FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-5540
PEOPLES ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Illinois 36-2642766
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
24th Floor, 130 East Randolph Drive, Chicago, Illinois 60601-6207
(Address of principal executive offices) (Zip Code)
(312) 240-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [x] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
34,981,897 shares of Common Stock, without par value, outstanding
at April 30, 1997.
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Peoples Energy Corporation
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Six Twelve
Months Ended Months Ended Months Ended
March 31, March 31, March 31,
------------------ ------------------ ----------------------
1997 1996 1997 1996 1997 1996
-------- -------- -------- -------- ---------- ----------
(Thousands, except per-share amounts)
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Gas sales $508,824 $452,290 $852,124 $727,463 $1,181,431 $ 978,307
Transportation 54,463 43,135 93,392 82,406 139,862 127,155
Other 4,698 3,131 9,617 6,293 16,335 12,592
-------- -------- -------- -------- ---------- ----------
Total Operating Revenues 567,985 498,556 955,133 816,162 1,337,628 1,118,054
-------- -------- -------- -------- ---------- ----------
OPERATING EXPENSES:
Gas costs 320,068 244,033 508,662 373,904 664,633 474,219
Operation 49,567 62,462 103,726 116,592 207,433 217,287
Maintenance 9,937 11,108 21,463 21,162 45,942 43,030
Depreciation and amortization 18,392 17,876 36,844 34,532 72,946 67,585
Taxes - Income 36,589 37,120 59,933 58,632 57,921 47,340
- State & local revenue 56,590 51,880 95,884 85,644 131,412 118,074
- Other 5,362 5,806 10,389 10,879 21,511 21,833
-------- -------- -------- -------- ---------- ----------
Total Operating Expenses 496,505 430,285 836,901 701,345 1,201,798 989,368
-------- -------- -------- -------- ---------- ----------
OPERATING INCOME 71,480 68,271 118,232 114,817 135,830 128,686
-------- -------- -------- -------- ----------
OTHER INCOME
AND (DEDUCTIONS):
Interest income 2,091 508 2,579 3,162 4,813 10,078
Allowance for funds used
during construction 35 -- 62 -- 85 --
Interest on long-term debt
of subsidiaries (8,935) (9,004) (17,862) (19,955) (35,733) (43,164)
Other interest expense (859) (1,663) (1,773) (3,662) (3,226) (7,748)
Income taxes (785) (2,660) (867) (1,735) (4,970) (4,336)
Miscellaneous - net 231 6,563 378 5,504 9,257 5,823
-------- -------- -------- -------- ---------- ----------
Total Other Income
and Deductions (8,222) (6,256) (17,483) (16,686) (29,774) (39,347)
-------- -------- -------- -------- ---------- ----------
NET INCOME $ 63,258 $ 62,015 $100,749 $ 98,131 $ 106,056 $ 89,339
======== ======== ======== ======== ========== ==========
Average Shares of Common Stock
Outstanding 34,981 34,939 34,976 34,933 34,964 34,922
Earnings Per Share of Common Stock $ 1.81 $ 1.77 $ 2.88 $ 2.81 $ 3.03 $ 2.56
======== ======== ======== ======== ========== ==========
Dividends Declared Per Share $ .47 $ .46 $ .93 $ .91 $ 1.85 $ 1.81
======== ======== ======== ======== ========== ==========
<FN>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
</TABLE>
<TABLE>
Peoples Energy Corporation
CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31, March 31,
1997 September 30, 1996
(Unaudited) 1996 (Unaudited)
---------- ---------- ----------
(Thousands of Dollars)
<S> <C> <C> <C>
PROPERTIES AND OTHER ASSETS
CAPITAL INVESTMENTS:
Property, plant and equipment,
at original cost $2,070,420 $2,046,156 $2,011,391
Less - Accumulated depreciation 691,931 665,077 644,919
---------- ---------- ----------
Net property, plant and equipment 1,378,489 1,381,079 1,366,472
Other investments 14,091 12,348 10,230
---------- ---------- ----------
TOTAL CAPITAL INVESTMENTS - NET 1,392,580 1,393,427 1,376,702
---------- ---------- ----------
CURRENT ASSETS:
Cash 16,790 4,684 6,871
Cash equivalents 33,080 33,086 73,752
Receivables -
Customers, net of allowance for
uncollectible accounts of $33,348,
$26,211, and $23,390, respectively 232,099 68,675 190,264
Other 31,081 32,399 54,631
Accrued unbilled revenues 61,847 29,314 67,236
Materials and supplies, at average cost 16,722 16,128 16,800
Gas in storage, at last-in, first-out cost 29,887 65,502 40,064
Gas costs recoverable through rate adjustments -- 19,920 51,078
Prepayments 28,784 12,287 3,457
Other 15,900 900 900
---------- ---------- ----------
TOTAL CURRENT ASSETS 466,190 282,895 505,053
---------- ---------- ----------
OTHER ASSETS:
Regulatory assets of subsidiaries 71,680 91,498 60,993
Deferred charges 20,030 15,930 14,807
---------- ---------- ----------
TOTAL OTHER ASSETS 91,710 107,428 75,800
---------- ---------- ----------
TOTAL PROPERTIES AND OTHER ASSETS $1,950,480 $1,783,750 $1,957,555
========== ========== ==========
<FN>
The Notes to Consolidated Financial Statements are an integral part of
these statements.
</TABLE>
<TABLE>
Peoples Energy Corporation
CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31, March 31,
1997 September 30, 1996
(Unaudited) 1996 (Unaudited)
---------- ---------- ----------
(Thousands of Dollars)
<S> <C> <C> <C>
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common Stockholders' Equity:
Common stock, without par value
Authorized - 60,000,000 shares
Outstanding - 34,981,897, 34,960,399,
and 34,940,815 shares, respectively $ 278,335 $ 277,881 $ 277,648
Retained earnings 471,521 403,304 430,918
---------- ---------- ----------
Total Common Stockholders' Equity 749,856 681,185 708,566
Long-term debt of subsidiaries,
exclusive of sinking fund payments
and maturities due within one year 527,039 527,064 527,104
---------- ---------- ----------
TOTAL CAPITALIZATION 1,276,895 1,208,249 1,235,670
---------- ---------- ----------
CURRENT LIABILITIES:
Interim loans of subsidiaries 700 2,625 8,700
Accounts payable 144,080 147,972 197,335
Dividends payable on common stock 16,441 16,082 16,073
Customer gas service and credit deposits 17,837 42,390 19,390
Accrued taxes 97,439 32,821 95,166
Gas sales revenue refundable through
rate adjustments 11,817 13,921 22,559
Accrued interest 10,599 10,796 10,679
Temporary LIFO liquidation credit 56,603 -- 66,704
---------- ---------- ----------
TOTAL CURRENT LIABILITIES 355,516 266,607 436,606
---------- ---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes - primarily
accelerated depreciation 238,973 230,948 212,023
Investment tax credits being amortized
over the average lives of related property 34,648 35,439 36,249
Other 44,448 42,507 37,007
---------- ---------- ----------
TOTAL DEFERRED CREDITS AND
OTHER LIABILITIES 318,069 308,894 285,279
---------- ---------- ----------
TOTAL CAPITALIZATION AND LIABILITIES $1,950,480 $1,783,750 $1,957,555
========== ========== ==========
<FN>
The Notes to Consolidated Financial Statements are an integral part of
these statements.
</TABLE>
<TABLE>
Peoples Energy Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Six Months Ended
March 31,
1997 1996
-------- --------
(Thousands of Dollars)
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $100,749 $ 98,131
Adjustments to reconcile net income to net cash:
Depreciation and amortization 36,844 34,532
Deferred income taxes and investment tax credits - net 4,664 (150)
Change in deferred credits and other liabilities 4,511 10,528
Change in other assets 12,911 (21,723)
Other -- 32
Change in current assets and liabilities:
Receivables - net (162,106) (186,283)
Accrued unbilled revenues (32,533) (46,069)
Materials and supplies (594) (334)
Gas in storage 35,615 60,483
Gas costs recoverable 19,920 (44,873)
Accounts payable (3,892) 94,958
Customer gas service and credit deposits (24,553) (21,187)
Accrued taxes 64,618 67,006
Gas sales revenue refundable (2,104) (56,943)
Accrued interest (197) (2,117)
Temporary LIFO liquidation credit 56,603 66,704
Prepayments (16,497) (1,155)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 93,959 51,540
-------- --------
INVESTING ACTIVITIES:
Capital expenditures of subsidiaries - construction (31,207) (38,312)
Other assets 528 12,481
Other capital investments (2,511) 106
Other temporary cash investments (15,000) 200
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (48,190) (25,525)
-------- --------
FINANCING ACTIVITIES:
Interim loans of subsidiaries - net (1,925) 7,800
Trust fund - bond redemption -- 237
Retirement of long-term debt of subsidiaries (25) (98,770)
Dividends paid on common stock (32,173) (31,433)
Proceeds from issuance of common stock 454 535
-------- --------
NET CASH USED IN FINANCING ACTIVITIES (33,669) (121,631)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 12,100 (95,616)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 37,770 176,239
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 49,870 $ 80,623
======== ========
<FN>
The Notes to Consolidated Financial Statements are an integral part of
these statements.
</TABLE>
Peoples Energy Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the
accounts of Peoples Energy Corporation (Company) and its wholly
owned subsidiaries, The Peoples Gas Light and Coke Company
(Peoples Gas), North Shore Gas Company (North Shore Gas), Peoples
District Energy Corporation (Peoples District Energy), Peoples
Energy Services Corporation, Peoples Energy Resources Corp., and
Peoples NGV Corp., and comprise the assets, liabilities, revenues,
expenses, and underlying common stockholder's equity of these
companies. Income is principally derived from the Company's
utility subsidiaries, Peoples Gas and North Shore Gas. The
statements have been prepared by the Company in conformity with
the rules and regulations of the Securities and Exchange
Commission (SEC) and reflect all adjustments that are, in the
opinion of management, necessary to present fairly the results for
the interim periods herein and to prevent the information from
being misleading.
Certain footnote disclosures and other information, normally
included in financial statements prepared in accordance with
generally accepted accounting principles, have been condensed or
omitted from these interim financial statements, pursuant to SEC
rules and regulations. Therefore, the statements should be read
in conjunction with the consolidated financial statements and
related notes contained in the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1996. Certain items
previously reported for the prior periods have been reclassified
to conform with the presentation in the current periods.
The business of the Company's utility subsidiaries is
influenced by seasonal weather conditions because a large element
of the utilities' customer load consists of gas used for space
heating. Weather-related deliveries can, therefore, have a
significant positive or negative impact on net income.
Accordingly, the results of operations for the interim periods
presented are not indicative of the results to be expected for all
or any part of the balance of the current fiscal year.
2. SIGNIFICANT ACCOUNTING POLICIES
2A Use of 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 liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
2B Revenue Recognition
Gas sales revenues are recorded on the accrual basis for all gas
delivered during the month, including an estimate for gas
delivered but unbilled at the end of each month.
2C Regulated Operations
The utility operations of Peoples Gas and North Shore Gas are
subject to regulation by the Illinois Commerce Commission
(Commission). Regulated operations are accounted for in
accordance with Statement of Financial Accounting Standards (SFAS)
No. 71, "Accounting for the Effects of Certain Types of
Regulation." This standard controls the application of generally
accepted accounting principles for companies whose rates are
determined by an independent regulator such as the Commission.
Regulatory assets represent certain costs that are expected to be
recovered from customers through the ratemaking process. When
incurred, such costs are deferred as assets in the balance sheet
and subsequently recorded as expenses when those same amounts are
reflected in revenues.
2D Income Taxes
The Company follows the liability method of accounting for
deferred income taxes. Under the liability method, deferred
income taxes have been recorded using currently enacted tax rates
for the differences between the tax basis of assets and
liabilities and the basis reported in the financial statements.
Due to the effects of regulation on Peoples Gas and North Shore
Gas, certain adjustments made to deferred income taxes are, in
turn, debited or credited to regulatory assets or liabilities.
2E Statement of Cash Flows
For purposes of the balance sheet and the statement of cash
flows, the Company considers all short-term liquid investments
with maturities of three months or less to be cash equivalents.
<TABLE>
Income taxes and interest paid (excluding capitalized
interest) were as follows:
<CAPTION>
For the six months
ended March 31, 1997 1996
-----------------------------------------------
(Thousands)
<S> <C> <C>
Income taxes paid $28,903 $26,717
Interest paid 19,195 23,218
</TABLE>
2F Recovery of Gas Costs, Including Charges for Transition Costs
Under the tariffs of Peoples Gas and North Shore Gas, the
difference for any month between costs recoverable through the Gas
Charge and revenues billed to customers under the Gas Charge is
refunded to or recovered from customers. Consistent with these
tariff provisions, such difference for any month is recorded
either as a current liability or as a current asset (with a contra
entry to Gas Costs).
