PG ENERGY INC.
(FORMERLY PENNSYLVANIA GAS AND WATER COMPANY)
OFFER TO PURCHASE FOR CASH
ANY AND ALL OF ITS OUTSTANDING DEPOSITARY PREFERRED SHARES
EACH REPRESENTING A ONE-FOURTH INTEREST IN A SHARE
OF ITS 9% CUMULATIVE PREFERRED STOCK
AT $27.00 NET PER SHARE
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THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON MONDAY, APRIL 8, 1996, UNLESS THE OFFER IS EXTENDED.
PG Energy Inc., a Pennsylvania corporation formerly known as Pennsylvania Gas
and Water Company (the "Company"), is offering to purchase any and all of its
outstanding Depositary Preferred Shares (the "Shares"), each representing a
one-fourth interest in a share of its 9% Cumulative Preferred Stock, at $27.00
per Share, net to the seller in cash, upon the terms and subject to the
conditions set forth herein and in the related Letter of Transmittal (which
together constitute the "Offer").
-------------------
Shares tendered and purchased by the Company will be entitled to the regular
quarterly cash dividend of $0.5625 per Share to be paid by the Company on March
15, 1996, to holders of record on March 1, 1996, regardless of when such tender
is made. Shares tendered and purchased by the Company will not be entitled to
any dividends in respect of any later dividend periods.
-------------------
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING TENDERED.
The Offer is, however, subject to certain other conditions. See Section 9.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
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NEITHER THE COMPANY NOR ANY OF ITS DIRECTORS OR EXECUTIVE OFFICERS MAKES ANY
RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER ALL OR ANY SHARES.
EACH STOCKHOLDER MUST MAKE HIS OR HER OWN DECISION AS TO WHETHER TO TENDER
SHARES AND, IF SO, HOW MANY SHARES TO TENDER. THE COMPANY HAS BEEN ADVISED THAT
TWO DIRECTORS AND TWO EXECUTIVE OFFICERS OF THE COMPANY (EACH OF WHOM ALSO
SERVES AS A DIRECTOR OR EXECUTIVE OFFICER OF PENNSYLVANIA ENTERPRISES, INC., THE
HOLDER OF ALL OF THE COMPANY'S COMMON STOCK) INTEND TO TENDER SHARES PURSUANT TO
THE OFFER AND THAT NO OTHER DIRECTOR OR EXECUTIVE OFFICER OF THE COMPANY OR ANY
OF ITS AFFILIATES INTENDS TO TENDER SHARES PURSUANT TO THE OFFER AS NO SUCH
PERSON OWNS ANY SHARES.
-------------------
As of the close of business on March 8, 1996, the last trading day prior to
the commencement of the Offer, the bid price of the Shares as reported on the
National Association of Securities Dealers Automated Quotation System was $26.00
per Share. Stockholders are urged to obtain current market quotations for the
Shares. Stockholders should note that the average weekly trading volume of the
Shares since January 1, 1995, has been approximately 5,000 Shares.
Questions or requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal or other tender offer materials may be
directed to the Information Agent at the address and telephone number set forth
on the back cover of this Offer to Purchase.
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THE DEALER MANAGER FOR THE OFFER IS:
LEGG MASON WOOD WALKER
INCORPORATED
March 11, 1996
IMPORTANT
Any stockholder desiring to tender all or any portion of his or her Shares
should either (1) complete and sign the Letter of Transmittal or a photocopy
thereof in accordance with the instructions in the Letter of Transmittal, mail
or deliver it and any other required documents to the Depositary, and either
deliver the certificates for Shares to the Depositary along with the Letter of
Transmittal or deliver such Shares pursuant to the procedure for book-entry
transfer set forth under "Book-Entry Transfer" in Section 6 hereof or (2)
request his or her broker, dealer, commercial bank, trust company or nominee to
effect the transaction for him or her. A stockholder whose Shares are registered
in the name of a broker, dealer, commercial bank, trust company or nominee must
contact such broker, dealer, commercial bank, trust company or nominee if he or
she desires to tender such Shares. Any stockholder who desires to tender Shares
and whose certificates for such Shares are not immediately available, or who
cannot comply in a timely manner with the procedure for book-entry transfer,
should tender such Shares by following the procedures for guaranteed delivery
set forth under "Guaranteed Delivery" in Section 6 hereof.
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NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF THE
COMPANY AS TO WHETHER STOCKHOLDERS SHOULD TENDER SHARES PURSUANT TO THE OFFER.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED HEREIN
OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH RECOMMENDATION AND SUCH
INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY.
1
TABLE OF CONTENTS
SECTION PAGE
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SUMMARY............................................................................. i
INTRODUCTION........................................................................ 1
SPECIAL FACTORS..................................................................... 1
1. Purpose of the Offer; Certain Effects of the Offer; Plans of the Company
After the Offer................................................................ 1
2. Certain Federal Income Tax Consequences........................................ 4
3. Fairness of the Offer; Reports and Opinions.................................... 8
4. Certain Legal Matters; Regulatory and Foreign Approvals; No Appraisal Rights... 8
THE OFFER........................................................................... 8
5. Number of Shares; Expiration Date; Extension of the Offer...................... 8
6. Procedure for Tendering Shares................................................. 9
7. Withdrawal Rights.............................................................. 11
8. Acceptance for Payment of Shares and Payment of Purchase Price................. 11
9. Certain Conditions of the Offer................................................ 12
10. Price Range of Shares; Dividends; Trading Volume............................... 14
11. Certain Information Concerning the Company..................................... 14
12. Source and Amount of Funds..................................................... 21
13. Transactions and Agreements Concerning the Shares and Other Securities
of the Company................................................................. 21
14. Extension of Tender Period; Termination; Amendments............................ 22
15. Fees and Expenses.............................................................. 23
16. Miscellaneous.................................................................. 24
Directors and Executive Officers of the Company................................ Schedule A
Interest in Preferred Stock of the Company..................................... Schedule B
Purchases of Preferred Stock of the Company by the Company or its Affiliates
Since January 1, 1994.......................................................... Schedule C
SUMMARY
This general summary is provided solely for the convenience of holders of
Shares and is qualified in its entirety by reference to the full text of and the
more specific details contained in this Offer to Purchase and the related Letter
of Transmittal and any amendments hereto and thereto. Capitalized terms used in
this summary without definition shall have the meaning ascribed to such terms in
the Offer to Purchase.
The Company................. PG Energy Inc. (formerly known as Pennsylvania Gas
and Water Company).
The Shares.................. Depositary Preferred Shares of the Company (the
"Shares"), each representing a one-fourth interest
in a share of its 9% Cumulative Preferred Stock,
par value $100.00 per share, liquidation
preference $100.00 per share (equivalent to $25.00
per Share).
Number of Shares Sought .... 1,000,000 (all of the Shares outstanding).
Purchase Price.............. $27.00 per Share, net to the seller in cash.
Expiration Date of Offer ... Monday, April 8, 1996, at 5:00 p.m., New York City
time, unless extended by the Company.
