AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 22, 1997
REGISTRATION NO. 333-32433
=================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
AMENDMENT NO. 1
TO
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
DQE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
PENNSYLVANIA 4911 25-1598483
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION
INCORPORATION) NUMBER)
CHERRINGTON CORPORATE CENTER, SUITE 100
500 CHERRINGTON PARKWAY
CORAOPOLIS, PENNSYLVANIA 15108-3189
(412) 262-4700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------
VICTOR A. ROQUE, ESQ. J. ANTHONY TERRELL, ESQ.
VICE PRESIDENT AND GENERAL COUNSEL REID & PRIEST LLP
DQE, INC. 40 WEST 57TH STREET
CHERRINGTON CORPORATE CENTER, NEW YORK, NEW YORK 10019-4097
SUITE 100 (212) 603-2000
500 CHERRINGTON PARKWAY
CORAOPOLIS, PENNSYLVANIA 15108-3189
(412) 262-4700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENTS FOR SERVICE)
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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR
AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES
HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE
ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BY ANY
SALE OF THESE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH JURISDICTION.
SUBJECT TO COMPLETION, DATED AUGUST 22, 1997
PROSPECTUS
----------
DQE, INC.
1,000,000 SHARES
PREFERRED STOCK, SERIES A (CONVERTIBLE)
($100 LIQUIDATION PREFERENCE PER SHARE)
___________________________
This Prospectus relates to 1,000,000 shares of Preferred
Stock, Series A (Convertible), $100 liquidation preference per
share (the "Series A Preferred Stock"), which may be offered and
issued by DQE, Inc., a Pennsylvania corporation (the "Company" or
"DQE"), from time to time in connection with the acquisition by
the Company of other businesses, assets or securities
("Acquisitions"). Any right or obligation of the Company to
redeem shares of Series A Preferred Stock is subject to certain
limitations described herein. As a result of such limitations
and under current law, the Company has no right or obligation to
redeem any share of Series A Preferred Stock. The Company may,
at any time and from time to time, convert all or any number of
shares of Series A Preferred Stock into the Company's Common
Stock, no par value (the "Common Stock" and, together with the
Series A Preferred Stock, the "Securities") or other Conversion
Securities (as hereinafter defined). Since the Company would not
have an obligation to redeem any share of Series A Preferred
Stock on the date that would have been scheduled for mandatory
redemption thereof, such share shall be converted automatically
into Common Stock or other Conversion Securities on such date.
The holders of Series A Preferred Stock will be entitled to vote,
together with the holders of Common Stock as one class, on all
matters submitted to a vote of the holders of Common Stock. Each
share of Series A Preferred Stock will be entitled to three
votes. See "Description of Capital Stock--Preferred Stock."
It is expected that the terms of Acquisitions will be
determined by direct negotiations with the owners or controlling
persons of the businesses, assets or securities to be acquired by
the Company. All expenses of this offering will be paid by the
Company. No underwriting discounts or commissions will be paid,
although finder's fees may be paid in cash or in shares of Series
A Preferred Stock from time to time with respect to specific
Acquisitions. Any person receiving such fees may be deemed to be
an underwriter within the meaning of the Securities Act of 1933,
as amended (the "Securities Act").
All of the Securities offered hereby, including Common Stock
issuable upon conversion of the Series A Preferred Stock, may be
resold, subject to certain conditions, pursuant to this
Prospectus by the persons who receive such Securities in
connection with Acquisitions or upon conversion of the Series A
Preferred Stock. See "Resales of Securities" for information
relating to resales, pursuant to this Prospectus or otherwise, of
Securities offered hereby.
The Company does not intend to list the Series A Preferred
Stock on any exchange or automated quotation system. The Common
Stock is listed on the New York, Philadelphia and Chicago stock
exchanges. As of June 30, 1997, there were 77,408,557 shares of
Common Stock outstanding.
----------------
THE SECURITIES TO WHICH THIS PROSPECTUS RELATES HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-----------------
The date of this Prospectus is August , 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder (the "Exchange Act"), and, in
accordance therewith, files reports and other information with
the Securities and Exchange Commission (the "Commission").
Reports, proxy and information statements, and other information
filed by the Company with the Commission may be inspected and
copied at the public reference facilities of the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the following Regional Offices: 7 World Trade
Center, 13th Floor, New York, New York 10048; and Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material also may be obtained
from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Company's Common Stock is listed on the New York, Philadelphia
and Chicago stock exchanges, where reports, proxy and information
statements and other information concerning the Company may be
inspected. In addition, the Commission maintains a site on the
World Wide Web at http://www.sec.gov that contains reports, proxy
and information statements and other information regarding
registrants that file electronically with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company incorporates herein by reference, and as of any
time after the date of this Prospectus and prior to the
termination of the offering made hereby the Company shall be
deemed to have incorporated by reference, (1) the Company's most
recent Annual Report on Form 10-K (the "Latest Annual Report")
filed by the Company with the Commission pursuant to the Exchange
Act, and (2) all other documents filed by the Company with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the filing of the Latest Annual
Report, and all of such documents shall be deemed to be
incorporated by reference in this Prospectus and to be a part
hereof from the date of filing such documents. The documents
incorporated or deemed to be incorporated herein by reference are
sometimes hereinafter called the "Incorporated Documents." Any
statement contained in an Incorporated Document shall be deemed
to be modified or superseded for all purposes to the extent that
a statement herein or in a Prospectus Supplement or supplement
thereto or in any subsequently field Incorporated Document
modifies or supersedes such statement. The Incorporated
Documents incorporated herein by reference as of the date of this
Prospectus are the Annual Report on Form 10-K for the year ended
December 31, 1996, the Quarterly Reports on Form 10-Q for the
quarters ended March 31 and June 30, 1997, the Current Report on
Form 8-K dated April 8, 1997, the Joint Proxy Statement dated
June 25, 1997 (the "Joint Proxy Statement"), and the Current
Reports on Form 8-K dated July 25 and August 7, 1997.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE
AVAILABLE WITHOUT CHARGE UPON REQUEST TO DIANE EISMONT, CORPORATE
SECRETARY, DQE, INC., BOX 68, PITTSBURGH, PENNSYLVANIA, 15230-
0068. TELEPHONE REQUESTS MAY BE DIRECTED TO DIANE EISMONT,
CORPORATE SECRETARY, AT (412) 595-6080. IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD ALLOW AT
LEAST FIVE BUSINESS DAYS FOR DELIVERY.
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<PAGE>
SUMMARY
The following summary, which is presented herein solely to
furnish limited introductory information regarding the Company
and the Securities, is based upon the detailed information
contained elsewhere, or incorporated by reference, in this
Prospectus, is not intended to be complete and is subject, and
qualified in its entirety by reference, thereto. Offerees are
urged to read carefully the entire Prospectus, including the
documents incorporated by reference.
THE COMPANY
DQE is an energy services holding company. Its principal
subsidiaries are Duquesne Light Company, an electric utility
company serving customers in southwestern Pennsylvania, Duquesne
Enterprises, Inc. ("Duquesne Enterprises"), DQE Energy Services,
Inc. (DQE Energy Services"), DQEnergy Partners, Inc. ("DQEnergy
Partners") and Montauk, Inc. ("Montauk").
DQE has entered into a definitive merger agreement with
Allegheny Power System, Inc. ("Allegheny"), pursuant to which,
subject to obtaining required regulatory approvals, a wholly-
owned subsidiary of Allegheny will merge with and into DQE. This
merger will result in DQE becoming a wholly-owned subsidiary of
Allegheny and each DQE shareholder receiving 1.12 shares of
Allegheny common stock for each share of DQE Common Stock. The
combined company will be called Allegheny Energy. The proposed
merger was approved by the respective shareholders of DQE and
Allegheny at meetings held on August 7, 1997.
The Company's executive offices are located at Cherrington
Corporate Center, Suite 100, 500 Cherrington Parkway, Coraopolis,
Pennsylvania, 15108-3184. Its telephone number is 412-262-4700.
MARKET FOR THE SERIES A PREFERRED STOCK AND COMMON STOCK
The Company does not intend to list the Series A Preferred
Stock for trading on any exchange or automated quotations system.
The Common Stock is listed on the New York, Philadelphia and
Chicago stock exchanges under the symbol "DQE." See "Description
of Capital Stock." The following table sets forth, for the
periods indicated, the high and low sale prices per share of the
Common Stock as reported on the NYSE Composite Transactions Tape
during the periods listed.
Calendar Quarter High Low
---------------- ---- ---
1995
----
First Quarter . . . . . . . . . . . . . . $22 3/8 $19 5/8
Second Quarter . . . . . . . . . . . . . . 25 21 5/8
Third Quarter . . . . . . . . . . . . . . 26 5/8 23 1/2
Fourth Quarter . . . . . . . . . . . . . . 30 3/4 26 1/2
1996
----
First Quarter . . . . . . . . . . . . . . 31 1/2 27 1/2
Second Quarter . . . . . . . . . . . . . . 28 7/8 25 3/4
Third Quarter . . . . . . . . . . . . . . 28 3/4 27 3/4
Fourth Quarter . . . . . . . . . . . . . . 30 3/8 27 3/4
1997
----
First Quarter . . . . . . . . . . . . . . 29 7/8 27 3/4
Second Quarter . . . . . . . . . . . . . . 29 3/4 26 1/2
Third Quarter (through August 18, 1997) . 31 7/8 27 1/2
On August 18, 1997, the closing sale price of the Common Stock
as reported on the NYSE Composite Transactions Tape was $31 7/8
per share.
OFFEREES ARE URGED TO OBTAIN CURRENT QUOTATIONS FOR THE MARKET
PRICES OF THE COMMON STOCK.
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<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The selected historical financial information set forth below
should be read in conjunction with the consolidated financial
statements of the Company and notes thereto contained in the
Incorporated Documents.
The income statement data for the years ended December 31,
1994, 1995 and 1996, and the balance sheet data as of December
31, 1995 and 1996, are derived from, and are qualified by
reference to, the Company's audited consolidated financial
statements which are contained in the Incorporated Documents.
The income statement data for the six months ended June 30, 1997
and the balance sheet data as of June 30, 1997 are derived from,
and are qualified by reference to, the Company's unaudited
financial statements which are contained in the Incorporated
Documents. The income statement data for the years ended
December 31, 1992 and 1993 and the balance sheet data as of
December 31, 1992, 1993 and 1994 are derived from audited
consolidated financial statements of the Company which are not
contained in the Incorporated Documents.
SIX
YEAR ENDED DECEMBER 31,
MONTHS
--------------------------------
ENDED
JUNE 30,
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
INCOME STATEMENT DATA:
Total Revenue . . $ 586 $1,225 $1,220 $1,224 $1,183 $1,153
Operating Expenses 455 923 898 907 870 809
----- ------ ------ ------ ------ ------
Income from
Operations . . . 131 302 322 317 313 344
Income before
Cumulative Effect
of Accounting
Changes . . . . . 92 179 171 157 141 142
Cumulative Effect
of Accounting
Changes(a) . . . -- -- -- -- 3 --
----- ------ ------ ------ ------ ------
Net Income . . . . $ 92 $ 179 $ 171 $ 157 $ 144 $ 142
Earnings Per Share
before Effect
of Accounting
Changes . . . . . $ 1.19 $ 2.32 $ 2.20 $ 1.98 $ 1.78 $ 1.78
Cumulative Effect
of Accounting
Changes(a) . . . $ -- $ -- $ -- $ -- $ 0.03 $ --
----- ------ ------ ------ ------ ------
Earnings Per Share
after Effect of
Accounting Changes $ 1.19 $ 2.32 $ 2.20 $ 1.98 $ 1.81 $ 1.78
Dividends Declared
Per Share of
DQE Common Stock $ 0.68 $ 1.30 $ 1.21 $ 1.13 $ 1.08 $ 1.03
BALANCE SHEET DATA:
Total Assets . . . $4,656 $4,639 $4,459 $4,427 $4,550 $3,778
Capitalization
Long-Term Debt $1,356 $1,440 $1,401 $1,378 $1,417 $1,413
Preferred/Preference
Stock . . . . . . . 224 223 71 95 133 132
Common
Shareholders'
Equity . . . . 1,433 1,392 1,329 1,277 1,231 1,171
----- ------ ------ ------ ------ ------
Total
Capitalization . . $3,013 $3,055 $2,801 $2,750 $2,781 $2,716
Book Value Per
Share of DQE
Common Stock . . $18.51 $18.01 $17.13 $16.27 $15.47 $14.75
NOTE TO SELECTED HISTORICAL FINANCIAL DATA
(a) The 1993 amount of $3 million ($.04 per share) represents
DQE's net cumulative effect for changes in accounting for
the adoption of "Statement of Financial Accounting Standards
No. 109, Income Taxes" ($8.0 million) and the cumulative
effect of accounting for maintenance costs by accruing over
the periods between outages for anticipated expenses of
scheduled major fossil generating station outages
($5.4 million).