The Commission conducts annual proceedings regarding, for each
gas utility, the reconciliation of revenues from the Gas Charge
and related costs incurred for gas. In such proceedings, costs
recovered by a utility through the Gas Charge are subject to
challenge. Such proceedings regarding Peoples Gas and North Shore
Gas for fiscal years 1995 and 1996 are currently pending before
the Commission.
Pursuant to Federal Energy Regulatory Commission (FERC) Order
636 and successor orders, pipelines are allowed to recover from
their customers so-called transition costs. These costs arise
from the restructuring of pipeline service obligations required by
the 636 Orders. The utilities are currently recovering pipeline
charges for transition costs through the Gas Charge. (See Notes
3A and 3B.)
3. RATES AND REGULATION
3A Utility Rate Proceedings
Peoples Gas' Rate Order. On November 8, 1995, the Commission
issued an order approving changes in rates of Peoples Gas that were
designed to increase annual revenues by approximately $30.8
million, exclusive of additional charges for revenue taxes.
Peoples Gas was allowed a rate of return on original-cost rate base
of 9.19 per cent, which reflected an 11.10 per cent cost of common
equity. The new rates were implemented on November 14, 1995. A
group of industrial transportation customers have appealed the
Commission's order to the Illinois Appellate Court. Any change
made by the Appellate Court would have a prospective effect only.
North Shore Gas' Rate Order. On November 8, 1995, the Commission
issued an order approving changes in rates of North Shore Gas that
were designed to increase annual revenues by approximately $5.6
million, exclusive of additional charges for revenue taxes. North
Shore Gas was allowed a rate of return on original-cost rate base
of 9.75 per cent, which reflected an 11.30 per cent cost of common
equity. The new rates were implemented on November 14, 1995. A
group of industrial transportation customers has appealed the
Commission's order to the Illinois Appellate Court. Any change
made by the Appellate Court would have a prospective effect only.
FERC Order 636 Cost Recovery. In 1994, the Commission issued
orders providing for the full recovery of pipeline charges for FERC
Order 636 transition costs from gas service customers of Peoples
Gas and North Shore Gas. The Commission directed that gas supply
realignment (GSR) costs (one of the four categories of transition
costs) be recovered on a uniform volumetric basis from all
transportation and sales customers. A group of industrial
transportation customers has filed a petition with the Illinois
Supreme Court appealing the Commission's orders. If the Illinois
Supreme Court accepts the appeal, any changes made by it to the
Commission's orders would have a prospective effect only. (See
Notes 2F and 3B.)
3B FERC Orders 636, 636-A, and 636-B
FERC Order 636 and successor orders require pipelines to make
separate rate filings to recover transition costs. The utilities
are subject to charges for transition cost recovery by Natural Gas
Pipeline Company of America (Natural). Under a Stipulation and
Agreement filed by Natural and approved by FERC, Natural's charges
to the utilities for GSR transition costs (the largest category of
such costs for Peoples Gas and North Shore Gas) are subject to a
cap of approximately $103 million for Peoples Gas and $25 million
for North Shore Gas. Peoples Gas and North Shore Gas are currently
recovering transition costs through the Gas Charge. At March 31,
1997, Peoples Gas and North Shore Gas have made payments of $83.2
million and $20.4 million, and have accrued an additional $19.8
million and $4.6 million, respectively, toward the caps.
The 636 Orders are not expected to have a material effect on
financial position or results of operations of the Company or its
subsidiaries. (See Notes 2F and 3A.)
4. ENVIRONMENTAL MATTERS
4A Former Manufactured Gas Plant Operations
The Company's utility subsidiaries, their predecessors, and
certain former affiliates operated facilities in the past at
multiple sites for the purpose of manufacturing gas and storing
manufactured gas (Manufactured Gas Sites). In connection with
manufacturing and storing gas, various by-products and waste
materials were produced, some of which might have been disposed of
rather than sold. Under certain laws and regulations relating to
the protection of the environment, the subsidiaries might be
required to undertake remedial action with respect to some of these
materials. Three of the Manufactured Gas Sites are discussed in
more detail below. Peoples Gas and North Shore Gas, under the
supervision of the Illinois Environmental Protection Agency (IEPA),
are conducting investigations of an additional 29 Manufactured Gas
Sites. These investigations may require the utility subsidiaries
to perform additional investigation and remediation. The
investigations are in a preliminary stage and are expected to occur
over an extended period of time.
In 1990, North Shore Gas entered into an Administrative Order on
Consent (AOC) with the United States Environmental Protection
Agency (EPA) and the IEPA to implement and conduct a remedial
investigation/feasibility study (RI/FS) of a Manufactured Gas Site
located in Waukegan, Illinois, where manufactured gas and coking
operations were formerly conducted (Waukegan Site). The RI/FS is
comprised of an investigation to determine the nature and extent of
contamination at the Waukegan Site and a feasibility study to
develop and evaluate possible remedial actions. North Shore Gas
entered into the AOC after being notified by the EPA that North
Shore Gas, General Motors Corporation (GMC) and Outboard Marine
Corporation were each a potentially responsible party (PRP) under
the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (CERCLA), with respect to the
Waukegan Site. A PRP is potentially liable for the cost of any
investigative and/or remedial work that the EPA determines is
necessary. Other parties identified as PRPs did not enter into the
AOC.
Under the terms of the AOC, North Shore Gas is responsible for
the cost of the RI/FS. North Shore Gas believes, however, that it
will recover a significant portion of the costs of the RI/FS from
other entities. GMC has agreed to share equally with North Shore
Gas in funding of the RI/FS cost, without prejudice to GMC's or
North Shore Gas' right to seek a lesser cost responsibility at a
later date.
Peoples Gas has observed what appear to be gas purification
wastes on a Manufactured Gas Site in Chicago, formerly called the
110th Street Station, and property contiguous thereto (110th Street
Station Site). Peoples Gas has fenced the 110th Street Station
Site and is conducting a study under the supervision of the IEPA to
determine the feasibility of a limited removal action.
The current owner of a site in Chicago, formerly called Pitney
Court Station, filed suit against Peoples Gas in federal district
court under CERCLA. The suit seeks recovery of the past and future
costs of investigating and remediating the site and an order
directing Peoples Gas to remediate the site. Peoples Gas is
contesting this suit.
The utility subsidiaries are accruing and deferring the costs
they incur in connection with all of the Manufactured Gas Sites,
including related legal expenses, pending recovery through rates or
from insurance carriers or other entities. At March 31, 1997, the
total of the costs deferred by the subsidiaries, net of recoveries
and amounts billed to other entities, was $16.5 million. This
amount includes an estimate of the costs of completing the studies
required by the EPA at the Waukegan Site and the investigations
being conducted under the supervision of the IEPA referred to
above. The amount also includes an estimate of the costs of
remediation at the Waukegan Site and at the 110th Street Station
Site in
Chicago, at the minimum amount of the current estimated range of
such costs. The costs of remediation at the other sites cannot be
determined at this time. While each subsidiary intends to seek
contributions from other entities for the costs incurred at the
sites, the full extent of such contributions cannot be determined
at this time.
Peoples Gas and North Shore Gas have filed suit against a number
of insurance carriers for the recovery of environmental costs
relating to the utilities' former manufactured gas operations. The
suit asks the court to declare that the insurers are liable under
policies in effect between 1937 and 1986 for costs incurred or to
be incurred by the utilities in connection with five of their
Manufactured Gas Sites in Chicago and Waukegan. The utilities are
also asking the court to award damages stemming from the insurers'
breach of their contractual obligation to defend and indemnify the
utilities against these costs. At this time, management cannot
determine the timing and extent of the subsidiaries' recovery of
costs from their insurance carriers. Accordingly, the costs
deferred at March 31, 1997, have not been reduced to reflect
recoveries from insurance carriers.
Costs incurred by Peoples Gas or North Shore Gas for
environmental activities relating to former manufactured gas
operations will be recovered from insurance carriers or other
entities or through rates for utility service. Accordingly,
management believes that the costs incurred by the subsidiaries in
connection with former manufactured gas operations will not have a
material adverse effect on financial position or results of
operations of the subsidiaries. Peoples Gas and North Shore Gas
are recovering the costs of environmental activities relating to
the utilities' former manufactured gas operations, including
carrying charges on the unrecovered balances, under rate mechanisms
approved by the Commission. At March 31, 1997, the subsidiaries
had recovered $11.5 million of such costs through rates.
4B Former Mineral Processing Site in Denver, Colorado
In 1994, North Shore Gas received a demand from the S.W.
Shattuck Chemical Company, Inc. (Shattuck), a responsible party
under CERCLA, for reimbursement, indemnification and contribution
for response costs incurred at a former mineral processing site in
Denver, Colorado. Shattuck is a wholly owned subsidiary of
Salomon, Inc. (Salomon). The demand alleged that North Shore Gas
was a successor-in-interest to certain companies that were
allegedly responsible during the period 1934-1941 for the disposal
of mineral processing wastes containing radium and other hazardous
substances at the site. The cost of the remedy at the site has
been estimated by Shattuck to be approximately $31 million.
Salomon has provided financial assurance for the performance of the
remediation at the site.
North Shore Gas filed a declaratory judgment action against
Salomon in the District Court for the Northern District of
Illinois. The suit asked the court to declare that North Shore Gas
is not liable for response costs incurred or to be incurred at the
Denver site. On May 5, 1997, the District Court denied Salomon's
request to alter or amend its ruling. Salomon filed a counterclaim
for costs to be incurred by Salomon and Shattuck with respect to
the site. On March 7, 1997, the District Court granted North Shore
Gas' motion for summary judgment, declaring that North Shore Gas is
not liable for any response costs in connection with the Denver
site. On May 5, 1997, the District Court denied Salomon's request
to alter or amend its ruling. Salomon may appeal the ruling of the
district court to the United States Court of Appeals, Seventh
Circuit.
North Shore Gas does not believe that it has liability for the
response costs, but cannot determine the matter with certainty. At
this time, North Shore Gas cannot reasonably estimate what range of
loss, if any, may occur. In the event that North Shore Gas
incurred liability, it would pursue reimbursement from insurance
carriers, other responsible parties, if any, and through its rates
for utility service.
4C Gasoline Release in Wheeling, Illinois
In June 1995, North Shore Gas received a letter from the IEPA
informing North Shore Gas that it was not in compliance with
certain provisions of the Illinois Environmental Protection Act
which prohibit water pollution within the State of Illinois. On
November 14, 1995, the Illinois Attorney General filed a complaint
in the Circuit Court of Cook County naming North Shore Gas and four
other parties as defendants. The complaint alleges that the
violations are the result of a gasoline release that occurred in
Wheeling, Illinois in June 1992 when a contractor who was
installing a pipeline for North Shore Gas accidentally struck a
gasoline pipeline owned by West Shore Pipeline Company. North
Shore Gas is contesting this suit. Management does not believe the
outcome of this suit will have a material adverse effect on
financial position or results of operations of the Company or North
Shore Gas.
5. COVENANTS REGARDING RETAINED EARNINGS
North Shore Gas' indenture relating to its first mortgage bonds
contains provisions and covenants restricting the payment of cash
dividends and the purchase or redemption of capital stock. At
March 31, 1997, such restrictions amounted to $11.6 million out of
North Shore Gas' total retained earnings of $75.6 million.
6. EXPIRATION OF GAS STORAGE CONTRACTS
Peoples Gas and North Shore Gas had certain natural gas storage
contracts with Natural that expired on or before December 1, 1995.
Associated with the expiration of the contracts, the utilities
realized a gain, after income taxes, of approximately $5.1 million
for the 12-months ended March 31, 1997.
7. TAX MATTERS
On September 30, 1993, the Company received notification from
the Internal Revenue Service (IRS) that settlement of past income
tax returns had been reached for fiscal years 1978 through 1990.
The IRS settlement resulted in payments of principal and interest
to the Company in 1994 in total amount of approximately $28
million, or $21.6 million after income taxes. Both Peoples Gas and
North Shore Gas received regulatory authorization to defer the
recognition of the settlement amount in income for fiscal year
1993, and to recognize their respective portions of the settlement
amount in income for fiscal years 1994 and 1995. Each utility
represented to the Commission that, having received this accounting
authorization, it would not file a request for an increase in base
rates before December 1994.
As a result of the Commission's accounting authorization,
Peoples Gas and North Shore Gas amortized to operation expense
approximately $3.6 million, or $2.7 million after income taxes, for
the 12-months ended March 31, 1996. The effect was to offset
increases in costs that the utilities incurred during the period.
8. LONG-TERM DEBT
8A Interest-Rate Adjustments
The rate of interest on the City of Joliet 1984 Series C Bonds,
which are secured by Peoples Gas' Adjustable-Rate First Mortgage
Bonds, Series W, is subject to adjustment annually on October 1.