How to Tender Shares........ See Section 6. For further information, call the
Information Agent or consult your broker for assistance.
Withdrawal Rights........... Tendered Shares may be withdrawn at any time until the
Expiration Date of the Offer and, unless previously purchased,
after May 3, 1996. See Section 7.
Market Price of Shares ..... On March 8, 1996, the bid price of the Shares on the
National Association of Securities Dealers Automated
Quotation System was $26.00 per Share. See Section 10.
Dividends................... Shares tendered and purchased by the Company will be entitled to
the regular quarterly cash dividend of $0.5625 per Share to be
paid by the Company on March 15, 1996, to holders of record on
March 1, 1996, regardless of when such tender is made. Shares
tendered and purchased by the Company will not be entitled to
any dividends in respect of any later dividend periods. See
Section 10.
Purpose of Offer............ The Company is making the Offer as one of the recapitalizations
being undertaken in connection with the sale on
February 16, 1996, by the Company and Pennsylvania
Enterprises, Inc., the owner of all of the Company's
common stock, of the Company's regulated water operations and certain
related assets (the "Sale of the Water Business"). The Company
believes that the Offer and the other recapitalizations will have a
positive effect on the Company's financial and capital ratios and
credit rating. In addition, the repurchase of Shares pursuant
to the Offer will adjust the Company's capital structure to
a level more appropriate to the size and nature of its
operations after the Sale of the Water Business. See Section 1.
(i)
Certain Effects of Offer ... The Company's purchase of Shares pursuant to the Offer will
reduce the number of holders of Shares and the number of
Shares that might otherwise trade publicly, and depending
upon the number of Shares so purchased, could adversely affect the
liquidity and market value of the remaining Shares held by the
public.
Brokerage Commissions....... Not payable by stockholders.
Stock Transfer Tax.......... None, except as provided in Instruction 6 of the Letter of Transmittal.
Payment Date................ As promptly as practicable after the Expiration Date of the
Offer.
Further Information......... Any questions, requests for assistance or requests for
additional copies of this Offer to Purchase, the Letter of
Transmittal or other tender offer materials may be directed to
D.F. King & Co., Inc., 77 Water Street, New York, New York
10005, Tel: (800) 714-3313 (toll free).
(ii)
To the Holders of Depositary Preferred
Shares Representing Shares of 9% Cumulative Preferred
Stock of PG Energy Inc.:
INTRODUCTION
PG Energy Inc., a Pennsylvania corporation formerly known as Pennsylvania Gas
and Water Company (the "Company"), is offering to purchase any and all of its
outstanding Depositary Preferred Shares (the "Shares"), each representing a
one-fourth interest in a share of its 9% Cumulative Preferred Stock, par value
$100.00 per share, liquidation preference $100.00 per share (equivalent to
$25.00 per Share), at $27.00 per Share (the "Purchase Price"), net to the seller
in cash, upon the terms and subject to the conditions set forth herein and in
the related Letter of Transmittal (which together constitute the "Offer").
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE
SECTION 9.
Tendering stockholders will not be obligated to pay brokerage commissions,
solicitation fees or, subject to Instruction 6 of the Letter of Transmittal,
stock transfer taxes on the purchase of Shares by the Company. The Company will
pay all charges and expenses of Legg Mason Wood Walker, Incorporated (the
"Dealer Manager"), Chemical Mellon Shareholder Services, L.L.C. (the
"Depositary") and D.F. King & Co., Inc. (the "Information Agent") incurred in
connection with the Offer. See Section 15. However, any tendering stockholder or
other payee who fails to complete and sign the Substitute Form W-9 that is
included in the Letter of Transmittal may be subject to a required federal
income tax backup withholding of 31% of the gross payments payable to such
stockholder or other payee pursuant to the Offer. See Sections 2 and 6.
NEITHER THE COMPANY NOR ANY OF ITS DIRECTORS OR EXECUTIVE OFFICERS MAKES ANY
RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER ALL OR ANY SHARES.
EACH STOCKHOLDER MUST MAKE HIS OR HER OWN DECISION AS TO WHETHER TO TENDER
SHARES AND, IF SO, HOW MANY SHARES TO TENDER. THE COMPANY HAS BEEN ADVISED THAT
TWO DIRECTORS AND TWO EXECUTIVE OFFICERS OF THE COMPANY (EACH OF WHOM ALSO
SERVES AS A DIRECTOR OR EXECUTIVE OFFICER OF PENNSYLVANIA ENTERPRISES, INC., THE
HOLDER OF ALL OF THE COMPANY'S COMMON STOCK) INTEND TO TENDER SHARES PURSUANT TO
THE OFFER AND THAT NO OTHER DIRECTOR OR EXECUTIVE OFFICER OF THE COMPANY OR ANY
OF ITS AFFILIATES INTENDS TO TENDER SHARES PURSUANT TO THE OFFER AS NO SUCH
PERSON OWNS ANY SHARES.
As of March 11, 1996, the Company had issued and outstanding 1,000,000
Shares, each representing a one-fourth interest in a share of the Company's 9%
Cumulative Preferred Stock. As of March 7, 1996, there were approximately 500
holders of record of Shares.
The bid price of the Shares is reported on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") under the symbol
"PGWCZ." See Section 10. Stockholders are urged to obtain current market
quotations for the Shares. Stockholders should note that the average weekly
trading volume of the Shares since January 1, 1995, has been approximately 5,000
Shares.
SPECIAL FACTORS
1. PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER; PLANS OF THE COMPANY
AFTER THE OFFER.
The Offer is one of the recapitalizations being undertaken in connection with
the sale on February 16, 1996, by the Company and Pennsylvania Enterprises, Inc.
("PEI"), the owner of all of the Company's common stock, of the Company's
regulated water operations and certain related assets (the "Sale of the
Water Business") to Pennsylvania-American Water Company, a wholly-owned
subsidiary of American Water Works Company, Inc. See "The Offer-Certain
Information Concerning the Company-Summary Unaudited Pro Forma Financial
Information" in Section 11 for a description of the other recapitalizations. The
Company believes that the Offer and the other recapitalizations will have a
positive effect on the Company's financial and capital ratios and credit rating.
In addition, the repurchase of Shares pursuant to the Offer will adjust the
Company's capital structure to a level more appropriate to the size and nature
of its operations after the Sale of the Water Business. See "The Offer-Certain
Information Concerning the Company-Summary Unaudited Pro Forma Financial
Information" in Section 11 for a pro forma presentation of the financial effect
of the Offer. Finally, the Offer will enable the Company to reduce its dividend
requirements and annual administrative expenses in connection with servicing the
accounts of holders of the Shares. If the Company repurchases 90% of the
outstanding Shares pursuant to the Offer, it will reduce its dividend
requirements by $2,025,000 annually. The Board of Directors of the Company has
authorized the Offer by a unanimous vote. Nine of the eleven directors are not
employees of the Company.
