event of involuntary dissolution, liquidation
or winding up of the Company shall be $100.00, and
no more, together in each case with an amount
equal to the accrued dividends on such shares to
the date fixed for the payment of said amount.
FURTHER RESOLVED, that, as provided in Section 3
of the Preferred Stock provisions of the Company's
charter, the holders of the 1966 Cumulative Preferred
Stock shall be entitled to an annual non-cumulative
tender right, the time, period and manner of exercise
of which shall be as follows:
(1) On May 1, 1967 and each May 1 thereafter
so long as any shares of the 1966 Cumulative
Preferred Stock shall be outstanding, the Company
will notify in writing each registered owner of
shares of the 1966 Cumulative Preferred Stock that
tenders of shares of the 1966 Cumulative Preferred
Stock may be made to the Company during the next
succeeding May 11 through May 31 (the "tender
period") pursuant to the provisions of paragraphs
(2) through (7) below. Such notice also shall
state (a) the total number of shares of the 1966
Cumulative Preferred Stock outstanding on such May
1 and the (b) the aggregate number of shares of
the 1966 Cumulative Preferred Stock which the
Company has purchased (other than pursuant to the
aforesaid tender right) during the 12 month period
immediately preceding such May 1 at a per share
price not exceeding $100 plus accrued dividends.
(2) From and after May 11, 1967 each
registered owner of the 1966 Cumulative Preferred
Stock shall have a non-cumulative right each year
to tender to the Company during the tender period
and offer to sell to the Company on the next
succeeding June 15, at a per share price not
exceeding $100, shares of the 1966 Cumulative
Preferred Stock.
(3) To the extent it shall have available
funds which it may legally use for the purpose and
subject to the provisions of Section 6 of the
Preferred Stock provisions of its charter, the
Company shall on June 15, 1967 and each June 15
thereafter, purchase from each registered owner of
the 1966 Cumulative Preferred stock shares of such
stock which such Preferred Stockholder has
properly tendered and offered for sale to the
Company during the immediately preceding tender
period in accordance with the preceding paragraph
(2), at the per share price specified in the
tender, provided, however, that in no event shall
the Company be required on any June 15 to purchase
from all tendering Preferred Stockholders a number
of shares of the 1966 Cumulative Preferred Stock
greater than the difference between (a) the whole
number of shares of the 1966 Cumulative Preferred
Stock which can be purchased by it on such June 15
for an aggregate purchase price of $50,000, less
(b) the number of shares of the 1966 Cumulative
Preferred Stock described in the Company's notice
pursuant to paragraph (1) above as having been
purchased by the Company during the preceding year
(such difference hereinafter being referred to as
"the maximum number of shares subject to the
tender right"). In the event more than the
maximum number of shares subject to the tender
right are tendered and offered for sale to the
Company during any tender period:
(a) the Company shall first purchase
from each tendering Preferred Stockholder the
lesser of (i) that whole number of shares of
the 1966 Cumulative Preferred Stock which
bears the same proportion to the maximum
number of shares subject to the tender right
as the total number of shares of the 1966
Cumulative Preferred Stock registered in the
name of that Preferred stockholder on the
preceding May 1 bears by the total number of
shares of the 1966 Cumulative Preferred Stock
outstanding on such May 1 or (ii) the number
of shares of the 1966 Cumulative Preferred
Stock which such Preferred Stockholder has
tendered and offered for sale during the
preceding tender period;
(b) If any of the maximum number of
shares subject to the tender right remain
unpurchased after the purchases described in
preceding subparagraph (a), the Company shall
then purchase from each tendering Preferred
Stockholder whose total number of shares
tendered during the preceding tender period
has not already been purchased pursuant to
subparagraph (a) above, the lesser of
(i) that whole number of shares of the 1966
Cumulative Preferred Stock which bears the
same proportion to the balance of the maximum
number of shares subject to the tender right
remaining unpurchased as the total number of
shares of the 1966 Cumulative Preferred Stock
registered in the name of that tendering
Preferred Stockholder on the preceding May 1
bears to the total number of shares of the
1966 Cumulative Preferred Stock registered on
such May 1 in the names of all tendering
Preferred Stockholders whose total number of
shares tendered during the preceding tender
period has not already been purchased
pursuant to subparagraph (a) above, or
(ii) the number of shares of the 1966
Cumulative Preferred Stock which such
tendering Preferred Stockholder has tendered
and offered for sale during the preceding
tender period and which remain unpurchased;
and
(c) if any of the maximum number of
shares subject to the tender right remain
unpurchased after the purchases described in
preceding subparagraphs (a) and (b), the
Company shall until the entire maximum number
shares subject to the tender right has been
purchased, purchase from each tendering
Preferred Stockholder whose total number of
shares tendered during the preceding tender
period has not already been purchased, shares
of the 1966 Cumulative Preferred Stock
tendered during the preceding tender period
on the basis described in subparagraph (b)
above.
(4) Any purchase by the Company of shares
of the 1966 Cumulative Preferred Stock made
pursuant to the provisions of the tender right as
described above shall be effected as of the close
of business on June 15 and the Preferred
Stockholder which is the registered owner of the
shares of the 1966 Cumulative Preferred Stock then
purchased shall be entitled to receive the
dividend payable on such date with respect to such
shares.
(5) The obligation of the Company to
purchase shares of the 1966 Cumulative Preferred
Stock tendered to it, although annual in nature,
is non-cumulative and to the extent on any June 15
the Company is not required to purchase the
maximum number of shares subject to the tender
right, its obligation to purchase shares of the
1966 Cumulative Preferred Stock on any succeeding
June 15 shall in no way be increased or otherwise
affected.
(6) All tenders of shares of the 1966
Cumulative Preferred Stock to the Company for
purchase by it shall be on such form as the
Company shall prescribe and shall furnish to
registered owners of the 1966 Cumulative Preferred
Stock, which form will provide, among other
things, that the tender and offer to sell
evidenced by the form shall be irrevocable until
the Preferred Stockholder is notified by the
Company that it has or has not accepted the
tender) and shall be accompanied by a certificate
or certificates evidencing the shares of the 1966
Cumulative Preferred Stock tendered for sale with
accompanying stock powers executed in blank by an
authorized signer, signatures appropriately
guaranteed, and, where appropriate, by evidence of
authorization of the sale of such shares.
(7) On or before June 20, 1967, and each
June 20 thereafter, the Company shall mail to each
holder of the 1966 Cumulative Preferred Stock
which tendered shares of such stock for sale to
the Company during the preceding tender period
(a) its check for an amount equal to the purchase
price of any shares of the 1966 Cumulative
Preferred Stock purchased by it in accordance with
the foregoing terms and conditions from such
Preferred Stockholder on the preceding June 15
less the amount of any sales or other transfer
taxes payable with respect to such purchase, and
(b) a certificate evidencing any shares of the
1966 Cumulative Preferred Stock tendered by such
Preferred Stockholder for sale during the
preceding tender period, but not purchased by the
Company, together with a notice that the tender of
such shares has not been accepted by the Company."
On August 10, 1992 at a special meeting held after due
notice thereof, the Pricing Committee of the Board of Directors
of the Company duly adopted resolutions fixing the annual
dividend rate, the redemption price or prices, the amounts per
share payable upon voluntary or involuntary dissolution, a
liquidation or winding up of the Company for the 9% Cumulative
Preferred Stock as follows:
"RESOLVED, that the terms and provisions of the
9% Cumulative Preferred Stock shall be as follows:
(1) Holders of the outstanding shares of 9%
Cumulative Preferred Stock shall be entitled to
receive an annual cash dividend of 9% of the par
value per share -- i.e., $9.00 per share per
annum.
(2) Upon any liquidation, dissolution or
winding up of the Company, the holders of the
outstanding shares of 9% Cumulative Preferred
Stock shall be entitled to receive out of the net
assets of the Company $100.00 per share of 9%
Cumulative Preferred Stock, plus accrued and
unpaid dividends to the date of such liquidation,
dissolution or winding up.
(3) (a) The 9% Cumulative Preferred Stock
will not be entitled to the benefit of any
sinking fund or any other mandatory
redemption provision.
(b) The 9% Cumulative Preferred Stock
may not be redeemed at the option of the
Company prior to September 15, 1997.
Thereafter, the Company, at its option, may
redeem all or any part of the 9% Cumulative
Preferred Stock at any time or from time to
time upon not less than 30 days' notice at
$100.00 per share plus accrued dividends to
the date of redemption, plus, in the case of
redemptions occurring from September 15,
1997, to September 14, 1998, a premium of
$8.00 per share, or in the case of
redemptions occurring from September 15, 1998
to September 14, 1999, a premium of $4.00 per
share.
(4) The provisions of the 9% Cumulative
Preferred Stock may be amended only with the
approval by the vote or written consent or written
waiver of the holders of all of the then
outstanding shares of the 9% Cumulative Preferred
Stock."
Seventh: The Board of Directors, by a majority vote of
its members, shall have the power to make, alter, amend and
repeal the by-laws of the corporation not inconsistent with its
Articles or with law, subject always to the power of the
shareholders to change such action.
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Thirtieth Supplemental Indenture
Dated as of December 1, 1995
(Supplemental to Indenture Dated as of March 15, 1946)
------------
PENNSYLVANIA GAS AND WATER COMPANY
(formerly Scranton-Spring Brook Water Service Company)
TO
FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION
Trustee
------------
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- -------------------------------------------------------------------------------
<PAGE>
THIRTIETH SUPPLEMENTAL INDENTURE, dated as of the first day of December 1995,
made by and between PENNSYLVANIA GAS AND WATER COMPANY (formerly
Scranton-Spring Brook Water Service Company), a corporation organized and
existing under the laws of the Commonwealth of Pennsylvania (hereinafter
sometimes called the "Company"), and FIRST TRUST OF NEW YORK, NATIONAL
ASSOCIATION, a national banking association organized and existing under the
laws of the United States, and having its principal place of business at No.
100 Wall Street, Suite 1600, in The City of New York, New York, as Trustee
(hereinafter sometimes called the "Trustee").