Owners of the Series C Bonds have the right to tender such bonds at
par during a limited period prior to that date. Peoples Gas is
obligated to purchase any such bonds tendered if they cannot be
remarketed. All Series C Bonds that were tendered prior to October
1, 1996, have been remarketed. The interest rate on such bonds is
3.95 per cent for the period October 1, 1996, through September 30,
1997.
The rate of interest on the City of Chicago 1993 Series B Bonds,
which are secured by Peoples Gas' Adjustable-Rate First Mortgage
Bonds, Series EE, is subject to adjustment annually on December 1.
Owners of the Series B Bonds have the right to tender such bonds at
par during a limited period prior to that date. Peoples Gas is
obligated to purchase any such bonds tendered if they cannot be
remarketed. All Series B Bonds that were tendered prior to
December 1, 1996, have been remarketed. The interest rate on such
bonds is 3.70 per cent for the period December 1, 1996, through
November 30, 1997.
Peoples Gas classifies these adjustable-rate bonds as long-term
liabilities, since it would refinance them on a long-term basis if
they could not be remarketed. In order to ensure its ability to do
so, on February 1, 1994, Peoples Gas established a $37.4 million
three year line of credit with The Northern Trust Company, which
has since been extended to January 31, 1999.
8B Bonds Redeemed
On December 29, 1995, Peoples Gas redeemed, from general
corporate funds, approximately $87 million aggregate principal
amount of the City of Joliet's 1984 Gas Supply Revenue Bonds,
Series A and B, which were secured by Peoples Gas' Series U and V
First and Refunding Mortgage Bonds.
On February 1, 1996, North Shore Gas redeemed $8 million
aggregate principal amount of its Series I First Mortgage Bonds
using the proceeds of a short-term bank loan as well as other
monies of North Shore Gas. The final payment on the short-term
bank loan was made by North Shore Gas on August 1, 1996.
9. PENSION EXPENSE
Pension expense for the Company decreased $9.9 million, $11.2
million, and $20.5 million for the three-, six-, and 12-month
periods, respectively. The decrease in pension expense was caused
by the Company's adoption of settlement accounting, an increase in
the number of employees choosing early retirement and changes in
actuarial assumptions.
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
RESULTS OF OPERATIONS
Net Income
Net income increased $1.2 million, to $63.3 million, for the
three-months ended March 31, 1997, from the results of last year's
like quarter, due mainly to decreased pension expense caused by the
Company's adoption of settlement accounting, an increase in the
number of employees choosing early retirement and changes in
actuarial assumptions. (See Note 9 of the Notes to Consolidated
Financial Statements.) In addition, net income benefited from a
tax accrual adjustment, reduced other operation and maintenance
expenses, and an increase in interest income. These positive
impacts were partially offset by reduced gas deliveries,
attributable to warmer weather and conservation, and last year's
gain associated with the expiration of gas storage contracts. (See
Note 6 of the Notes to Consolidated Financial Statements.)
Net income increased $2.6 million, to $100.7 million for the
current six-months ended March 31, 1997, from the results of last
year's like period, due mainly to the aforementioned decreased
pension expense and tax accrual adjustment. In addition, the
Company benefited from a full six-month effect of the utilities'
rate increases (see Note 3A of the Notes to Consolidated Financial
Statements), increased miscellaneous operating revenues, and a
reduction in interest expense. However, these positive effects
were partially offset by the same negative factors that impacted
the current second quarter as well as by lower interest income due
to lower cash balances.
Net income increased $16.7 million, to $106.1 million, for the
current 12-month period, from the results of the similar prior
period, due primarily to the aforementioned decreased pension
expense, the full 12-month benefit of the utilities' rate increases
(see Note 3A of the Notes to Consolidated Financial Statements), a
reduction in interest expense and a gain associated with the
expiration of certain gas storage contracts. These beneficial
developments were partially offset by reduced gas deliveries and
lower interest income.
<TABLE>
A summary of variations affecting income between periods is
presented below, with explanations of significant differences
following:
<CAPTION>
Three Months Ended Six Months Ended 12-Months Ended
March 31, 1997 March 31,1997 March 31, 1997
Increase/(Decrease) Increase/(Decrease) Increase/(Decrease)
from Prior Period from Prior Period from Prior Period
------------------- ------------------- -------------------
(Thousands of dollars) Amount % Amount % Amount %
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net operating revenues (a) $(11,316) (5.6) $(6,027) (1.7) $15,822 3.0
Operation and
maintenance expenses (14,066) (19.1) (12,565) (9.1) (6,942) (2.7)
Depreciation and
amortization expense 516 2.9 2,312 6.7 5,361 7.9
Income taxes (531) (1.4) 1,301 2.2 10,581 22.4
Other income and deductions 1,966 31.4 797 4.8 (9,573) (24.3)
Net Income 1,243 2.0 2,618 2.7 16,717 18.7
<FN>
(a) Operating revenues, net of gas costs and revenue taxes.
</TABLE>
Net Operating Revenues
Gross revenues of Peoples Gas and North Shore Gas are affected
by changes in the unit cost of the subsidiaries' gas purchases and
do not include the cost of gas supplies for customers who purchase
gas directly from producers and marketers rather than from the
subsidiaries. The direct customer purchases have no effect on net
income because the utilities provide transportation service for
such gas volumes and recover margins similar to those applicable to
conventional gas sales. Changes in the unit cost of gas do not
significantly affect net income because the utilities' tariffs
provide for dollar-for-dollar recovery of gas costs. (See Note 2F
of the Notes to Consolidated Financial Statements.) The utilities'
tariffs also provide for dollar-for-dollar recovery of the cost of
revenue taxes imposed by the State and various municipalities.
Since income is not significantly affected by changes in revenue
from customers' gas purchases from producers or marketers rather
than from the subsidiaries, changes in gas costs, or changes in
revenue taxes, the discussion below pertains to "net operating
revenues" (operating revenues, net of gas costs and revenue taxes).
The Company considers net operating revenues to be a more pertinent
measure of operating results than gross revenues.
Net operating revenues decreased $11.3 million, to $191.3
million, and $6.0 million, to $350.6 million, for the current
three- and six-month periods, respectively, reflecting lower gas
deliveries due to warmer weather and conservation. The current
six-month period also benefited from a full six month's effect of
the utilities' rate increases.
Net operating revenues increased $15.8 million, to $541.6
million, for the current 12-month period, due to the full effect of
the utilities rate increases. However, this was partially offset
by decreased gas deliveries due to conservation and warmer weather.
See Other Matters - Operating Statistics for details of selected
financial and operating information by gas service classification.
Operation and Maintenance Expenses
Operation and maintenance expenses decreased $14.1 million, to
$59.5 million, and $12.6 million, to $125.2 million, for the
current three- and six-month periods due mainly to a $9.9 million
and an $11.2 million decrease in pension expense caused by the
Company's adoption of settlement accounting, an increase in the
number of employees choosing early retirement and by changes in
actuarial assumptions in the three- and six-month periods,
respectively. (See Note 9 of the Notes to Consolidated Financial
Statements.) In addition, labor costs decreased $1.1 million,
during the three-month period. The positive developments in the
current six-month period were partially offset by an increase of
$2.1 million in the provision for uncollectible accounts due to
increased gas sales revenues.
Operation and maintenance expenses decreased $6.9 million, to
$253.4 million for the current 12-month period due primarily to a
$20.5 million reduction in pension expense caused by the Company's
adoption of settlement accounting, an increase in the number of
employees choosing early retirement and changes in pension
assumptions. (See Note 9 of the Notes to Consolidated Financial
Statements.) This decrease in costs was partially offset by an
increase in the provision for uncollectible accounts of $4.7
million, due to increased gas sales revenues; the prior period's
recognition of an IRS settlement (see Note 7 of the Notes to
Consolidated Financial Statements) which accounted for a $3.6
million reduction of expense; and an increase in other non-labor
operation and maintenance expenses.
Depreciation and Amortization Expense
Depreciation and amortization expense increased $516,000, to
$18.4 million, for the current three-month period, due primarily to
net property additions.
Depreciation and amortization expense increased $2.3 million, to
$36.8 million, and $5.4 million to $72.9 million, for the current
six- and 12-month periods, due primarily to depreciable property
additions and the amortization of costs associated with the closing
of the SNG Plant. (See Note 7 of the Notes to Consolidated
Financial Statements.)
Income Taxes
Income taxes, exclusive of income taxes included in other income
and deductions, decreased $531,000, to $36.6 million for the
three-month period due to an adjustment to reduce taxes accrued.
This decrease was partially offset by increased income taxes due to
higher pre-tax income.
Income taxes, exclusive of income taxes included in other income
and deductions, increased $1.3 million, to $59.9 million and $10.6
million to $57.9 million for the current six- and 12-month periods,
due primarily to increased pre-tax income. These increases were
partially offset by an adjustment to reduce taxes accrued.
Other Income and Deductions
Other income and deductions increased $2.0 million for the
current three-month period, due chiefly to the prior year's gain of
$3.8 million, after income taxes, associated with the expiration of
certain natural gas storage contracts. (See Note 8 of the Notes to
the Consolidated Financial Statements.) This was partially offset
by higher interest income and lower interest expense.
Other income and deductions increased $797,000 for the current
six-month period, due primarily to the prior year's gain of $3.8
million, after income taxes, associated with the expiration of
certain natural gas storage contracts (see Note 8 of the Notes to
the Consolidated Financial Statements) and to lower interest income
due to lower cash balances. The effects were partially offset by
lower interest expense.
Other income and deductions decreased $9.6 million for the
current 12-month period, due primarily to decreased interest
expense, due to reductions in long-term debt and amounts refundable
to customers, and to a gain associated with the expiration of
certain natural gas storage contracts. These positive impacts were
partially offset by lower interest income due to lower cash
balances.
Other Matters
Effect of Weather. Weather variations affect the volumes of gas
delivered for heating purposes and, therefore, can have a
significant positive or negative impact on net income, cash
position, and coverage ratios.
Accounting Standards. In March 1995, the Financial Accounting
Standards Board (FASB) issued SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of ". This statement requires recognition of impairment
losses on long-lived assets when an asset's book value may not be
recoverable. For regulated companies, the statement requires that
regulatory assets be probable of recovery at every balance sheet
date. This statement requires adoption no later than the Company's
1997 fiscal year. The Company does not expect the adoption of SFAS
No. 121 to have a material effect on its financial position or
results of operations.
In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation". This statement requires companies to
either recognize compensation costs measured at fair value
attributable to employee stock options or similar equity
instruments at the grant date in net income, or, in the
alternative, provide pro forma footnote disclosure on net income
and earnings per share. This statement requires adoption no later
than the Company's 1997 fiscal year. The Company anticipates
electing the pro forma footnote disclosure provisions of this
statement in 1997.
FERC Order 636 Costs. In 1992, the FERC issued Order 636 and
successor orders that required substantial restructuring of the
service obligations of interstate pipelines. (See Notes 2F, 3A,
and 3B of the Notes to Consolidated Financial Statements.)
In 1994, the Commission entered orders providing for full
recovery by Peoples Gas and North Shore Gas of FERC Order 636
transition costs from the Companies' respective gas service
customers. The Commission's orders have been appealed to the
Illinois Supreme Court. (See Notes 2F, 3A, and 3B of the Notes to
Consolidated Financial Statements.)
Large Volume Gas Service Agreements. Peoples Gas has entered into
gas service contracts with certain large volume customers under a
specific rate schedule approved by the Commission. These contracts
were negotiated to overcome the potential threat of bypassing the
utility's distribution system. The impact on the net income of
Peoples Gas as a result of these contracts is not material.