Following the consummation of the Offer, the business and operations of the
Company will be continued by the Company substantially as they are currently
being conducted. Except as disclosed in the Offer (see "The Offer-Certain
Information Concerning the Company-Summary Unaudited Pro Forma Financial
Information" in Section 11 for a description of the other recapitalizations),
the Company has no plans or proposals which relate to or would result in: (a)
the acquisition by any person of additional securities of the Company or the
disposition of securities of the Company; (b) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, involving the
Company or any of its subsidiaries; (c) a sale or transfer of a material amount
of assets of the Company or any of its subsidiaries; (d) any change in the
present Board of Directors or management of the Company; (e) any material change
in the present dividend rate or policy, or indebtedness or capitalization of the
Company; (f) any other material change in the Company's corporate structure or
business; or (g) any change in the Company's Restated Articles of Incorporation
or Bylaws or any actions which may impede the acquisition of control of the
Company by any person.
The Company's purchase of Shares pursuant to the Offer will reduce the number
of holders of Shares and the number of Shares that might otherwise trade
publicly, and depending upon the number of Shares so purchased, could adversely
affect the liquidity and market value of the remaining Shares held by the
public. The extent of the public market for the Shares and the availability of
price quotations would, however, depend upon such factors as the number of
stockholders remaining at such time, the interest in maintaining a market in the
Shares on the part of securities firms, the possible termination of registration
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
described below, and other factors.
The Shares are currently registered under the Exchange Act. Registration of
the Shares under the Exchange Act may be terminated upon application of the
Company to the Securities and Exchange Commission (the "Commission") if the
Shares are held by fewer than 300 holders of record. Termination of registration
of the Shares under the Exchange Act would substantially reduce the information
required to be furnished by the Company to holders of the Shares (although the
Company would, among other things, remain for the time being subject to the
reporting obligations under the Exchange Act as a result of other of its
outstanding securities) and would make certain provisions of the Exchange Act,
such as the requirements of Rule 13e-3 thereunder with respect to "going
private" transactions, no longer applicable in respect of the Shares.
The Shares are presently included on the list of OTC margin stocks and are
"margin securities" under the regulations of the Board of Governors of the
Federal Reserve System, which has the effect, among other things, of allowing
brokers to extend credit on the collateral of such securities. As a result of
the Offer, the Shares may no longer meet the requirements for continued
inclusion on this list because, among other reasons, there may be fewer than 800
holders of record. If the Shares are no longer included on the list, they would
no longer constitute "margin securities" for purposes of the margin regulations
of the Board of Governors of the Federal Reserve System, and, therefore, could
no longer be used as collateral for loans made by brokers.
2
If the aggregate purchase price of Shares purchased pursuant to the Offer and
related costs (together with the net reduction in consolidated net worth
associated with the other recapitalizations being undertaken in connection with
the Sale of the Water Business) exceeds approximately $53 million, PEI's
consolidated net worth, based on its consolidated net worth as of December 31,
1995, would fall below the $110.0 million that PEI is required to maintain by
the Indenture, dated as of June 15, 1992, as supplemented (the "Indenture"),
relating to its 10.125% Senior Notes due June 15, 1999 (the "Senior Notes").
Failure to maintain this minimum net worth at the end of two consecutive
quarters will constitute an "Event of Default" under the Indenture if PEI does
not cure such failure within 60 days after receipt of notice from the trustee
under the Indenture or from holders of at least 25% in principal amount of the
outstanding Senior Notes. If an Event of Default occurs, the trustee may, and
the trustee shall upon the request of the holders of at least 25% in principal
amount of the outstanding Senior Notes, declare the principal of and accrued and
unpaid interest to the date of acceleration on the Senior Notes due and payable.
Before the failure to maintain the minimum net worth becomes an "Event of
Default," PEI intends to elect to be released from certain provisions of the
Indenture ("covenant defeasance"), including the covenant to maintain such
minimum net worth, so that any omission to comply with such covenant will not
constitute an Event of Default. To effect covenant defeasance, PEI must make an
irrevocable deposit with the trustee, in trust for such purpose, of money and/or
U.S. Government Obligations (as defined in the Indenture) which through the
payment of principal and interest in accordance with their terms will provide
money in an amount sufficient to pay the principal of and interest on the Senior
Notes to the date for redemption of the Senior Notes (June 15, 1997) plus 91
days (or, under certain circumstances, such longer period as may be determined)
during which no bankruptcy or insolvency petition shall have been filed by or
against PEI. Part of the proceeds from the Sale of the Water Business were used
by the Company to pay PEI a one-time special dividend on February 16, 1996, in
the form of a $30 million unsecured promissory note. The full $30 million
principal amount of this note was paid on March 8, 1996, and the funds
therefrom, along with other funds provided by PEI, will be used by PEI to make
the required deposit with the trustee. See "The Offer-Certain Information
Concerning the Company-Summary Unaudited Pro Forma Financial Information" in
Section 11.
The Shares are not redeemable by the Company prior to September 15, 1997. The
Offer does not constitute a notice of redemption of the Shares pursuant to the
Company's Restated Articles of Incorporation, as amended, and owners of Shares
are not under any obligation to accept the Offer or to remit their Shares to the
Company pursuant to the Offer. From the time the Shares become redeemable in
accordance with the Company's Restated Articles of Incorporation, as amended, on
September 15, 1997, the Company may, but is not obligated to, redeem Shares not
purchased pursuant to the Offer, in whole or in part, at any time or from time
to time, upon not less than 30 days' notice, at $25.00 per Share, plus all
accrued and unpaid dividends to the date of redemption and a premium of $2.00
per Share in the case of redemptions occurring from September 15, 1997, to
September 14, 1998, or $1.00 per Share in the case of redemptions occurring from
September 15, 1998, to September 14, 1999. The Company reserves the right to
redeem Shares not purchased pursuant to the Offer at any time after they become
redeemable on September 15, 1997. The Shares have no preemptive or conversion
rights and are not entitled to any sinking fund or similar fund. In the event of
any liquidation, dissolution or winding up of the Company, holders of the Shares
are entitled to a liquidation preference of $25.00 per Share, plus all accrued
and unpaid dividends thereon to the date of such liquidation, dissolution or
winding up, prior to the payment of any amounts to any holder of the Company's
common stock. Any Shares remaining outstanding after the Offer will continue to
be redeemable at the option of the Company on and after September 15, 1997.
Following the expiration of the Offer, the Company may, in its sole
discretion, determine to purchase any remaining Shares through privately
negotiated transactions, open market purchases or otherwise, on such terms and
at such prices as the Company may determine from time to time, the terms of
which purchases or offers could differ from those of the Offer, except that the
Company will not make any such purchases of Shares until the expiration of ten
business days after the termination of the Offer. Any possible future purchases
of Shares by the Company will depend on many factors, including
3
the market price of the Shares, the Company's business and financial position,
alternative investment opportunities available to the Company, the results of
the Offer and general economic and market conditions.
All Shares purchased by the Company pursuant to the Offer will be exchanged
by the Company for the related 9% Cumulative Preferred Stock which will in turn
be reclassified to the status of authorized but unissued shares of the Company's
preferred stock.
NEITHER THE COMPANY NOR ANY OF ITS DIRECTORS OR EXECUTIVE OFFICERS MAKES ANY
RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER ALL OR ANY SHARES.