WHEREAS, the Company executed and delivered its Indenture (hereinafter called
the "Original Indenture") dated as of March 15, 1946, to Morgan Guaranty Trust
Company of New York ("Morgan") (formerly Guaranty Trust Company of New York),
to secure its First Mortgage Bonds and has executed and delivered twenty-nine
indentures supplemental thereto dated respectively as of February 15, 1951; as
of September 15, 1951; as of January 15, 1952; as of March 15, 1952; as of June
15, 1952; as of December 1, 1954; as of April 15, 1956; as of November 15,
1956; as of March 15, 1957; as of September 1, 1958; as of April 15, 1959; as
of July 15, 1960; as of October 31, 1961; as of December 15, 1961; as of
December 15, 1963; as of June 15, 1966; as of October 15, 1967; as of May 1,
1970; as of June 1, 1972; as of March 1, 1976; as of December 1, 1976; as of
August 15, 1989; as of August 15, 1989; as of September 1, 1991; as of
September 1, 1992; as of December 1, 1992; as of December 1, 1992; as of
December 1, 1993; and as of November 1, 1994 (the Original Indenture as
heretofore supplemented and to be supplemented by this Thirtieth Supplemental
Indenture, and as the same may be further supplemented by additional indentures
supplemental thereto, being hereinafter collectively called the "Indenture");
and
WHEREAS, the Company, Morgan and the Trustee executed and delivered the
Resignation, Successor Appointment and Acceptance Agreement dated as of
September 2, 1994, pursuant to which the Trustee became successor trustee under
the Indenture; and
WHEREAS, the Company at November 1, 1995 (i) had retired all of the original
issue of $24,500,000 principal amount of bonds of a series designated First
Mortgage Bonds 27/8% Series due 1976 (hereinafter called "bonds of the First
Series"), all of the original issue of $4,000,000 principal amount of bonds of
a series designated First Mortgage Bonds 31/2% Series due 1982, all of the
original issue of $1,000,000 principal amount of bonds of a series designated
First Mortgage Bonds 47/8% Series due 1987, all of the original issue of
$2,000,000 principal amount of bonds of a series designated First Mortgage
Bonds 43/4% Series due 1983, all of the original issue of $3,000,000 principal
amount of bonds of a series designated First Mortgage Bonds 51/2% Series due
1985, all of the original issue of $3,000,000 principal amount of bonds of a
series designated First Mortgage Bonds 5% Series due 1986, all of the original
issue of $5,000,000 principal amount of
<PAGE>
bonds of a series designated First Mortgage Bonds 45/8% Series due 1988, all of
the original issue of $4,000,000 principal amount of bonds of a series
designated First Mortgage Bonds 57/8% Series due 1991, all of the original
issue of $15,000,000 principal amount of bonds of a series designated First
Mortgage Bonds 9% Series due 1991, all of the original issue of $10,000,000
principal amount of bonds of a series designated First Mortgage Bonds 67/8%
Series due 1992, all of the original issue of $12,000,000 principal amount of
bonds of a series designated First Mortgage Bonds 10% Series due 1995, all of
the original issue of $20,000,000 principal amount of bonds of a series
designated First Mortgage Bonds 91/4% Series due 1996, all of the original
issue of $7,000,000 principal amount of bonds of a series designated First
Mortgage Bonds 8% Series due 1997 and all of the original issue of $50,000,000
principal amount of bonds of a series designated First Mortgage Bonds 9.57%
Series due 1996 and (ii) had outstanding and secured by the Original Indenture,
as so supplemented to the date hereof, $10,000,000 (of an original issue of
$10,000,000) principal amount of bonds of a series designated First Mortgage
Bonds 9.23% Series due 1999, $15,000,000 (of an original issue of $15,000,000)
principal amount of bonds of a series designated First Mortgage Bonds 9.34%
Series due 2019, $50,000,000 (of an original issue of $50,000,000) principal
amount of bonds of a series designated First Mortgage Bonds 7.20% Series due
2017, $30,000,000 (of an original issue of $30,000,000) principal amount of
bonds of a series designated First Mortgage Bonds 8.375% Series due 2002,
$30,000,000 (of an original issue of $30,000,000) principal amount of bonds of
a series designated First Mortgage Bonds 7.125% Series due 2022, $19,000,000
(of an original issue of $19,000,000) principal amount of bonds of a series
designated First Mortgage Bonds 6.05% Series due 2019 and $30,000,000 (of an
original issue of $30,000,000) principal amount of bonds of a series designated
First Mortgage Bonds 7% Series due 2017; and
WHEREAS, Section 14.01 of the Original Indenture provides, among other
things, that the Company, when authorized by a resolution of its Board of
Directors, and the Trustee from time to time may enter into an indenture or
indentures supplemental thereto and which thereafter shall form a part thereof
for the purpose of modifying any provisions of the Indenture provided that such
modifications have been approved in accordance with Article 15 of the Original
Indenture by the holders of bonds issued and outstanding under the Indenture;
and
WHEREAS, Section 14.02 of the Original Indenture provides that the Trustee is
authorized to join with the Company in the execution of any such supplemental
indenture; and
WHEREAS, all requirements of law and of the restated articles of
incorporation, as amended, and by-laws of the Company, including all requisite
action on the part of its directors and officers, relating to the execution of
this Thirtieth Supplemental Indenture have been complied with and observed, all
approvals of holders of bonds issued and outstanding under the Indenture
required pursuant to Article 15
2
<PAGE>
of the Original Indenture in connection with this Thirtieth Supplemental
Indenture have been obtained, and all things necessary to make this Thirtieth
Supplemental Indenture a valid and legally binding instrument in accordance
with its terms for the security of all bonds from time to time issued under the
Indenture have happened, been done and been performed;
NOW THEREFORE, THIS THIRTIETH SUPPLEMENTAL INDENTURE WITNESSETH: That
Pennsylvania Gas and Water Company, intending to be legally bound, in
consideration of the premises and of One Dollar ($1.00) to it duly paid by the
Trustee at or before the ensealing and delivery of these presents, the receipt
whereof is hereby acknowledged, and in order to secure the payment of the
principal of, premium, if any, and interest on all bonds from time to time
outstanding under the Indenture, according to the terms of said bonds and to
secure the performance and observance of all the covenants and conditions
therein and in the Indenture contained, hath granted, bargained, sold,
warranted, aliened, remised, released, conveyed, assigned, transferred,
mortgaged, created a security interest in, pledged, set over and confirmed, and
by these presents doth grant, bargain, sell, warrant, alien, remise, release,
convey, assign, transfer, mortgage, create a security interest in, pledge, set
over and confirm unto First Trust of New York, National Association, as
Trustee, and its successor or successors in the trust and its or their assigns
forever, the following described property-that is to say:
All property, real, personal and mixed, tangible and intangible, of the
Company whether now owned or hereafter acquired by it (except such property as
is expressly excepted from the lien and the operation of the Indenture).
Without limitation of the foregoing, all real estate and interests in or
relating to real estate, plants, properties and equipment, and all pumping and
transmission systems and facilities, together with all franchises, grants,
easements, permits, privileges, appurtenances, tenements and other rights and
property thereunto belonging or appertaining, whether now owned by the Company
or hereafter acquired by it and used in its business of impounding, storing,
transporting and selling water, or in its business of manufacturing, storing,
transporting and selling gas, at wholesale or retail, for domestic, commercial,
industrial and municipal use and consumption.
Also, without limitation of the foregoing, all buildings, improvements,
standpipes, towers, reservoirs, wells, springs, flumes, sluices, canals,
basins, cribs, mains, conduits, hydrants, valves, pipes, pipe lines, service
pipes, tanks, shops, structures, purification systems, pumping stations, pumps,
meters, fixtures machinery and equipment, used or useful for the impounding,
procuring, transmission or distribution of water; all generators, conveyors,
purifiers, holders, power plants, fixtures, engines, boilers, pumps, meters,
transmission and distribution mains, machinery and equipment used or useful for
the manufacture, transmission or distribution of gas; and all and every
character of apparatus whatsoever used or useful for procuring, manufacturing,
transmitting or distributing water or gas; whether the same or any thereof are
now owned by the Company or hereafter acquired by it.
3
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Also, without limitation of the foregoing, all real estate and interests in
real estate acquired by sale or by merger of subsidiary or constituent
companies, now owned or as may be subsequently acquired by the Company.
The property covered by the lien of the Indenture shall include particularly,
among other property, without prejudice to the generality of the language
hereinbefore or hereinafter contained, the following described property (which
generally includes property additions through October 31, 1995, except such
property as is expressly excepted from the lien and operation of the
Indenture):
I
The following piece or parcel of land situate in the County of Lackawanna and
Commonwealth of Pennsylvania, to wit:
(S) 01. Parcel of land situate in the Township of Carbondale, Lackawanna
County, from Gary A. Gormley and Carol Gormley, his wife, by Deed dated
November 28, 1994 and recorded December 8, 1994 in Lackawanna County Deed Book
1494 at Page 553. Containing Three and Two One-Hundredths (3.02) acres, more or
less.
II
The following rights-of-way and/or easements situate in the County of
Columbia and Commonwealth of Pennsylvania, to wit:
(S) 01. Right-of-way for gas pipeline in the Borough of Berwick, Columbia
County, from Thomas A. Bafile, et ux, by Indenture dated November 16, 1994 and
recorded December 22, 1994 in Columbia County Record Book 587 at Page 77.
(S) 02. Right-of-way for gas pipeline in the Township of Briar Creek,
Columbia County, from Bennie E. Naunczek, et ux, by Indenture dated November
21, 1994 and recorded December 22, 1994 in Columbia County Record Book 587 at
Page 80.
(S) 03. Right-of-way for gas pipeline in the Township of Briar Creek,
Columbia County, from Roman Catholic Congregation, et al, by Indenture dated
November 30, 1994 and recorded December 22, 1994 in Columbia County Record Book
587 at Page 86.
(S) 04. Right-of-way for gas pipeline in the Town of Bloomsburg, Columbia
County, from Karl Henry Dildine, by Indenture dated January 25, 1995 and
recorded February 6, 1995 in Columbia County Record Book 589 at Page 869.
4
<PAGE>
(S) 05. Right-of-way for gas pipeline in the Town of Bloomsburg, Columbia
County, from Shangrila Development Corporation, by Indenture dated February 1,
1995 and recorded February 6, 1995 in Columbia County Record Book 589 at Page
865.
(S) 06. Right-of-way for gas pipeline in the Township of Scott, Columbia
County, from Drue C. Hoffman, et ux, by Indenture dated February 9, 1995 and
recorded March 2, 1995 in Columbia County Record Book 591 at Page 178.
(S) 07. Right-of-way for gas pipeline in the Township of Scott, Columbia
County, from Charles B. Pursel, et ux, et al, by Indenture dated February 22,
1995 and recorded March 10, 1995 in Columbia County Record Book 591 at Page
753.
(S) 08. Right-of-way for gas pipeline in the Township of South Centre,
Columbia County, from Star-Kist Foods, Inc., by Indenture dated March 11, 1995
and recorded April 18, 1995 in Columbia County Record Book 594 at Page 227.
(S) 09. Right-of-way for gas pipeline in the Township of Scott, Columbia
County, from Kenneth E. Carey, et ux, by Indenture dated March 21, 1995 and
recorded April 18, 1995 in Columbia County Record Book 594 at Page 231.
(S) 10. Right-of-way for gas pipeline in the Township of Scott, Columbia
County, from Judith Ann Ernst, by Indenture dated April 12, 1995 and recorded
April 18, 1995 in Columbia County Record Book 594 at Page 234.
(S) 11. Right-of-way for gas pipeline in the Borough of Berwick, Columbia
County, from Robert A. Pearson, et al, by Indenture dated June 20, 1995 and
recorded July 25, 1995 in Columbia County Record Book 601 at Page 870.
(S) 12. Right-of-way for gas pipeline in the Township of Montour, Columbia
County, from Alan R. Behrent, et ux, by Indenture dated August 17, 1995 and
recorded August 31, 1995 in Columbia County Record Book 604 at Page 968.
(S) 13. Right-of-way for gas pipeline in the Township of Montour, Columbia
County, from Robert H. Progansky, by Indenture dated August 17, 1995 and
recorded August 31, 1995 in Columbia County Record Book 604 at Page 971.
(S) 14. Right-of-way for gas pipeline in the Township of Montour, Columbia
County, from H&C Realty Corporation, by Indenture dated August 25, 1995 and
recorded August 31, 1995 in Columbia County Record Book 604 at Page 974.
III
The following rights-of-way and/or easements situate in the County of
Lackawanna and Commonwealth of Pennsylvania, to wit:
(S) 01. Right-of-way for water pipeline in the City of Scranton, Lackawanna
County, from Ralph D. Noto, et al, by Indenture dated September 3, 1993 and
recorded June 8, 1995 in Lackawanna County Deed Book 1511 at Page 703.
5
<PAGE>
(S) 02. Right-of-way for gas pipeline in the Borough of Dalton, Lackawanna
County, from Richard J. Volz, et ux, et al, by Indenture dated October 15, 1993
and recorded October 20, 1993 in Lackawanna County Deed Book 1451 at Page 186.