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<PAGE>
RATIOS OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED AND
PREFERENCE STOCK DIVIDENDS
The ratios of earnings to combined fixed charges and preferred
and preference stock dividends, calculated according to the rules
set forth under the Securities Act of 1933, as amended, for the
following twelve-month periods were:
TWELVE MONTHS ENDED
SIX MONTHS
ENDED DECEMBER 31,
JUNE 30, --------------------------------------------------
1997 1996 1995 1994 1993 1992
----------- ---------- ---------- ---------- ---------- -------
2.69 2.69 2.73 2.57 2.29 2.24
Earnings consist of net income to which has been added taxes
on income and fixed charges. Fixed charges consist of interest
on all indebtedness, amortization of debt expense and discount or
premium, and the estimated interest portion of rentals charged to
income. The Company's share of the fixed charges of an
unaffiliated coal supplier, which amounted to approximately $1.4
million for the six months ended June 30, 1997, has been excluded
from the ratio. Preferred and preference stock dividends consist
of dividends paid on preferred and preference stock of DQE
subsidiaries.
Earnings available for fixed charges include $6.0 million
for the six months ended June 30, 1997, and $12 million, $13.5
million, $13.5 million and $10.4 million for the twelve months
ended December 31, 1996, 1995, 1994 and 1993, respectively, due
to a financial statement reclassification related to Statement of
Financial Accounting Standards No. 109, Accounting for Income
Taxes. The ratio of earnings to fixed charges and preferred and
preference stock dividends, absent this reclassification, equals
2.76 for the six months ended June 30, 1997, and 2.76, 2.82, 2.65
and 2.35 for the twelve months ended December 31, 1996, 1995, 1994
and 1993, respectively.
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<PAGE>
THE COMPANY
DQE is an energy services holding company. DQE's principal
subsidiaries are Duquesne Light Company, Duquesne Enterprises,
DQE Energy Services, DQEnergy Partners and Montauk.
Duquesne Light Company is an electric utility engaged in the
production, transmission, distribution and sale of electric
energy and is the largest of DQE's subsidiaries. Duquesne Light
Company provides electric service to customers in a service
territory of about 800 square miles in southwestern Pennsylvania,
comprised of parts of Allegheny County (including the City of
Pittsburgh), and parts of Beaver County and Westmoreland County.
Duquesne Light Company provides service to about 580,000
customers in this service area and its revenues account for the
majority of DQE's revenue. Duquesne Enterprises makes strategic
investments beneficial to DQE's core energy business. These
investments enhance DQE's capabilities as an energy provider,
increase asset utilization, and act as a hedge against changing
business conditions. DQE Energy Services is a diversified energy
services company offering a wide range of energy solutions for
industrial, utility and consumer markets worldwide. DQE Energy
Services initiatives include energy facility development and
operation, domestic and international independent power
production, and the production and supply of innovative fuels.
DQEnergy Partners was formed in December 1996 to align DQE with
strategic partners to capitalize on opportunities in the dynamic
energy services industry. These alliances enhance the
utilization and value of DQE's strategic investments and
capabilities while establishing DQE as a total energy provider.
Montauk is a financial services company that makes long-term
investments and provides financing for the Company's other
market-driven businesses and their customers.
DQE has entered into a definitive merger agreement with
Allegheny, pursuant to which, subject to obtaining required
regulatory approvals, a wholly-owned subsidiary of Allegheny will
merge with and into DQE. This merger will result in DQE becoming
a wholly-owned subsidiary of Allegheny and each DQE shareholder
receiving 1.12 shares of Allegheny common stock for each share of
DQE Common Stock. The combined company will be called Allegheny
Energy. The proposed merger was approved by the respective
shareholders of DQE and Allegheny at meetings held on August 7,
1997. If the Allegheny transaction is consummated prior to the
conversion of any shares of Series A Preferred Stock, such shares
will thereupon become convertible, at the option of DQE, into
shares of Allegheny common stock. See "Description of Capital
Stock -- Preferred Stock -- Conversion".
The merger is conditioned, among other things, upon the
necessary approvals of various state and federal regulatory
agencies, including the public utility commissions in
Pennsylvania and Maryland; the Securities and Exchange
Commission; the Federal Energy Regulatory Commission and the
Nuclear Regulatory Commission. The companies are hopeful that
the required approvals can be obtained in the first half of 1998.
Allegheny provides electric service to nearly 1.4 million
customers in parts of Maryland, Ohio, Pennsylvania, Virginia and
West Virginia, an area of about 29,000 square miles with a
population of nearly 3 million. Incorporated in Maryland in 1925
with headquarters near Hagerstown, Maryland, Allegheny is a
registered public utility holding company that derives
substantially all of its income from the operations of its
electric utility subsidiaries, Monongahela Power Company, The
Potomac Edison Company, and West Penn Power Company. Allegheny
has a wholly owned, nonutility subsidiary, AYP Capital, which is
pursuing and developing opportunities related to its core utility
business.
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<PAGE>
THE ACQUISITIONS
The Company intends to issue the Series A Preferred Stock from
time to time in connection with the acquisition by the Company of
other businesses, assets or securities ("Acquisitions"). It is
expected that each Acquisition will be structured either as a
merger or as an acquisition of assets or securities. The
structure and terms of each Acquisition will be determined by
direct negotiations with the owners or controlling persons of the
businesses, assets or securities to be acquired by the Company in
such Acquisition.
The specific terms of the shares of Series A Preferred Stock
to be issued in connection with each Acquisition, including the
dividend rate and mandatory redemption date, and information with
respect to finders fees, if any, will be set forth in an
amendment or supplement to this Prospectus delivered to the
offerees prior to the consummation of such Acquisition. As a
general rule, each Acquisition and the Company being acquired
will be described in such an amendment or supplement; provided,
however, that if any Acquisition would itself qualify for an
exemption from the registration requirements of the Securities
Act, absent the existence of other similar (prior or subsequent)
transactions, no information regarding the Acquisition or the
company being acquired is expected to be furnished prior to the
consummation of the Acquisition, and such information, to the
extent deemed material, will be contained in Incorporated
Documents filed after the consummation of such Acquisition.
RESALES OF SECURITIES
The Securities to be issued in connection with Acquisitions
have been registered under the Securities Act. Individuals who
are not affiliates of the entity being acquired and do not become
affiliates of the Company will not be subject to resale
restrictions under Rule 145 promulgated under the Securities Act
and, unless otherwise contractually restricted, may resell the
Securities immediately following the consummation of the
Acquisition. Affiliates of the Company, or of entities acquired
by the Company, may not resell Securities registered under the
Registration Statement to which this Prospectus relates except
pursuant to an effective registration statement under the
Securities Act covering such shares, or in compliance with Rule
145 or another applicable exemption from the registration
requirements of the Securities Act. "Affiliates" are generally
defined as persons who control, are controlled by or are under
common control with the acquired company.
Generally, Rule 145 will permit such affiliates to sell such
Securities immediately following the Acquisition in compliance
with certain volume limitations and manner of sale requirements.
Under Rule 145, sales by such affiliates during any three-month
period cannot exceed the greater of (i) one percent of the shares
of the class of such Securities outstanding and (ii) the average
weekly reported volume of trading in shares of such class of
Securities on all national securities exchanges during the four
calendar weeks preceding the proposed sale. These restrictions
will cease to apply in certain circumstances one year from the
date of the Acquisition, provided that the person or entity is
not then an affiliate of the Company. The ability of affiliates
of entities acquired by the Company to resell Securities under
Rule 145 for two years subsequent to such acquisition will be
subject to the Company having satisfied its Exchange Act
reporting requirements for specified periods prior to the time of
sale.
The Company does not intend to list the Series A Preferred
Stock on any securities exchange or automated quotation system.
Therefore, any resale of Series A Preferred Stock that is not
registered for resale by affiliates of acquired entities during
any period for which Rule 145 volume limitations apply must be
limited to one percent of the Series A Preferred Stock then
outstanding or must be made pursuant to an exemption from the
registration requirements of the Securities Act.
This Prospectus may be used in connection with resales of the
Securities by affiliates of the Company or of entities acquired
by the Company. Such persons may not use this Prospectus without
the consent of the Company. Any information with respect to
selling securityholders, the Securities being resold and plan of
distribution with respect to such Securities will be set forth in
an amendment or supplement to this Prospectus.
-7-
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company's Restated Articles of Incorporation, as amended
(the "Articles"), authorize the Company to issue up to
182,500,000 shares of Common Stock. The Articles also authorize
the Company to issue up to 4,000,000 shares of Preferred Stock,
no par value (the "Preferred Stock"). As of June 30, 1997, there
were 77,408,557 shares of Common Stock outstanding. Prior to
this Offering, no shares of Preferred Stock had ever been issued
or were outstanding.
PREFERRED STOCK
GENERAL
The Board of Directors is authorized to divide the Preferred
Stock into series and, as to each series, to determine the
designation and number of shares of such series and the voting
rights, preferences, limitations and special rights, if any, of
the shares of such series. Such divisions and determinations
shall be set forth in one or more amendments to the Articles
adopted by the Board of Directors.
The Board of Directors has established a series of the
Preferred Stock consisting of 1,000,000 shares, designated
"Preferred Stock, Series A (Convertible)" (the "Series A
Preferred Stock") and having the voting rights preferences,
limitations and special rights set forth below. Shares of the
Series A Preferred Stock will be issued from time to time in
connection with Acquisitions. All shares of Series A Preferred
Stock will be identical except for the date of issuance thereof,
the dividend rate thereon and the date, if any, for the mandatory
redemption thereof.
DIVIDENDS
General. When, as and if declared by the Board of Directors
and subject to the rights of the holders of any shares of any
series of Preferred Stock or other stock ranking senior to the
Series A Preferred Stock with respect to dividends, the Company
will pay, out of funds legally available therefor, dividends in
cash to the holders of shares of Series A Preferred at the
respective rates thereon. The dividend rates on each share of
Series A Preferred Stock will be set forth in a supplement to
this Prospectus relating to such share.
Dividends on shares of the Series A Preferred Stock will be
payable, subject to the terms and conditions set forth in the
Articles, on each Dividend Payment Date (as hereinafter defined),
beginning on the first Dividend Payment Date following the
respective Dates of Issuance (as hereinafter defined) of such
shares, to the registered holders of such shares as of the close
of business on the Record Date (as hereinafter defined) with
respect to such Dividend Payment Date; provided, however, that,
if the Date of Issuance of a share of Series A Preferred Stock
shall be after a Record Date and before the corresponding
Dividend Payment Date, the first payment of a dividend on such
share will be made on the next succeeding Dividend Payment Date
to the holder in whose name such share is registered at the close
of business on the Record Date with respect to such next
succeeding Dividend Payment Date.
Accrual of Dividends, etc. Dividends will begin to accrue on
shares of the Series A Preferred Stock from the Date or Dates of
Issuance thereof. Dividends will accrue on a daily basis whether
or not at the time the Corporation shall have funds legally
available for distributions to shareholders. Accrued dividends
for any period less than a full annual period will be computed on
the basis of a year deemed to consist of (A) 360 days and (B)
twelve calendar months each, itself, deemed to consist of 30
days; provided, however, that, if any part of the period for
which accrued dividends are being computed shall consist of a
portion of a calendar month, accrued dividends for such part of
such period will be computed on the basis of the actual number of
days elapsed during such calendar month (excluding the date of
payment, if any, in such calendar month) in relation to the full
annual dividend accrued during a deemed 360-day year. Accrued
but unpaid dividends will accumulate as of the Dividend Payment
Date on which they first become payable, but no interest shall
accrue on accumulated but unpaid dividends.
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<PAGE>
Parity Stock. So long as any Series A Preferred Stock shall
be outstanding, if (A) at any time the Company shall not have
satisfied in full the cumulative dividends accrued on the Series
A Preferred Stock for all Dividend Periods (as hereinafter
defined) ended at or prior to such time and (B) at such time
there shall have accrued and shall remain unpaid, for Dividend
Periods ended at or prior to such time, dividends on shares of
any other series of the Preferred Stock or any other class of
stock in either case ranking as to dividends on a parity with the
Series A Preferred Stock, any funds of the Corporation legally
available for the purpose will be allocated among all cumulative
dividends accrued and unpaid, for all Dividend Periods ended at
or prior to such time, on all such parity series of the Preferred
Stock and such other parity stock in proportion to the respective
amounts thereof.
Junior Securities. So long as any Series A Preferred Stock
shall be outstanding, the Company will not (A) declare or pay or
set apart for payment any dividends or make any other
distributions on any Junior Securities (as hereinafter defined)
or (B) make any payment on account of the redemption, purchase or
other acquisition or retirement of any Junior Securities, unless,
as of the date of any such declaration, setting aside or payment,
as the case may be, there shall also have been declared and paid
or set aside for payment dividends accumulated on the Series A
Preferred Stock during all Dividend Periods ended on or prior to
such date; provided, however, that the foregoing restriction will
not prohibit (X) any dividend payable solely in shares of Junior
Securities or (Y) the acquisition of any Junior Securities either
(i) pursuant to any employee or director incentive or benefit
plan or arrangement (including any employment, severance or
consulting agreement), or any dividend or interest reinvestment
or stock purchase plan, of the Company or any affiliate of the
Company heretofore or hereafter adopted or (ii) in exchange
solely for any other Junior Securities; and provided, further,
that nothing in the Articles will prevent the simultaneous
declaration or payment of dividends on both the Series A
Preferred Stock and any Junior Securities if, at the time of such
declaration, there are sufficient funds legally available to pay
all dividends concurrently.