EACH STOCKHOLDER MUST MAKE HIS OR HER OWN DECISION AS TO WHETHER TO TENDER
SHARES AND, IF SO, HOW MANY SHARES TO TENDER. THE COMPANY HAS BEEN ADVISED THAT
TWO DIRECTORS AND TWO EXECUTIVE OFFICERS OF THE COMPANY (EACH OF WHOM ALSO
SERVES AS A DIRECTOR OR EXECUTIVE OFFICER OF PEI) INTEND TO TENDER SHARES
PURSUANT TO THE OFFER AND THAT NO OTHER DIRECTOR OR EXECUTIVE OFFICER OF THE
COMPANY OR ANY OF ITS AFFILIATES INTENDS TO TENDER SHARES PURSUANT TO THE OFFER
AS NO SUCH PERSON OWNS ANY SHARES.
2. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
In General. The following summary is a general discussion of certain United
States federal income tax consequences relating to the Offer. This summary does
not discuss any aspects of state, local, foreign or other tax laws. The summary
is based on the Internal Revenue Code of 1986, as amended (the "Code"), and
existing final, temporary and proposed Treasury Regulations, Revenue Rulings and
judicial decisions, all of which are subject to prospective and retroactive
changes. The summary deals only with Shares held as capital assets within the
meaning of Section 1221 of the Code and does not address tax consequences that
may be relevant to investors in special tax situations, such as certain
financial institutions, tax-exempt organizations, insurance companies, dealers
in securities or currencies, stockholders who have acquired their Shares upon
the exercise of options or otherwise as compensation, or stockholders holding
the Shares as part of a conversion transaction, as part of a hedge or hedging
transaction, or as a position in a straddle for tax purposes. The Company will
not seek a ruling from the Internal Revenue Service (the "IRS") with regard to
the tax matters discussed below. Accordingly, each stockholder should consult
its own tax advisor with regard to the Offer and the application of United
States federal income tax laws, as well as the laws of any state, local or
foreign taxing jurisdiction, to its particular situation.
Characterization of the Sale. A sale of Shares by a stockholder of the
Company pursuant to the Offer will be a taxable transaction for United States
federal income tax purposes and may also be a taxable transaction under
applicable state, local and foreign tax laws. The United States federal income
tax consequences to a stockholder may vary depending upon the stockholder's
particular facts and circumstances. Under Section 302 of the Code, a sale of
Shares by a stockholder to the Company pursuant to the Offer will be treated as
a "sale or exchange" of such Shares for United States federal income tax
purposes (rather than as a distribution by the Company with respect to the
Shares held by the tendering stockholder) if the receipt of cash upon such sale
(i) results in a "complete termination" of the stockholder's interest in the
Company, (ii) is "not essentially equivalent to a dividend" with respect to the
stockholder, or (iii) in the case of a noncorporate stockholder, qualifies as a
distribution in "partial liquidation" of the Company. These tests (the "Section
302 tests") are explained more fully below. A sale of Shares by a tendering
stockholder to the Company pursuant to the Offer should be treated as a sale or
exchange of such Shares for United States federal income tax purposes, absent
other integrated purchase transactions. See "Section 302 Tests," below.
If any of the Section 302 tests is satisfied, and the sale of the Shares is
therefore treated as a "sale or exchange" of such Shares for United States
federal income tax purposes, the tendering stockholder will recognize capital
gain or loss equal to the difference between the amount of cash received by the
stockholder pursuant to the Offer and the stockholder's tax basis in the Shares
sold pursuant to the Offer. Any such gain or loss will be long-term capital gain
or loss if the Shares have been held for more than one year.
4
If none of the Section 302 tests is satisfied and the Company has sufficient
current and accumulated earnings and profits, the tendering stockholder will be
treated as having received a dividend includible in gross income in an amount
equal to the entire amount of cash received by the stockholder pursuant to the
Offer (without reduction for the tax basis of the Shares sold pursuant to the
Offer), no loss will be recognized, and (subject to reduction as described below
for corporate stockholders eligible for the dividends-received deduction) the
tendering stockholder's basis in the Shares sold pursuant to the Offer will be
added to such stockholder's basis in its remaining Shares, if any. No assurance
can be given that any of the Section 302 tests will be satisfied as to any
particular stockholder, and thus no assurance can be given that any particular
stockholder will not be treated as having received a dividend taxable as
ordinary income. If the sale of Shares is not treated as a sale or exchange for
federal income tax purposes, any cash received for Shares pursuant to the Offer
in excess of the Company's earnings and profits will be treated, first, as a
nontaxable return of capital to the extent of the stockholder's basis for such
stockholder's Shares, and, thereafter, as capital gain, to the extent it exceeds
such basis.
Constructive Ownership of Stock. In determining whether any of the Section
302 tests is satisfied, stockholders must take into account not only the Shares
which are actually owned by the stockholder, but also Shares which are
constructively owned by the stockholder within the meaning of Section 318 of the
Code. Under Section 318 of the Code, a stockholder may constructively own Shares
actually owned, and in some cases constructively owned, by certain related
individuals or entities in which the stockholder has an interest, or, in the
case of stockholders that are entities, by certain individuals or entities that
have an interest in the stockholder, and Shares which the stockholder has the
right to acquire by exercise of an option or by conversion. Contemporaneous
dispositions or acquisitions of Shares by a stockholder or related individuals
or entities may be deemed to be part of a single integrated transaction which
will be taken into account in determining whether any of the Section 302 tests
has been satisfied.
Section 302 Tests. One of the following tests must be satisfied in order for
the sale of Shares pursuant to the Offer to be treated as a sale or exchange for
federal income tax purposes.
a. Complete Termination Test. The receipt of cash by a stockholder will be
a "complete termination" of the stockholder's interest if either (i) all of
the Shares actually and constructively owned by the stockholder are sold
pursuant to the Offer, or (ii) all of the Shares actually owned by the
stockholder are sold pursuant to the Offer and, with respect to the Shares
constructively owned by the stockholder which are not sold pursuant to the
Offer, the stockholder is eligible to waive (and effectively waives)
constructive ownership of all such Shares under procedures described in
Section 302(c) of the Code. Stockholders considering making such a waiver
should do so in consultation with their tax advisors.
b. Not Essentially Equivalent to a Dividend Test. Even if the receipt of
cash by a stockholder fails to satisfy the "complete termination" test or the
"partial liquidation" test, a stockholder may nevertheless satisfy the "not
essentially equivalent to a dividend" test if the stockholder's sale of
Shares pursuant to the Offer results in a "meaningful reduction" in the
stockholder's proportionate interest in the Company. The sale of Shares to
the Company by a tendering stockholder should qualify as "not essentially
equivalent to a dividend," absent other integrated purchase transactions.