(S) 03. Right-of-way for gas pipeline in the City of Scranton, Lackawanna
County, from Lewis Marcus, et ux, by Indenture dated April 25, 1994 and
recorded December 22, 1994 in Lackawanna County Deed Book 1496 at Page 426.
(S) 04. Right-of-way for water pipeline in the Borough of Archbald,
Lackawanna County, from East Side Hose Company, No. 4, by Indenture dated June
15, 1994 and recorded June 8, 1995 in Lackawanna County Deed Book 1511 at Page
690.
(S) 05. Right-of-way for gas pipeline in the Borough of Archbald, Lackawanna
County, from East Side Hose Company, No. 4, by Indenture dated June 15, 1994
and recorded June 8, 1995 in Lackawanna County Deed Book 1511 at Page 694.
(S) 06. Right-of-way for gas pipeline in the Township of Abington, Lackawanna
County, from Paul Misiura, et ux, by Indenture dated June 30, 1994 and recorded
February 17, 1995 in Lackawanna County Deed Book 1501 at Page 252.
(S) 07. Right-of-way for gas pipeline in the Borough of Archbald, Lackawanna
County, from Valley View School District, by Indenture dated July 28, 1994 and
recorded November 14, 1994 in Lackawanna County Deed Book 1491 at Page 732.
(S) 08. Right-of-way for gas pipeline in the Borough of Blakely, Lackawanna
County, from William Alaimo, et ux, by Indenture dated August 5, 1994 and
recorded October 5, 1994 in Lackawanna County Deed Book 1487 at Page 414.
(S) 09. Right-of-way for gas pipeline in the Borough of Moosic, Lackawanna
County, from Hemingway Development Limited Partnership, by Indenture dated
August 15, 1994 and recorded November 14, 1994 in Lackawanna County Deed Book
1491 at Page 736.
(S) 10. Right-of-way for water pipeline in the Borough of Moosic, Lackawanna
County, from Hemingway Development Limited Partnership, by Indenture dated
August 15, 1994 and recorded November 14, 1994 in Lackawanna County Deed Book
1491 at Page 741.
(S) 11. Right-of-way for gas pipeline in the Township of Abington, Lackawanna
County, from Thomas A. Regula, et ux, by Indenture dated August 19, 1994 and
recorded November 14, 1994 in Lackawanna County Deed Book 1491 at Page 746.
6
<PAGE>
(S) 12. Right-of-way for gas pipeline in the Borough of Dunmore, Lackawanna
County, from Eric A. Gerchman, et ux, by Indenture dated August 20, 1994 and
recorded November 14, 1994 in Lackawanna County Deed Book 1491 at Page 750.
(S) 13. Right-of-way for gas pipeline in the Borough of Blakely, Lackawanna
County, from Frank Antenori, et ux, by Indenture dated August 28, 1994 and
recorded November 14, 1994 in Lackawanna County Deed Book 1491 at Page 754.
(S) 14. Right-of-way for gas pipeline in the Borough of Jessup, Lackawanna
County, from Envirotest/Synterra Partners, by Indenture dated September 2, 1994
and recorded October 5, 1994 in Lackawanna County Deed Book 1487 at Page 418.
(S) 15. Right-of-way for gas pipeline in the Township of South Abington,
Lackawanna County, from Nikelle, Inc., by Indenture dated September 9, 1994 and
recorded October 5, 1994 in Lackawanna County Deed Book 1487 at Page 423.
(S) 16. Right-of-way for gas pipeline in the Borough of Old Forge, Lackawanna
County, from Evo C. Taffera, et ux, by Indenture dated September 22, 1994 and
recorded November 14, 1994 in Lackawanna County Deed Book 1491 at Page 770.
(S) 17. Right-of-way for ground bed for cathodic protection in the Borough of
Dickson City, Lackawanna County, from Borough of Dickson City, by Indenture
dated September 26, 1994 and recorded November 14, 1994 in Lackawanna County
Deed Book 1491 at Page 774.
(S) 18. Right-of-way for water pipeline in the City of Scranton, Lackawanna
County, from David A. Fidati, et ux, by Indenture dated September 27, 1994 and
recorded November 14, 1994 in Lackawanna County Deed Book 1491 at Page 778.
(S) 19. Right-of-way for gas pipeline in the Borough of Dickson City,
Lackawanna County, from Wegmans Food Markets, Inc., by Indenture dated
October 3, 1994 and recorded March 13, 1995 in Lackawanna County Deed Book 1503
at Page 278.
(S) 20. Right-of-way for water pipeline in the Borough of Dickson City,
Lackawanna County, from Wegman's Food Markets, Inc., by Indenture dated
October 3, 1994 and recorded November 14, 1994 in Lackawanna County Deed Book
1491 at Page 758.
(S) 21. Right-of-way for gas pipeline in the Township of Abington, Lackawanna
County, from Joseph E. Cronkey, et ux, by Indenture dated October 5, 1994 and
recorded November 14, 1994 in Lackawanna County Deed Book 1491 at Page 766.
7
<PAGE>
(S) 22. Right-of-way for gas pipeline in the City of Scranton, Lackawanna
County, from William J. Boston, et ux, by Indenture dated October 6, 1994 and
recorded November 14, 1994 in Lackawanna County Deed Book 1491 at Page 782.
(S) 23. Right-of-way for gas pipeline in the Borough of Clarks Summit,
Lackawanna County, from Timothy D. Rowland, et ux, by Indenture dated October
10, 1994 and recorded November 14, 1994 in Lackawanna County Deed Book 1491 at
Page 786.
(S) 24. Right-of-way for gas pipeline in the Borough of Olyphant, Lackawanna
County, from Sean Rist, by Indenture dated October 19, 1994 and recorded
November 14, 1994 in Lackawanna County Deed Book 1491 at Page 790.
(S) 25. Right-of-way for gas pipeline in the Township of Scott, Lackawanna
County, from Lawrence C. Duchnik, by Indenture dated October 21, 1994 and
recorded November 14, 1994 in Lackawanna County Deed Book 1491 at Page 794.
(S) 26. Right-of-way for gas pipeline in the Borough of Clarks Summit,
Lackawanna County, from Henry Jellock, et ux, by Indenture dated October 25,
1994 and recorded November 14, 1994 in Lackawanna County Deed Book 1491 at Page
798.
(S) 27. Right-of-way for gas pipeline in the Township of Abington, Lackawanna
County, from Glenn J. Gress, et ux, by Indenture dated October 31, 1994 and
recorded November 14, 1994 in Lackawanna County Deed Book 1492 at Page 1.
(S) 28. Right-of-way for gas pipeline in the City of Carbondale, Lackawanna
County, from Daniel M. McNabb, et ux, by Indenture dated November 8, 1994 and
recorded December 22, 1994 in Lackawanna County Deed Book 1496 at Page 430.
(S) 29. Right-of-way for gas pipeline in the Borough of Moosic, Lackawanna
County, from Stanley J. Gurecki, by Indenture dated November 23, 1994 and
recorded December 22, 1994 in Lackawanna County Deed Book 1496 at Page 434.
(S) 30. Right-of-way for gas pipeline in the Borough of Dunmore, Lackawanna
County, from Charles V. Mesiti, et ux, by Indenture dated December 2, 1994 and
recorded December 22, 1994 in Lackawanna County Deed Book 1496 at Page 438.
(S) 31. Right-of-way for gas pipeline in the City of Scranton, Lackawanna
County, from Sharon Marranca, et al, by Indenture dated December 14, 1994 and
recorded February 8, 1995 in Lackawanna County Deed Book 1500 at Page 425.
(S) 32. Right-of-way for gas pipeline in the City of Scranton, Lackawanna
County, from Howard Seymour, et ux, by Indenture dated December 20, 1994 and
recorded February 8, 1995 in Lackawanna County Deed Book 1500 at Page 429.
8
<PAGE>
(S) 33. Right-of-way for gas pipeline in the City of Carbondale, Lackawanna
County, from Charles J. Zazzera, et ux, by Indenture dated December 23, 1994
and recorded February 8, 1995 in Lackawanna County Deed Book 1500 at Page 433.
(S) 34. Right-of-way for gas pipeline in the Borough of Dunmore, Lackawanna
County, from Leo C. Woelkers, et ux, by Indenture dated December 23, 1994 and
recorded February 8, 1995 in Lackawanna County Deed Book 1500 at Page 437.
(S) 35. Right-of-way for gas pipeline in the Township of Abington, Lackawanna
County, from Lee T. Besen, et ux, by Indenture dated December 23, 1994 and
recorded February 8, 1995 in Lackawanna County Deed Book 1500 at Page 441.
(S) 36. Right-of-way for gas pipeline in the Borough of Clarks Summit,
Lackawanna County, from Highland Associates II, et al, by Indenture dated
January 4, 1994 and recorded March 13, 1995 in Lackawanna County Deed Book 1503
at Page 285.
(S) 37. Right-of-way for gas pipeline in the Borough of Clarks Summit,
Lackawanna County, from Mack Bolus, et ux, by Indenture dated January 13, 1995
and recorded February 8, 1995 in Lackawanna County Deed Book 1500 at Page 445.
(S) 38. Right-of-way for gas pipeline in the Borough of Dunmore, Lackawanna
County, from Robert C. Bolus, et ux, by Indenture dated January 31, 1995 and
recorded March 13, 1995 in Lackawanna County Deed Book 1503 at Page 290.
(S) 39. Right-of-way for gas pipeline in the Borough of Clarks Summit,
Lackawanna County, from Edwin R. Swarts, et ux, by Indenture dated February 2,
1995 and recorded February 8, 1995 in Lackawanna County Deed Book 1500 at Page
449.
(S) 40. Right-of-way for gas pipeline in the Borough of Moosic, Lackawanna
County, from Donald McGuire, et al, by Indenture dated February 10, 1995 and
recorded March 13, 1995 in Lackawanna County Deed Book 1503 at Page 294.
(S) 41. Right-of-way for gas pipeline in the Borough of Taylor, Lackawanna
County, from Lloyd Evans, et ux, by Indenture dated February 13, 1995 and
recorded March 13, 1995 in Lackawanna County Deed Book 1503 at Page 298.
(S) 42. Right-of-way for gas pipeline in the Borough of Clarks Summit,
Lackawanna County, from Allied Genevieve Hayes/McDade Apartments, by
Indenture dated February 14, 1995 and recorded March 13, 1995 in Lackawanna
County Deed Book 1503 at Page 302.
9
<PAGE>
(S) 43. Right-of-way for gas pipeline in the Borough of Dunmore, Lackawanna
County, from Jeffrey L. Frear, by Indenture dated February 17, 1995 and
recorded March 13, 1995 in Lackawanna County Deed Book 1503 at Page 307.
(S) 44. Right-of-way for gas pipeline in the Borough of Dunmore, Lackawanna
County, from Paul G. Walsh, et ux, by Indenture dated February 20, 1995 and
recorded March 13, 1995 in Lackawanna County Deed Book 1503 at Page 311.
(S) 45. Right-of-way for water pipeline in the Borough of Dunmore, Lackawanna
County, from Paul G. Walsh, et ux, by Indenture dated February 20, 1995 and
recorded March 13, 1995 in Lackawanna County Deed Book 1503 at Page 315.
(S) 46. Right-of-way for gas pipeline in the City of Scranton, Lackawanna
County, from Gerald J. Notarianni, by Indenture dated March 13, 1995 and
recorded April 20, 1995 in Lackawanna County Deed Book 1506 at Page 785.