LIQUIDATION.
General. Subject to the rights of the holders of any stock of
the Company ranking senior to or on a parity with the Series A
Preferred Stock in respect of distributions upon the liquidation,
dissolution or winding up of the Company, upon any such
liquidation, dissolution or winding up (whether voluntary or
involuntary), each holder of Series A Preferred Stock will be
entitled to be paid, out of the assets of the Company which
remain after the payment and discharge of all liabilities of the
Company, before any distribution or payment is made upon any
Junior Securities, an amount in cash equal to the aggregate
Liquidation Value (as hereinafter defined) of the shares of
Series A Preferred Stock held by such holder plus an amount equal
to accrued and unpaid dividends thereon to (but excluding) the
date of payment, and the holders of Series A Preferred Stock will
not be entitled to any further payment. If, upon any such
liquidation, dissolution or winding up of the Company, the
Company's assets available to be distributed among the holders of
the Series A Preferred Stock and any other series of the
Preferred Stock and any other stock of the corporation in either
case ranking as to any such distribution on a parity with the
Series A Preferred Stock are insufficient to permit payment to
such holders of the aggregate amount which they are entitled to
be paid, then the entire assets available to be distributed to
the Company's shareholders will be allocated among all
liquidation requirements on all such parity series of Preferred
Stock and such other parity stock in proportion to the respective
amounts then required for the satisfaction thereof.
Neither the consolidation, merger or other combination of the
Company with or into any other entity or entities (whether or not
the Company is the surviving entity), nor the sale, transfer or
other disposition by the Company of all or any part of its
assets, nor the reduction of the capital stock of the Company nor
any other form of recapitalization or reorganization affecting
the Company will be deemed to be a liquidation, dissolution or
winding up of the Company within the meaning of the preceding
paragraph.
REDEMPTION
Limitation. Anything herein to the contrary notwithstanding,
the Company will not have at any time any right to redeem, or any
obligation to redeem, any share of Series A Preferred Stock if,
by virtue of the Company having such right or obligation at such
time, such share of Series A Preferred Stock, effective as of its
Date of Issuance,
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would not constitute "stock" for purposes of any of Sections 351,
354, 355, 356 and 1036 of the Internal Revenue Code of 1986, as
amended to the date hereof (the "Code"), or any successor
provisions thereto.
By virtue of such limitation and under current law, the
Company would not have any right to redeem or any obligation to
redeem any share of Series A Preferred Stock. However, any share
of Series A Preferred Stock issued at a time when this limitation
no longer would apply would be redeemable as described under "--
Mandatory Redemption" and "--Optional Redemption" below.
The supplement to this Prospectus which sets forth the terms
of any share of Series A Preferred Stock will state whether this
limitation is applicable to such share on its Date of Issuance.
Mandatory Redemption. If, due to a change in law, any share
of Series A Preferred Stock is issued at a time when the
limitation on redemption described under "--Limitation" above no
longer applies, the Company will, on the Scheduled Call Date (as
hereinafter defined) for such share redeem such share at a price
per share equal to the Liquidation Value thereof plus an amount
equal to accrued and unpaid dividends thereon to (but excluding)
the date fixed for redemption; provided, however, that the
Company will not be obligated to redeem any share of Series A
Preferred Stock which is to be converted into Conversion
Securities (as hereinafter defined) on or prior to the Scheduled
Call Date (see "Conversion" below). The Scheduled Call Date for
each share of Series A Preferred Stock will be set forth in a
supplement to this Prospectus relating to such share.
Optional Redemption. If, due to a change in law, any share of
Series A Preferred Stock is issued at a time when the limitation
on redemption described under "--Limitation" above no longer
applies, the Company may, at any time after the fifth anniversary
of the Date of Issuance of such shares and from time to time
thereafter, redeem all or any number of such shares of Series A
Preferred Stock then outstanding at a price per share equal to
the Liquidation Value thereof plus an amount equal to accrued and
unpaid dividends thereon to (but excluding) the date fixed for
redemption. If less than all of the outstanding shares of such
redeemable Series A Preferred Stock are to be redeemed, the
Company will select the shares to be redeemed based on their
respective Dates of Issuance; and, if less than all of the
outstanding shares of the Series A Preferred Stock having the
same Date of Issuance are to be redeemed, the Company will select
the shares to be redeemed pro rata, by lot or by any other method
as shall be determined by the Company to be equitable.
Notice of Redemption. Unless otherwise required by applicable
law, any notice of mandatory or optional redemption will be sent
to the holders of the shares of Series A Preferred Stock to be
redeemed at the addresses shown on the books of the Company by
first class mail, postage prepaid, mailed not less than thirty
(30) days nor more than sixty (60) days prior to the redemption
date.
With respect to any notice of redemption of shares of Series A
Preferred Stock at the option of the Company, unless, upon the
giving of such notice, such shares shall be deemed to have been
redeemed and to be no longer outstanding by reason of the deposit
with a redemption agent of funds sufficient to effect such
redemption in accordance with and subject to the Articles, such
notice may state that such redemption shall be conditional upon
the setting aside by the Company or the delivery to a redemption
agent, on or prior to the date fixed for such redemption, of
legally available funds sufficient to pay the redemption price of
such shares, and that if such funds shall not have been so set
aside or delivered such notice shall be of no force or effect and
the Company shall not be required to redeem such shares. In the
event that such notice of redemption contains such a condition
and such funds are not so set aside or delivered, the redemption
shall not be made and within a reasonable time thereafter notice
shall be given that such funds were not so set aside or delivered
and such redemption was not required to be made.
Parity Stock. If (A) at any time the Company shall not have
satisfied in full its mandatory redemption obligations described
above and (B) at such time the Company shall be obligated to
redeem, purchase or otherwise acquire or retire shares of any
other series of Preferred Stock or any other class of stock in
either case ranking as to distributions upon liquidation,
dissolution or winding up on a parity with the Series A Preferred
Stock, any funds
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of the Company legally available for the purpose shall be
allocated among all such obligations on all such parity
series of Preferred Stock and such other parity stock in
proportion to the respective amounts thereof.
Junior Securities. If at any time the Company shall not have
satisfied in full its mandatory redemption obligations described
above, the Company shall not (A) declare or pay or set apart for
payment any dividends or make any other distributions on any
Junior Securities or (B) make any payment on account of the
redemption, purchase or other acquisition or retirement of any
Junior Securities; provided, however, that the foregoing
restriction shall not prohibit (X) any dividend payable solely in
shares of Junior Securities or (Y) the acquisition of Junior
Securities either (i) pursuant to any employee or director
incentive or benefit plan or arrangement (including any
employment, severance or consulting agreement), or any dividend
or interest reinvestment or stock purchase plan, of the Company
or any affiliate of the Company heretofore or hereafter adopted
or (ii) in exchange solely for any other Junior Securities.
CONVERSION
General. The Company may, at any time and from time to time,
convert all or any number of shares of the Series A Preferred
Stock into Conversion Securities. If less than all of the
outstanding shares of the Series A Preferred Stock are to be
converted, the Company will select the shares to be converted
based on their respective Dates of Issuance; and, if less than
all of the outstanding shares of the Series A Preferred Stock
having the same Date of Issuance are to be converted, the Company
will select the shares to be converted pro rata, by lot or by any
other method determined by the Company to be equitable. Each
share of Series A Preferred Stock to be so converted will be
converted into a number of units of Conversion Securities
computed by dividing the Liquidation Value by the Fair Market
Value (as hereinafter defined) for the Conversion Securities, all
as of the close of business on the trading day next preceding the
date fixed for conversion. If the Conversion Securities are not
securities of the Company, prior to the conversion of any shares
of Series A Preferred Stock, the Company will acquire sufficient
Conversion Securities to effectuate the conversion. The Company
will make a cash payment in lieu of delivering fractional
securities upon any conversion, such payment to be based upon the
Fair Market Value of any fractional securities otherwise
deliverable as of the close of business on the trading day next
preceding the date fixed for conversion.
Mandatory Conversion. Each share of Series A Preferred Stock
which is not subject to mandatory redemption on the Scheduled
Call Date thereof, to the extent that such share has not been
converted into Conversion Securities prior to such Scheduled Call
Date, will be converted automatically into Conversion Securities
on such Scheduled Call Date. See "Redemption--Limitation."
Notice of Conversion. Unless otherwise required by applicable
law, notice of conversion pursuant to this subsection (d) will be
sent to the holders of shares of Series A Preferred Stock to be
converted at the addresses shown on the books of the Company by
first class mail, postage prepaid, mailed not less than thirty
(30) days nor more than sixty (60) days prior to the conversion
date.
Conversion Procedure. Upon the surrender by a holder of
converted shares of Series A Preferred Stock of certificates
representing such shares in accordance with the notice of
conversion on or after the conversion date, the Company will
deliver to or upon the order of such holder:
(A) whole units of the Conversion Securities into which
such shares of Series A Preferred Stock have been converted,
certificates representing securities to be registered in such
name or names, and to be issued in such denominations, as such
holder shall have specified;
(B) in lieu of fractional units of Conversion Securities
resulting from the conversion of such Series A Preferred
Stock, an amount equivalent to the Fair Market Value of any
such fractional units of Conversion Securities as of the close
of business on the trading day next preceding the conversion
date;
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(C) an amount equivalent to accrued and unpaid dividends on
such shares of Series A Preferred Stock to (but excluding) the
conversion date; and
(D) a certificate representing any shares of Series A
Preferred Stock which had been represented by the certificate
or certificates delivered to the Company in connection with
such conversion but which were not converted.
Miscellaneous. The delivery of certificates representing
Conversion Securities upon conversion of shares of Series A
Preferred Stock shall be made without charge to the holders of
such shares for any tax or other governmental charge in respect
thereof or other cost incurred by the Company in connection with
such conversion, except that the Company shall not be required to
pay any such tax or charge payable by reason of the registration
of Conversion Securities in a name other than the name of the
holder of the shares of Series A Preferred Stock which were so
converted.
Anything herein to the contrary notwithstanding, upon the
conversion of shares of Series A Preferred Stock, the Company
shall have the right to elect to deliver, or cause the delivery
of, either (i) authorized but unissued Conversion Securities
reserved for such purpose or (ii) authorized but previously
issued Conversion Securities.
The Company currently intends to purchase authorized but
previously issued shares of Common Stock for delivery upon the
conversion of any share of Series A Preferred Stock which is
convertible into Common Stock of the Company.
DEFINITIONS
"Common Stock" means the Company's common stock, without par
value.
"Conversion Securities" means, initially, shares of Common
Stock; provided, however, that if there shall have occurred an
Organic Change, then the term "Conversion Securities" shall mean
the class or type of stock, securities, cash or other assets
(payable in kind) to which the holders of Common Stock or other
Conversion Securities outstanding immediately prior to the
effective time of the Organic Change are entitled to receive
(either directly or upon subsequent liquidation) with respect to
or in exchange for Common Stock or such other Conversion
Securities as a result of the Organic Change; and provided,
further, that if, by virtue of the structure of such transaction,
a holder of Common Stock or other Conversion Securities is
required to make an election with respect to the nature and kind
of consideration to be received in such transaction, then
Conversion Securities shall mean the stock, securities, cash or
other assets (payable in kind) receivable in such transaction by
a holder of the number of shares of Common Stock or other
Conversion Securities into which shares of Series A Preferred
Stock could have been converted immediately prior to the
effective time of such transaction if such holder of Common Stock
or other Conversion Securities failed to exercise any rights of
election as to the kind or amount of stock, securities, cash or
other assets receivable upon such transaction (it being
understood that, if the kind or amount of stock, securities, cash
or other assets receivable upon such transaction is not the same
for each non-electing share, then the kind and amount of stock,
securities, cash or other property receivable upon such
transaction for each non-electing share shall be the kind and
amount so receivable per share by a plurality of the non-electing
shares).
"Date of Issuance," as to any share of Series A Preferred
Stock, means the date on which the Company initially issues such
share, irrespective of the subsequent delivery of certificates
for such share upon registration of transfer or exchange.
"Dividend Payment Date," as to the Series A Preferred Stock,
means January 1, April 1, July 1 and October 1.
"Dividend Period," as to the shares of the Series A Preferred
Stock or any other series of the Preferred Stock or of any other
class of stock in either case ranking as to dividends on a parity
with the Series A Preferred Stock, means the period commencing on
any dividend payment date prescribed for such series and ending
on the day next preceding the next succeeding dividend payment
date for such series, except that the initial Dividend Period
for any
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particular shares of any series or class shall be the period
commencing on the date or dates from which dividends on such
shares shall be cumulative and ending on the day next preceding
the first dividend payment date prescribed for such shares.