<TABLE>
Operating Statistics. The following table represents gas
distribution margin components:
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
March 31, March 31, March 31,
------------------ ---------------- --------------------
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues (thousands):
Gas sales
Residential $425,151 $370,911 $716,633 $604,687 $ 995,046 $ 819,639
Commercial 68,720 66,121 112,294 100,102 153,786 129,884
Industrial 14,953 15,258 23,197 22,674 32,599 28,784
-------- -------- -------- -------- ---------- ----------
508,824 452,290 852,124 727,463 1,181,431 978,307
Transportation
Residential 13,967 12,387 25,421 24,732 37,823 37,521
Commercial 18,123 18,901 33,365 35,577 49,038 52,623
Industrial 9,610 11,847 18,997 22,097 32,958 37,011
Contract Pooling 12,757 -- 15,203 -- 19,637 --
Other 6 -- 406 -- 406 --
-------- -------- -------- -------- ---------- ----------
54,463 43,135 93,392 82,406 139,862 127,155
-------- -------- -------- -------- ---------- ----------
Other Revenues 4,698 3,131 9,617 6,293 16,335 12,592
-------- -------- -------- -------- ---------- ----------
Total Operating Revenues 568,985 498,556 955,133 816,162 1,337,628 1,118,054
Less - Gas Costs 320,068 244,033 508,662 373,904 664,633 474,219
- Revenues Taxes 56,590 51,880 95,884 85,644 131,412 118,074
-------- -------- -------- -------- ---------- ----------
Net Operating Revenues $191,327 $202,643 $350,587 $356,614 $ 541,583 $ 525,761
======== ======== ======== ======== ========== ==========
Deliveries (MDth):
Gas Sales
Residential 64,427 71,389 111,093 119,182 146,038 152,430
Commercial 10,979 13,649 18,564 21,066 24,888 26,794
Industrial 2,584 3,288 4,152 5,113 5,842 6,512
-------- -------- -------- -------- ---------- ----------
77,990 88,326 133,809 145,361 176,768 185,736
-------- -------- -------- -------- ---------- ----------
Transportation (a)
Residential 11,701 9,952 10,105 18,814 17,814 25,775
Commercial 16,079 16,685 28,876 30,457 40,880 43,425
Industrial 11,497 13,769 22,985 25,913 40,438 43,518
Other 224 -- 234 -- 234 --
--------- -------- -------- -------- ---------- ----------
39,501 40,406 62,200 75,184 99,366 112,718
--------- -------- -------- -------- ---------- ----------
Total Gas Sales
and Transportation 117,491 128,732 196,009 220,545 276,134 298,454
========= ======== ======== ======== ========== ==========
Margin per Dth
delivered $1.63 $1.57 $1.79 $1.62 $1.96 $1.76
<FN>
(a)Volumes associated with contract pooling revenues are
included in their respective customer classes.
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Indenture Restrictions. North Shore Gas' indenture relating to its
first mortgage bonds contains provisions and covenants restricting
the payment of cash dividends and the purchase or redemption of
capital stock. At March 31, 1997, such restrictions amounted to
$11.6 million out of North Shore Gas' total retained earnings of
$75.6 million. (See Note 5 of the Notes to Consolidated Financial
Statements.)
Rate Order. On November 8, 1995, the Commission issued orders
approving changes in rates of Peoples Gas and North Shore Gas.
(See Note 3A of the Notes to Consolidated Financial Statements.)
Environmental Matters. The Company's utility subsidiaries are
conducting environmental investigations and work at certain sites
that were the location of former manufactured gas operations. (See
Note 4A of the Notes to Consolidated Financial Statements.)
In 1994, North Shore Gas received a demand from a responsible
party under CERCLA for reimbursement, indemnification and
contribution for response costs incurred at a former mineral
processing site in Denver, Colorado. North Shore Gas filed a
declaratory judgment action asking the court to declare that North
Shore Gas is not liable for response costs relating to the site.
Salomon filed a counterclaim for costs to be incurred by Salomon
and Shattuck with respect to the site. On March 7, 1997, the
District Court granted North Shore Gas' motion for summary
judgment, declaring that North Shore Gas is not liable for any
response costs in connection with the Denver site. On May 5, 1997,
the District Court denied Salomon's request to alter or amend its
ruling. Salomon may appeal the ruling of the district court to the
United States Court of Appeals, Seventh Circuit. (See Note 4B of
the Notes to Consolidated Financial Statements.)
On November 14, 1995, the Illinois Attorney General filed a
complaint in the Circuit Court of Cook County naming North Shore
Gas and four other parties as defendants. The complaint alleges
violations arising out of a gasoline release that occurred in
Wheeling, Illinois in June 1992 when a contractor who was
installing a pipeline for North Shore Gas accidentally struck a
gasoline pipeline owned by West Shore Pipeline Company. North
Shore Gas is currently contesting this suit. (See Note 4C of the
Notes to Consolidated Financial Statements.)
District Energy. Peoples District Energy is a 50 per cent
participant in a partnership, Trigen-Peoples District Energy
Company, that provides district energy services to the McCormick
Place Exposition and Convention Center, as well as to the adjacent
Hyatt Regency McCormick Place Hotel, in Chicago, Illinois. Neither
the partnership nor its partners are regulated as a public utility.
The Company and Trigen Energy Corporation have provided a joint and
several limited guarantee to the owner and operator of McCormick
Place and also have certain limited obligations to the
partnership's lender under a Sponsors Support and Equity
Contribution Agreement.
Bonds Redeemed. On December 29, 1995, Peoples Gas redeemed, from
general corporate funds, approximately $87 million aggregate
principal amount of the City of Joliet's 1984 Gas Supply Revenue
Bonds, Series A and B, which were secured by Peoples Gas' Series U
and V First and Refunding Mortgage Bonds. (See Note 8B of the
Notes to Consolidated Financial Statements.)
On February 1, 1996, North Shore Gas redeemed $8 million
aggregate principal amount of its Series I First Mortgage Bonds
using the proceeds of a short-term bank loan as well as other
monies of North Shore Gas. (See Note 8B of the Notes to
Consolidated Financial Statements.)
Credit Lines. The utility subsidiaries have lines of credit of
$129.4 million. At March 31, 1997, the utility subsidiaries had
unused credit available of $128.6 million.
Interest Coverage. The fixed charges coverage ratios for Peoples
Gas for the 12-months ended March 31, 1997, and for fiscal 1996 and
1995 were 5.29, 4.84, and 2.76, respectively.
The corresponding coverage ratios for North Shore Gas for the
same periods were 6.07, 5.62, and 2.93, respectively.
Dividends. On February 5, 1997, the Directors of the Company voted
to increase the regular quarterly dividend on the Company's common
stock to 47 cents per share from 46 cents per share previously in
effect. The annualized dividend rate now amounts to $1.88 per
share.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
See Note 4 of the Notes to Consolidated Financial Statements
for a discussion pertaining to environmental matters.
Item 4. Submission of Matters to a Vote of Security Holders
a. The Company held its Annual Meeting of Shareholders on
February 28, 1997.
b. The following matters were voted upon at the Annual
Meeting of Shareholders.
There were no broker non-votes with respect to any
matters voted upon.
1. The election of nominees for directors who will
serve for a one-year term or until their respective
successors shall be duly elected. The nominees, all of
whom were elected, were as follows: Pastora San Juan
Cafferty, J. Bruce Hasch, Frederick C. Langenberg, Homer
J. Livingston, Jr., William G. Mitchell, Earl L. Neal,
Michael S. Reeves, Richard E. Terry, Richard P. Toft, and
Arthur R. Velasquez. The Inspectors of Election certified
the following vote tabulations:
FOR WITHHELD
Pastora San Juan Cafferty . . . . . . 28,680,491 352,624
J. Bruce Hasch. . . . . . . . . . . . . . . 28,716,850 352,624
Frederick C. Langenberg . . . . . . . 28,675,502 352,624
Homer J. Livingston, Jr. . . . . . . . . 28,725,021 352,624
William G. Mitchell . . . . . . . . . .. 28,716,434 352,624
Earl L. Neal . . . . . . . . . . . . . . . . .28,672,772 352,624
Michael S. Reeves . . . . . . . . . . . . 28,406,037 352,624
Richard E. Terry . . . . . . . . . . . . . 28,690,370 352,624
Richard P. Toft . . . . . . . . . . . . . . 28,729,010 352,624
Arthur R. Velasquez . . .. . . . . . . . 28,693,893 352,624
2. A proposal to ratify the recommendation of the
Audit Committee and the appointment by the Board of
Directors of Arthur Andersen LLP as the independent public
accountants for the Company and its subsidiaries for the
fiscal year ending September 30, 1997. The Inspectors of
Election certified the following vote tabulations:
FOR AGAINST ABSTAIN
28,512,605 350,302 199,955
Item 6. Exhibits and Reports on Form 8-K
---------------------------------
a. Exhibits
Exhibit
Number Description of Document
------- -------------------------
3(a) Amendment to the By-Laws of the Registrant
dated December 4, 1996. (Effective
February 28, 1997)
3(b) By-Laws of the Registrant, as amended,
dated February 28, 1997.
10 Peoples Energy Corporation Long-Term
Incentive Compensation Plan, as amended
December 4, 1996.
27 Financial Data Schedule.
b. Reports on Form 8-K filed during the quarter ended March
31, 1997
Date of Report - March 24, 1997.
Item 5. Other Events
Environmental Matters
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
Peoples Energy Corporation
------------------------------
(Registrant)
May 13, 1997 By: /s/ K. S. BALASKOVITS
------------ ----------------------------------
(Date) K. S. Balaskovits
Vice President and Controller
(Same as above)
--------------------------------
Principal Accounting Officer
Exhibit 3(a)
Peoples Energy Corporation
Consider Recommendation of the Compensation-Nominating
Committee Concerning Amendment to the By-Laws
After discussion, on motion duly made and
seconded, the following resolution was unanimously
adopted:
RESOLVED, That, effective as of the
close of business on February 28, 1997, Section
3.1 of Article III of the By-Laws of the
Company be, and it hereby is, amended by
deleting said Section in its entirety and
substituting the following in lieu thereof:
ARTICLE III
Directors and Committees
SECTION 3.1. Number and
Election. The business and affairs of the
Company shall be managed and controlled by
a Board of Directors, ten (10) in number,
none of whom need to be a shareholder,
which number may be altered from time to
time by amendment of these by-laws, but
shall never be less than three (3).
Except as provided in the Articles of
Incorporation, the directors shall be
elected by the shareholders entitled to
vote at the annual meeting of such
shareholders and each director shall be
elected to serve for a term of one (1)
year and thereafter until a successor
shall be elected and shall qualify. Only
persons who are nominated in accordance
with the procedures set forth in this
section shall be eligible to be nominated
as directors at any meeting of the
shareholders of the Company. At any
meeting of the shareholders of the
Company, nominations of persons for
election to the Board of Directors may be
made (1) by or at the direction of the
Board of Directors or (2) by any
shareholder of the Company who is a holder
of record at the time of giving the notice
provided for in this section, who shall be
entitled to vote at the meeting, and who
complies with the notice procedures set
forth in this section. For a nomination
to be properly brought before a
shareholders' meeting by a shareholder,
timely written notice shall be made to the
Secretary of the Company. The
shareholder's notice shall be delivered
to, or mailed and received at, the
principal office of the Company no less
than 60 days nor more than
90 days prior to the meeting; provided,
however, in the event that less than 70
days notice or prior public disclosure of
the date of the meeting is given or made
to shareholders, notice by the shareholder
to be timely must be received not later
than the close of business on the tenth
day following the day on which the notice
of the date of the meeting was mailed or
the public disclosure was made; provided
further, however, notice by the
shareholder to be timely must be received
in any event not later than the close of
business on the seventh day preceding the
day on which the meeting is to be held.
The shareholder's notice shall set forth
(1) as to each person whom the shareholder
proposes to nominate for election or
reelection as a director, all information
relating to such person that is required
to be disclosed in solicitations of
proxies for election of directors, or is
otherwise required by applicable law
(including the person's written consent to
being named as a nominee and to serving as
a director if elected), and (2) (a) the
name and address, as they appear on the
Company's books, of the shareholder, (b)
the class and number of shares of capital
stock of the Company owned by the
shareholder, and (c) a description of all
arrangements or understandings between the
shareholder and each nominee and any other
person or persons (naming such person or
persons) pursuant to which the nomination
or nominations are to be made by the
shareholder. The shareholder shall also
comply with all applicable requirements of
the 1934 Act and the rules and regulations
thereunder with respect to the matters set
forth in this section. If the chairman of
the meeting shall determine and declare at
the meeting that a nomination was not made
in accordance with the procedures
prescribed by this section, the nomination
shall not be accepted.