(S) 47. Right-of-way for water pipeline in the City of Scranton, Lackawanna
County, from Gerald J. Notarianni, by Indenture dated March 13, 1995 and
recorded April 20, 1995 in Lackawanna County Deed Book 1506 at Page 789.
(S) 48. Right-of-way for gas pipeline in the City of Scranton, Lackawanna
County, from Claire Notarianni, by Indenture dated March 13, 1995 and recorded
April 20, 1995 in Lackawanna County Deed Book 1506 at Page 793.
(S) 49. Right-of-way for water pipeline in the City of Scranton, Lackawanna
County, from Claire Notarianni, by Indenture dated March 13, 1995 and recorded
April 20, 1995 in Lackawanna County Deed Book 1506 at Page 797.
(S) 50. Right-of-way for gas pipeline in the City of Scranton, Lackawanna
County, from Claire Utz, et al, by Indenture dated March 13, 1995 and recorded
April 20, 1995 in Lackawanna County Deed Book 1506 at Page 801.
(S) 51. Right-of-way for water pipeline in the City of Scranton, Lackawanna
County, from Claire Utz, et al, by Indenture dated March 13, 1995 and recorded
April 20, 1995 in Lackawanna County Deed Book 1507 at Page 1.
(S) 52. Right-of-way for gas pipeline in the City of Scranton, Lackawanna
County, from Jerry Notarianni, et ux, by Indenture dated March 13, 1995 and
recorded April 20, 1995 in Lackawanna County Deed Book 1507 at Page 5.
(S) 53. Right-of-way for water pipeline in the City of Scranton, Lackawanna
County, from Jerry Notarianni, et ux, by Indenture dated March 13, 1995 and
recorded April 20, 1995 in Lackawanna County Deed Book 1507 at Page 9.
10
<PAGE>
(S) 54. Right-of-way for gas pipeline in the City of Carbondale, Lackawanna
County, from Sandra Baumann Marsh, by Indenture dated March 14, 1995 and
recorded April 20, 1995 in Lackawanna County Deed Book 1507 at Page 13.
(S) 55. Right-of-way for gas pipeline in the Borough of Moosic, Lackawanna
County, from County of Lackawanna, by Indenture dated March 24, 1995 and
recorded June 8, 1995 in Lackawanna County Deed Book 1511 at Page 698.
(S) 56. Right-of-way for gas pipeline in the Borough of Old Forge, Lackawanna
County, from Joseph E. Mariotti Trustee, by Indenture dated April 6, 1995 and
recorded April 20, 1995 in Lackawanna County Deed Book 1506 at Page 781.
(S) 57. Right-of-way for water pipeline in the Borough of Dunmore, Lackawanna
County, from Price Chopper Operating Co. of PA. Inc., by Indenture dated April
26, 1995 and recorded June 8, 1995 in Lackawanna County Deed Book 1511 at Page
709.
(S) 58. Right-of-way for gas pipeline in the Borough of Dunmore, Lackawanna
County, from Price Chopper Operating Co. of PA. Inc., by Indenture dated April
26, 1995 and recorded June 8, 1995 in Lackawanna County Deed Book 1511 at Page
719.
(S) 59. Right-of-way for gas pipeline in the Borough of Moosic, Lackawanna
County, from Scranton Lackawanna Industrial Building Company, by Indenture
dated May 12, 1995 and recorded June 8, 1995 in Lackawanna County Deed Book
1511 at Page 724.
(S) 60. Right-of-way for gas pipeline in the Borough of Clarks Summit,
Lackawanna County, from Richard C. Florey, et ux, by Indenture dated May 19,
1995 and recorded June 8, 1995 in Lackawanna County Deed Book 1511 at Page 714.
(S) 61. Right-of-way for gas pipeline in the Township of Scott, Lackawanna
County, from Robert J. Vail, et ux, by Indenture dated June 19, 1995 and
recorded August 4, 1995 in Lackawanna County Deed Book 1517 at Page 744.
(S) 62. Right-of-way for water pipeline in the Township of Scott, Lackawanna
County, from Robert J. Vail, et ux, by Indenture dated June 19, 1995 and
recorded August 4, 1995 in Lackawanna County Deed Book 1517 at Page 749.
(S) 63. Right-of-way for gas pipeline in the Township of Abington, Lackawanna
County, from Ronald Schack, et ux, by Indenture dated June 20, 1995 and
recorded August 4, 1995 in Lackawanna County Deed Book 1517 at Page 754.
(S) 64. Right-of-way for gas pipeline in the Borough of Old Forge, Lackawanna
County, from Joseph J. Gentile, et ux, by Indenture dated July 11, 1995 and
recorded August 4, 1995 in Lackawanna County Deed Book 1517 at Page 759.
11
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(S) 65. Right-of-way for gas pipeline in the Borough of Dunmore, Lackawanna
County, from GNB Battery Technologies, Inc., by Indenture dated July 18, 1995
and recorded September 1, 1995 in Lackawanna County Deed Book 1520 at Page 630.
(S) 66. Right-of-way for water pipeline in the Borough of Moosic, Lackawanna
County, from Hemingway Development, by Indenture dated August 7, 1995 and
recorded September 1, 1995 in Lackawanna County Deed Book 1520 at Page 647.
(S) 67. Right-of-way for gas pipeline in the Borough of Moosic, Lackawanna
County, from Hemingway Development, by Indenture dated August 7, 1995 and
recorded September 1, 1995 in Lackawanna County Deed Book 1520 at Page 640.
(S) 68. Right-of-way for gas pipeline in the Borough of Old Forge, Lackawanna
County, from Mariotti Lumber Company, by Indenture dated August 7, 1995 and
recorded September 1, 1995 in Lackawanna County Deed Book 1520 at Page 635.
IV
The following rights-of-way and/or easements situate in the County of
Lancaster and Commonwealth of Pennsylvania, to wit:
(S)01. Right-of-way for gas pipeline in the Township of Warwick, Lancaster
County, from Ivan Z. Stauffer and Marie L. Stauffer (Stauffers) and Clyde
Sauder, Arlene W. Sauder and Earl W. Hostetter, Partners, as tenants in
co-partnership t/d/b/a Samuel N. Hostetter and Clyde Sauder, Partners,
(Hostetter and Sauder) by Indenture dated February 22, 1995 and recorded March
27, 1995 in Lancaster County Deed Book 4593 at Page 0382.
V
The following rights-of-way and/or easements situate in the County of Luzerne
and Commonwealth of Pennsylvania, to wit:
(S) 01. Right-of-way for gas pipeline in the Borough of Kingston, Luzerne
County, from First Valley Bank, by Indenture dated September 28, 1994 and
recorded October 24, 1994 in Luzerne County Deed Book 2508 at Page 449.
(S) 02. Right-of-way for gas pipeline in the Township of Lehman, Luzerne
County, from Bradly E. Bryant, et al, by Indenture dated October 4, 1994 and
recorded October 24, 1994 in Luzerne County Deed Book 2508 at Page 445.
(S) 03. Right-of-way for gas pipeline in the City of Wilkes-Barre and
Township of Wilkes-Barre, Luzerne County, from Carol Ciavarella, widow, by
Indenture dated October 5, 1994 and recorded October 24, 1994 in Luzerne County
Deed Book 2508 at Page 441.
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<PAGE>
(S) 04. Right-of-way for water pipeline in the Borough of Exeter, Luzerne
County, from The Greater Pittson Industrial & Commerical Development
Authority, et al, by Indenture dated October 11, 1994 and recorded October 24,
1994 in Luzerne County Deed Book 2508 at Page 436.
(S) 05. Right-of-way for gas pipeline in the Township of Wright, Luzerne
County, from Mark J. Luchi, et al, by Indenture dated October 12, 1994 and
recorded October 24, 1994 in Luzerne County Deed Book 2508 at Page 431.
(S) 06. Right-of-way for water pipeline in the Township of Wright, Luzerne
County, from Mark J. Luchi, et al, by Indenture dated October 12, 1994 and
recorded October 24, 1994 in Luzerne County Deed Book 2508 at Page 472.
(S) 07. Right-of-way for gas pipeline in the Borough of Luzerne, Luzerne
County, from Borough of Luzerne, by Indenture dated October 13, 1994 and
recorded October 24, 1994 in Luzerne County Deed Book 2508 at Page 468.
(S) 08. Right-of-way for gas pipeline in the Borough of Harveys Lake, Luzerne
County, from Joseph Paglianite, by Indenture dated October 14, 1994 and
recorded October 24, 1994 in Luzerne County Deed Book 2508 at Page 464.
(S) 09. Right-of-way for gas pipeline in the Township of Newport, Luzerne
County, from Edward E. James, Jr., et ux, by Indenture dated October 17, 1994
and recorded October 24, 1994 in Luzerne County Deed Book 2508 at Page 460.
(S) 10. Right-of-way for gas pipeline in the Borough of Kingston, Luzerne
County, from Daniel Pieretti, by Indenture dated October 18, 1994 and recorded
October 24, 1994 in Luzerne County Deed Book 2508 at Page 456.
(S) 11. Right-of-way for gas pipeline in the Borough of Avoca, Luzerne
County, from Leo Murphy, et ux, by Indenture dated October 24, 1994 and
recorded November 4, 1994 in Luzerne County Deed Book 2509 at Page 1198.
(S) 12. Right-of-way for gas pipeline in the Township of Kingston, Luzerne
County, from Gregson Amos, et ux, by Indenture dated October 26, 1994 and
recorded November 4, 1994 in Luzerne County Deed Book 2510 at Page 1.
(S) 13. Right-of-way for gas pipeline in the City of Wilkes-Barre, Luzerne
County, from Hampton Corners, by Indenture dated October 31, 1994 and recorded
December 21, 1994 in Luzerne County Deed Book 2514 at Page 241.
(S) 14. Right-of-way for gas pipeline in the Township of Hanover, Luzerne
County, from Raymond M. Black, Sr., by Indenture dated November 9, 1994 and
recorded December 21, 1994 in Luzerne County Deed Book 2514 at Page 246.
(S) 15. Right-of-way for gas pipeline in the Township of Hanover, Luzerne
County, from Paul V. Irzinski, et ux, by Indenture dated November 14, 1994 and
recorded December 21, 1994 in Luzerne County Deed Book 2514 at Page 289.
13
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(S) 16. Right-of-way for gas pipeline in the Borough of Luzerne, Luzerne
County, from Richard M. Uter, et al, by Indenture dated November 17, 1994 and
recorded December 21, 1994 in Luzerne County Deed Book 2514 at Page 281.
(S) 17. Right-of-way for gas pipeline in the Borough of Luzerne, Luzerne
County, from James Keller, et ux, by Indenture dated November 17, 1994 and
recorded December 21, 1994 in Luzerne County Deed Book 2514 at Page 250.
(S) 18. Right-of-way for gas pipeline in the Township of Lehman, Luzerne
County, from Maplemoor, Inc., T/A Huntsville Golf Club, by Indenture dated
November 17, 1994 and recorded December 21, 1994 in Luzerne County Deed Book
2514 at Page 275.
(S) 19. Right-of-way for gas pipeline in the Township of Dallas, Luzerne
County, from James T. Reese, by Indenture dated November 18, 1994 and recorded
December 21, 1994 in Luzerne County Deed Book 2514 at Page 271.
(S) 20. Right-of-way for gas pipeline in the Township of Hanover, Luzerne
County, from Nellie Fromel, by Indenture dated November 18, 1994 and recorded
December 21, 1994 in Luzerne County Deed Book 2514 at Page 263.
(S) 21. Right-of-way for gas pipeline in the City of Wilkes-Barre, Luzerne
County, from Mary Pensieri, by Indenture dated December 1, 1994 and recorded
December 21, 1994 in Luzerne County Deed Book 2514 at Page 254.