"Fair Market Value," as to publicly traded shares of Common
Stock or any other class of capital stock or securities of the
Company or any other issuer which are publicly traded, as of a
particular day, means the average Market Price of such shares or
securities over a period of five consecutive trading days ending
on (and including) the trading day as of which "Fair Market
Value" is being determined. "Fair Market Value", as to any
security which is not publicly traded or of any other property,
as of a particular day, means the fair value thereof as
determined by an independent investment banking or appraisal firm
experienced in the valuation of such securities or property
selected in good faith by the Board of Directors, or, if no such
investment banking or appraisal firm is in the good faith
judgment of the Board of Directors available to make such
determination, as determined in good faith by the Board of
Directors.
"Junior Securities" means the Common Stock and (1) for
purposes of clause (A) in the paragraph "Junior Securities" under
each of "Dividends" and "Redemption" above, any other class or
series of stock ranking junior to the Series A Preferred Stock in
right of payment of dividends or (2) for all other purposes, any
other class or series of stock ranking junior to the Series A
Preferred Stock in right of payment of amounts distributable upon
liquidation, dissolution or winding up.
"Liquidation Value," as to any share of Series A Preferred
Stock, means the amount of $100.
"Market Price," as to publicly traded shares of Common Stock
or any other class of capital stock or other security of the
Company or any other issuer which are publicly traded, as of a
particular day, means the last reported sales price, regular way,
or, if no sale takes place on such day, the average of the
reported closing bid and asked prices, regular way, in either
case as reported on the Composite Tape for New York Stock
Exchange Transactions or, if such security is not listed or
admitted to trading on the New York Stock Exchange, on the
principal national securities exchange on which such security is
listed or admitted to trading or, if not listed or admitted to
trading on any national securities exchange, on the National
Market System of the National Association of Securities Dealers,
Inc. Automated Quotation System or, if such security is not
quoted on such National Market System, the average of the closing
bid and asked prices on such day in the over-the-counter market
as reported by NASDAQ or, if bid and asked prices for such
security on such day shall not have been reported through NASDAQ,
the average of the bid and asked prices for such day as furnished
by any New York Stock Exchange member firm regularly making a
market in such security selected for such purpose by the Board of
Directors.
"Organic Change" means any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or
substantially all of the Company's assets or similar transaction,
in each case which is effected in such a manner that the holders
of Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities, cash or other assets
with respect to or in exchange for Common Stock. The
transactions contemplated by the Agreement and Plan of Merger,
dated as of April 5, 1997, among the Company, Allegheny Power
System, Inc. and AYP Sub, Inc., if consummated, would constitute
an Organic Change, and, giving effect thereto, Conversion
Securities would be shares of common stock, par value $1.25 per
share, of Allegheny Power System, Inc. Anything herein to the
contrary notwithstanding, if the Company shall not be the
surviving or resulting person following any Organic Change, the
Series A Preferred Stock shall by virtue of such Organic Change
be exchanged for, or changed, reclassified or converted into,
preferred stock of such successor or resulting person having in
respect of such person, insofar as practicable, the same
preferences, limitations, voting rights and special rights that
the Series A Preferred Stock had immediately prior to such
Organic Change except for the change in the type of Conversion
Securities into which such preferred stock is convertible
effected as a result of such Organic Change.
"Record Date," as to any Dividend Payment Date, means the
fifteenth day of the calendar month next preceding such Dividend
Payment Date.
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"Scheduled Call Date," as to any share of Series A Preferred
Stock, means the first day of the first month commencing after
the sixth anniversary of the Date of Issuance of such share.
RANKING; PRO RATA SHARING; RETIREMENT
Ranking. The Series A Preferred Stock will rank senior to the
Common Stock as to the payment of dividends and as to the
distribution of assets on liquidation, dissolution or winding-up
of the Company, and, unless otherwise provided in the Articles,
the Series A Preferred Stock will rank on a parity with all other
series of Preferred Stock as to the payment of dividends and as
to the distribution of assets on liquidation, dissolution or
winding-up.
Pro Rata Sharing. Except to the extent otherwise provided in
the Articles, all payments to be made in respect of the shares of
Series A Preferred Stock and any other stock ranking on a parity
with the Series A Preferred Stock with respect to payments of
such character will be made pro rata, so that amounts paid per
share on the Series A Preferred Stock and such other stock will
in all cases bear to each other the same ratio that the amounts
then payable per share on the shares of the Series A Preferred
Stock and such other stock bear to each other.
Retirement. Any shares of Series A Preferred Stock redeemed
or converted as provided hereby will be retired as shares of
Series A Preferred Stock and be restored to the status of
authorized but unissued shares of Preferred Stock, undesignated
as to series, and may thereafter be reissued as permitted by
applicable law.
VOTING RIGHTS
General. The holders of Series A Preferred Stock will be
entitled to vote on all matters submitted to a vote of the
holders of Common Stock, voting together with the holders of
Common Stock as one class. Each share of Series A Preferred Stock
will be entitled three votes, subject to certain adjustments.
No Special Rights. Except to the extent otherwise
specifically provided by applicable law or set forth in the
preceding paragraph, holders of Series A Preferred Stock will
have no special voting rights and their consent shall not be
required for the taking of any corporate action.
Under Pennsylvania law, the holders of shares of Series A
Preferred Stock will be entitled to vote as a class with respect
to any amendment to the Articles which would authorize a new
series of Preferred Stock or another class of stock having a
preference as to dividends or assets which is senior to the
shares of Series A Preferred Stock, or would authorize an
increase in the number of authorized shares of any such series or
class; and no such amendment may be adopted unless, among other
things, it receives the affirmative vote of a majority of the
votes cast in such class vote. In addition, under Pennsylvania
law, the holders of shares of Series A Preferred Stock will be
entitled to similar voting rights, as a class, with respect to
any merger or consolidation which would effect any change in the
Articles if such holders would have been entitled to a class vote
with respect to such change if such change had been accomplished
as an amendment to the Articles rather than by merger or
consolidation.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion sets forth the material United States
federal income tax consequences under existing law of the
ownership and disposition of the shares of Series A Preferred
Stock. Changes to existing law, which could have retroactive
effect, may alter the consequences described below. This
discussion relates only to shares of Series A Preferred Stock
that are held as capital assets within the meaning of Section
1221 of the Code, and does not deal with all tax consequences
that may be relevant in the particular circumstances of each
holder (some of which, such as dealers in securities, insurance
companies, tax-exempt organizations and foreign persons, may be
subject to special rules). Except as otherwise indicated,
statements of legal conclusions regarding federal income tax
consequences in this section reflect the opinion of Reid & Priest
LLP, counsel to the Company. These conclusions are based on the
Code, regulations promulgated thereunder, and the current
judicial and administrative interpretations thereof. The Company
has not and will not seek a ruling as to any tax matters relating
to the shares of Series A Preferred Stock. PERSONS CONSIDERING
ANY TRANSACTION PURSUANT TO WHICH THEY WILL RECEIVE SHARES
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OF SERIES A PREFERRED STOCK SHOULD CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE APPLICATION OF THE UNITED STATES FEDERAL INCOME
TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX
CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR
FOREIGN TAXING JURISDICTION.
Classification of Series A Preferred Stock. The Series A
Preferred Stock should be treated as stock for federal income tax
purposes. The remainder of this discussion assumes that the
Series A Preferred Stock will be respected as stock for federal
income tax purposes.
Dividends. Dividends paid on the shares of Series A Preferred
Stock out of the Company's current or accumulated earnings and
profits (as determined for federal income tax purposes) will be
taxable as ordinary income. To the extent that the amount of
distributions paid on the Series A Preferred Stock exceeds the
Company's current or accumulated earnings and profits (as
determined for federal income tax purposes), the distributions
will be treated as a return of capital, thus reducing the
holder's adjusted tax basis in such stock. The amount of any
distribution which exceeds the holder's adjusted basis in the
Series A Preferred Stock will be taxed as capital gain, and will
be long-term capital gain if the holder's holding period for such
stock exceeds one year. The Company expects to have sufficient
earnings and profits (as determined for federal income tax
purposes) to cause distributions on the Series A Preferred Stock
to be treated as dividends for federal income tax purposes.
To the extent that dividends are treated as ordinary income,
dividends received by corporate holders will qualify for the 70
percent intercorporate dividends-received deduction subject to
the minimum holding period (generally at least 46 days) and other
applicable requirements. Under certain circumstances, a
corporate holder may be subject to the alternative minimum tax
with respect to the amount of its dividends-received deduction.
Under certain circumstances, a corporation that receives an
"extraordinary dividend," as defined in Section 1059(c) of the
Code, is required to reduce its stock basis by the non-taxed
portion of such dividend. Generally, quarterly dividends not in
arrears paid to an original holder of the shares of Series A
Preferred Stock will not constitute extraordinary dividends under
Section 1059(c). In addition, under Section 1059(f), any dividend
with respect to "disqualified preferred stock" is treated as an
"extraordinary dividend." However, while the issue is not free
from doubt due to the lack of authority directly on point, the
shares of Series A Preferred Stock will not constitute
"disqualified preferred stock."
Redemption Premium. Under certain circumstances, Section
305(c) of the Code requires that any excess of the redemption
price of preferred stock over its issue price be includable in
income, prior to receipt, as a constructive dividend. While the
issue is not free from doubt due to a lack of authority
addressing the issue, Section 305(c) should not currently apply
to stock with terms such as those of the shares of Series A
Preferred Stock.
Conversion into Common Stock. Gain or loss generally will not
be recognized by a holder upon the conversion of shares of Series
A Preferred Stock into shares of Common Stock if no cash is
received. Income may be recognized, however, to the extent cash
is received in payment of accrued and unpaid dividends in
arrears. Such income would probably be characterized as dividend
income, although some uncertainty exists as to the appropriate
characterization of payments in satisfaction of undeclared
accrued and unpaid dividends. In addition, a holder who receives
cash in lieu of a fractional share will be treated as having
received such fractional share and having exchanged it for cash
in a transaction subject to Section 302 of the Code and related
provisions. Such exchange should generally result in capital
gain or loss measured by the difference between the cash received
for the fractional share interest and the holder's basis in the
fractional share interest.
Generally, a holder's basis in the Common Stock received upon
the conversion of the shares of Series A Preferred Stock (other
than shares of Common Stock taxed upon receipt) will equal the
adjusted tax basis of the converted shares of Series A Preferred
Stock plus the amount of gain recognized, minus the amount of
cash received, and the holding period of such Common Stock will
include the holding period of the redeemed or converted shares of
Series A Preferred Stock.
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Backup Withholding. Certain non-corporate holders may be
subject to backup withholding at a rate of 31 percent on
dividends and certain consideration received upon the redemption
or conversion of the shares of Series A Preferred Stock.
Generally, backup withholding applies only when the taxpayer
fails to furnish or certify a property Taxpayer Identification
Number or when the taxpayer is notified by the Internal Revenue
Service that the taxpayer has failed to report payments of
interest and dividends properly. Holders should consult their
tax advisors regarding their qualification for exemption from
backup withholding and the procedure for obtaining any applicable
exemption.
COMMON STOCK
GENERAL
Except for the rights of holders of the Series A Preferred
Stock and such rights as may be granted to the holders of any
other series of Preferred Stock in the amendment establishing
such series or as required by law, all of the voting and other
rights of the shareholders of the Company belong exclusively to
the holders of the Common Stock.
VOTING RIGHTS
General. Each holder of Common Stock is entitled to one vote
for each whole share held and in addition at all elections of
directors is entitled to cumulate votes.
Election of Directors. The Articles provide that the Board of
Directors shall consist of such number of directors as may be
fixed from time to time by a majority of the Disinterested
Directors (defined below) then in office, plus such number of
additional directors, if any, as the holders of Preferred Stock,
voting separately as a class or series, shall have the right from
time to time to elect. The Articles further provide that the
Board of Directors, excluding any directors elected by the
holders of Preferred Stock, voting separately as a class or
series, shall be divided into three classes, as nearly equal in
number as possible. One class of directors is elected at each
annual meeting of shareholders, to hold office until the third
succeeding annual meeting and until their successors are elected
and qualify.
The Articles provide that for so long as the general corporate
law of the Company's state of incorporation specifically mandates
such power, a director, any class of directors or the entire
Board of Directors may be removed from office by shareholder vote
without cause, but only if shareholders entitled to cast at least
80% of the votes which all shareholders are entitled to cast at
an annual election of directors or of such class of directors
shall vote in favor of such removal. The power of shareholders
to remove directors without cause is not required under the
Pennsylvania Business Corporation Law as currently in effect and,
therefore, pursuant to the Articles, the shareholders may remove
a director from office only for cause and only if the holders of
at least a majority of the voting power of the then outstanding
shares of Voting Stock (defined below) which are not beneficially
owned by an Interested Shareholder (defined below) shall vote in
favor of such removal.