Stockholders expecting to rely on the "not essentially equivalent to a
dividend" test should consult their own tax advisors as to its application in
their particular situation.
c. Partial Liquidation Test. A sale of Shares pursuant to the Offer will
be treated as a sale or exchange for federal income tax purposes if such sale
is (i) a redemption of Shares from a stockholder that is not a corporation,
and (ii) in partial liquidation of the Company. To determine whether a
stockholder is a corporation for these purposes, shares held by a
partnership, trust or estate are treated as if owned proportionately by the
partners or beneficiaries. A distribution is treated as in partial
liquidation of a corporation if the distribution is not essentially
equivalent to a dividend (as determined at the corporate rather than the
stockholder level) and the distribution is pursuant to a plan and occurs
within the taxable year in which the plan is adopted or within the succeeding
taxable year. A distribution is not essentially equivalent to a dividend at
the corporate
5
level for these purposes if (A) the distribution is attributable to the
corporation's ceasing to conduct a trade or business which was actively
conducted for the previous five years and which was not acquired by the
distributing corporation in a taxable transaction during such five year
period (a "qualified trade or business"), and (B) the distributing
corporation is actively involved in the conduct of a qualified trade or
business immediately after the distribution. The Company actively conducted
the water business for more than five years, and, subsequent to the Sale of
the Water Business, the Company has continued to be actively engaged in the
conduct of a qualified trade or business. Thus, the Sale of the Water
Business and the Offer will likely constitute a partial liquidation of the
Company.
Corporate Stockholder Dividend Treatment. Under current law, if a sale of
Shares by a corporate stockholder is treated as a dividend, the corporate
stockholder may be entitled to claim a deduction equal to 70% of the dividend
under Section 243 of the Code, subject to applicable limitations. Corporate
stockholders should consider the effect of Section 246(c) of the Code, which
disallows the 70% dividends-received deduction with respect to stock that is
held for 45 days or less (90 days or less, in the case of preferred stock if the
stockholder receives dividends attributable to a period aggregating in excess of
366 days). For this purpose, the length of time a taxpayer is deemed to have
held stock may be reduced by periods during which the taxpayer's risk of loss
with respect to the stock is diminished by reason of the existence of certain
options or other transactions. Moreover, under Section 246A of the Code, if a
corporate stockholder has incurred indebtedness directly attributable to an
investment in Shares, the 70% dividends-received deduction may be reduced by a
percentage generally computed based on the amount of such indebtedness and the
total adjusted tax basis in the Shares.
In addition, because it is expected that the redemption of Shares will not be
pro rata with respect to all stockholders, any amount received by a corporate
stockholder pursuant to the Offer that is treated as a dividend will likely
constitute an "extraordinary dividend" under Section 1059 of the Code (except as
may otherwise be provided in regulations yet to be promulgated by the Treasury
Department). A redemption which is part of a partial liquidation of the
redeeming company will also constitute an "extraordinary dividend" under Section
1059 (in the absence of such regulations). A corporate stockholder receiving an
"extraordinary dividend" would be required under Section 1059(a) of the Code to
reduce its basis (but not below zero) in its Shares by the non-taxed portion of
the extraordinary dividend (i.e., the portion of the dividend for which a
deduction is allowed), and, if such portion exceeds the stockholder's tax basis
for its Shares, to treat the excess as gain from the sale of such Shares in the
year in which a sale or disposition of such Shares occurs. The basis reduction
rules of Section 1059 also generally apply to dividends which exceed a threshold
percentage of a stockholder's basis in its stock, unless the stockholder has
held its stock for more than two years before the dividend announcement date of
such dividend. For purposes of applying Section 1059, all dividends received by
a stockholder and having their ex-dividend dates within an 85-day period
(expanded to a 365-day period, in the case of dividends received in such period
that in the aggregate exceed 20% of the stockholder's adjusted tax basis in the
Shares) are aggregated. Corporate stockholders should consult their own tax
advisors as to the application of Section 1059 of the Code to the Offer, and to
any dividends which may be paid with respect to the Shares, as well as the
effect of pending legislation discussed below.
Foreign Stockholders. The Company will withhold United States federal income
tax at a rate of 30% from the gross proceeds paid pursuant to the Offer to a
foreign stockholder or his agent, unless the Company determines that a reduced
rate of withholding is applicable pursuant to a tax treaty or that an exemption
from withholding is applicable because such gross proceeds are effectively
connected with the conduct of a trade or business by the foreign stockholder
within the United States. For this purpose, a foreign stockholder is any
stockholder that is not (i) a citizen or resident or the United States, (ii) a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, or (iii) any
estate or trust the income of which is subject to United States federal income
taxation regardless of its source.
Generally, the determination of whether a reduced rate of withholding is
applicable is made by reference to a foreign stockholder's address or to a
properly completed Form 1001 furnished by the stockholder, and the determination
of whether an exemption from withholding is available on the
6
grounds that gross proceeds paid to a foreign stockholder are effectively
connected with a United States trade or business is made on the basis of a
properly completed Form 4224 furnished by the stockholder. The Company will
determine a foreign stockholder's eligibility for a reduced rate of, or
exemption from, withholding by reference to the stockholder's address and any
Forms 1001 or 4224 submitted to the Company by a foreign stockholder unless
facts and circumstances indicate that such reliance is not warranted or unless
applicable law requires some other method for determining whether a reduced rate
of withholding is applicable. These forms can be obtained from the Company.
A foreign stockholder with respect to whom tax has been withheld may be
eligible to obtain a refund of all or a portion of the withheld tax if the
stockholder satisfied one of the Section 302 tests for capital gain treatment or
is otherwise able to establish that no tax or a reduced amount of tax was due.
Foreign stockholders are urged to consult their own tax advisors regarding the
application of United States federal income tax withholding, including
eligibility for a withholding tax reduction or exemption and the refund
procedure.
Backup Withholding. See Section 6 with respect to the application of
United States federal income tax backup withholding.
Legislative Proposals.
(a) Capital Gains: The Revenue Reconciliation Act of 1995, as passed by
Congress and vetoed by the President, includes a reduction in the tax on net
long-term capital gains for both individuals and corporations. Under the bill,
individual taxpayers would be permitted a deduction for 50% of net capital gains
(i.e., the excess of net long-term capital gains over net short-term capital
losses). In addition, the deduction for net long-term capital losses could not
exceed 50% of the excess of net long-term capital losses over net short-term
capital gains. Corporations would be subject to a maximum tax rate of 28% on
their net capital gains. These reductions in the effective capital gains tax
rates generally would have been effective for transactions occurring after 1994.
It is uncertain whether capital gains relief ultimately will be adopted and, if
adopted, what form such relief will take or what the effective date will be.
(b) Corporate dividends-received deduction: The Revenue Reconciliation Act of
1995, as passed by Congress and vetoed by the President, and the President's
budget proposal would amend Section 1059 of the Code to require corporate
stockholders to recognize gain immediately whenever the non-taxed portion of an
extraordinary dividend exceeds the basis of stock with respect to which the
dividend is received. Such legislation would also cause any amount characterized
as a dividend due to the Section 318 option attribution rules to be treated as
an extraordinary dividend under Section 1059 (with the legislation's gain
recognition rule applied by taking into account only the basis of the stock
redeemed). The legislation generally is proposed to be effective for redemptions
after May 3, 1995. It is uncertain whether such proposals will be adopted and,
if adopted, what form such legislation will take.