(S) 22. Right-of-way for water pipeline in the Township of Plains, Luzerne
County, from Michael J. Milkanin, Jr., et al, by Indenture dated December 5,
1994 and recorded December 21, 1994 in Luzerne County Deed Book 2514 at Page
258.
(S) 23. Right-of-way for gas pipeline in the Township of Plains, Luzerne
County, from Michael J. Milkanin, Jr., et al, by Indenture dated December 5,
1994 and recorded December 21, 1994 in Luzerne County Deed Book 2514 at Page
297.
(S) 24. Right-of-way for gas pipeline in the Township of Dallas, Luzerne
County, from Township of Dallas, by Indenture dated December 7, 1994 and
recorded February 7, 1995 in Luzerne County Deed Book 2518 at Page 319.
(S) 25. Right-of-way for gas pipeline in the Township of Dallas, Luzerne
County, from Wilkes-Barre General Realty Corporation, by Indenture dated
December 8, 1994 and recorded February 7, 1995 in Luzerne County Deed Book 2518
at Page 314.
(S) 26. Right-of-way for gas pipeline in the Borough of Forty Fort, Luzerne
County, from County of Luzerne, by Indenture dated December 8, 1994 and
recorded July 26, 1995 in Luzerne County Deed Book 2534 at Page 562.
(S) 27. Right-of-way for gas pipeline in the Township of Wilkes-Barre,
Luzerne County, from John Giampietro, et al, by Indenture dated December 9,
1994 and recorded December 21, 1994 in Luzerne County Deed Book 2514 at Page
285.
14
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(S) 28. Right-of-way for gas pipeline in the Borough of Plymouth, Luzerne
County, from John A. Krasson, et ux, by Indenture dated December 12, 1994 and
recorded December 21, 1994 in Luzerne County Deed Book 2514 at Page 267.
(S) 29. Right-of-way for gas pipeline in the Township of Plains, Luzerne
County, from Robert K. Mericle, by Indenture dated December 13, 1994 and
recorded December 21, 1994 in Luzerne County Deed Book 2514 at Page 293.
(S) 30. Corrective Right-of-way for gas pipeline in the Township of Hanover,
Luzerne County, from Raymond M. Black, Sr., by Indenture dated January 11, 1995
and recorded February 7, 1995 in Luzerne County Deed Book 2518 at Page 306.
(S) 31. Right-of-way for water pipeline in the Borough of West Wyoming,
Luzerne County, from Pagnotti Coal Company, by Indenture dated January 25, 1995
and recorded February 7, 1995 in Luzerne County Deed Book 2518 at Page 310.
(S) 32. Right-of-way for gas pipeline in the Township of Plains, Luzerne
County, from Bernard Hudler, by Indenture dated January 31, 1995 and recorded
March 9, 1995 in Luzerne County Deed Book 2520 at Page 913.
(S) 33. Right-of-way for gas pipeline in the Borough of Nescopeck, Luzerne
County, from Ruth Creveling, by Indenture dated February 1, 1995 and recorded
February 7, 1995 in Luzerne County Deed Book 2518 at Page 302.
(S) 34. Right-of-way for gas pipeline in the Borough of Nescopeck, Luzerne
County, from Dale C. Knelly, et ux, by Indenture dated February 1, 1995 and
recorded February 7, 1995 in Luzerne County Deed Book 2518 at Page 323.
(S) 35. Right-of-way for water pipeline in the Township of Wright, Luzerne
County, from Richard Ayre, et ux, by Indenture dated February 9, 1995 and
recorded March 9, 1995 in Luzerne County Deed Book 2520 at Page 908.
(S) 36. Right-of-way for gas pipeline in the Township of Wright, Luzerne
County, from Richard Ayre, et ux, by Indenture dated February 9, 1995 and
recorded March 9, 1995 in Luzerne County Deed Book 2520 at Page 917.
(S) 37. Right-of-way for gas pipeline in the Township of Plains, Luzerne
County, from 315 Realty Corp., Inc. by Indenture dated February 13, 1995 and
recorded March 9, 1995 in Luzerne County Deed Book 2520 at Page 900.
(S) 38. Right-of-way for gas pipeline in the Township of Hanover, Luzerne
County, from M. B. Investments, by Indenture dated February 15, 1995 and
recorded March 9, 1995 in Luzerne County Deed Book 2520 at Page 904.
(S) 39. Right-of-way for gas pipeline in the Borough of Luzerne, Luzerne
County, from Gerald Kolman, et ux, by Indenture dated March 23, 1995 and
recorded April 19, 1995 in Luzerne County Deed Book 2524 at Page 588.
15
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(S) 40. Right-of-way for gas pipeline in the Borough of Luzerne, Luzerne
County, from James R. Shepherd, Sr., et al, by Indenture dated March 23, 1995
and recorded April 19, 1995 in Luzerne County Deed Book 2524 at Page 620.
(S) 41. Right-of-way for gas pipeline in the Township of Plains, Luzerne
County, from 315 Realty Corp., Inc., by Indenture dated March 28, 1995 and
recorded April 19, 1995 in Luzerne County Deed Book 2524 at Page 592.
(S) 42. Right-of-way for gas pipeline in the Township of Lehman, Luzerne
County, from Maplemoor, Inc. T/A Huntsville Golf Club, by Indenture dated March
28, 1995 and recorded April 19, 1995 in Luzerne County Deed Book 2524 at Page
601.
(S) 43. Right-of-way for water pipeline in the City of Wilkes-Barre, Luzerne
County, from Housing Authority of The City of Wilkes-Barre, by Indenture dated
April 3, 1995 and recorded April 19, 1995 in Luzerne County Deed Book 2524 at
Page 606.
(S) 44. Right-of-way for gas pipeline in the Township of Wright, Luzerne
County, from Eastern Consolidated Management Corp., by Indenture dated April
11, 1995 and recorded April 19, 1995 in Luzerne County Deed Book 2524 at Page
610.
(S) 45. Right-of-way for water pipeline in the Township of Wright, Luzerne
County, from Eastern Consolidated Management Corp., by Indenture dated April
11, 1995 and recorded April 19, 1995 in Luzerne County Deed Book 2524 at Page
615.
(S) 46. Right-of-way for gas pipeline in the Township of Plains, Luzerne
County, from Victoria Giovagnoli, widow, by Indenture dated April 24, 1995 and
recorded June 7, 1995 in Luzerne County Deed Book 2529 at Page 207.
(S) 47. Right-of-way for gas pipeline in the Borough of Dallas, Luzerne
County, from M. Mercedes Kane, by Indenture dated May 5, 1995 and recorded June
7, 1995 in Luzerne County Deed Book 2529 at Page 199.
(S) 48. Right-of-way for gas pipeline in the Borough of Dallas, Luzerne
County, from Robert E. Post, et ux, by Indenture dated May 5, 1995 and recorded
June 7, 1995 in Luzerne County Deed Book 2529 at Page 203.
(S) 49. Right-of-way for water pipeline in the City of Nanticoke, Luzerne
County, from Daniel Markowski Jr., et ux, by Indenture dated May 9, 1995 and
recorded June 7, 1995 in Luzerne County Deed Book 2529 at Page 195.
(S) 50. Right-of-way for gas pipeline in the Borough of Dallas, Luzerne
County, from Frank R. Orloski, Sr., et ux, by Indenture dated May 9, 1995 and
recorded June 7, 1995 in Luzerne County Deed Book 2529 at Page 191.
16
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(S) 51. Right-of-way for gas pipeline in the City of Wilkes-Barre, Luzerne
County, from Dorthy C. Alstein, widow, by Indenture dated May 12, 1995 and
recorded June 7, 1995 in Luzerne County Deed Book 2529 at Page 220.
(S) 52. Right-of-way for gas pipeline in the Borough of Duryea, Luzerne
County, from Stephen James Scoda, by Indenture dated May 12, 1995 and recorded
June 7, 1995 in Luzerne County Deed Book 2529 at Page 211.
(S) 53. Right-of-way for gas pipeline in the Township of Wilkes-Barre,
Luzerne County, from Cedar Associates, by Indenture dated May 16, 1995 and
recorded June 7, 1995 in Luzerne County Deed Book 2529 at Page 183.
(S) 54. Right-of-way for gas pipeline in the City of Wilkes-Barre, Luzerne
County, from Joseph C. Flynn, Jr., et ux, et al, by Indenture dated May 18,
1995 and recorded June 7, 1995 in Luzerne County Deed Book 2529 at Page 187.
(S) 55. Right-of-way for gas pipeline in the City of Wilkes-Barre, Luzerne
County, from William Lamoreux, III, et ux, by Indenture dated May 18, 1995 and
recorded June 7, 1995 in Luzerne County Deed Book 2529 at Page 179.
(S) 56. Right-of-way for gas pipeline in the Township of Kingston, Luzerne
County, from Maple Crest-Phase II Development Company, by Indenture dated June
2, 1995 and recorded June 7, 1995 in Luzerne County Deed Book 2529 at Page 215.
(S) 57. Right-of-way for gas pipeline in the Township of Fairview, Luzerne
County, from Ruth Nobel, et vir, by Indenture dated June 15, 1995 and recorded
July 26, 1995 in Luzerne County Deed Book 2534 at Page 567.
(S) 58. Right-of-way for gas pipeline in the Borough of Plymouth, Luzerne
County, from John C. Good, et ux, by Indenture dated June 21, 1995 and recorded
July 26, 1995 in Luzerne County Deed Book 2534 at Page 571.
(S) 59. Right-of-way for gas pipeline in the Township of Wright, Luzerne
County, from Greater Wilkes-Barre Industrial Fund, Inc. and Communication
Microwave Corp., by Indenture dated June 28, 1995 and recorded July 26, 1995 in
Luzerne County Deed Book 2534 at Page 579.
(S) 60. Right-of-way for gas pipeline in the Township of Township, Luzerne
County, from Robert K. Mericle, by Indenture dated June 30, 1995 and recorded
July 26, 1995 in Luzerne County Deed Book 2534 at Page 575.
(S) 61. Right-of-way for water pipeline in the Township of Fairview, Luzerne
County, from Thomas A. Hollock, et ux, by Indenture dated July 7, 1995 and
recorded July 26, 1995 in Luzerne County Deed Book 2534 at Page 548.
17
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(S) 62. Right-of-way for gas pipeline in the Borough of Sugar Notch, Luzerne
County, from Esther P. Munson, by Indenture dated July 13, 1995 and recorded
July 26, 1995 in Luzerne County Deed Book 2534 at Page 558.
(S) 63. Right-of-way for gas pipeline in the Township of Kingston, Luzerne
County, from Echo Valley Estates, Inc., by Indenture dated July 27, 1995 and
recorded September 1, 1995 in Luzerne County Deed Book 2538 at Page 477.
(S) 64. Right-of-way for gas pipeline in the City of Wilkes-Barre, Luzerne
County, from McCarthy Tire Service Company, by Indenture dated July 27, 1995
and recorded September 1, 1995 in Luzerne County Deed Book 2538 at Page 455.
(S) 65. Right-of-way for gas pipeline in the Borough of Kingston, Luzerne
County, from William Barney Trustee, et al, by Indenture dated August 1, 1995
and recorded September 1, 1995 in Luzerne County Deed Book 2538 at Page 472.
(S) 66. Right-of-way for gas pipeline in the Borough of Wyoming, Luzerne
County, from John J. Rygiel, Executor, by Indenture dated August 1, 1995 and
recorded September 1, 1995 in Luzerne County Deed Book 2538 at Page 459.