The Articles provide that vacancies in the members of the
Board of Directors elected by holders of Voting Stock, including
vacancies resulting from an increase in the number of directors,
shall be filled only by a majority vote of the Disinterested
Directors then in office, though less than a quorum, except as
otherwise required by law. Directors elected to fill vacancies
will hold office for a term expiring at the annual meeting of
shareholders at which the term of the class to which they have
been elected expires.
The Articles require that any shareholder intending to
nominate a candidate for election as a director must give written
notice of the nomination, containing certain specified
information, to the Secretary of the Company not later than 120
days in advance of the meeting at which the election is to be
held.
The provisions of the Articles with respect to Election of
Directors described above would not apply to any directors
elected by the holders of any class or series of stock having a
preference over the Common Stock as to dividends or assets if
such directors are elected by holders of such stock, voting
separately as a class or series.
-16-
<PAGE>
Business Combinations. The Articles provide that the
affirmative vote of the holders of (i) at least 80% of the voting
power of all then outstanding shares of Voting Stock (as
hereinafter defined), voting as a single class, and (ii) at least
a majority of the voting power of the then outstanding shares of
Voting Stock which are not beneficially owned by an Interested
Stockholder (as hereinafter defined), voting as a single class,
is required for the approval or authorization of any Business
Combination (as hereinafter defined) involving an Interested
Stockholder, except (a) a Business Combination approved by a
majority of the Disinterested Directors (as hereinafter defined),
or (b) a Business Combination as to which certain minimum price
and procedural requirements are satisfied. In the event the
requisite approval of the Board would be given or the minimum
price and procedural requirements would be satisfied with respect
to a particular Business Combination, the normal requirements of
Pennsylvania law would apply to such Business Combination.
An "Interested Stockholder" at any particular time means any
person which (1) is at such time the beneficial owner, directly
or indirectly, of more than 10% of the voting power of the
outstanding Voting Stock; (2) is at such time an affiliate of the
Company and at any time within the two-year period immediately
prior to such time was the beneficial owner, directly or
indirectly, of more than 10% of the voting power of the then
outstanding Voting Stock; or (3) is at such time an assignee of
or has otherwise succeeded to the beneficial ownership of any
shares of Voting Stock which were at any time within the two-year
period immediately prior to such time beneficially owned by an
Interested Stockholder, if such assignment or succession shall
have occurred in the course of a transaction or series of
transactions not involving a public offering within the meaning
of the Securities Act. A person is deemed the "beneficial owner"
of any shares which such person or any of its "affiliates" or
"associates" (as defined in the Articles) owns directly or
indirectly or has the right to acquire or vote, or which are
owned by any other person with which such person or an affiliate
or an associate has an understanding with respect to acquiring,
holding, voting or disposing of Voting Stock.
A "Business Combination" includes the following transactions:
(1) a merger, consolidation or share exchange of the Company or a
subsidiary with an Interested Stockholder (or an affiliate or
associate of an Interested Stockholder); (2) the sale, lease,
exchange, mortgage, pledge, transfer, or other disposition or
investment, loan or other arrangement by the Company or a
subsidiary of 5% or more of the Company's consolidated total
assets to, with or for the benefit of an Interested Stockholder
(or an affiliate or associate of an Interested Stockholder); (3)
the issuance or transfer of securities of the Company or of a
subsidiary to an Interested Stockholder (or an affiliate or
associate of an Interested Stockholder) in exchange for cash,
securities or other consideration valued at 5% or more of the
Company's consolidated total assets; (4) the adoption of any plan
for the liquidation, dissolution or division of the Company
proposed by or on behalf of an Interested Stockholder (or an
affiliate or associate of any Interested Stockholder); (5) any
reclassification of securities, recapitalization of the Company,
merger or consolidation of the Company with a subsidiary or other
transaction which increases the percentage of any class of stock
of the Company or a subsidiary owned by an Interested Stockholder
(or an affiliate or associate of an Interested Stockholder); or
(6) any other transaction similar in purpose or effect to the
foregoing.
The term "Disinterested Director" means generally a director
of the Company who is not an Interested Stockholder or an
affiliate, associate or representative of an Interested
Stockholder and either (1) was a director of the Company
immediately prior to the time the Interested Stockholder became
an Interested Stockholder or (2) is a successor to a
Disinterested Director and is recommended or elected to succeed a
Disinterested Director by a majority of the then Disinterested
Directors.
The term "Voting Stock" means the capital stock of the Company
entitled to vote generally in an annual election of directors of
the Company. At present, the Common Stock and the Series A
Preferred Stock are the only classes or series of the Company's
Voting Stock.
Amendments to the Articles or By-Laws. The Articles provide
that any amendment, alteration, change or repeal of any provision
of Article 7 or Article 8 of the Articles (which contain
provisions relating to business combinations), the adoption of
any provision inconsistent therewith, or the adoption, amendment
or repeal by the shareholders of any By-Law, shall require the
affirmative votes of (i) the holders of at least 80% of the
voting power of all then outstanding shares of Voting Stock,
voting together as a single class, and (ii) the holders of at
least
-17-
<PAGE>
a majority of the voting power of the then outstanding shares
of Voting Stock which are not beneficially owned by any
Interested Stockholder, voting together as a single class, unless
such action is recommended by a majority of the Disinterested
Directors and at the time of such recommendation the
Disinterested Directors constitute a majority of the full Board
of Directors, excluding any directors elected by the holders of
Preferred Stock, voting separately as a class or series.
The Articles provide that the Board of Directors, by a vote
including a majority of the Disinterested Directors then in
office, may adopt, amend or repeal By-Laws with respect to those
matters which are not, by statute, reserved exclusively to the
shareholders.
The provisions of the Articles described in this subsection
"Voting Rights" are in addition to certain provisions of
Pennsylvania law which restrict, or require a special shareholder
vote to approve, certain transactions between the Company and a
shareholder of the Company.
The Articles reserve for the Company the right to amend,
alter, change or repeal any provision contained therein in the
manner now or hereafter prescribed by law, and all rights
conferred upon shareholders therein are granted subject to this
reservation.
The Articles also provide that any action required or
permitted to be taken at a meeting of shareholders or a class of
shareholders of the Company may be taken without a meeting upon
the written consent of shareholders who would have been entitled
to cast the minimum number of votes that would be necessary to
authorize the action at a meeting at which all shareholders
entitled to vote thereon were present and voting. Such consents
shall be filed with the Secretary of the Company.
DIVIDEND RIGHTS
The holders of Common Stock are entitled to dividends when, as
and if declared by the Board of Directors out of funds legally
available therefor. However, the Board of Directors has granted,
in the case of the Series A Preferred Stock, and may grant, if
additional Preferred Stock is issued, preferential dividend
rights to the holders of such stock which would prohibit payment
of dividends on the Common Stock unless and until specified
dividends on the Series A Preferred Stock or other Preferred
Stock had been paid or in other circumstances.
The Company owns all of the issued and outstanding common
stock of Duquesne Light Company. Future dividends on the
Company's Common Stock will be largely dependent upon the payment
of dividends by Duquesne Light Company to the Company. The
payment of dividends by Duquesne Light Company to the Company
will be affected by the earnings, financial condition and capital
requirements of Duquesne Light Company, as well as by the
provisions of Duquesne Light Company's Restated Articles which
restrict the payment of cash dividends or other distributions on,
or the purchase or redemption of, its common stock or other
capital stock ranking junior to Duquesne Light Company's
preferred stock (collectively referred to as "junior stock
payments"). No dividends or distribution may be made on Duquesne
Light Company's common stock if dividends or sinking or purchase
fund obligations on Duquesne Light Company's preferred stock or
preference stock are accumulated and unpaid. Furthermore, the
aggregate amount of junior stock payments which may be made in
any 12-month period is in general limited to (i) 50% of Duquesne
Light Company's consolidated net income (as defined in Duquesne
Light Company's Restated Articles) for any period of 12
consecutive calendar months within the 15 preceding months if the
effect of such payments would be to reduce Duquesne Light
Company's ratio of common stock equity to total capitalization to
less than 20% or (ii) 75% of such consolidated net income if the
effect would be to reduce such ratio to 20% or more but less than
25%.
LIQUIDATION RIGHTS
Upon liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, the holders of Common Stock are
entitled to share ratably in the assets of the Company available
for distribution after all liabilities of the Company have been
satisfied. The Board of Directors has granted, in the case of
the Series A Preferred Stock, and may grant, if additional
Preferred Stock is issued, preferential liquidation rights to the
holders of such
-18-
<PAGE>
stock which would entitle them to be paid out of the assets
of the Company available for distribution before any
distribution is made to the holders of Common Stock. In
addition, because Duquesne Light Company and the Company's other
subsidiaries have debt obligations and other liabilities of their
own, the Company's rights and the rights of its creditors and
shareholders to participate in the assets of Duquesne Light
Company or other subsidiaries of the Company upon the liquidation
of Duquesne Light Company or any other such subsidiary will be
subject to the prior claims of creditors of such subsidiaries.
MISCELLANEOUS
Holders of Common Stock have no preemptive or other rights to
subscribe for any shares or securities of the Company. There are
no sinking fund provisions, conversion rights or redemption
provisions applicable to the Common Stock, and the holders of
fully paid Common Stock are under no liability for assessments by
the Company.
ALLEGHENY COMMON STOCK
Upon the consummation of the merger of the Company and
Allegheny, as described herein, each share of the Company's
Common Stock will be exchanged for 1.12 shares of Allegheny
common stock. For a description of Allegheny common stock and a
comparison of the rights of holders of Allegheny common stock
relative to holders of the Company's Common Stock, see
"Description of APS Stock" and "Comparison of Certain Rights of
the Holders of APS Common Stock and DQE Common Stock" in the
Joint Proxy Statement, which is incorporated herein by reference.
TRANSFER AGENTS AND REGISTRARS
The Co-Transfer Agent and Co-Registrar for the DQE Common
Stock is The First National Bank of Boston, P.O. Box 1728,
Boston, Massachusetts 02105-1728. Duquesne Light Company, Box
68, Pittsburgh, Pennsylvania 15230-0068, is an additional Co-
Transfer Agent, and Mellon Securities Trust Company, Mellon Bank
Center, Pittsburgh, Pennsylvania 15258, is an additional Co-
Registrar. Duquesne Light Company, Box 68, Pittsburgh,
Pennsylvania 15230-0068, will serve as the Transfer Agent and
Registrar for the Series A Preferred Stock.
EXPERTS
The consolidated financial statements incorporated in this
Prospectus by reference from the Company's latest Annual Report
on Form 10-K have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
LEGAL MATTERS
The validity of the Series A Preferred Stock and the Common
Stock will be passed upon for the Company by David R. High, Esq.,
Assistant General Counsel of Duquesne Light Company, and by Reid
& Priest LLP of New York, New York. Reid & Priest LLP may rely
as to all matters of Pennsylvania law upon the opinion of Mr.
High.
-19-
<PAGE>
==================================================
TABLE OF CONTENTS
PAGE
----
Available Information . . . . . . . . . . . . . 2
Incorporation of Certain Documents
by Reference . . . . . . . . . . . . . . . 2
Summary . . . . . . . . . . . . . . . . . . . 3
The Company . . . . . . . . . . . . . . . . . . 6
The Acquisitions . . . . . . . . . . . . . . . 7
Resales of Securities . . . . . . . . . . . . . 7
Description of Capital Stock . . . . . . . . . 8
Experts . . . . . . . . . . . . . . . . . . . . 19
Legal Matters . . . . . . . . . . . . . . . . . 19
-------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY SHARES BY ANYONE IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED,
OR IN WHICH THE PERSON MAKING THE OFFER OR SOLICITATION
IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER TO SOLICITATION. UNDER
NO CIRCUMSTANCES SHALL THE DELIVERY OF THIS PROSPECTUS,
OR ANY SALE MADE PURSUANT TO THIS PROSPECTUS, CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED IN THIS
PROSPECTUS IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE OF THIS PROSPECTUS.
======================================================
======================================================
DQE, INC.
1,000,000 SHARES
PREFERRED STOCK,
SERIES A (CONVERTIBLE)
---------------
PROSPECTUS
---------------
August , 1997
====================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Reference is made to the Exhibit Index on page II-3 hereof,
such Exhibit Index being incorporated by such reference in this
Item 21.
II-1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the
Registrant has duly caused this Amendment to the Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Pittsburgh,
Commonwealth of Pennsylvania, on August 21, 1997.
DQE, Inc.
By:/s/ Gary L. Schwass
------------------
Gary L. Schwass
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933,
this Amendment to the Registration Statement has been signed by
the following persons in the capacities and on the dates
indicated.