In addition, the President's budget proposal (but not the Revenue
Reconciliation Act of 1995 as passed by Congress) would reduce the
dividends-received deduction under Section 243 of the Code from 70% to 50% and
would require the 46-day holding period of Section 246(c) of the Code to be
satisfied over a period immediately before and/or after the taxpayer becomes
entitled to receive the dividend. Both of these provisions would apply to
dividends paid after January 31, 1996.
The impact of pending and future budget and tax legislation on the United
States federal tax system, including possible effects on taxation of the Offer,
is uncertain. Stockholders are advised to consult their own tax advisors as to
these matters.
THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY.
THE TAX CONSEQUENCES OF A SALE PURSUANT TO THE OFFER MAY VARY DEPENDING UPON,
AMONG OTHER THINGS, THE PARTICULAR CIRCUMSTANCES OF THE TENDERING STOCKHOLDER.
NO INFORMATION IS PROVIDED HEREIN AS TO THE STATE, LOCAL OR FOREIGN TAX
CONSEQUENCES OF THE TRANSACTION CONTEMPLATED BY THE OFFER. STOCKHOLDERS ARE
URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR
7
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF SALES MADE BY THEM
PURSUANT TO THE OFFER, THE EFFECT OF THE STOCK OWNERSHIP ATTRIBUTION RULES
MENTIONED ABOVE AND THE EFFECT OF TAX LEGISLATIVE PROPOSALS.
3. FAIRNESS OF THE OFFER; REPORTS AND OPINIONS.
The Company believes the Offer is fair to holders of Shares. The Offer gives
holders of Shares the opportunity to sell substantial amounts of Shares without
driving down the bid price. The Offer will also provide stockholders with the
opportunity to dispose of Shares without the usual transaction costs associated
with a market sale including the payment of brokerage commissions.
Correspondingly, the costs to the Company for servicing the accounts of odd lot
holders will be reduced.
Neither the Company nor its Board of Directors received any report, opinion
(other than any opinion of counsel it may have received) or appraisal which is
materially related to the Offer, including, but not limited to, any such report,
opinion or appraisal relating to the consideration or the fairness of the
consideration to be offered to the holders of the Shares or the fairness of such
transaction to the Company. A majority of the directors who are not employees of
the Company have not retained an unaffiliated representative to act solely on
behalf of unaffiliated stockholders for the purposes of negotiating the terms of
the transaction.
4. CERTAIN LEGAL MATTERS; REGULATORY AND FOREIGN APPROVALS; NO APPRAISAL RIGHTS.
The Company is not aware of any license or regulatory permit that appears to
be material to its business that might be adversely affected by its acquisition
of Shares as contemplated in the Offer or of any approval or other action by any
government or governmental, administrative or regulatory authority or agency,
domestic or foreign, that would be required for the Company's acquisition or
ownership of Shares pursuant to the Offer. Should any such approval or other
action be required, the Company currently contemplates that it will seek such
approval or other action. The Company cannot predict whether it may determine
that it is required to delay the acceptance for payment of, or payment for,
Shares tendered pursuant to the Offer pending the outcome of any such matter.
There can be no assurance that any such approval or other action, if needed,
would be obtained or would be obtained without substantial conditions or that
the failure to obtain any such approval or other action might not result in
adverse consequences to the Company's business. The Company intends to make all
required filings under the Exchange Act. The Company's obligation under the
Offer to accept for payment, or make payment for, Shares is subject to certain
conditions. See Section 9.
There is no stockholder vote required in connection with the Offer.
There are no appraisal rights available to holders of Shares in connection
with the Offer.
THE OFFER
5. NUMBER OF SHARES; EXPIRATION DATE; EXTENSION OF THE OFFER.
Upon the terms and subject to the conditions described herein and in the
Letter of Transmittal, the Company will purchase any and all Shares that are
validly tendered on or prior to the Expiration Date (and not properly withdrawn
in accordance with Section 7) at the Purchase Price. The later of 5:00 p.m., New
York City time, on Monday, April 8, 1996, or the latest time and date to which
the Offer is extended, is referred to herein as the "Expiration Date." The Offer
is not conditioned on any minimum number of Shares being tendered.
Shares tendered and purchased by the Company will be entitled to the regular
quarterly cash dividend of $0.5625 per Share to be paid by the Company on March
15, 1996, to holders of record on March 1, 1996, regardless of when such tender
is made. Shares tendered and purchased by the Company will not be entitled to
any dividends in respect of any later dividend periods.
8
If (i) the Company increases or decreases the price to be paid for Shares or
decreases the number of Shares being sought and (ii) the Offer is scheduled to
expire at any time earlier than the expiration of a period ending on the tenth
business day from, and including, the date that notice of such increase or
decrease is first published, sent or given in the manner described in Section
14, the Offer will be extended until the expiration of ten business days from
the date of publication of such notice.
The Company also expressly reserves the right, in its sole discretion, at any
time or from time to time, to extend the period of time during which the Offer
is open by giving oral or written notice of such extension to the Depositary and
making a public announcement thereof. See Section 14. There can be no assurance,
however, that the Company will exercise its right to extend the Offer.
For purposes of the Offer, a "business day" means any day other than a
Saturday, Sunday or federal holiday and consists of the time period from 12:01
a.m. through 12:00 midnight, New York City time.
Copies of this Offer to Purchase and the Letter of Transmittal are being
mailed to record holders of Shares and will be furnished to brokers, banks and
similar persons whose names, or the names of whose nominees, appear on the
Company's stockholder list or, if applicable, who are listed as participants in
a clearing agency's security position listing for subsequent transmittal to
beneficial owners of Shares.
6. PROCEDURE FOR TENDERING SHARES.
Proper Tender of Shares. To tender Shares validly pursuant to the Offer,
either (a) a properly completed and duly executed Letter of Transmittal or
photocopy thereof, together with any required signature guarantees and any other
documents required by the Letter of Transmittal, must be received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase and either (i) certificates for the Shares to be tendered must be
received by the Depositary at one of such addresses or (ii) such Shares must be
delivered pursuant to the procedures for book-entry transfer described below
(and a confirmation of such delivery received by the Depositary), in each case
on or prior to the Expiration Date, or (b) the tendering holder of Shares must
comply with the guaranteed delivery procedure described below.
Book-Entry Transfer. The Depositary will establish an account with respect to
the Shares at The Depository Trust Company and the Philadelphia Depository Trust
Company (collectively referred to as the "Book-Entry Transfer Facilities") for
purposes of the Offer within two business days after the date of this Offer to
Purchase, and any financial institution that is a participant in the system of
any Book-Entry Transfer Facility may make delivery of Shares by causing such
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account in accordance with the procedures of such Book-Entry Transfer Facility.
Although delivery of Shares may be effected through book-entry transfer, a
properly completed and duly executed Letter of Transmittal or photocopy thereof,
together with any required signature guarantees and any other required
documents, must, in any case, be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase on or prior to
the Expiration Date, or the tendering holder of Shares must comply with the
guaranteed delivery procedure described below. Delivery of the Letter of
Transmittal and any other required documents to a Book-Entry Transfer Facility
does not constitute delivery to the Depositary.