Exhibit 3(b)
BY-LAWS
OF
PEOPLES ENERGY CORPORATION
AMENDED FEBRUARY 28, 1997
PEOPLES ENERGY CORPORATION
BY-LAWS
ARTICLE I - OFFICES
ARTICLE II - MEETINGS OF SHAREHOLDERS
ARTICLE III - DIRECTORS AND COMMITTEES
ARTICLE IV - OFFICERS
ARTICLE V - INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES AND AGENTS
ARTICLE VI - CERTIFICATES OF STOCK AND THEIR
TRANSFER
ARTICLE VII - MISCELLANEOUS (CONTRACTS)
ARTICLE VIII - AMENDMENT OR REPEAL OF BY-LAWS
PEOPLES ENERGY CORPORATION
INDEX
PAGE
A
Amendment of By-Laws 18
Appointment of Officers 10
Assistant Controller, Duties of 13
Assistant General Counsel, Duties of 13
Assistant Secretary, Duties of 13
Assistant Treasurer, Duties of 13
Assistant Vice President, Duties of 12
B
Board of Directors 5
C
Certificates of Stock and Their Transfer 15
Chairman of the Board, Duties of 11
Chairman of the Executive Committee 8
Committees
Executive 8
Other 9
Controller, Duties of 13
Contracts, Execution of 17
D
Directors and Committees 5
E
Election of Directors 5
Election of Officers 10
Executive Committee 8
F
Fees and Compensation 9
PEOPLES ENERGY CORPORATION
PAGE
G
General Counsel, Duties of 13
I
Indemnification of Directors, Officers, Employees
and Agents 14
M
Meetings
Directors 7
Action Without Meeting 9
Shareholders 1
N
Notice of Meetings
Directors 7
Shareholders 2
O
Officers
Appointed 10
Elected 10
Offices, Two or More Held By One Person 10
P
President, Duties of 11
Presiding Officer
Board Meetings 8
Shareholders Meetings 5
Proxies 4
Q
Quorum
Board 7
Shareholders 4
PEOPLES ENERGY CORPORATION
PAGE
S
Secretary, Duties of 12
Signatures to Checks, Drafts, etc. 17
Stock, Certificates of and their Transfer 15
T
Treasurer, Duties 12
V
Vice President, Duties of 12
Voting
Shareholders 4
Stock Owned by Company 18
BY-LAWS
OF
PEOPLES ENERGY CORPORATION
ARTICLE I
Offices
SECTION 1.1.
Principal Office. The principal office of the Company shall be in
the City of Chicago, County of Cook and State of Illinois.
SECTION 1.2.
Other Offices. The Company may also have offices at such other
places both within and without the State of Illinois as the Board
of Directors may from time to time determine or the business of
the Company may require.
ARTICLE II
Meetings of Shareholders
SECTION 2.1.
Annual Meeting. The annual meeting of the shareholders shall be
held on the fourth Friday of the month of February in each year,
if not a legal holiday, or, if a legal holiday, then on the next
succeeding business day, for the purpose of electing directors and
for the transaction of such other business as may come before the
meeting. If the election of directors shall not be held on the
day herein designated for the annual meeting, or at any
adjournment thereof, the Board of Directors shall cause such
election to be held at a special meeting of the shareholders as
soon thereafter as convenient.
SECTION 2.2.
Special Meetings. Except as otherwise prescribed by statute,
special meetings of the shareholders for any purpose or purposes,
may be called by the Chairman of the Board, the Vice Chairman of the
Executive Committee, the Executive Committee or the President.
Such request shall state the purpose or purposes of the proposed
meeting.
SECTION 2.3.
Place of Meetings. Each meeting of the shareholders for the
election of the directors shall be held at the principal office of
the Company in the City of Chicago, Illinois, unless the Board of
Directors shall by resolution designate another place as the place
of such meeting. Meetings of shareholders for any other purpose
may be held at such place, and at such time as shall be determined
by the Chairman of the Board, or the President, or in their
absence, by the Secretary, and stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
SECTION 2.4.
Notice of Meetings. Written or printed notice stating the place,
date and hour of each annual or special meeting of the
shareholders, and, in the case of a special meeting, the purpose
or purposes for which the meeting is called, shall be given not
less than 10 nor more than 60 days before the date of the meeting,
except as otherwise provided in this section or by statute.
Notice of any meeting of the shareholders may be waived by any
shareholder. At any meeting of the shareholders of the Company,
only such business shall be conducted as shall have been brought
before the meeting (1) by or at the direction of the Board of
Directors or (2) by any shareholder of the Company who is a holder
of record at the time of giving the notice provided for in this
section, who shall be entitled to vote at the meeting, and who
complies with the notice procedures set forth in this section.
For business to be properly brought before a shareholders' meeting
by a shareholder, timely written notice shall be made to the
Secretary of the Company. The shareholder's notice shall be
delivered to, or mailed and received at, the principal office of
the Company not less than 60 days nor more than 90 days prior to
the meeting; provided, however, in the event that less than 70
days notice or prior public disclosure of the date of the meeting
is given or made to shareholders, notice by the shareholder to be
timely must be received not later than the close of business on
the tenth day following the day on which the notice of the date of
the meeting was mailed or the public disclosure was made; provided
further however, notice by the shareholder to be timely must be
received in any event not later than the close of business on the
seventh day preceding the day on which the meeting is to be held.
The shareholder's notice shall set forth (1) a brief description
of the business desired to be brought before the meeting and the
reasons for considering the business, and (2) (a) the name and
address, as they appear on the Company's books, of the
shareholder, (b) the class and number of shares of capital stock
of the Company owned by the shareholder, and (c) any material
interest of the shareholder in the proposed business. The
shareholder shall also comply with all applicable requirements of
the Securities Exchange Act of 1934 (the "1934 Act") and the rules
and regulations thereunder with respect to the matters set forth
in this section. If the chairman of the meeting shall determine
and declare at the meeting that the proposed business was not
brought before the meeting in accordance with the procedures
prescribed by this section, the business shall not be considered.
The notice procedures set forth in this section 2.4 do not change
or limit any procedures the Company may require in accordance with
applicable law with respect to the inclusion of matters in the
Company's proxy statement.
SECTION 2.5.
Quorum. The holders of a majority of the shares issued and
outstanding and entitled to vote thereat, present in person or
represented by proxy, shall be requisite for, and shall
constitute, a quorum at all meetings of the shareholders of the
Company for the transaction of business, except as otherwise
provided by statute or these by-laws. If a quorum shall not be
present or represented at any meeting of the shareholders, the
shareholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from
time to time, without notice other than announcement at the
meeting if the adjournment is for thirty days or less or unless
after that adjournment a new record date is fixed, until a quorum
shall be present or represented. At such adjourned meeting at
which a quorum shall be present or represented, any business may
be transacted which might have been transacted at the meeting as
originally noticed.
SECTION 2.6.
Proxies. At every meeting of the shareholders, each shareholder
having the right to vote thereat shall be entitled to vote in
person or by proxy. Such proxy shall be appointed by an
instrument in writing subscribed by such shareholder and bearing a
date not more than eleven months prior to such meeting, unless
such proxy provides for a longer period, and shall be filed with
the Secretary of the Company before, or at the time of, the
meeting.
SECTION 2.7.
Voting. At each meeting of the shareholders, each shareholder
shall be entitled to one vote for each share of stock entitled to
vote thereat which is registered in the name of such shareholder
on the books of the Company. At all elections of directors of the
Company, the holders of shares of stock of the Company shall be
entitled to cumulative voting. When a quorum is present at any
meeting of the shareholders, the vote of the holders of a
majority of the shares present in person or represented by
proxy and entitled to vote at the meeting shall be sufficient
for the transaction of any business, unless otherwise provided
by statute, the Articles of Incorporation or these by-laws.
SECTION 2.8.
Presiding Officer. The presiding officer of any meeting of the
shareholders shall be the Chairman of the Board or, in the case of
the absence of the Chairman of the Board, the President.
ARTICLE III
Directors and Committees
SECTION 3.1. Number and Election. The business and
affairs of the Company shall be managed and controlled by a Board
of Directors, ten (10) in number, none of whom need to be a
shareholder, which number may be altered from time to time by
amendment of these by-laws, but shall never be less than three
(3). Except as provided in the Articles of Incorporation, the
directors shall be elected by the shareholders entitled to vote at
the annual meeting of such shareholders and each director shall be
elected to serve for a term of one (1) year and thereafter until a
successor shall be elected and shall qualify. Only persons who
are nominated in accordance with the procedures set forth in this
section shall be eligible to be nominated as directors at any
meeting of the shareholders of the Company. At any meeting of the
shareholders of the Company, nominations of persons for election
to the Board of Directors may be made (1) by or at the direction
of the Board of Directors or (2) by any shareholder of the Company
who is a holder of record at the time of giving the notice
provided for in this section, who shall be entitled to vote at the
meeting, and who complies with the notice procedures set forth in
this section. For a nomination to be properly brought before a
shareholders' meeting by a shareholder, timely written notice
shall be made to the Secretary of the Company. The shareholder's
notice shall be delivered to, or mailed and received at, the
principal office of the Company no less than 60 days nor more than
90 days prior to the meeting; provided, however, in the event that
less than 70 days notice or prior public disclosure of the date of
the meeting is given or made to shareholders, notice by the
shareholder to be timely must be received not later than the close
of business on the tenth day following the day on which the notice
of the date of the meeting was mailed or the public disclosure was
made; provided further, however, notice by the shareholder to be
timely must be received in any event not later than the close of
business on the seventh day preceding the day on which the meeting
is to be held. The shareholder's notice shall set forth (1) as to
each person whom the shareholder proposes to nominate for election or
reelection as a director, all information relating to such person
that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required by applicable law
(including the person's written consent to being named as a
nominee and to serving as a director if elected), and (2) (a) the
name and address, as they appear on the Company's books, of the
shareholder, (b) the class and number of shares of capital stock
of the Company owned by the shareholder, and (c) a description of
all arrangements or understandings between the shareholder and
each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to
be made by the shareholder. The shareholder shall also comply
with all applicable requirements of the 1934 Act and the rules and
regulations thereunder with respect to the matters set forth in
this section. If the chairman of the meeting shall determine and
declare at the meeting that a nomination was not made in
accordance with the procedures prescribed by this section, the
nomination shall not be accepted.
SECTION 3.2.
Regular Meetings. A regular meeting of the Board of Directors
shall be held immediately, or as soon as practicable, after the
annual meeting of the shareholders in each year for the purpose of
electing officers and for the transaction of such other business
as may be deemed necessary, and regular meetings of the Board
shall be held at such date and time and at such place as the Board
of Directors may from time to time determine. Not less than two
days' notice of all regular meetings of the Board, except the
meeting to be held after the annual meeting of shareholders which
shall be held without other notice than this by-law, shall be
given to each director personally or by mail or telegram.
SECTION 3.3.
Special Meetings. Special meetings of the Board may be called at
any time by the Chairman of the Board, the President, or by any
two directors, by causing the Secretary to mail to each director,
not less than three days before the time of such meeting, a
written notice stating the time and place of such meeting. Notice
of any meeting of the Board may be waived by any director.
SECTION 3.4.
Quorum. At each meeting of the Board of Directors, the presence
of not less than a majority of the total number of directors
specified in Section 3.l hereof shall be necessary and sufficient
to constitute a quorum for the transaction of business, and the
act of a majority of the directors present at any meeting at which
there is a quorum shall be the act of the Board of Directors,
except as may be otherwise specifically provided by statute.
If a quorum shall not be present at any meeting of directors,
the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting,
until a quorum shall be present. In determining the presence of
a quorum at a meeting of the directors or a committee thereof for
the purpose of authorizing a contract or transaction between the
Company and one or more of its directors, or between the Company
and any other corporation, partnership, association, or other
organization in which one or more of the directors of this Company
are directors or officers, or have a financial interest in such other
organization, such interested director or directors may be counted
in determining a quorum.
SECTION 3.5.
Presiding Officer. The presiding officer of any meeting of the
Board of Directors shall be the Chairman of the Board. In the
case of the absence of the Chairman of the Board, for reasons
other than provided in Section 4.3, the President shall act in his
place and stead. In the case of the temporary absence of both the
Chairman of the Board and the President, the Vice Chairman of the
Executive Committee or, in his absence, any other director elected
by vote of a majority of the directors present at the meeting,
shall act as chairman of the meeting.
SECTION 3.6.
Executive Committee. The Executive Committee of the Board of
Directors shall consist of the Chairman of the Board who shall be
the Chairman of the Executive Committee, and each of the
nonmanagement directors. The Chairman of the Board shall select a
Vice Chairman of the Executive Committee subject to the approval
of the Board of Directors of the Company. The Executive Committee
shall, in the recess of the Board, have all the powers of the
Board except those powers which, under the law of the State of
Illinois, may not be exercised by such Committee and shall keep
a record of its proceedings and report the same to the Board. The
Executive Committee may meet at any place whenever required by a
member of the Committee and may act by the consent of a majority
of its members, although not formally convened.
SECTION 3.7.
Other Committees. The Board may appoint other committees,
standing or special, from time to time from among its own members
or otherwise, and may confer such powers on such committees as the
Board may determine and may revoke such powers and terminate the
existence of such committees at its pleasure.
SECTION 3.8.
Action Without Meeting. Any action required or permitted to be
taken at any meeting of the Board of Directors, or any committee
thereof, may be taken without a meeting if all members of the
Board or of such committee, as the case may be, consent thereto in
writing and such writing or writings are filed with the minutes of
the proceedings of the Board or such committee.
SECTION 3.9.
Fees and Compensation of Directors. Directors shall not receive
any stated salary for their services as such; but, by resolution
of the Board of Directors, reasonable fees, with or without
expenses of attendance, may be allowed. Members of the Board
shall be allowed their reasonable traveling expenses when actually
engaged in the business of the Company, to be audited and allowed
as in other cases of demands against the Company. Members of
standing or special committees may be allowed fees and expenses
for attending committee meetings.Nothing herein contained shall
be construed to preclude any director from serving the Company in
any other capacity and receiving compensation therefor.