(S) 67. Right-of-way for gas pipeline in the Borough of Plymouth, Luzerne
County, from Borough of Plymouth, by Indenture dated August 1, 1995 and
recorded September 1, 1995 in Luzerne County Deed Book 2538 at Page 467.
(S) 68. Right-of-way for water pipeline in the Township of Pittston, Luzerne
County, from Joseph A. Milhalka, et ux, by Indenture dated August 5, 1995 and
recorded September 1, 1995 in Luzerne County Deed Book 2538 at Page 482.
(S) 69. Right-of-way for gas pipeline in the Borough of Wyoming, Luzerne
County, from Jacob Vinitsker, et ux, by Indenture dated August 9, 1995 and
recorded September 1, 1995 in Luzerne County Deed Book 2538 at Page 494.
(S) 70. Right-of-way for gas pipeline in the City of Wilkes-Barre, Luzerne
County, from Harish Joshi, et al, by Indenture dated August 14, 1995 and
recorded September 1, 1995 in Luzerne County Deed Book 2538 at Page 503.
(S) 71. Right-of-way for gas pipeline in the Township of Newport, Luzerne
County, from Edward H. Kerbaugh, et ux, by Indenture dated August 21, 1995 and
recorded September 1, 1995 in Luzerne County Deed Book 2538 at Page 512.
(S) 72. Right-of-way for gas pipeline in the Township of Wright, Luzerne
County, from Richard Ayre, et ux, by Indenture dated August 28, 1995 and
recorded September 1, 1995 in Luzerne County Deed Book 2538 at Page 577.
(S) 73. Right-of-way for gas pipeline in the Borough of Plymouth, Luzerne
County, from Susan A. Stravinsky and Kurt Santayana, by Indenture dated August
29, 1995 and recorded September 1, 1995 in Luzerne County Deed Book 2538 at
Page 521.
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VI
The following rights-of-way and/or easements situate in the County of
Lycoming and Commonwealth of Pennsylvania, to wit:
(S) 01. Right-of-way for gas pipeline in the City of Williamsport, Lycoming
County, from Industrial Properties Corporation, et al, by Indenture dated
November 17, 1994 and recorded December 22, 1994 in Lycoming County Deed Book
2364 at Page 302.
(S) 02. Right-of-way for gas pipeline in the City of Williamsport, Lycoming
County, from Marguerite L. Thompson, by Indenture dated November 21, 1994 and
recorded December 22, 1994 in Lycoming County Deed Book 2364 at Page 307.
(S) 03. Right-of-way for gas pipeline in the City of Williamsport, Lycoming
County, from David W. Himmelreich, et ux, by Indenture dated November 21, 1994
and recorded December 22, 1994 in Lycoming County Deed Book 2364 at Page 310.
(S) 04. Right-of-way for gas pipeline in the Township of Fairfield, Lycoming
County, from Kevin P. Fenstermacher, et ux, by Indenture dated December 8, 1994
and recorded December 22, 1994 in Lycoming County Deed Book 2364 at Page 313.
(S) 05. Right-of-way for gas pipeline in the Township of Fairfield, Lycoming
County, from Byron A. Singer, et ux, by Indenture dated December 12, 1994 and
recorded December 22, 1994 in Lycoming County Deed Book 2364 at Page 316.
(S) 06. Right-of-way for gas pipeline in the Township of Fairfield, Lycoming
County, from Robert D. Sitler, et ux, by Indenture dated December 12, 1994 and
recorded December 22, 1994 in Lycoming County Deed Book 2364 at Page 319.
(S) 07. Right-of-way for gas pipeline in the City of Williamsport, Lycoming
County, from J. K. Rishel Furniture Company, et al, by Indenture dated January
18, 1995 and recorded March 10, 1995 in Lycoming County Deed Book 2393 at Page
234.
(S) 08. Right-of-way for gas pipeline in the Township of Loyalsock, Lycoming
County, from Jack E. Strouse, by Indenture dated May 5, 1995 and recorded June
13, 1995 in Lycoming County Deed Book 2433 at Page 187.
(S) 09. Right-of-way for gas pipeline in the City of Williamsport, Lycoming
County, from Warrior Run Development Corporation, by Indenture dated May 5,
1995 and recorded June 13, 1995 in Lycoming County Deed Book 2433 at Page 190.
(S) 10. Right-of-way for gas pipeline in the City of Williamsport, Lycoming
County, from Linn Street Manor Associates, by Indenture dated May 5, 1995 and
recorded June 13, 1995 in Lycoming County Deed Book 2433 at Page 193.
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(S) 11. Right-of-way for gas pipeline in the City of Williamsport, Lycoming
County, from Wegmans Food Markets, Inc., by Indenture dated June 2, 1995 and
recorded June 13, 1995 in Lycoming County Deed Book 2433 at Page 196.
(S) 12. Right-of-way for gas pipeline in the Township of Muncy Creek,
Lycoming County, from Muncy Valley Hospital, by Indenture dated June 27, 1995
and recorded July 28, 1995 in Lycoming County Deed Book 2457 at Page 20.
(S) 13. Right-of-way for gas pipeline in the Township of Loyalsock, Lycoming
County, from William L. Cuebas, et ux, by Indenture dated August 1, 1995 and
recorded August 31, 1995 in Lycoming County Deed Book 2474 at Page 313.
VII
The following rights-of-way and/or easements situate in the County of
Montour and Commonwealth of Pennsylvania, to wit:
(S) 01. Right-of-way for gas pipeline in the Borough of Danville, Montour
County, from Danville Municipal Authority, by Indenture dated September 14,
1994 and recorded November 7, 1994 in Montour County Record Book 179 at Page
1130.
VIII
The following rights-of-way and/or easements situate in the County of
Northumberland and Commonwealth of Pennsylvania, to wit:
(S) 01. Right-of-way for gas pipeline in the City of Sunbury,
Northumberland County, from Sunbury Textile Mills, Inc., by Indenture dated
December 6, 1993 and recorded November 7, 1994 in Northumberland County Record
Book 982 at Page 032.
(S) 02. Right-of-way for gas pipeline in the Borough of Turbotville,
Northumberland County, from Susquehanna Valley School Authority, by Indenture
dated August 24, 1994 and recorded February 6, 1995 in Northumberland County
Record Book 991 at Page 663.
(S) 03. Right-of-way for gas pipeline in the Township of Upper Augusta,
Northumberland County, from Jeanne M. Broscious, by Indenture dated October 15,
1994 and recorded November 7, 1994 in Northumberland County Record Book 982 at
Page 025.
(S) 04. Right-of-way for gas pipeline in the City of Sunbury, Northumberland
County, from Pennsylvania Power & Light Company, by Indenture dated October 17,
1994 and recorded November 7, 1994 in Northumberland County Record Book 982 at
Page 028.
20
<PAGE>
(S) 05. Right-of-way for gas pipeline in the Township of Lewis,
Northumberland County, from John Sensenig, et ux, by Indenture dated October
25, 1994 and recorded November 7, 1994 in Northumberland County Record Book 982
at Page 013.
(S) 06. Right-of-way for gas pipeline in the Township of Lewis,
Northumberland County, from Leon H. Zimmerman, et ux, by Indenture dated
October 25, 1994 and recorded November 7, 1994 in Northumberland County Record
Book 982 at Page 016.
(S) 07. Right-of-way for gas pipeline in the Borough of Watsontown,
Northumberland County, from Kenneth W. Blessing, Jr., et al, by Indenture dated
October 25, 1994 and recorded November 7, 1994 in Northumberland County Record
Book 982 at Page 019.
(S) 08. Right-of-way for gas pipeline in the Borough of Watsontown,
Northumberland County, from Franklin L. Harmon, Sr., by Indenture dated October
28, 1994 and recorded November 7, 1994 in Northumberland County Record Book 982
at Page 022.
(S) 09. Right-of-way for gas pipeline in the Township of Point,
Northumberland County, from Michael R. Connelly, et ux, by Indenture dated
November 21, 1994 and recorded December 22, 1994 in Northumberland County
Record Book 987 at Page 404.
(S) 10. Right-of-way for gas pipeline in the Borough of Milton,
Northumberland County, from Albert A. Posseda, et ux, by Indenture dated
November 28, 1994 and recorded February 6, 1995 in Northumberland County Record
Book 991 at Page 670.
(S) 11. Right-of-way for gas pipeline in the Borough of Milton,
Northumberland County, from Brenda L. Reeder, by Indenture dated November 28,
1994 and recorded February 6, 1995 in Northumberland County Record Book 991 at
Page 674.
(S) 12. Right-of-way for gas pipeline in the Township of Point,
Northumberland County, from Douglas W. Mertz, by Indenture dated November 30,
1994 and recorded February 6, 1995 in Northumberland County Record Book 991 at
Page 660.
(S) 13. Right-of-way for gas pipeline in the Borough of Watsontown,
Northumberland County, from Lawrence S. Mattern, et al, by Indenture dated
December 19, 1994 and recorded December 22, 1994 in Northumberland County
Record Book 987 at Page 401.
(S) 14. Right-of-way for gas pipeline in the Township of Delaware,
Northumberland County, from Russell F. Yordy Jr., et ux, by Indenture dated
January 5, 1995 and recorded February 6, 1995 in Northumberland County Record
Book 991 at Page 677.
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(S) 15. Right-of-way for gas pipeline in the Township of Point,
Northumberland County, from Gun Rack, Inc., by Indenture dated January 5, 1995
and recorded February 6, 1995 in Northumberland County Record Book 991 at Page
680.
(S) 16. Right-of-way for gas pipeline in the Borough of Turbotville,
Northumberland County, from Florence M. Schell, widow, by Indenture dated
January 18, 1995 and recorded February 6, 1995 in Northumberland County Record
Book 991 at Page 684.
(S) 17. Right-of-way for gas pipeline in the Township of Point,
Northumberland County, from Steven L. Vankirk, by Indenture dated February 23,
1995 and recorded April 25, 1995 in Northumberland County Record Book 999 at
Page 820.
(S) 18. Right-of-way for gas pipeline in the Township of Point,
Northumberland County, from Benedict Cerven, et ux, by Indenture dated March
16, 1995 and recorded April 25, 1995 in Northumberland County Record Book 999
at Page 823.
(S) 19. Right-of-way for gas pipeline in the Township of Point,
Northumberland County, from Benedict Cerven, et ux, by Indenture dated March
16, 1995 and recorded April 25, 1995 in Northumberland County Record Book 999
at Page 826.
(S) 20. Right-of-way for gas pipeline in the Borough of Northumberland,
Northumberland County, from Kenneth L. Young, et al, by Indenture dated March
24, 1995 and recorded April 25, 1995 in Northumberland County Record Book 999
at Page 829.
(S) 21. Right-of-way for gas pipeline in the Borough of Northumberland,
Northumberland County, from Branchview, Inc., by Indenture dated April 7, 1995
and recorded April 25, 1995 in Northumberland County Record Book 999 at Page
835.
(S) 22. Right-of-way for gas pipeline in the Township of Lewis,
Northumberland County, from Robert L. Kilgus, Jr., et ux, by Indenture dated
April 11, 1995 and recorded April 25, 1995 in Northumberland County Record Book
999 at Page 832.
(S) 23. Right-of-way for gas pipeline in the Township of Point,
Northumberland County, from Kenneth Bollinger, et ux, by Indenture dated May
13, 1995 and recorded June 6, 1995 in Northumberland County Record Book 1005 at
Page 472.