Signature Title Date
--------- ----- ----
/s/ David D. Marshall* President, Chief August 21, 1997
---------------------- Executive Officer
David D. Marshall and Director
/s/ Gary L. Schwass Executive Vice President August 21, 1997
---------------------- and Chief Financial
Gary L. Schwass Officer
/s/ Morgan K. O'Brien* Controller and Principal August 21, 1997
---------------------- Accounting
Morgan K. O'Brien Officer
/s/ Daniel Berg* Director August 21, 1997
----------------------
Daniel Berg
/s/ Doreen E. Boyce* Director August 21, 1997
----------------------
Doreen E. Boyce
/s/ Robert P. Bozzone* Director August 21, 1997
----------------------
Robert P. Bozzone
/s/ Sigo Falk* Director August 21, 1997
----------------------
Sigo Falk
/s/ William H. Knoell* Director August 21, 1997
----------------------
William H. Knoell
/s/ Robert Mehrabian* Director August 21, 1997
----------------------
Robert Mehrabian
/s/ Thomas J. Murrin* Director August 21, 1997
----------------------
Thomas J. Murrin
/s/ Eric W. Springer*
---------------------- Director August 21, 1997
Eric W. Springer
/s/ Victor A. Roque
---------------------- August 21, 1997
*By:Victor A. Roque
Attorney-in-fact
II-2
<PAGE>
INDEX TO EXHIBITS
-----------------
Exhibit No. Description and Method of Filing
----------- --------------------------------
4.1 Form of Statement with Filed herewith.
respect to Preferred
Stock, Series A
(Convertible).
12.1 Computation of ratio of Filed herewith.
earnings to combined
fixed charges and
preferred stock
dividends.
23.3 Consent of Deloitte & Filed herewith.
Touche LLP.
II-3
Exhibit 4.1
DQE, INC.
Form of
Statement with respect to the
Preferred Stock, Series A (Convertible)
__________________________________________
In compliance with the requirements of Section 1522 of
the Pennsylvania Business Corporation Law of 1988, DQE, Inc., a
Pennsylvania corporation, certifies under its corporate seal as
follows:
(1) The name of the corporation is DQE, Inc.
(2) At a meeting of the Board of Directors of the
corporation duly called and held on July 29, 1997, at which a
quorum was present and acting throughout, the Board adopted the
following resolutions establishing a series of Preferred Stock of
the corporation designated as "Preferred Stock, Series A
(Convertible)" and determining the voting rights, preferences,
limitations and special rights thereof:
RESOLVED, that pursuant to the authority expressly
vested in this Board of Directors by the Restated Articles of
Incorporation, as amended, of the Company, the Board hereby (i)
establishes a series of Preferred Stock designated "Preferred
Stock, Series A (Convertible)" (the "Series A Preferred Stock")
consisting of 1,000,000 shares and having the terms and
provisions presented to this meeting, such terms and provisions
being incorporated into this resolution by reference and deemed
to be a part hereof and (ii) directs that such terms and
provisions be attached as an exhibit to the statement required by
Section 1522 of the Pennsylvania Business Corporation Law of 1988
to be filed with the Department of State of the Commonwealth of
Pennsylvania with respect to the Series A Preferred Stock; and
RESOLVED FURTHER, that the President, any Vice
President or the Treasurer, together with the Secretary or any
Assistant Secretary, of the Company be, and they hereby are,
authorized and empowered to execute, with such changes as they
deem necessary, under the corporate seal of the Company, and
cause to be filed with the Department of State of the
Commonwealth of Pennsylvania a statement with respect to the
Series A Preferred Stock in accordance with Section 1522 of the
Pennsylvania Business Corporation Law of 1988; and
(3) The aggregate number of shares of such series
established and designated by the Board of Directors of the
corporation is 1,000,000 shares. No additional shares of such
series have been established and designated in prior statements
or in any provisions of the Restated Articles of the corporation.
(4) The resolutions set forth in (2) above were
adopted by the Board of Directors of the corporation at a meeting
held on July 29, 1997; and the terms and provisions of the
Preferred Stock, Series A (Convertible) presented to and approved
at such meeting are attached hereto as Exhibit A.
(5) On August 5, 1997, the Taxpayer Relief Act of 1997
(the "Act") was signed into law. As a result of (i) the
amendments to the Internal Revenue Code of 1986, as amended,
contained in the Act and (ii) the operation of the provisions of
subparagraph (7) of paragraph (c) of the terms and provisions of
the Preferred Stock, Series A (Convertible), under law in effect
at the time of filing of this Statement the corporation would not
have a right or an obligation to redeem any share of such series
and each share of such series would be automatically convertible
into Common Stock of the corporation or other conversion
securities on the date that would have been scheduled for the
mandatory redemption thereof.
IN WITNESS WHEREOF, DQE, Inc. has caused this Statement
to be executed by its Executive Vice President and Chief
Financial Officer and its corporate seal to be hereunto affixed
and attested by an Assistant Secretary this day of August,
1997.
DQE, Inc.
By
--------------------------
Gary L. Schwass
Executive Vice President and
Chief Financial Officer
Attest:
------------------------------------
Assistant Secretary
Filed in the Department of State on the___ day of
______, 1997.
------------------------------
Secretary of the Commonwealth
<PAGE>
EXHIBIT A
DQE, INC.
____________
PREFERRED STOCK, SERIES A (CONVERTIBLE)
____________
One Million (1,000,000) shares of the authorized Preferred
Stock shall be designated Preferred Stock, Series A (Convertible)
(the "Series A Preferred Stock") and shall have the voting
rights, preferences, limitations and special rights set forth in
paragraphs (a) through (h) hereof.
(a) Dividends.
---------
(1) General. When, as and if declared by the Board of
-------
Directors and subject to the rights of the holders of any shares
of any series of Preferred Stock or other stock ranking senior to
the Series A Preferred Stock with respect to dividends, the
Corporation shall pay, out of funds legally available therefor,
dividends in cash to the holders of shares of Series A Preferred
at the applicable dividend rate or rates.
(2) Dividend Rate. The dividend rate with respect to
-------------
each share of Series A Preferred Stock shall be equal to 67% of
the average yield (for a maturity range of from five to seven
years) on corporate bonds rated in the second highest rating
category (without regard to any refinement or gradation by a
numerical modifier or otherwise) by any nationally recognized
statistical rating organization for a period of not less than
five business days ending on a day not more than 10 business days
preceding the Date of Issuance (as hereinafter defined) of such
share, as reported by any independent source of publicly
available financial information, all as certified to the
Corporate Secretary of the Corporation by the President, or any
Vice President, or the Treasurer, or any Assistant Treasurer, of
the Corporation, it being understood that each certificate
representing a share or shares of Series A Preferred Stock shall
set forth the actual dividend rate on the share or shares
represented thereby. Anything herein to the contrary
notwithstanding, (a) the dividend rate on any share of Series A
Preferred Stock determined as aforesaid, if not a multiple of
one-tenth (1/10) of one percentum (1%), shall be rounded up to
the nearest such multiple and (b) such dividend rate shall in no
event be more than 12% per annum.
(3) Dividend Payment Dates. Dividends on shares of
----------------------
the Series A Preferred Stock shall be payable, subject to the terms
and conditions hereof, on each Dividend Payment Date (as
hereinafter defined), beginning on the first Dividend Payment
Date following the respective Dates of Issuance of such shares,
to the registered holders of such shares as of the close of
business on the Record Date (as hereinafter defined) with respect
to such Dividend Payment Date; provided, however, that, if the
Date of Issuance of a share of Series A Preferred Stock shall be
after a Record Date and before the corresponding Dividend Payment
Date, the first payment of a dividend on such share shall be made
on the next succeeding Dividend Payment Date to the holder in
whose name such share is registered at the close of business on
the Record Date with respect to such next succeeding Dividend
Payment Date.
(4) Accrual of Dividends, etc. Dividends shall begin
-------------------------
to accrue on shares of the Series A Preferred Stock from the Date or
Dates of Issuance thereof; provided, however, that if additional
shares of Series A Preferred Stock shall have been issued
subsequent to the initial issuance of shares of Series A
Preferred Stock, all dividends declared and paid or set apart for
payment on the Series A Preferred Stock prior to the Date of
Issuance of such additional shares shall be deemed to have been
paid on such additional shares. Dividends shall accrue on a daily
basis whether or not at the time the Corporation shall have funds
legally available for distributions to shareholders. Accrued
dividends for any period less than a full annual period shall be
computed on the basis of a year deemed to consist of (A) 360 days
and (B) twelve calendar months each, itself, deemed to consist of
30 days; provided, however, that, if any part of the period for
which accrued dividends are being computed shall consist of a
portion of a calendar month, accrued dividends for such part of
such period shall be computed on the basis of the actual number
of days elapsed during such calendar month (excluding the date of
payment, if any, in such calendar month) in relation to the full
annual dividend accrued during a deemed 360-day year. Accrued
but unpaid dividends shall accumulate as of the Dividend Payment
Date on which they first become payable, but no interest shall
accrue on accumulated but unpaid dividends.
(5) Parity Stock. So long as any Series A Preferred
------------
Stock shall be outstanding, if (A) at any time the Corporation
shall not have satisfied in full the cumulative dividends accrued
on the Series A Preferred Stock for all Dividend Periods (as
hereinafter defined) ended at or prior to such time and (B) at
such time there shall have accrued and shall remain unpaid, for
Dividend Periods ended at or prior to such time, dividends on
shares of any other series of the Preferred Stock or any other
class of stock in either case ranking as to dividends on a parity
with the Series A Preferred Stock, any funds of the Corporation
legally available for the purpose shall be allocated among all
cumulative dividends accrued and unpaid, for all Dividend Periods
ended at or prior to such time, on all such parity series of the
Preferred Stock and such other parity stock in proportion to the
respective amounts thereof.
(6) Junior Securities. So long as any Series A
-----------------
Preferred Stock shall be outstanding, the Corporation shall not
(A) declare or pay or set apart for payment any dividends or make
any other distributions on any Junior Securities (as hereinafter
defined) or (B) make any payment on account of the redemption,
purchase or other acquisition or retirement of any Junior
Securities, unless, as of the date of any such declaration,
setting aside or payment, as the case may be, there shall also
have been declared and paid or set aside for payment dividends
accumulated on the Series A Preferred Stock during all Dividend
Periods ended on or prior to such date; provided, however, that
the foregoing restriction shall not prohibit (X) any dividend
payable solely in shares of Junior Securities or (Y) the
acquisition of any Junior Securities either (i) pursuant to any
employee or director incentive or benefit plan or arrangement
(including any employment, severance or consulting agreement), or
any dividend or interest reinvestment or stock purchase plan, of
the Corporation or any affiliate of the Corporation heretofore or
hereafter adopted or (ii) in exchange solely for any other Junior
Securities; and provided, further, that nothing herein shall
prevent the simultaneous declaration or payment of dividends on
both the Series A Preferred Stock and any Junior Securities if,
at the time of such declaration, there are sufficient funds
legally available to pay all dividends concurrently.
(b) Liquidation.
-----------
(1) General. Subject to the rights of the holders of
-------
any stock of the Corporation ranking senior to or on a parity
with the Series A Preferred Stock in respect of distributions
upon the liquidation, dissolution or winding up of the
Corporation, upon any such liquidation, dissolution or winding up
(whether voluntary or involuntary), each holder of Series A
Preferred Stock shall be entitled to be paid, out of the assets
of the Corporation which remain after the payment and discharge
of all liabilities of the Corporation, before any distribution or
payment is made upon any Junior Securities, an amount in cash
equal to the aggregate Liquidation Value (as hereinafter defined)
of the shares of Series A Preferred Stock held by such holder
plus an amount equal to accrued and unpaid dividends thereon to
(but excluding) the date of payment, and the holders of Series A
Preferred Stock shall not be entitled to any further payment.
If, upon any such liquidation, dissolution or winding up of the
Corporation, the Corporation's assets available to be distributed
among the holders of the Series A Preferred Stock and any other
series of the Preferred Stock and any other stock of the
corporation in either case ranking as to any such distribution on
a parity with the Series A Preferred Stock are insufficient to
permit payment to such holders of the aggregate amount which they
are entitled to be paid, then the entire assets available to be
distributed to the Corporation's shareholders shall be allocated
among all liquidation requirements on all such parity series of
Preferred Stock and such other parity stock in proportion to the
respective amounts then required for the satisfaction thereof.
(2) Notice. Not less than 30 days prior to the
-------
payment date stated therein, the Corporation shall mail written
notice of any such liquidation, dissolution or winding up to
each record holder of Series A Preferred Stock, the payment
date or dates when, and the place or places where, the amounts
distributable to holders of Series A Preferred Stock in such
circumstances shall be payable, and stating that such payment
will be made only after the surrender of certificates representing
shares of Series A Preferred Stock; provided, however, that a
failure to give notice as provided above or any defect therein
shall not affect the Corporation's ability to consummate a
liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary.
(3) Other Transactions. Neither the consolidation,
------------------
merger or other combination of the Corporation with or into any
other entity or entities (whether or not the Corporation is the
surviving entity), nor the sale, transfer or other disposition by
the Corporation of all or any part of its assets, nor the
reduction of the capital stock of the Corporation nor any other
form of recapitalization or reorganization affecting the
Corporation shall be deemed to be a liquidation, dissolution or
winding up of the Corporation within the meaning of this
paragraph (b).
(c) Redemption.