Signature Guarantees. Except as otherwise provided below, all signatures on a
Letter of Transmittal must be guaranteed by a firm that is a member of a
registered national securities exchange or the National Association of
Securities Dealers, Inc., or by a commercial bank or trust company having an
office or correspondent in the United States which is a participant in an
approved Signature Guarantee Medallion Program (each of the foregoing being
referred to as an "Eligible Institution"). Signatures on a Letter of Transmittal
need not be guaranteed if (a) the Letter of Transmittal is signed by the
registered holder of the Shares tendered therewith and such holder has not
completed the box entitled "Special Payment Instructions" or the box entitled
"Special Delivery Instructions" in the Letter of Transmittal or (b) such Shares
are tendered for the account of an Eligible Institution. See Instructions 1 and
5 of the Letter of Transmittal.
9
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and cannot deliver certificates for such Shares and all other required
documents to the Depositary on or prior to the Expiration Date or the procedure
for book-entry transfer cannot be complied with in a timely manner, such Shares
may nevertheless be tendered if all of the following conditions are met:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed Delivery
substantially in the form provided by the Company (with any required
signature guarantees) is received by the Depositary as provided below on or
prior to the Expiration Date; and
(iii) the certificates for such Shares (or a confirmation of a book-entry
transfer of such Shares into the Depositary's account at one of the
Book-Entry Transfer Facilities), together with a properly completed and duly
executed Letter of Transmittal (or photocopy thereof) and any other documents
required by the Letter of Transmittal, are received by the Depositary no
later than 5:00 p.m., New York City time, on the third business day after the
date of execution of the Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
facsimile transmission or mail to the Depositary and must include a guarantee by
an Eligible Institution in the form set forth in such Notice.
The method of delivery of Shares and all other required documents is at the
option and risk of the tendering stockholder. If delivery is by mail, registered
mail with return receipt requested, properly insured, is recommended. In all
cases sufficient time should be allowed to assure timely delivery.
Federal Backup Withholding. To avoid federal income tax backup withholding
equal to 31% of the gross payments made pursuant to the Offer, each stockholder
must notify the Depositary of such stockholder's correct taxpayer identification
number and provide certain other information by properly completing the
Substitute Form W-9 included in the Letter of Transmittal. Foreign stockholders
(as defined in Section 2) may be required to submit a properly completed Form
W-8, certifying non-United States status, in order to avoid backup withholding.
In addition, foreign stockholders may be subject to 30% (or lower treaty rate)
withholding on gross payments received pursuant to the Offer (as discussed in
Section 2). For a discussion of certain federal income tax consequences to
tendering stockholders, see Section 2. Each stockholder is urged to consult with
his or her own tax advisor.
Determinations of Validity. All questions as to the Purchase Price, the form
of documents and the validity, eligibility (including time of receipt) and
acceptance for payment of any tender of Shares will be determined by the
Company, in its sole discretion, and its determination shall be final and
binding. The Company reserves the absolute right to reject any or all tenders of
Shares that it determines are not in proper form or the acceptance for payment
of or payment for Shares that may, in the opinion of the Company's counsel, be
unlawful. The Company also reserves the absolute right to waive any defect or
irregularity in any tender of Shares. None of the Company, the Dealer Manager,
the Depositary, the Information Agent or any other person will be under any duty
to give notice of any defect or irregularity in tenders, nor shall any of them
incur any liability for failure to give any such notice.
Rule 14e-4. It is a violation of Rule 14e-4 promulgated under the Exchange
Act for a person to tender Shares for his or her own account unless the person
so tendering (i) has a net long position equal to or greater than the amount of
(x) Shares tendered or (y) other securities immediately convertible into,
exercisable, or exchangeable for the amount of Shares tendered and will acquire
such Shares for tender by conversion, exercise or exchange of such other
securities and (ii) will cause such Shares to be delivered in accordance with
the terms of the Offer. Rule 14e-4 provides a similar restriction applicable to
the tender or guarantee of a tender on behalf of another person. The tender of
Shares pursuant to any one of the procedures described above will constitute the
tendering stockholder's representation and warranty that (i) such stockholder
has a net long position in the Shares being tendered within the meaning of Rule
14e-4 promulgated under the Exchange Act, and (ii) the tender of such Shares
complies with Rule 14e-4. The Company's acceptance for payment of Shares
tendered pursuant to the Offer will constitute a binding agreement between the
tendering stockholder and the Company upon the terms and subject to the
conditions of the Offer.
10
7. WITHDRAWAL RIGHTS.
Tenders of Shares made pursuant to the Offer may be withdrawn at any time
prior to the Expiration Date. Thereafter, such tenders are irrevocable, except
that they may be withdrawn after May 3, 1996, unless theretofore accepted for
payment as provided in this Offer to Purchase. If the Company extends the period
of time during which the Offer is open, is delayed in accepting for payment or
paying for Shares or is unable to accept for payment or pay for Shares pursuant
to the Offer for any reason, then, without prejudice to the Company's rights
under the Offer, the Depositary may, on behalf of the Company, retain all Shares
tendered, and such Shares may not be withdrawn except as otherwise provided in
this Section 7, subject to Rule 13e-4(f)(5) under the Exchange Act, which
provides that the issuer making the tender offer shall either pay the
consideration offered, or return the tendered securities promptly after the
termination or withdrawal of the tender offer.
To be effective, a written or facsimile transmission notice of withdrawal
must be timely received by the Depositary at one of its addresses set forth on
the back cover of this Offer to Purchase and must specify the name of the person
who tendered the Shares to be withdrawn and the number of Shares to be
withdrawn. If the Shares to be withdrawn have been delivered to the Depositary,
a signed notice of withdrawal with signatures guaranteed by an Eligible
Institution (except in the case of Shares tendered by an Eligible Institution)
must be submitted prior to the release of such Shares. In addition, such notice
must specify, in the case of Shares tendered by delivery of certificates, the
name of the registered holder (if different from that of the tendering
stockholder) and the serial numbers shown on the particular certificates
evidencing the Shares to be withdrawn or, in the case of Shares tendered by
book-entry transfer, the name and number of the account at one of the Book-Entry
Transfer Facilities to be credited with the withdrawn Shares. Withdrawals may
not be rescinded, and Shares withdrawn will thereafter be deemed not validly
tendered for purposes of the Offer. However, withdrawn Shares may be retendered
by again following one of the procedures described in Section 6 at any time
prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by the Company, in its sole discretion,
which determination shall be final and binding. None of the Company, the Dealer
Manager, the Depositary, the Information Agent or any other person will be under
any duty to give notification of any defect or irregularity in any notice of
withdrawal or incur any liability for failure to give any such notification.