(S) 24. Right-of-way for gas pipeline in the Township of West Chillisquaque,
Northumberland County, from West Chillisquaque Post No. 84, American Legion
Home Association, by Indenture dated June 13, 1995 and recorded July 25, 1995
in Northumberland County Record Book 1011 at Page 559.
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(S) 25. Right-of-way for gas pipeline in the Township of West Chillisquaque,
Northumberland County, from Crossroads Church of the Nazarene of Lewisburg, by
Indenture dated June 14, 1995 and recorded July 25, 1995 in Northumberland
County Record Book 1011 at Page 563.
IX
The following rights-of-way and/or easements situate in the County of Snyder
and Commonwealth of Pennsylvania, to wit:
(S) 01. Right-of-way for gas pipeline in the Township of Monroe, Snyder
County, from Wal-Mart Stores, Inc., by Indenture dated October 3, 1994 and
recorded November 7, 1994 in Snyder County Record Book 343 at Page 412.
(S) 02. Right-of-way for gas pipeline in the Township of Monroe, Snyder
County, from Lee C. Brouse, et ux, by Indenture dated October 28, 1994 and
recorded November 7, 1994 in Snyder County Record Book 343 at Page 409.
(S) 03. Right-of-way for gas pipeline in the Borough of Selinsgrove, Snyder
County, from Gary L. Lenig, et ux, by Indenture dated November 14, 1994 and
recorded December 22, 1994 in Snyder County Record Book 345 at Page 410.
(S) 04. Right-of-way for gas pipeline in the Borough of Selinsgrove, Snyder
County, from Susquehanna University of The Evangelical Lutheran Church, by
Indenture dated July 26, 1995 and recorded August 31, 1995 in Snyder County
Record Book 358 at Page 4.
X
The following rights-of-way and/or easements situate in the County of
Susquehanna and Commonwealth of Pennsylvania, to wit:
(S) 01. Right-of-way for gas pipeline in the Township of Clifford,
Susquehanna County, from Kent D. Maxwell, et ux, by Indenture dated January 30,
1995 and recorded March 20, 1995 in Susquehanna County Deed Book 518 at Page
70.
XI
The following rights-of-way and/or easements situate in the County of Union
and Commonwealth of Pennsylvania, to wit:
(S) 01. Right-of-way for gas pipeline in the Township of Kelly, Union
County, from Lewisburg Area School District, by Indenture dated September 12,
1994 and recorded November 7, 1994 in Union County Record Book 390 at Page 95.
(S) 02. Right-of-way for gas pipeline in the Township of White Deer, Union
County, from Clyde S. Showers, et ux, by Indenture dated May 31, 1995 and
recorded June 6, 1995 in Union County Record Book 418 at Page 101.
23
<PAGE>
(S) 03. Right-of-way for gas pipeline in the Township of White Deet, Union
County, from Edward A. Doebler, Jr., et ux, by Indenture dated May 31, 1995 and
recorded June 6, 1995 in Union County Record Book 418 at Page 105.
(S) 04. Right-of-way for gas pipeline in the Township of Kelly, Union
County, from Julia E. Sanders, Executrix, by Indenture dated July 12, 1995 and
recorded August 31, 1995 in Union County Record Book 432 at Page 235.
(S) 05. Right-of-way for gas pipeline in the Township of Kelly, Union County,
from United Methodist Countinuing Care Services, by Indenture dated July 20,
1995 and recorded August 31, 1995 in Union County Record Book 432 at Page 240.
SAVING AND EXCEPTING, HOWEVER, FROM THE PROPERTY DESCRIBED OR REFERRED TO
ABOVE, all property which is reserved or excepted from the lien and operation
of the Indenture by virtue of the exceptions contained in the Granting Clauses
thereof.
TO HAVE AND TO HOLD the same, unto the Trustee and its successors and assigns
forever;
SUBJECT, HOWEVER, to permitted encumbrances as defined in the Original
Indenture and to any lien thereon existing, and to any liens for unpaid
portions of the purchase money placed thereon, at the time of acquisition, and
also subject to the provisions of Article 12 of the Original Indenture;
IN TRUST, NEVERTHELESS, upon the terms and trusts set forth in the
Indenture.
PROVIDED, HOWEVER, and these presents are upon the condition that if the
Company, its successors or assigns, shall pay or cause to be paid unto the
holders of bonds issued and to be issued under the Indenture the principal and
interest, and premium, if any, due or to become due in respect thereof at the
times and in the manner stipulated therein and shall keep, perform and observe
all and singular the covenants and promises in said bonds and in the Indenture
expressed to be kept, performed and observed by or on the part of the Company,
then the Indenture and the estates and rights hereby granted shall cease,
determine and be void, otherwise to be and remain in full force and effect.
IT IS HEREBY COVENANTED, DECLARED AND AGREED by and between the parties
hereto that the Company will protect and make effective the lien intended to be
created by the Indenture with respect to all of the properties hereinabove de
scribed and that all bonds are to be issued, authenticated, delivered and held,
and that all property subject or to become subject to the Indenture is to be
held, subject to the further covenants, conditions, uses and trusts set forth
in the Original Indenture as heretofore supplemented, and as supplemented by
this Thirtieth Supplemental Indenture, in all respects as if said property was
specifically
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described in the Granting Clauses of the Original Indenture; and the Company,
for itself and its successors, doth hereby covenant and agree to and with the
Trustee, for the benefit of those who hold said bonds as follows:
ARTICLE 1.
Miscellaneous
(S) 1.01 The WITNESSETH granting clause of the Original Indenture is hereby
amended by:
(i) deleting the words "impounding, storing, transporting and selling" in the
eighth line of the third paragraph thereof;
(ii) deleting the words "water, or in its business of" in the ninth line of
the third paragraph thereof;
(iii) deleting the words "all buildings, improvements, standpipes, towers" in
the first line of the fourth paragraph thereof;
(iv) deleting the second through sixth lines of the fourth paragraph
thereof;
(v) deleting the words "ing, transmission or distribution of water;" in the
seventh line of the fourth paragraph thereof;
(vi) deleting the words "water or" in the fourteenth line of the fourth
paragraph thereof;
(vii) deleting the sixth paragraph thereof.
(S) 1.02 Section 1.02(m) of the Original Indenture is hereby amended by
deleting the words "water or" in the first and eighth lines thereof.
(S) 1.03 Section 1.05 of the Original Indenture is hereby amended by (i)
deleting the words "water or" in the seventh and thirteenth lines thereof and
(ii) adding the words "except if not" immediately after the word "case" in the
seventh and tenth lines thereof.
(S) 1.04 Section 1.05(a)(2) of the Original Indenture is hereby amended by
deleting the words "water or" in the fifth line thereof.
(S) 1.05 Section 1.05(b)(4) of the Original Indenture is hereby amended by
deleting the words "water or" in the fifth line thereof.
(S) 1.06 Section 1.05(b)(5) of the Original Indenture is hereby amended by
adding the word "and" immediately after the semi-colon in the fifth line
thereof.
(S) 1.07 Section 1.06(A)(1) of the Original Indenture is hereby amended by
(i) deleting the words "water and gas businesses" in the second line thereof
and (ii) substituting therefor the words "gas business."
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(S) 1.08 Section 1.06(A)(2) of the Original Indenture is hereby amended by
(i) deleting the word "businesses" in the second line thereof and substituting
therefor the word "business" and (ii) deleting the words "the sum of twelve and
one-half per centum (121/2%) of the gross water operating revenues and" in the
fifteenth, sixteenth and seventeenth lines thereof.
(S) 1.09 Section 1.06(A)(4) of the Original Indenture is hereby amended by
deleting the words "water and gas businesses" in the second and third lines
thereof and substituting therefor the words "gas business."
(S) 1.10 The further proviso in Section 1.06 of the Original Indenture is
hereby amended by deleting the words "water and gas businesses" in the second
line of clause (b) thereof and substituting therefor the words "gas business"
in the second line of clause (b) thereof.
(S) 1.11 Section 3.06(3)(B)(h) of the Original Indenture is hereby amended by
deleting the words "water or" in the second, fifth, and tenth lines thereof.
(S) 1.12 Section 3.06(4) of the Original Indenture is hereby amended by
deleting the words "water or" in the third and thirtieth lines thereof.
(S) 1.13 Section 3.07 of the Original Indenture is hereby amended by adding
the words "after the date of the consummation of the sale by Pennsylvania
Enterprises, Inc. ("PEI") and the Company of the Company's regulated water
utility operations and certain related assets (the "Sale of the Water
Business") to Pennsylvania-American Water Company ("PAWC") pursuant to an Asset
Purchase Agreement dated as of April 26, 1995 (the "Asset Purchase Agreement")
among PEI, the Company, PAWC and American Water Works Company, Inc."
immediately after the word "cancellation" in the eighth line thereof.
(S) 1.14 Section 3.07(2) of the Original Indenture is hereby amended by
adding the words "after the date of the consummation of the Sale of the Water
Business" immediately after the word "cancellation" in the twelfth line
thereof.
(S) 1.15 Section 4.07 of the Original Indenture is hereby amended by deleting
the words "water and" in the eighth line thereof.
(S) 1.16 Section 4.10 of the Original Indenture is hereby amended by:
(i) deleting the words "a sum equal to twelve and one-half per centum
(121/2%) of the gross water operating revenues (as hereinafter defined) and" in
the ninth, tenth and eleventh lines of the first paragraph thereof;
(ii) by adding the words "after the date of the consummation of the Sale of
the Water Business" immediately after the word "cancelled" in the fourth line
of subdivision (3) of the first paragraph thereof;
(iii) adding the words "and; provided, further, that with respect to the
calendar year in which the Sale of the Water Business is consummated, there
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shall be deemed to be two accounting periods for purposes of the calculations
set forth in this Section, the first of which (the "Pre-Sale Period") shall
commence on January 1 of that year and shall continue until the date
immediately preceding the date of the consummation of the Sale of the Water
Business and the second of which (the "Post-Sale Period") shall commence
immediately following the consummation of the Sale of the Water Business and
end on December 31 of that year; and provided, further, that all calculations
made under this (S) 4.10 (x) with respect to the Pre-Sale Period shall be made
in accordance with the provisions of this Section as in effect on the date
prior to the date of the consummation of the Sale of the Water Business and (y)
with respect to the Post-Sale Period shall be made in accordance with the
provisions of this Section as in effect immediately following the consummation
of the Sale of the Water Business." at the end of subdivision (4) of the first
paragraph thereof;
(iv) deleting the words "the amount of the gross water operating revenues of
the mortgaged property during such accounting period; (b)" in the third, fourth
and fifth lines of the second paragraph thereof;
(v) deleting "(c)" in the seventh and fifteenth lines of the second
paragraph thereof and substituting therefor "(b)";
(vi) deleting "(d)" in the eighth and sixteenth lines of the second
paragraph thereof and substituting therefor "(c)";
(vii) deleting "(e)" in the eleventh and sixteenth lines of the second
paragraph thereof and substituting therefor "(d)";
(viii) adding the words "; provided, however, that as of the date of the
consummation of the Sale of the Water Business, the cumulative excess credit
balance shown by the last preceding certificate of the Company (the certificate
for the Pre-Sale Period) shall be deemed to be zero and the Company's
calculation of excess credits for the Post-Sale Period and all subsequent
periods shall include only the amount of excess credits after the date of the
consummation of the Sale of the Water Business" immediately after the word
"hereunder" in the thirteenth line of the second paragraph thereof;
(ix) deleting "(f)" in the fourteenth line of the second paragraph thereof
and the fourth line of the third paragraph thereof and substituting therefor
"(e)";
(x) by deleting the word "If" in the first line of the sixth paragraph
thereof and substituting therefor the words "Except as otherwise provided in
this Section, if";
(xi) deleting the words "terms 'gross water operating revenues' and" in the
first line of the seventh paragraph thereof and substituting therefor the word
"term";
(xii) deleting the word "are" in the third line of the seventh paragraph
thereof and substituting therefor the word "is";
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(viii) deleting the words "water or" in the fourth, sixth, seventh and
eleventh lines of the seventh paragraph thereof;
(xiv) deleting the words "(as the case may be)" in the fourth, fifth, sixth,
eighth, eleventh and twelfth lines thereof; and
(xv) deleting the words "water or" in the sixth line of the eighth
paragraph thereof.