ARTICLE IV
Officers
SECTION 4.1.
Election of Officers. There shall be elected by the Board of
Directors in each year the following officers: a Chairman of the
Board; a President; such number of Senior Vice Presidents, such
number of Executive Vice Presidents, such number of Vice
Presidents and such number of Assistant Vice Presidents as the
Board at the time may decide upon; a Secretary; such number of
Assistant Secretaries as the Board at the time may decide upon; a
Treasurer; such number of Assistant Treasurers as the Board at the
time may decide upon; a Controller; and such number of Assistant
Controllers as the Board at the time may decide upon; a General
Counsel; and such number of Assistant General Counsel as the Board
at the time may decide upon. Any two or more offices may be held
by one person, except that the offices of President and Secretary
may not be held by the same person. All officers shall hold their
respective offices during the pleasure of the Board.
SECTION 4.2.
Appointment of Officers. The Board of Directors, the Executive
Committee, the Chairman of the Board, or the President may from
time to time appoint such other officers as may be deemed
necessary, including one or more Vice Presidents, one or more
Assistant Vice Presidents, one or more Assistant Secretaries, one
or more Assistant Treasurers, one or more Assistant Controllers
and one or more Assistant General Counsel, and such other agents
and employees of the Company as may be deemed proper. Such
officers, agents and employees shall have such authority, perform
such duties and receive such compensation as the Board of Directors,
the Executive Committee or, in the case of appointments made by the
Chairman of the Board or the President, as the Chairman of the Board
or the President, may from time to time prescribe and determine.
The Board of Directors or the Executive Committee may from time to time
authorize any officer to appoint and remove agents and employees,
to prescribe their powers and duties and to fix their compensation
therefor.
SECTION 4.3.
Duties of Chairman of the Board. The Chairman of the Board shall
be the chief executive officer of the Company and shall have
control and direction of the management and affairs of the Company
and may execute all contracts, deeds, assignments, certificates,
bonds or other obligations for and on behalf of the Company, and
sign certificates of stock and records of certificates required by
law to be signed by the Chairman of the Board. When present, the
Chairman of the Board shall preside at all meetings of the Board
and of the shareholders. In the absence of the Chairman of the
Board, due to his permanent disability, death, resignation or
removal from office, the Vice Chairman of the Executive Committee
shall promptly convene the Executive Committee to select a nominee
for that office and submit said nominee's name to the Board of
Directors for their consideration.
SECTION 4.4.
Duties of President. Subject to the Control and direction of the
Chairman of the Board, and to the control of the Board, the
President shall have general management of all the business of the
Company, and he shall have such other powers and perform such
other duties as may be prescribed for him by the Board or be
delegated to him by the Chairman of the Board. He shall possess
the same power as the Chairman of the Board to sign all certificates,
contracts and other instruments of the Company. In case of the
absence or disability of the President, or in case of his death,
resignation or removal from office, the powers and duties of
the President shall devolve upon the Chairman of the Board during
absence or disability, or until the vacancy in the office of President
shall be filled.
SECTION 4.5.
Duties of Vice President. Each of the Senior Vice Presidents,
Executive Vice Presidents, Vice Presidents and Assistant Vice
Presidents shall have such powers and duties as may be prescribed
for him by the Board, or be delegated to him by the Chairman of
the Board or by the President. Each of such officers shall
possess the same power as the President to sign all certificates,
contracts and other instruments of the Company.
SECTION 4.6.
Duties of Secretary. The Secretary shall have the custody and
care of the corporate seal, records and minute books of the
Company. He shall attend the meetings of the Board, of the
Executive Committee, and of the shareholders, and duly record and
keep the minutes of the proceedings, and file and take charge of
all papers and documents belonging to the general files of the
Company, and shall have such other powers and duties as are
commonly incident to the office of Secretary or as may be
prescribed for him by the Board, or be delegated to him by the
Chairman of the Board or by the President.
SECTION 4.7.
Duties of Treasurer. The Treasurer shall have charge of, and be
responsible for, the collection, receipt, custody and disbursement
of the funds of the Company, and shall deposit its funds in the
name of the Company in such banks, trust companies or safety
deposit vaults as the Board may direct. He shall have the
custody of the stock record books and such other books and papers
as in the practical business operations of the Company shall
naturally belong in the office or custody of the Treasurer, or as
shall be placed in his custody by the Board, the Chairman of the
Board, the President, or any Vice President, and shall have such
other powers and duties as are commonly incident to the office of
Treasurer, or as may be prescribed for him by the Board, or be
delegated to him by the Chairman of the Board or by the President.
SECTION 4.8.
Duties of Controller. The Controller shall have control over all
accounting records pertaining to moneys, properties, materials and
supplies of the Company. He shall have Charge of the bookkeeping
and accounting records and functions, the related accounting
information systems and reports and executive supervision of the
system of internal accounting controls, and such other powers and
duties as are commonly incident to the office of Controller or as
may be prescribed by the Board, or be delegated to him by the
Chairman of the Board or by the President.
SECTION 4.9.
Duties of General Counsel. The General Counsel shall have full
responsibility for all legal advice, counsel and services for the
Company and its subsidiaries including employment and retaining of
attorneys and law firms as shall in his discretion be necessary or
desirable and shall have such other powers and shall perform such
other duties as from time to time may be assigned to him by the
Board, the Chairman of the Board or the President.
SECTION 4.10.
Duties of Assistant Secretary, Assistant Treasurer, Assistant
Controller and Assistant General Counsel. The Assistant
Secretary, Assistant Treasurer, Assistant Controller and Assistant
General Counsel shall assist the Secretary, Treasurer, Controller,
and General Counsel, respectively, in the performance of the duties
assigned to each and shall for such purpose have the same powers as
his principal. He shall also have such other powers and duties as may be
prescribed for him by the Board, or be delegated to him by the
Chairman of the Board or by the President.
ARTICLE V
Indemnification of Directors, Officers, Employees and Agents
SECTION 5.1. Indemnification of Directors, Officers and
Employees. The Company shall indemnify, to the fullest extent
permitted under the laws of the State of Illinois and any other
applicable laws, as they now exist or as they may be amended in
the future, any person who was or is a party, or is threatened to
be made a party, to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or
investigative (including, without limitation, an action by or in
the right of the Company), by reason of the fact that he or she is
or was a director, officer or employee of the Company, or is or
was serving at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise against
expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding.
SECTION 5.2. Advancement of Expenses to Directors,
Officers and Employees. Expenses incurred by such a director,
officer or employee in defending a civil or criminal action, suit
or proceeding shall be paid by the Company in advance of the final
disposition of such action, suit or proceeding to the fullest
extent permitted under the laws of the State of Illinois and any
other applicable laws, as they now exist or as they may be amended
in the future.
SECTION 5.3. Indemnification and Advancement of Expenses
to Agents. The board of directors may, by resolution, extend the
provisions of this Article V regarding indemnification and the
advancement of expenses to any person who was or is a party or is
threatened to be made a party to any threatened, pending or
completed action, suit or proceeding by reason of the fact he or
she is or was an agent of the Company or is or was serving at the
request of the Company as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise.
SECTION 5.4. Rights Not Exclusive. The rights provided
by or granted under this Article V are not exclusive of any other
rights to which those seeking indemnification or advancement of
expenses may be entitled.
SECTION 5.5. Continuing Rights. The indemnification and
advancement of expenses provided by or granted under this Article
V shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of that person.
ARTICLE VI
Certificates of Stock and Their Transfer
SECTION 6.1.
Certificates of Stock. The certificates of stock of the Company
shall be in such form as may be determined by the Board of
Directors, shall be numbered and shall be entered in the books of
the Company as they are issued. They shall exhibit the holder's
name and number of shares and shall be signed by the
Chairman of the Board, the President or a Vice President and also
by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary and shall bear the corporate seal or a
facsimile thereof. If a certificate is countersigned by a
transfer agent or registrar, other than the Company itself or its
employee, any other signature or countersignature on the
certificate may be facsimiles. In case any officer of the
Company, or any officer or employee of the transfer agent or
registrar, who has signed or whose facsimile signature has been
placed upon such certificate ceases to be an officer of the
Company, or an officer or employee of the transfer agent or
registrar, before such certificate is issued, said certificate may
be issued with the same effect as if the officer of the Company,
or the officer or employee of the transfer agent or registrar, had
not ceased to be such at the date of issue.
SECTION 6.2.
Transfer of Stock. Upon surrender to the Company of a certificate
for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, and upon payment
of applicable taxes with respect to such transfer, it shall be the
duty of the Company, subject to such rules and regulations as the
Board of Directors may from time to time deem advisable concerning
the transfer and registration of certificates for shares of stock
of the Company, to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction
upon its books.
SECTION 6.3.
Shareholders of Record. 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 or any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by statute.
SECTION 6.4.
Lost, Destroyed or Stolen Certificates. The Board of Directors,
in individual cases or by general resolution, may direct a new
certificate or certificates to be issued by the Company as a
replacement for a certificate or certificates for a like number of
shares alleged to have been lost, destroyed or stolen, upon the
making of an affidavit of that fact by the person claiming the
certificate or certificates of stock to be lost, destroyed or
stolen. When authorizing such issue of a new certificate or
certificates, the Board of Directors may, in its discretion and as
a condition precedent to the issuance thereof, require the owner
of such lost, destroyed or stolen certificate or certificates, or
his legal representative, to give the Company a bond in such form
and amount as it may direct as indemnity against any claim that
may be made against the Company with respect to the certificate or
certificates alleged to have been lost, destroyed or stolen.
ARTICLE VII
Miscellaneous
SECTION 7.1.
Contracts and Other Instruments. All contracts or obligations of
the Company shall be in writing and shall be signed either by the
Chairman of the Board, the President, or any Vice President and,
unless the Board shall otherwise determine and direct, the seal of
the Company shall be attached thereto, duly attested by the
Secretary or an Assistant Secretary, except contracts entered into
in the ordinary course of business where the amount involved is
less than Five Hundred Thousand Dollars ($500,000), and except
contracts for the employment of servants or agents, which contracts
so excepted may be entered into by the Chairman of the Board,
the President, any Vice President, or by such officers or agents
as the Chairman of the Board or the President may designate and
authorize. Unless the Board shall otherwise determine and direct,
all checks or drafts and all promissory notes shall be signed by
two officers of the Company. When prescribed by the Board, bonds,
promissory notes, and other obligations of the Company may bear
the facsimile signature of the officer who is authorized to sign such
instruments and, likewise, may bear the facsimile signature of the
Secretary or an Assistant Secretary.
SECTION 7.2.
Voting Stock Owned by Company. Any or all shares owned by the
Company in any other corporation, and any or all voting trust
certificates owned by the Company calling for or representing
shares of stock of any other corporation, may be voted by the
Chairman of the Board, the President, any Vice President, the
Secretary or the Treasurer, either in person or by written proxy
given to any person in the name of the Company at any meeting of
the shareholders of such corporation, or at any meeting of voting
trust certificate holders, upon any question that may be presented
at any such meeting. Any such officer, or anyone so representing
him by written proxy, may on behalf of the Company waive any
notice of any such meeting required by any statute or by-law and
consent to the holding of such meeting without notice.
ARTICLE VIII
Amendment or Repeal of By-Laws
These by-laws may be added to, amended or repealed at any
regular or special meeting of the Board by a vote of a majority of
the membership of the Board.
Exhibit 10
LONG-TERM INCENTIVE COMPENSATION PLAN
Effective February 22, 1990
(Amended December 2, 1992, December 7, 1994, February 24, 1995,
November 1,
1996 and as of December 4, 1996)
1. Purpose
The purpose of the Long-Term Incentive Compensation Plan
("the Plan") is to attract, retain and motivate strong management
employees by providing additional incentive to key employees of
Peoples Energy Corporation (the "Company") and its Subsidiaries (as
defined by paragraph 13) to acquire a proprietary interest in the
business of the Company and its Subsidiaries and by encouraging the
interest of such persons in the financial success and growth of the
Company. The Plan contemplates the granting of non-qualified stock
options (i.e. options which are not "statutory" within the meaning
of Section 1.421-7(b) of the regulations under the Internal Revenue
Code of 1986, as amended) ("Options"), Stock Appreciation Rights
("SARs") or restricted stock awards, or combinations thereof. A
key employee may be granted and may hold one or more Options, SARs,
restricted stock awards or any combination thereof under this Plan.