----------
(1) Mandatory Redemption. The Corporation shall, on the
--------------------
Scheduled Call Date (as hereinafter defined) for each share of
Series A Preferred Stock, redeem such share at a price per share
equal to the Liquidation Value thereof plus an amount equal to
accrued and unpaid dividends thereon to (but excluding) the date
fixed for redemption; provided, however, that the Corporation
shall not be obligated to redeem any share of Series A Preferred
Stock which is to be converted into Conversion Securities (as
hereinafter defined) on or prior to the Scheduled Call Date
pursuant to paragraph (d) hereof.
(2) Optional Redemption. The Corporation may, at any
-------------------
time after the fifth anniversary of the Date of Issuance of any
shares of Series A Preferred Stock and from time to time
thereafter, redeem all or any number of such shares of Series A
Preferred Stock then outstanding at a price per share equal to
the Liquidation Value thereof plus an amount equal to accrued and
unpaid dividends thereon to (but excluding) the date fixed for
redemption. If less than all of the outstanding shares of the
Series A Preferred Stock are to be redeemed, the Corporation
shall select the shares to be redeemed based on their respective
Dates of Issuance; and, if less than all of the outstanding
shares of the Series A Preferred Stock having the same Date of
Issuance are to be redeemed, the Corporation shall select the
shares to be redeemed pro rata, by lot or by any other method as
shall be determined by the Corporation to be equitable.
(3) Notice of Redemption. Unless otherwise required by
---------------------
applicable law, notice of redemption pursuant to subparagraph (1)
or (2) of this paragraph (c) shall be sent to the holders of the
shares of Series A Preferred Stock to be redeemed at the
addresses shown on the books of the Corporation by first class
mail, postage prepaid, mailed not less than thirty (30) days nor
more than sixty (60) days prior to the redemption date. Each such
notice shall state (A) the redemption date, (B) the total number
of shares of Series A Preferred Stock to be redeemed and, if
fewer than all the shares held by such holder are to be redeemed,
the number of such shares to be redeemed, (C) the redemption
price, (D) the place or places where certificates for such shares
are to be surrendered for payment of the redemption price and (E)
that dividends on the shares to be redeemed will cease to accrue
on such redemption date. Notwithstanding the foregoing, the
failure so to mail any such notice of redemption or any defect
therein or in the mailing thereof shall not affect the validity
of the redemption proceedings with respect to shares as to which
there shall have been no such failure or defect. A notice of
redemption may be combined with a notice of conversion pursuant
to paragraph (d).
With respect to any notice of redemption of shares of
Series A Preferred Stock at the option of the Corporation,
unless, upon the giving of such notice, such shares shall be
deemed to have been redeemed and to be no longer outstanding in
accordance with and subject to subparagraph (4) of this paragraph
(c), such notice may state that such redemption shall be
conditional upon the setting aside by the Corporation or the
delivery to a Redemption Agent (as hereinafter defined), on or
prior to the date fixed for such redemption, of legally available
funds sufficient to pay the redemption price of such shares, and
that if such funds shall not have been so set aside or delivered
such notice shall be of no force or effect and the Corporation
shall not be required to redeem such shares. In the event that
such notice of redemption contains such a condition and such
funds are not so set aside or delivered, the redemption shall not
be made and within a reasonable time thereafter notice shall be
given that such funds were not so set aside or delivered and such
redemption was not required to be made.
Notice of redemption having been given as aforesaid,
and the conditions, if any, set forth in such notice having been
satisfied, (A) the shares of Series A Preferred Stock so to be
redeemed shall, on the date fixed for redemption and upon
surrender of certificates for such shares in accordance with such
notice, be redeemed at the redemption price therein specified,
(B) from and after such date (unless, in the case of an
unconditional notice of redemption, the Corporation shall have
failed to set aside or deliver to a Redemption Agent moneys to
pay the redemption price and accrued and unpaid dividends to the
redemption date) dividends shall cease to accrue on such shares
and (C) no interest shall accrue on the redemption price on or
after the date fixed for redemption.
(4) Redemption Payment. Any shares of Series A
------------------
Preferred Stock shall be deemed to have been redeemed and to be
no longer outstanding capital stock of the Corporation, and all
rights of the holders of such shares (except only the right to
receive the redemption price thereof and (without duplication)
dividends accrued and to accrue thereon to the date of the
redemption thereof pursuant to this paragraph (c)) shall
terminate, on the earlier of (A) the date on or after the date
fixed for the redemption of such shares on which the Corporation
shall have set aside money sufficient to pay the redemption price
thereof and (B) the date of an irrevocable deposit with a
Redemption Agent, in trust, of money in an amount which shall be
sufficient to pay when due the redemption price of such shares
and (without duplication) dividends accrued and to accrue thereon
to (but excluding) the date fixed for the redemption thereof;
provided, however, that in the case of the provision for
redemption of less than all shares of Series A Preferred Stock
then outstanding, such shares shall have been selected for
redemption as provided herein and the notice of such redemption
shall have been duly given or irrevocable authority shall have
been given by the Corporation to such Redemption Agent to give
such notice, under arrangements satisfactory to such Redemption
Agent; and provided, further, that if such deposit shall have
been made prior to the date fixed for the redemption of such
shares, the Corporation shall have delivered to such Redemption
Agent written instructions stating that the money so deposited
with such Redemption Agent shall be held by such Redemption
Agent, in trust, as hereinafter provided.
The money deposited with a Redemption Agent pursuant to
this subparagraph (4) of paragraph (c) shall not be withdrawn or
used for any purpose other than, and shall be held in trust for,
the payment of the redemption price of the shares of Series A
Preferred Stock in respect of which such deposit was made and
(without duplication) dividends accrued and to accrue thereon to
the date fixed for the redemption thereof; provided, however,
that any of such moneys so held by such Redemption Agent on the
date fixed for the redemption of such shares in excess of the
amount required to pay the redemption price thereof and (without
duplication) dividends accrued and unpaid thereon to (but
excluding) the date fixed for the redemption thereof shall be
paid over to the Corporation free and clear of any trust, lien or
pledge.
Any money remaining set aside by the Corporation or on
deposit with a Redemption Agent and unclaimed by the registered
holders of shares so called for redemption at the end of a period
of one year after the date fixed for redemption shall be paid
over to the Corporation and/or returned to its general funds and
thereafter such holders shall look only to the Corporation for
the satisfaction of such rights, if any, as they may have to the
payment of the redemption price of such shares and (without
duplication) dividends accrued and unpaid to (but excluding) the
date fixed for redemption.
(5) Parity Stock. If (A) at any time the Corporation
------------
shall not have satisfied in full its redemption obligations under
subparagraph (1) of this paragraph (c) and (B) at such time the
Corporation shall be obligated to redeem, purchase or otherwise
acquire or retire shares of any other series of Preferred Stock
or any other class of stock in either case ranking as to
distributions upon liquidation, dissolution or winding up on a
parity with the Series A Preferred Stock, any funds of the
Corporation legally available for the purpose shall be allocated
among all such obligations on all such parity series of Preferred
Stock and such other parity stock in proportion to the respective
amounts thereof.
(6) Junior Securities. If at any time the Corporation
-----------------
shall not have satisfied in full its redemption obligations under
subparagraph (1) of this paragraph (c), the Corporation shall not
(A) declare or pay or set apart for payment any dividends or make
any other distributions on any Junior Securities or (B) make any
payment on account of the redemption, purchase or other
acquisition or retirement of any Junior Securities; provided,
however, that the foregoing restriction shall not prohibit (X)
any dividend payable solely in shares of Junior Securities or (Y)
the acquisition of Junior Securities either (i) pursuant to any
employee or director incentive or benefit plan or arrangement
(including any employment, severance or consulting agreement), or
any dividend or interest reinvestment or stock purchase plan, of
the Corporation or any affiliate of the Corporation heretofore or
hereafter adopted or (ii) in exchange solely for any other Junior
Securities.
(7) Limitation. Anything in this paragraph (c) to the
-----------
contrary notwithstanding, the Corporation shall not have at any
time any right to redeem, or any obligation to redeem, any share
of Series A Preferred Stock if, by virtue of the Corporation
having such right or obligation at such time, such share of
Series A Preferred Stock, effective as of its Date of Issuance,
would not constitute "stock" for purposes of any of Sections 351,
354, 355, 356 and 1036 of the Internal Revenue Code of 1986, as
amended, or any successor provisions thereto.
(d) Conversion.
----------
(1) General. The Corporation may, at any time and from
-------
time to time, convert all or any number of shares of the Series A
Preferred Stock into Conversion Securities. If less than all of
the outstanding shares of the Series A Preferred Stock are to be
converted, the Corporation shall select the shares to be
converted based on their respective Dates of Issuance; and, if
less than all of the outstanding shares of the Series A Preferred
Stock having the same Date of Issuance are to be converted, the
Corporation shall select the shares to be converted pro rata, by
lot or by any other method determined by the Corporation to be
equitable. Each share of Series A Preferred Stock to be so
converted shall be converted into a number of units of Conversion
Securities computed by dividing the Liquidation Value by the Fair
Market Value (as hereinafter defined) for the Conversion
Securities, all as of the close of business on the trading day
next preceding the date fixed for conversion. If the Conversion
Securities are not securities of the Corporation, prior to the
conversion of any shares of Series A Preferred Stock, the
Corporation shall acquire sufficient Conversion Securities to
effectuate the conversion. The Corporation shall make a cash
payment in lieu of delivering fractional securities upon any
conversion, such payment to be based upon the Fair Market Value
of any fractional securities otherwise deliverable as of the
close of business on the trading day next preceding the date
fixed for conversion.
(2) Notice of Conversion. Unless otherwise required by
--------------------
applicable law, notice of conversion pursuant to this paragraph
(d) shall be sent to the holders of shares of Series A Preferred
Stock to be converted at the addresses shown on the books of the
Corporation by first class mail, postage prepaid, mailed not less
than thirty (30) days nor more than sixty (60) days prior to the
conversion date. Each such notice shall state (A) the conversion
date, (B) the total number of shares of Series A Preferred Stock
to be converted and, if fewer than all the shares held by such
holder are to be converted, the number of such shares to be
converted, (C) the Conversion Securities into which such shares
are to be converted, (D) the place or places where certificates
for such shares are to be surrendered in exchange for Conversion
Securities and (E) that dividends on the shares to be converted
will cease to accrue on such conversion date. Notwithstanding the
foregoing, the failure so to mail any such notice of conversion
or any defect therein or in the mailing thereof shall not affect
the validity of the conversion proceedings with respect to shares
as to which there shall have been no such failure or defect. A
notice of conversion may be combined with a notice of redemption
pursuant to paragraph (c).
Notice of conversion having been given as aforesaid,
(A) the shares of Series A Preferred Stock so to be converted
shall, on the date fixed for conversion, be deemed to have been
converted into Conversion Securities in accordance with such
notice (to the extent that the same are securities of the
Corporation) or converted into the right to receive Conversion
Securities (to the extent that the same are securities of another
Person (as hereinafter defined)), (B) from and after such date
(unless the Corporation shall have failed to set aside or acquire
Conversion Securities and moneys to pay accrued and unpaid
dividends to the conversion date) dividends shall cease to accrue
on such shares and (C) all rights of the holders of such shares
(except only rights as holders of Conversion Securities (to the
extent the same are securities of the Corporation), the right to
receive Conversion Securities (to the extent that the same are
securities of another Person) and the right to receive (without
duplication) an amount equal to dividends accrued thereon to the
date fixed for such conversion) shall terminate.
(3) Conversion Procedure. Upon the surrender by a
--------------------
holder of converted shares of Series A Preferred Stock of
certificates representing such shares in accordance with the
notice of conversion on or after the conversion date, the
Corporation shall deliver to or upon the order of such holder:
(A) whole units of the Conversion Securities into
which such shares of Series A Preferred Stock have been
converted, certificates representing securities to be
registered in such name or names, and to be issued in such
denominations, as such holder shall have specified;
(B) in lieu of fractional units of Conversion
Securities resulting from the conversion of such shares of
Series A Preferred Stock, an amount equivalent to the Fair
Market Value of any such fractional units of Conversion
Securities as of the close of business on the trading day
next preceding the conversion date;
(C) an amount equivalent to accrued and unpaid
dividends on such shares of Series A Preferred Stock to (but
excluding) the conversion date; and
(D) a certificate representing any shares of Series A
Preferred Stock which had been represented by the
certificate or certificates delivered to the Corporation in
connection with such conversion but which were not
converted.
(4) Miscellaneous. (A) The delivery of
-------------
certificates representing Conversion Securities upon conversion
of shares of Series A Preferred Stock shall be made without
charge to the holders of such shares for any tax or other
governmental charge in respect thereof or other cost incurred by
the Corporation in connection with such conversion, except that
the Corporation shall not be required to pay any such tax or
charge payable by reason of the registration of Conversion
Securities in a name other than the name of the holder of the
shares of Series A Preferred Stock which were so converted.