(S) 1.17 Section 4.11 of the Original Indenture is hereby amended by (i)
deleting the words "water and" in the sixteenth line thereof and (ii) adding
the following proviso at the end thereof: "; provided, however, that the
foregoing shall not restrict the Company from paying to PEI following the
consummation of the Sale of the Water Business (i) an amount not to exceed $85
million to enable the Company to repurchase shares of its common stock, which
funds would, in turn, be utilized by PEI to repurchase shares of PEI common
stock and (ii) a one-time special dividend of a $30 million promissory note to
reduce by $30 million PEI's common shareholder's investment in the Company, and
that such payment and dividend shall not reduce the amount of the earned
surplus of the Company for purposes of any determination thereof under this (S)
4.11."
(S) 1.18 Section 8.03 of the Original Indenture is hereby amended by (i)
deleting the words "water and" in the first and second lines of the second
paragraph thereof and (ii) adding the following proviso at the end thereof:
"Notwithstanding the foregoing, nothing in this Indenture shall prevent the
Company from obtaining releases from the lien of this Indenture of (a) all real
and personal property of the Company which are not used exclusively in the
Company's gas utility operations and (b) all real property of the Company which
is the subject of the operating and maintenance easement agreement to be
executed by the Company and PAWC in connection with the Sale of the Water
Business (the releases referenced in clauses (a) and (b) of this proviso are
hereby collectively referred to herein as the "Special Release").
Notwithstanding anything set forth in (S) 8.03, the Company shall not be
required to comply with the conditions set forth in subdivisions (C), (D), (E),
(F), (G)(2), (G)(4), or (G)(5) of the first paragraph of (S) 8.03 or lines six
through twelve (other than the word "requested" in line six) of subdivision
(G)(1) of the first paragraph of (S)8.03 in connection with obtaining the
Special Release and the Trustee shall execute and deliver the Special Release
to the Company without receipt of items set forth in subdivisions (C), (D),
(E), (F), (G)(2), (G)(4), or (G)(5) of the first paragraph of (S) 8.03 and
lines six through twelve (except for the word "requested" in line six) of
subdivision (G)(1) of the first paragraph of (S)8.03. In connection with
obtaining the Special Release, the Company shall deliver to the Trustee (x) a
certificate of the Company stating the book value of the remaining property
viz: all real and personal property of the Company which are used exclusively in
connection with the Company's gas utility operations, following the release of
the real and personal property which are the subject of the Special Release and
(y) a certificate of an independent engineer stating that based upon the
results of an appraisal performed by such independent engineer, the aggregate
fair value of
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the remaining property following the release of the real and personal property
which are the subject of the Special Release exceeds 1662/3% of the aggregate
principal amount of the bonds issued under this Indenture which will be
outstanding immediately following the consummation of the Sale of the Water
Business."
(S) 1.19 Section 8.11 of the Original Indenture is hereby amended by adding
the following paragraph at the end thereof. "The provisions set forth in this
(S) 8.11 shall not apply to any consideration to be received by the Company in
connection with the properties which are the subject of the Special Release,
the Company shall not be required to pay any such consideration to the Trustee
and no part of any such consideration shall be deemed to be "trust moneys" for
purposes of this Indenture."
(S) 1.20 The amendments to the Original Indenture set forth in (S) 1.01-(S)
1.19 hereof shall take effect on the date of the consummation of the Sale of
the Water Business and the Trustee may conclusively rely on the certificate of
an officer of the Company that the Sale of the Water Business has been
consummated.
(S) 1.21 The Trustee accepts the trusts hereby declared and provided and
agrees to perform the same upon the terms and conditions in the Original
Indenture and in this Thirtieth Supplemental Indenture set forth. The Trustee
shall not be responsible in any manner whatsoever for or in respect of the
validity or sufficiency of this Thirtieth Supplemental Indenture or the due
execution hereof by the Company, or for or in respect of the recitals contained
herein, all of which recitals are made by the Company solely.
The Original Indenture as heretofore supplemented by twenty-nine
supplemental indentures and as supplemented by this Thirtieth Supplemental
Indenture is in all respects ratified and confirmed, and the Original
Indenture, together with the thirty indentures supplemental thereto, shall be
read, taken and construed as one and the same indenture.
(S) 1.21 This Thirtieth Supplemental Indenture may be executed in any
number of counterparts, and all said counterparts executed and delivered, each
as an original, shall constitute but one and the same instrument.
Pennsylvania Gas and Water Company does hereby constitute and appoint Thomas
J. Ward to be its attorney for it, and in its name and as and for its corporate
act and deed to acknowledge this Thirtieth Supplemental Indenture before any
person having authority by the laws of the Commonwealth of Pennsylvania to take
such acknowledgment, to the intent that the same may be duly recorded, and
First Trust of New York, National Association, does hereby constitute and
appoint Alfia Monastra to be its attorney for it, and in its name and as and
for its corporate act and deed to acknowledge this Thirtieth Supplemental
Indenture before any person having authority by the laws of the State of New
York to take such acknowledgment, to the intent that the same may be duly
recorded.
29
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IN WITNESS WHEREOF, said Pennsylvania Gas and Water Company and said First
Trust of New York, National Association have caused this Supplemental Indenture
to be signed in their respective corporate names, and their respective
corporate seals to be hereunto affixed and attested by their respective
officers thereunto duly authorized, all as of the day and year first above
written.
PENNSYLVANIA GAS AND
WATER COMPANY
/s/ John F. Kell, Jr.
By:
Name: John F. Kell, Jr.
Title: Vice President, Finance
[Corporate Seal]
Attest:
/s/ Thomas J. Ward
Secretary
FIRST TRUST OF NEW YORK,
NATIONAL ASSOCIATION
/s/ Catherine F. Donohue
By:
Name: Catherine F. Donohue
Title: Vice President
[Corporate Seal]
Attest:
/s/ Alfia Monastra
Assistant Secretary
30
<PAGE>
COMMONWEALTH OF PENNSYLVANIA
COUNTY OF LUZERNE
ss.:
BE IT REMEMBERED that on the 12th day of December, A.D. 1995, before the
undersigned Notary Public in and for said County and said Commonwealth,
commissioned for and residing in the County of Luzerne, personally came Thomas
J. Ward, who, being duly sworn according to law, doth depose and say that he
was personally present and did see the common or corporate seal of the
above-named PENNSYLVANIA GAS AND WATER COMPANY affixed to the foregoing
Supplemental Indenture; that the seal so affixed is the common or corporate
seal of said PENNSYLVANIA GAS AND WATER COMPANY and was so affixed by
authority of said corporation as the act and deed thereof; that the above-named
John F. Kell, Jr. is the Vice President, Finance of said corporation and did
sign the said Supplemental Indenture as such in the presence of this deponent;
that this deponent is the Secretary of the said corporation and that the name
of this deponent, above signed in attestation of the due execution of the said
Supplemental Indenture, is in this deponent's own proper handwriting.
/s/ Thomas J. Ward
Thomas J. Ward
Sworn and subscribed before me
the day and year aforesaid.
/s/ JoAnne McHale
Notary Public
NOTARIAL SEAL
JOANNE MCHALE, NOTARY PUBLIC
WILKES-BARRE, LUZURNE COUNTY
MY COMMISSION EXPIRES SEPT. 6, 1998
Member, Pennsylvania Association of Notaries
31
<PAGE>
COMMONWEALTH OF PENNSYLVANIA
COUNTY OF LUZERNE
ss.:
I HEREBY CERTIFY that on this 12th day of December, A.D. 1995, before me, a
Notary Public in and for said County and said Commonwealth, commissioned for
and residing in the County of Luzerne, personally appeared Thomas J. Ward, the
attorney named in the foregoing Supplemental Indenture, and he, by virtue and
in pursuance of the authority therein conferred upon him, acknowledged said
Supplemental Indenture to be the act and deed of the said PENNSYLVANIA GAS AND
WATER COMPANY.
Witness my hand and notarial seal the day and year aforesaid.
/s/ JoAnne McHale
- -------------------------------------------------------------------------------
Notary Public
NOTARIAL SEAL
JOANNE MCHALE, NOTARY PUBLIC
WILKES-BARRE, LUZURNE COUNTY
MY COMMISSION EXPIRES SEPT. 6, 1998
Member, Pennsylvania Association of Notaries
32
<PAGE>
STATE OF NEW YORK
COUNTY OF NEW YORK
ss.:
BE IT REMEMBERED that on the 11th day of December, A.D. 1995, before the
undersigned Notary Public in and for said County and State, commissioned for
the County of New York, personally came Alfia Monastra who, being duly sworn
according to law, doth depose and say that she was personally present and did
see the corporate seal of the above-named FIRST TRUST OF NEW YORK, NATIONAL AS
SOCIATION, affixed to the foregoing Supplemental Indenture; that the seal so
affixed is the corporate seal of said FIRST TRUST OF NEW YORK, NATIONAL
ASSOCIATION, and was so affixed by authority of said corporation as the act and
deed thereof; that the above-named Catherine F. Donohue is a Vice President of
said corporation and did sign the said Supplemental Indenture as such in the
presence of this deponent; that this deponent is an Assistant Secretary of said
corporation and that the name of this deponent, above signed in attestation of
the due execution of the said Supplemental Indenture, is in this deponent's own
proper handwriting.
/s/ Alfia Monastra
Alfia Monastra
Sworn and subscribed before me
the day and year aforesaid.
NOTARIAL SEAL
JOANNE E. ILSE
NOTARY PUBLIC, STATE OF NEW YORK
NO. 01IL5018680
QUALIFIED IN QUEENS COUNTY
COMMISSION EXPIRES
OCTOBER 4, 1997
/s/ Joanne E. Ilse
Notary Public
33
<PAGE>
STATE OF NEW YORK
COUNTY OF NEW YORK
ss.:
I HEREBY CERTIFY that on this 11th day of December, A.D. 1995, before me, a
Notary Public in and for said County and State, commissioned for the County of
New York, personally appeared Alfia Monastra, the attorney named in the
foregoing Supplemental Indenture, and she, by virtue and in pursuance of the
authority therein conferred upon her, acknowledged said Supplemental Indenture
to be the act and deed of the said FIRST TRUST OF NEW YORK, NATIONAL
ASSOCIATION.
Witness my hand and notarial seal the day and year aforesaid.
/s/ Joanne E. Isle
Notary Public
NOTARIAL SEAL
JOANNE E. ILSE
NOTARY PUBLIC, STATE OF NEW YORK
NO. 01IL5018680
QUALIFIED IN QUEENS COUNTY
COMMISSION EXPIRES
OCTOBER 4, 1997
CERTIFICATE OF RESIDENCE
FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION hereby certifies that its
precise name and address as Trustee hereunder are: FIRST TRUST OF NEW YORK,
NATIONAL ASSOCIATION, 100 WALL STREET, SUITE 1600, NEW YORK, NEW YORK 10005.
/s/ Catherine F. Donohue
By:
Name: Catherine F. Donohue
Title: Vice President
34