2. Administration
(a) Generally
Except to the extent that this Plan applies to the Chief
Executive Officer, this Plan shall be administered solely by the
Compensation-Nominating Committee of the Board of Directors of the
Company (the "Committee"). The Committee shall be
composed of not less than three persons who shall be appointed by
the Board of Directors of the Company (the "Board") from the
membership of the Board. No person who is an officer or employee
of the Company or a Subsidiary shall be a member of the Committee
nor shall any person be a member of the Committee whose membership
would disqualify any transactions made under the Plan from
complying with the requirements of Rule 16b-3 under the Securities
Exchange Act of 1934 (the "1934 Act") or any successor rule
thereunder. Except to the extent that this Plan applies to the
Chief Executive Officer, the Committee is solely authorized to
prescribe the form and content of Options, SARs and restricted
stock awards to be granted under the Plan, to interpret the Plan,
to prescribe, amend or rescind rules and regulations relating to
it, and to make all other determinations necessary or advisable for
its administration.
(b) Chief Executive Officer
With respect to the Chief Executive Officer, this Plan
shall be administered by the Committee subject to the approval of
the majority of all members of the Board (including members of the
Committee) who are not officers or employees of the Company or a
Subsidiary and who are Non-Employee Directors as defined under Rule
16b-3 under the 1934 Act (the "Outside Directors"). The Outside
Directors shall not include any person whose inclusion would
disqualify any transactions made under the Plan from complying with
the requirements of Rule 16b-3 under the 1934 Act or any successor
rule thereunder. With respect to the Chief Executive Officer, the
Committee is authorized to prescribe the form and content of
Options, SARs and restricted stock awards to be granted under
the Plan to interpret the Plan, to prescribe, amend, or rescind
rules and regulations relating to it, and to make all other
determinations necessary or advisable for its administration,
subject to the approval of the majority of the Outside Directors.
All references to the "Committee" contained in any provision of
paragraphs 3 through 13 of this Plan shall, to the extent that
such provision applies to the Chief Executive Officer,
be deemed and construed to mean the Committee, the decisions of
which shall be subject to the approval of the majority of the
Outside Directors.
3. Incentive Awards
Under the Plan participants may be granted any one or
more of the following:
(a) Options: non-qualified stock options to purchase
stock of the Company at a purchase price of 100
percent of the fair market value of such Common
Stock on the date that the Option is granted. The
stock under Options granted under the Plan shall be
shares of the Company's authorized but unissued
common stock, without par value ("Common Stock").
(b) SARs: a right to receive, for each SAR granted,
cash in an amount equal to the excess of the fair
market value of one share of the Common Stock of
the Company on the date the SAR is exercised
over the fair market value of such Common Stock on
the date the SAR is granted.
(c) Restricted Stock Awards: shares of Common Stock
which are restricted as provided in paragraph 8.
Up to 1,800,000 shares of Common Stock (500,000
originally authorized under the Plan plus an additional 500,000
authorized for grant by the stockholders on February 28, 1986 plus
an additional 400,000 authorized for grant by the stockholders on
February 23, 1990 plus an additional 400,000 authorized for grant
by the stockholders on February 24, 1995) may be sold under Options
granted pursuant to the Plan or awarded pursuant to restricted
stock awards granted under the Plan, provided that the number of
shares available for sale or award hereunder shall be subject to
adjustment as provided in paragraph 9. Up to 1,800,000 SARs
(1,000,000 originally authorized under the Plan plus an additional
400,000 authorized for grant by the shareholders on February 23,
1990 plus an additional 400,000 authorized for grant by the
stockholders on February 24, 1995) may be granted pursuant to the
Plan, provided that the number of SARs available for granting
hereunder shall be subject to adjustment as provided in paragraph
9.
If an Option or SAR ceases to be exercisable in whole or
in part by reason of the expiration of the term of the Option or
SAR, the termination of the employment of the recipient or the
waiver by a recipient of the right to exercise an Option or SAR,
the shares or SAR which were subject to such exercise but as to
which the recipient has not exercised, shall again become available for
further grants under the Plan. If a restricted stock award is
forfeited in whole or in part by reason of the termination of the
employment of the recipient before such award has become fully
vested, the shares which were subject to such restricted stock
award but which were not vested shall again become available for
further grants under the Plan.
4. Designation of Recipients and Allotment of Shares and SARs
The Committee shall determine and designate from time to
time those key employees of the Company and its Subsidiaries
(including officers and directors employed in capacities other than
as directors only) to whom Options, SARs and restricted stock
awards, or any combination thereof, shall be granted and who shall
thereby become recipients. The Committee shall also determine the
number of shares of Common Stock to be optioned, the number of SARs
to be granted and the number of shares of restricted stock to be
granted from time to time to each recipient.
In selecting the key employees to whom Options, SARs or
restricted stock awards, or any combination thereof, shall be
granted, as well as in determining the number of SARs, shares under
Option, or shares of restricted stock to be granted to key
employees, the Committee shall weigh the positions and
responsibilities of the individuals being considered, the nature of
their services to the Company, their past, present and potential
contributions to the success of the Company or its Subsidiaries,
and such other factors as the Committee shall deem relevant to
accomplish the purposes of the Plan; provided, however, that a
restricted stock award shall be granted only in recognition of and
as consideration for the performance of services by the recipient or other
consideration received by the Company prior to the time of grant.
Directors of the Company or its Subsidiaries who are not officers
or employees of the Company or its Subsidiaries shall not be
eligible to become recipients under the Plan. No Option, SAR or
restricted stock award shall be granted to any individual
possessing more than 5 percent of the total combined voting power
or value of all classes of stock of the Company or of any of its
Subsidiaries. Each recipient shall agree to continue such
recipient's employee status for such period (not less than one
year) as shall be provided in the Option, SAR or restricted stock
award, subject to the right of the recipient's employer to
terminate the recipient's employment at any time. Options, SARs
and restricted stock awards shall contain such conditions and
restrictions as to exercise, the purchase and delivery of shares,
and the forfeiture of shares, and such provisions as to the rights
of the Company or its Subsidiaries, as may be deemed advisable by
the Committee.
The Committee may grant Options, SARs or restricted stock
awards to any key employee at any time or from time to time during
the period of such employee's employment under the Plan, in
accordance with such determinations as the Committee shall make
from time to time. Options, SARs and restricted stock awards need
not contain similar provisions.
5. Term of Plan
No Option, SAR or restricted stock award may be granted
under this Plan after October 31, 2000.
6. Option and SAR Price
Shares of the Common Stock of the Company shall be
optioned and SARs shall be granted from time to time at 100 percent
of the fair market value of the Common Stock on the date the Option
or SAR is granted (rounded, in the case of a fraction of a cent, to
the nearest full cent above). The day on which the Committee
approves the granting of an Option or SAR shall be considered the
date on which such Option or SAR is granted. The fair market value
of the Common Stock on the date the Option or SAR is granted shall
be the mean between the highest and lowest quoted selling price in
the New York Stock Exchange Composite Transactions on such date or,
if such stock was not traded on such date, on the last preceding
date on which such stock was traded.
7. Terms of Options and SARs
Each Option or SAR granted under the Plan shall be
evidenced by a written agreement which shall comply with and be
subject to the following terms and conditions:
(a) Full payment for shares purchased shall be made in
cash and/or Common Stock of the Company at the time
or times the Option is exercised in whole or in
part. Payment in Common Stock may be made at the
recipient's election by the Company's deducting
from the number of shares otherwise deliverable
upon the exercise of the Option such number of
shares of Common Stock as shall have a value equal
to the amount of the Option exercise price. Any
such Common Stock submitted in payment for an
Option shall be valued at the mean between the
highest and lowest quoted selling price of such
Common Stock of the Company in the New York Stock
Exchange Composite Transactions on the date of
exercise or, if such stock was not traded on such
date, on the last preceding date on which such
stock was traded. No shares shall be issued
pursuant to the exercise of an Option until full
payment thereof has been made and no person shall
have any of the rights of a stockholder with
respect to Options held, except to the extent such
Options have been exercised and the shares issued
to such person.
(b) A recipient's rights to exercise an Option or SAR
shall terminate when the recipient is no longer an
employee of the Company or any of its Subsidiaries
unless such recipient's employment is
terminated by reason of such recipient's death,
disability or retirement.
(c) If a recipient dies prior to termination of such
recipient's Option or SAR without having fully
exercised such Option or SAR, the beneficiary or
beneficiaries designated by such recipient pursuant
to paragraph 7(f) hereof, or, if no such
beneficiary or beneficiaries have been designated
by such recipient or if no such beneficiary or
beneficiaries have survived the recipient, then the
recipient's surviving spouse, or, if the recipient
has no surviving spouse, then the estate of the
recipient or any person who acquires the right to
exercise such Option or SAR by bequest or
inheritance or by reason of the death of the
recipient, shall have the right to exercise the
Option or SAR during its term within the eighteen
month period after the recipient's death, but only
to the extent such Option or SAR was exercisable by
such recipient immediately prior to such
recipient's death.
(d) If a recipient's employment is terminated by reason
of such recipient's disability (as determined in
the sole discretion of the Committee) prior to
termination of such recipient's Option or SAR
without the recipient's having fully exercised such
Option or SAR, such recipient shall have the right
to exercise the Option or SAR
during its term within such period as may be
provided at the time of the grant, not to exceed
three years after termination of employment, but
only to the extent such Option or SAR was
exercisable by such recipient immediately prior to
such recipient's termination of employment.
(e) If a recipient retires prior to termination of such
recipient's Option or SAR without having fully
exercised such Option or SAR, such recipient shall
have the right to exercise the Option or SAR during
its term within such period as may be provided at
the time of the grant, not to exceed three years
after retirement, but only to the extent such
Option or SAR was exercisable by the recipient
immediately prior to such recipient's retirement.
(f) Except as otherwise expressly provided in this
paragraph 7(f), Options and SARs shall not be
transferable other than by will or by the laws of
descent and distribution and during a recipient's
lifetime shall be exercisable only by the recipient
or the recipient's guardian or legal
representative. Notwithstanding the preceding
sentence, a recipient may, by giving notice to the
Company during the recipient's lifetime, designate
(i) a beneficiary or beneficiaries to whom Options
or SARs shall be transferred in the event of the
recipient's death, and (ii) the specific number or
proportions of the recipient's Options or SARs to
be transferred to each such designated beneficiary
if more than one beneficiary is properly designated.
Any such designation may be revoked or changed by the
recipient at any time and from time to time by
similar notice. If there is no such designated
beneficiary living upon the death of the recipient
or if all such designated beneficiaries die prior
to exercise of all of the recipient's Options and
SARs under this Plan, any remaining Options and
SARs shall be transferred to the recipient's
surviving spouse or, if none, then the remaining
Options and SARs will be transferred to the estate
or personal representative of the recipient. If
the Company, after reasonable inquiry, is unable to
determine within twelve months after the
recipient's death whether any designated
beneficiary of such recipient did in fact survive
the recipient, such beneficiary shall be
conclusively presumed to have died prior to the
recipient's death. Any designated beneficiary,
surviving spouse or other person acquiring any
Options or SARs pursuant to this paragraph 7(f)
shall have the right to exercise such Options and
SARs as set forth in paragraph 7(c), above.
(g) Subject to paragraph 7(k) below, no Option or SAR
granted under this Plan shall be exercisable before
the expiration of one year from the date of grant
of such Option or SAR.
(h) Options and SARs granted under this Plan shall
contain such provisions as may be deemed advisable
by the Committee.
(i) Subject to paragraph 7(k) below, until a recipient
has completed five years of service, the total
number of Options and SARs that may be exercised by
such recipient during the first four years after
such Options and SARs are granted thereto shall not
exceed the following percentages of the number of
Options and SARs so granted:
Years Since Option Percentage of Options
Or SAR Is Granted Or SARs Exercisable
less than 1 None
1 but less than 2 25%
2 but less than 3 50%
3 but less than 4 75%
4 or more 100%
Notwithstanding the above, the Committee may, in
its sole discretion, accelerate the exercisability
under this paragraph 7(i) of any or all Options
and/or SARs granted under the Plan.
(j) In no event shall any Option or SAR granted under
the Plan be exercisable after the expiration of ten
years from the date such Option or SAR is granted.
(k) All outstanding Options and SARs granted under the
Plan shall immediately become exercisable upon the
occurrence of a Change in Control (as defined by
paragraph 13).
8. Terms of Restricted Stock Awards
Each restricted stock award granted under the Plan shall
be evidenced by a written agreement which shall comply with and be
subject to the following terms and conditions:
(a) Shares of Common Stock covered by a restricted
stock award may not be sold, assigned, transferred
or otherwise disposed of, or mortgaged, pledged or
otherwise encumbered until such shares have become
fully vested pursuant to paragraph 8(d) or 8(f).
(b) The recipient of a restricted stock award shall
have the right to vote the shares of Common Stock
covered by such award and to receive dividends
thereon, unless and until such shares are forfeited
pursuant to paragraph 8(e).