(B) Anything herein to the contrary notwithstanding,
upon the conversion of shares of Series A Preferred Stock, the
Corporation shall have the right to elect to deliver, or cause
the delivery of, either (i) authorized but unissued Conversion
Securities reserved for such purpose or (ii) authorized but
previously issued Conversion Securities.
(5) Mandatory Conversion. Anything in this paragraph
--------------------
(d) to the contrary notwithstanding, if, pursuant to subparagraph
(7) of paragraph (c), the Corporation shall not have an
obligation to redeem any share of Series A Preferred Stock on the
Scheduled Call Date with respect to such share, such share of
Series A Preferred Stock, to the extent that such share has not
been converted into Conversion Securities prior to such Scheduled
Call Date, shall be converted automatically into Conversion
Securities on such Scheduled Call Date.
(e) Definitions.
-----------
"Common Stock" means the Corporation's common stock,
------------
without par value.
"Conversion Securities" means, initially, shares of
----------------------
Common Stock; provided, however, that if there shall have
occurred an Organic Change, then the term "Conversion Securities"
shall mean the class or type of stock, securities, cash or other
assets (payable in kind) to which the holders of Common Stock or
other Conversion Securities outstanding immediately prior to the
effective time of the Organic Change are entitled to receive
(either directly or upon subsequent liquidation) with respect to
or in exchange for Common Stock or such other Conversion
Securities as a result of the Organic Change; and provided,
further, that if, by virtue of the structure of such transaction,
a holder of Common Stock or other Conversion Securities is
required to make an election with respect to the nature and kind
of consideration to be received in such transaction, then
Conversion Securities shall mean the stock, securities, cash or
other assets (payable in kind) receivable in such transaction by
a holder of the number of shares of Common Stock or other
Conversion Securities into which shares of Series A Preferred
Stock could have been converted immediately prior to the
effective time of such transaction if such holder of Common Stock
or other Conversion Securities failed to exercise any rights of
election as to the kind or amount of stock, securities, cash or
other assets receivable upon such transaction (it being
understood that, if the kind or amount of stock, securities, cash
or other assets receivable upon such transaction is not the same
for each non-electing share, then the kind and amount of stock,
securities, cash or other property receivable upon such
transaction for each non-electing share shall be the kind and
amount so receivable per share by a plurality of the non-electing
shares).
"Date of Issuance", as to any share of Series A Preferred
-----------------
Stock, means the date on which the Corporation initially issues
such share, irrespective of the subsequent delivery of
certificates for such share upon registration of transfer or
exchange.
"Dividend Payment Date", as to the Series A Preferred
-----------------------
Stock, means January 1, April 1, July 1 and October 1.
"Dividend Period", as to the shares of the Series A
----------------
Preferred Stock or any other series of the Preferred Stock or of
any other class of stock in either case ranking as to dividends
on a parity with the Series A Preferred Stock, means the period
commencing on any dividend payment date prescribed for such
series and ending on the day next preceding the next succeeding
dividend payment date for such series, except that the initial
Dividend Period for any particular shares of any series or class
shall be the period commencing on the date or dates from which
dividends on such shares shall be cumulative and ending on the
day next preceding the first dividend payment date prescribed for
such shares.
"Fair Market Value", as to publicly traded shares of
------------------
Common Stock or any other class of capital stock or securities of
the Corporation or any other issuer which are publicly traded, as
of a particular day, means the average Market Price of such
shares or securities over a period of five consecutive trading
days ending on (and including) the trading day as of which "Fair
Market Value" is being determined. "Fair Market Value", as to
any security which is not publicly traded or of any other
property, as of a particular day, means the fair value thereof as
determined by an independent investment banking or appraisal firm
experienced in the valuation of such securities or property
selected in good faith by the Board of Directors, or, if no such
investment banking or appraisal firm is in the good faith
judgment of the Board of Directors available to make such
determination, as determined in good faith by the Board of
Directors.
"Junior Securities" means the Common Stock and (1) for
------------------
purposes of clause (A) in subparagraph (6) of paragraphs (a) and
(c) above, any other class or series of stock ranking junior to
the Series A Preferred Stock in right of payment of dividends or
(2) for all other purposes, any other class or series of stock
ranking junior to the Series A Preferred Stock in right of
payment of amounts distributable upon liquidation, dissolution or
winding up.
"Liquidation Value", as to any share of Series A
-------------------
Preferred Stock, means the amount of $100.
"Market Price", as to publicly traded shares of Common
--------------
Stock or any other class of capital stock or other security of
the Corporation or any other issuer which are publicly traded, as
of a particular day, means the last reported sales price, regular
way, or, if no sale takes place on such day, the average of the
reported closing bid and asked prices, regular way, in either
case as reported on the Composite Tape for New York Stock
Exchange Transactions or, if such security is not listed or
admitted to trading on the New York Stock Exchange, on the
principal national securities exchange on which such security is
listed or admitted to trading or, if not listed or admitted to
trading on any national securities exchange, on the National
Market System of the National Association of Securities Dealers,
Inc. Automated Quotation System or, if such security is not
quoted on such National Market System, the average of the closing
bid and asked prices on such day in the over-the-counter market
as reported by NASDAQ or, if bid and asked prices for such
security on such day shall not have been reported through NASDAQ,
the average of the bid and asked prices for such day as furnished
by any New York Stock Exchange member firm regularly making a
market in such security selected for such purpose by the Board of
Directors.
"Organic Change" means any recapitalization,
----------------
reorganization, reclassification, consolidation, merger, sale of
all or substantially all of the Corporation's assets or similar
transaction, in each case which is effected in such a manner that
the holders of Common Stock are entitled to receive (either
directly or upon subsequent liquidation) stock, securities, cash
or other assets with respect to or in exchange for Common Stock.
The transactions contemplated by the Agreement and Plan of
Merger, dated as of April 5, 1997, among the Corporation,
Allegheny Power System, Inc. and AYP Sub, Inc., if consummated,
would constitute an Organic Change, and, giving effect thereto,
Conversion Securities would be shares of common stock, par value
$1.25 per share, of Allegheny Power System, Inc. Anything herein
to the contrary notwithstanding, if the Corporation shall not be
the surviving or resulting person following any Organic Change,
the Series A Preferred Stock shall by virtue of such Organic
Change be exchanged for, or changed, reclassified or converted
into, preferred stock of such successor or resulting Person
having in respect of such Person, insofar as practicable, the
same preferences, limitations, voting rights and special rights
that the Series A Preferred Stock had immediately prior to such
Organic Change except for the change in the type of Conversion
Securities into which such preferred stock is convertible
effected as a result of such Organic Change.
"Person" means an individual, a partnership, a
--------
corporation, a limited liability company, a limited liability
partnership, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization or a governmental
entity or any department, agency or political subdivision
thereof.
"Record Date", as to any Dividend Payment Date, means the
------------
fifteenth day of the calendar month next preceding such Dividend
Payment Date.
"Redemption Agent" means any bank or trust company having
-----------------
a combined capital and surplus of at least $2,000,000 and doing
business in the continental United States, selected by the
Corporation in connection with the redemption of any shares of
Series A Preferred Stock.
"Scheduled Call Date", as to any share of Series A
--------------------
Preferred Stock, means the first day of the first month
commencing after the sixth anniversary of the Date of Issuance of
such share.
(f) Ranking; Pro Rata Sharing; Retirement.
-------------------------------------
(1) Ranking. The Series A Preferred Stock shall rank
-------
senior to the Common Stock as to the payment of dividends and as
to the distribution of assets on liquidation, dissolution or
winding-up of the Corporation, and, unless otherwise provided in
the Restated Articles of Incorporation, as the same may be
amended, including one or more amendments relating to one or more
subsequent series of Preferred Stock, the Series A Preferred
Stock shall rank on a parity with all other series of Preferred
Stock as to the payment of dividends and as to the distribution
of assets on liquidation, dissolution or winding-up.
(2) Pro Rata Sharing. Except to the extent otherwise
---------------
provided in the Restated Articles of Incorporation, as the same
may be amended, all payments to be made in respect of the shares
of Series A Preferred Stock and any other stock ranking on a
parity with the Series A Preferred Stock with respect to payments
of such character shall be made pro rata, so that amounts paid
per share on the Series A Preferred Stock and such other stock
shall in all cases bear to each other the same ratio that the
amounts then payable per share on the shares of the Series A
Preferred Stock and such other stock bear to each other.
(3) Retirement. Any shares of Series A Preferred Stock
----------
redeemed or converted as provided hereby shall be retired as
shares of Series A Preferred Stock and be restored to the status
of authorized but unissued shares of Preferred Stock,
undesignated as to series, and may thereafter be reissued as
permitted by applicable law.
(g) Voting Rights.
-------------
(1) General. The holders of Series A Preferred Stock
--------
shall be entitled to vote on all matters submitted to a vote of
the holders of Common Stock, voting together with the holders of
Common Stock as one class. Each share of Series A Preferred
Stock shall be entitled to three votes; provided, however, that
if there is a change in the number of shares of Common Stock
outstanding as a result of a reclassification, stock split
(including a reverse split), stock dividend or distribution,
recapitalization, merger, subdivision, issuer tender or exchange
offer, or similar transaction, the number of votes per share of
Series A Preferred Stock shall be equitably adjusted.
(2) No Special Rights. Except to the extent otherwise
-----------------
specifically provided by applicable law or set forth in
subparagraph (1) of this paragraph (g), holders of Series A
Preferred Stock shall have no special voting rights and their
consent shall not be required for the taking of any corporate
action.
(h) Notices.
-------
Except as otherwise expressly provided hereunder, all
notices referred to herein shall be in writing and shall be
sufficiently given, and shall be deemed given, if and when
mailed, first class postage prepaid, (1) to the Corporation, at
its principal executive offices and (2) to any shareholder, at
such holder's address as it appears in the stock records of the
Corporation (unless otherwise indicated by such holder).
_____________________
EXHIBIT 12.1
CALCULATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED AND PREFERENCE STOCK DIVIDENDS
(THOUSANDS OF DOLLARS)
Six Months
Ended Twelve Months Ended
June 30, December 31,
-------- -----------------------
1997 1996 1995
---- ---- ----
FIXED CHARGES:
Interest on long-term debt . . . $43,754 $88,478 $95,391
Other interest . . . . . . . . . 5,521 10,926 7,033
Portion of lease payments
representing an interest factor 22,179 44,357 44,386
Dividend requirement . . . . . . 8,838 14,385 7,374
------- ------- -------
Total Fixed Charges . . . . . $80,292 $158,146 $154,184
-------- --------- ---------
EARNINGS:
Income from continuing $91,875 $179,138 $170,563
operations . . . . . . . . . . . .
Income taxes . . . . . . . . . . 43,816* 87,388* 96,661*
Fixed Charges as above . . . . . 80,292 158,146 154,184
-------- -------- ---------
Total Earnings . . . . . . $215,983 $424,672 $421,408
--------- --------- ---------
RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED
AND PREFERENCE STOCK
DIVIDENDS . . . . . . . . . . . . 2.69 2.69 2.73
==== ==== =====
Twelve Months Ended
December 31,
-----------------------
1994 1993 1992
---- ---- ----
FIXED CHARGES:
Interest on long-term debt $101,027 $108,479 $123,402
Other interest . . . . . . . 4,050 2,718 1,767
Portion of lease payments
representing an interest 44,839 45,925 60,721
factor . . . . . . . . . . . .
Dividend requirement . . . . 9,355 14,368 17,940
------- ------- --------
Total Fixed Charges . . .
$159,271 $171,490 $203,830
--------- -------- ---------
EARNINGS:
Income from continuing
$156,816 $141,407 $141,518
operations . . . . . . . . .
Income taxes . . . . . . . . 92,973* 79,822* 111,934*
Fixed Charges as above . . .
159,271 171,490 203,830
--------- -------- ---------
Total Earnings . . $409,060 $392,719 $457,282
--------- -------- ---------
RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED
AND PREFERENCE STOCK
DIVIDENDS . . . . . . . . . . 2.57 2.29 2.24
==== ===== =====
The Company's share of the fixed charges of an unaffiliated coal
supplier, which amounted to approximately $1.4 million for the six months
ended June 30, 1997, has been excluded from the ratio.
*Earnings available for fixed charges include $6.0 million for
the six months ended June 30, 1997, and $12 million, $13.5 million, $13.5
million and $10.4 million for the twelve months ended December 31,
1996, 1995, 1994 and 1993, respectively, due to a financial statement
reclassification related to Statement of Financial Accounting Standards No.
109, Accounting for Income Taxes. The ratio of earnings to fixed charges,
absent this reclassification, equals 2.76 for the six months ended June 30,
1997, and 2.76, 2.82, 2.65 and 2.35 for the twelve months ended December
31, 1996, 1995, 1994 and 1993, respectively.
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment
No. 1 to Registration Statement No. 333-32433 of DQE, Inc. on
Form S-4 of our report dated January 28, 1997, appearing in the
Annual Report on Form 10-K of DQE, Inc. for the year ended
December 31, 1996, and to the reference to us under the heading
"Experts" in the Prospectus, which is part of this Registration
Statement.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
August 20, 1997