(c) Shares of Common Stock covered by a restricted
stock award will be held by the Company until such
shares have become vested pursuant to paragraph
8(d) or 8(f), and will thereupon, subject to the
satisfaction of the withholding obligations
described in paragraph 11, be delivered to the
recipient.
(d) Shares of Common Stock covered by a restricted
stock award granted to a recipient shall vest in
accordance with the terms of the grant; provided,
however, that shares of Common Stock covered by a
restricted stock award granted to a recipient shall
vest with respect to 100% of the shares covered by
the restricted stock award upon the termination of
the recipient's employment by reason of death,
disability (as determined in the sole discretion of
the Committee) or retirement after attaining age 65
(or such earlier date as determined by the
Committee). In addition, the Committee may, in its
sole discretion, accelerate the vesting of any or
all restricted stock awards granted under the Plan.
A recipient may, by giving notice to the Company
during the recipient's lifetime, designate (i) a
beneficiary or beneficiaries to whom shares of
restricted stock covered by a restricted stock
award shall be transferred in the event of the
recipient's death, and (ii) the specific number or
proportions of such shares of Common Stock to be
transferred to each such designated beneficiary if
more than one beneficiary is properly designated.
Any such designation may be revoked or changed by
the recipient at any time and from time to time by
similar notice. If there is no such designated
beneficiary living upon the death of the recipient
or if all such designated beneficiaries die prior
to vesting of all shares of Common Stock covered
by a restricted stock award of the recipient,
any remaining shares of Common Stock vesting upon
the recipient's death shall be transferred to the
recipient's surviving spouse or, if none, then the
remaining shares so vesting will be transferred to
the estate or personal representative of the recipient.
If the Company, after reasonable inquiry, is unable to
determine within twelve months after the recipient's death
whether any designated beneficiary of such
recipient did in fact survive the recipient, such
beneficiary shall be conclusively presumed to have
died prior to the recipient's death.
(e) In the event of the termination of employment of
the recipient of a restricted stock award other
than by reason of death, disability (as determined
in the sole discretion of the Committee) or
retirement after attaining age 65 (or such earlier
date as determined by the Committee) the recipient
will forfeit the shares of Common Stock covered by
the restricted stock award which are not vested.
(f) All outstanding restricted stock awards granted
under the Plan shall immediately become fully
vested upon the occurrence of a Change in Control
(as defined by paragraph 13).
(g) Restricted stock awards granted under this Plan
shall contain such provisions as may be deemed
advisable by the Committee.
9. Adjustment Upon Changes in Capitalization, Etc.
In the event there is any change in the Common Stock of
the Company through the declaration of stock dividends, or through
recapitalization resulting in stock split-ups, or combinations or
exchanges of shares, or otherwise, then the number of SARs and
shares remaining available for future grants of Options and
restricted stock awards under the Plan and exercisable under
existing grants of SARs and Options shall be appropriately adjusted
by the Committee. Appropriate adjustment shall also be made in the
SAR price and the Option price per share.
10. Amendment
The Board may, by resolution, at any time and from time
to time, amend, revise or terminate this Plan, except that, without
stockholder approval, no amendment shall increase the maximum
number of SARs or shares which may be sold pursuant to Options or
covered by restricted stock awards granted under the Plan or reduce
the Option price of any Option or the SAR price of any SAR (except
as provided by paragraph 9), change the class of employees eligible
to receive SARs, Options or restricted stock awards under the Plan,
or extend the term of the Plan. Except as otherwise provided in
the Plan, no SAR, Option or restricted stock award previously
granted under the Plan may be altered or impaired without the
consent of the holder of the SAR, Option or restricted stock award.
11. Taxes
The Company may make such provisions and take such steps
as it may deem necessary or appropriate for the withholding of all
federal, state and local taxes required by law to be withheld with
respect to Options, SARs and restricted stock awards granted
pursuant to the Plan including, but not limited to (a) deducting
the amount required to be withheld from any other amount then or
thereafter payable to a recipient or legal representative, and (b)
requiring a recipient or legal representative to pay to the Company
the amount required to be withheld as a condition of releasing
shares of Common Stock. In addition, subject to the Committee's
sole discretion and to such rules and regulations as the Committee
shall from time to time establish, a recipient shall be permitted
to satisfy federal, state and local taxes, if any, imposed upon the
exercise of an Option or the vesting of a restricted stock award at
a rate up to such recipient's maximum marginal tax rate with
respect to each such tax by (i) electing to have the Company deduct
from the number of shares of Common Stock otherwise deliverable
upon the exercise of an Option or the vesting of a restricted stock
award such number of shares of Common Stock as shall have a value
equal to the amount of tax to be withheld, or (ii) delivering to
the Company such number of shares of Common Stock or combination of
shares of Common Stock and cash as shall have a value equal to the
amount of tax to be withheld.
12. Effective Date
Any amendment to this Plan requiring shareholder approval
shall become effective upon approval thereof by the holders of a
majority of the Company's outstanding shares of Common Stock,
provided such approval occurs within twelve months of the date such
amendment is adopted by the Board. No SARs or shares of Common
Stock shall be issued pursuant to this Plan prior to compliance
with requirements under applicable laws and regulations.
13. Definitions and Miscellaneous
(a) For purposes of this Plan, a Subsidiary is any
corporation more than 50 percent of the total combined voting power
of which is owned by the Company or by another corporation
qualifying as a Subsidiary within this definition, or by a
combination of any of them.
(b) For purposes of this Plan, a Change in Control
means,
(i) with respect to Options, SARs and restricted stock
awards granted prior to December 4, 1996, that any of the following
events described in this paragraph (i) or in paragraph (ii) below
has occurred:
(A) twenty percent (20%) or more of the Company's
outstanding shares of Common Stock have been
acquired by any person (as defined by Section
3(a)(9) of the 1934 Act) other than directly from
the Company;
(B) there has been a merger or equivalent combination
after which forty-nine percent (49%) or more of the
voting stock of the surviving corporation is held
by persons other than former stockholders of the
Company; or
(C) twenty percent (20%) or more of the directors
elected by stockholders to the Board of Directors
of the Company are persons who were not nominated
by management in the most recent proxy statement of
the Company.
(ii) with respect to Options, SARs and restricted stock
awards granted on or after December 4, 1996, any of
the following events has occurred:
(A) either (1) receipt by the Company of a report on
Schedule 13D, or an amendment to such a report,
filed with the Securities and Exchange Commission
("SEC") pursuant to Section 13(d) of the 1934 Act
disclosing that any person (as such term is used in
Section 13(d) of the 1934 Act) ("Person"), is the
beneficial owner, directly or indirectly, of twenty
(20) percent or more of the outstanding stock of
the Company, or (2) actual knowledge by the
Company of facts, on the basis of which any Person
is required to file such a report on Schedule 13D,
or to make an amendment to such a report, with the
SEC (or would be required to file such a report or
amendment upon the lapse of the applicable period
of time specified in Section 13 (d) of the 1934
Act) disclosing that such Person is the beneficial
owner, directly or indirectly, of twenty (20)
percent or more of the outstanding stock of the
Company;
(B) purchase by any Person, other than the Company or a
wholly-owned subsidiary of the Company, of shares
pursuant to a tender or exchange offer to acquire
any stock of the Company (or securities convertible
into stock) for cash, securities or any other
consideration provided that, after consummation of
the offer, such Person is the beneficial owner (as
defined in Rule 13d-3 under the 1934 Act), directly
or indirectly, of twenty (20) percent or more of
the outstanding stock of the Company (calculated as
provided in paragraph (d) of Rule 13d-3 under the
1934 Act in the case of rights to acquire stock);
(C) approval by the shareholders of the Company of (1)
any consolidation or merger of the Company in which
the Company is not the continuing or surviving
corporation or pursuant to which shares of stock of
the Company would be converted into cash,
securities or other property, other than a
consolidation or merger of the Company in which
holders of its stock immediately prior to the
consolidation or merger have substantially the same
proportionate ownership of common stock of the
surviving corporation immediately after the
consolidation or merger as immediately before, or
(2) any consolidation or merger in which the
Company is the continuing or surviving corporation,
but in which the common shareholders of the Company
immediately prior to the consolidation or merger do
not hold at least ninety (90) percent of the
outstanding common stock of the continuing or
surviving corporation (except where such holders of
common stock hold at least ninety (90) percent of
the common stock of the corporation which owns all
of the common stock of the Company), or (3) any
sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of
all or substantially all the assets of the Company
(Transfer Transaction), (except where (x) the
Company owns all of the outstanding stock of the
transferee entity or (y) the holders of the
Company's common stock immediately prior to the
Transfer Transaction own at least ninety (90)
percent of the outstanding stock of the transferee
entity, immediately after the Transfer
Transaction), or (4) any consolidation or merger of
the Company where, after the consolidation or merger,
one Person owns one hundred (100) percent of the
shares of stock of the Company (except where the
holders of the Company's common stock immediately
prior to such merger or consolidation own at least
ninety (90) percent of the outstanding stock of
such Person immediately after such consolidation or
merger); or
(D) a change in the majority of the members of the
Board within a twenty-four (24) month period,
unless the election or nomination for election by
the Company's shareholders of each new director was
approved by the vote of at least two-thirds of the
directors then still in office who were in office
at the beginning of the twenty-four (24) month
period.
(c) The transfer of an employee from the Company to a
Subsidiary or from a Subsidiary to the Company or
another Subsidiary shall not be a termination of
employment or an interruption of continuous
employment for the purposes of this Plan.
(d) No SAR, Option, restricted stock award, shares of
Common Stock issuable upon the exercise of an Option
or cash payable incident to the exercise of an SAR
granted under this Plan shall be transferable or
assignable by anticipation either by the voluntary
or involuntary act of the recipient or by operation
of law, or be liable for any debts or liabilities
of the recipient, except as provided herein.
(e) Nothing herein shall entitle any employee to remain
in the employ of the Company or any of its
Subsidiaries or affect the right of such employer to
discharge such employee with or without cause.
(f) The right of recipients to designate one or more
beneficiaries pursuant to paragraph 7(f) or
paragraph 8(d) shall apply to any and all Options,
SARs or restricted shares granted under the Plan,
notwithstanding anything contained in any written
agreement evidencing such grant of Options, SARs or
restricted stock to the contrary.
(g) Notwithstanding anything contained in any written
agreement evidencing a grant of Options or
restricted stock made under the Plan prior to
November 1, 1996, recipients of Options or
restricted stock may make, on or after November 1,
1996 at any time at the recipient's discretion, but
subject to such rules and regulations as the
Committee may from time to time establish, one or
more elections for the Company to withhold from the
number of shares of Common Stock otherwise
deliverable pursuant to the exercise of an Option or
vesting of restricted stock in full or partial
satisfaction of taxes imposed upon such exercise or
vesting as described in paragraph 11 above; provided,
however, that any such election is made in accordance
with the requirements of Rule 16b-3 under the 1934 Act
or any successor rule or regulation so as to exempt
such election and the resulting transaction from
Section 16(b) of the 1934 Act.
(h) This Plan shall be construed according to the laws
of the State of Illinois.
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
STATEMENTS OF INCOME, CONSOLIDATED BALANCE SHEETS, AND CONSOLIDATED STATEMENTS
OF CASH FLOWS, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> MAR-31-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,378,489
<OTHER-PROPERTY-AND-INVEST> 14,091
<TOTAL-CURRENT-ASSETS> 466,190
<TOTAL-DEFERRED-CHARGES> 20,030
<OTHER-ASSETS> 71,680
<TOTAL-ASSETS> 1,950,480
<COMMON> 278,335
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 471,521
<TOTAL-COMMON-STOCKHOLDERS-EQ> 749,856
0
0
<LONG-TERM-DEBT-NET> 527,039
<SHORT-TERM-NOTES> 700
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 672,885
<TOT-CAPITALIZATION-AND-LIAB> 1,950,480
<GROSS-OPERATING-REVENUE> 955,133
<INCOME-TAX-EXPENSE> 59,933
<OTHER-OPERATING-EXPENSES> 776,968
<TOTAL-OPERATING-EXPENSES> 836,901
<OPERATING-INCOME-LOSS> 118,232
<OTHER-INCOME-NET> 2,152
<INCOME-BEFORE-INTEREST-EXPEN> 120,384
<TOTAL-INTEREST-EXPENSE> 19,635
<NET-INCOME> 100,749
0
<EARNINGS-AVAILABLE-FOR-COMM> 100,749
<COMMON-STOCK-DIVIDENDS> 32,173
<TOTAL-INTEREST-ON-BONDS> 17,862
<CASH-FLOW-OPERATIONS> 93,959
<EPS-PRIMARY> 2.88
<EPS-DILUTED> 2.88
</TABLE>