8. ACCEPTANCE FOR PAYMENT OF SHARES AND PAYMENT OF PURCHASE PRICE.
Upon the terms and subject to the conditions of the Offer and as promptly as
practicable after the Expiration Date, the Company will accept for payment and
pay the Purchase Price for any and all Shares validly tendered. Thereafter,
payment for all Shares accepted for payment pursuant to the Offer will be made
by the Depositary by check as promptly as practicable. In all cases, payment for
Shares accepted for payment pursuant to the Offer will be made only after timely
receipt by the Depositary of certificates for Shares (or of a confirmation of a
book-entry transfer of such Shares into the Depositary's account at one of the
Book-Entry Transfer Facilities), a properly completed and duly executed Letter
of Transmittal or photocopy thereof, and any other required documents.
For purposes of the Offer, the Company will be deemed to have accepted for
payment (and thereby purchased) Shares that are validly tendered prior to the
applicable Expiration Date and not withdrawn as, if and when it gives oral or
written notice to the Depositary of its acceptance for payment of such Shares.
The Company will pay for Shares that it has purchased pursuant to the Offer by
depositing the Purchase Price therefor with the Depositary. The Depositary will
act as agent for tendering stockholders for the purpose of receiving payment
from the Company and transmitting payment to tendering stockholders. Under no
circumstances will interest be paid on amounts to be paid to tendering
stockholders, regardless of any delay in making such payment.
If certain events occur, the Company may not be obligated to purchase Shares
pursuant to the Offer. See Section 9. Certificates for all Shares not purchased
will be returned (or, in the case of Shares tendered by book-entry transfer,
such Shares will be credited to an account maintained with a Book-Entry Transfer
Facility) as promptly as practicable without expense to the tendering
stockholder.
11
The Company will pay or cause to be paid any stock transfer taxes with
respect to the sale and transfer of any Shares to it or its order pursuant to
the Offer. If, however, payment of the Purchase Price is to be made to, or
Shares not tendered or not purchased are to be registered in the name of, any
person other than the registered holder, or if tendered Shares are registered in
the name of any person other than the person signing the Letter of Transmittal,
the amount of any stock transfer taxes (whether imposed on the registered
holder, such other person or otherwise) payable on account of the transfer to
such person will be deducted from the Purchase Price unless satisfactory
evidence of the payment of such taxes, or exemption therefrom, is submitted. See
Instruction 6 of the Letter of Transmittal.
9. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provisions of the Offer, the Company will not be
required to accept for payment or pay for any Shares tendered, and may terminate
or amend the Offer or may postpone (subject to the requirements of the Exchange
Act for prompt payment for or return of Shares) the acceptance for payment of or
payment for Shares tendered, if at any time on or after March 11, 1996, and
before acceptance for payment of or payment for any such Shares, any of the
following events shall have occurred (or shall have been determined by the
Company in its sole judgment to have occurred) regardless of the circumstances
giving rise thereto (including any action or omission to act by the Company):
(a) there shall have been threatened, instituted or pending any action or
proceeding by any government or governmental, regulatory or administrative
agency or authority or tribunal or any other person, domestic or foreign, or
before any court, authority, agency or tribunal that (i) challenges the
acquisition of Shares pursuant to the Offer or otherwise in any manner
relates to or affects the Offer, (ii) challenges the acquisition by the
Company of shares of its 4.10% Cumulative Preferred Stock (the "4.10%
Preferred Shares") pursuant to the Company's Offer to Purchase, dated March
11, 1996, concerning such 4.10% Preferred Shares (the "4.10% Preferred
Offer") or otherwise in any manner relates to or affects the 4.10% Preferred
Offer, (iii) challenges the acquisition by PEI of shares of its common stock
pursuant to PEI's Offer to Purchase, dated March 11, 1996, concerning such
common stock (the "PEI Offer") or otherwise in any manner relates to or
affects the PEI Offer or (iv) in the sole judgment of the Company, could
materially and adversely affect the business, condition (financial or other),
income, operations or prospects of the Company or PEI and its subsidiaries,
taken as a whole, or otherwise materially impair in any way the contemplated
future conduct of the business of PEI or any of its subsidiaries (including
the Company) or materially impair the contemplated benefits of the Offer to
the Company;
(b) there shall have been any action threatened, pending or taken, or
approval withheld, withdrawn or abrogated or any statute, rule, regulation,
judgment, order or injunction threatened, proposed, sought, promulgated,
enacted, entered, amended, enforced or deemed to be applicable to the Offer,
the 4.10% Offer or the PEI Offer, or PEI or any of its subsidiaries
(including the Company), by any legislative body, court, authority, agency or
tribunal which, in the Company's sole judgment, would or might directly or
indirectly (i) make the acceptance for payment of, or payment for, some or
all of the Shares, the 4.10% Preferred Shares or shares of the common stock
of PEI illegal or otherwise restrict or prohibit consummation of the Offer,
the 4.10% Offer or the PEI Offer, (ii) delay or restrict the ability of the
Company or PEI, or render the Company or PEI unable, to accept for payment or
pay for some or all of the Shares, the 4.10% Preferred Shares or shares of
the common stock of PEI, as the case may be, (iii) materially impair the
contemplated benefits of the Offer or the 4.10% Offer to the Company or of
the PEI Offer to PEI (iv) materially affect the business, condition
(financial or other), income, operations or prospects of the Company or PEI
and its subsidiaries, taken as a whole, or otherwise materially impair in any
way the contemplated future conduct of the business of PEI or any of its
subsidiaries (including the Company);
(c) it shall have been publicly disclosed or the Company shall have
learned that (i) any person or "group" (within the meaning of Section
13(d)(3) of the Exchange Act) has acquired or proposes to acquire beneficial
ownership of more than 5% of the outstanding shares of the common stock of
PEI, whether through the acquisition of stock, the formation of a group, the
grant of any option or right,
12
or otherwise (other than as disclosed in a Schedule 13D or 13G (or an
amendment thereto) on file with the Commission on March 8, 1996), (ii) any
such person or group that on or prior to March 8, 1996, had filed such a
Schedule with the Commission thereafter shall have acquired or shall propose
to acquire whether through the acquisition of stock, the formation of a
group, the grant of any option or right, or otherwise, beneficial ownership
of additional shares of the common stock of PEI representing 2% or more of
the outstanding shares of such common stock, (iii) any new group shall have
been formed which beneficially owns more than 5% of the outstanding shares of
the common stock of PEI, or (iv) any person, entity or group shall have filed
a Notification and Report Form under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 or made a public announcement reflecting an intent
to acquire PEI or any or its subsidiaries or any of their respective assets
or securities;
(d) there shall have occurred (i) any general suspension of trading in, or
limitation on prices for, securities on any national securities exchange or
in the over-the-counter market, (ii) any significant decline in the market
price of the Shares or in the general level of market prices of equity
securities in the United States or abroad, (iii) any change in the general
political, market, economic or financial condition in the United States or
abroad that could have a material adverse effect on PEI's or the Company's
business, condition (financial or other), income, operations, prospects or
ability to obtain financing generally or the trading in the Shares, (iv) the
declaration of a banking moratorium or any suspension of payments in respect
of banks in the United States or any limitation on, or any event which, in
the Company's sole judgment, might affect, the extension of credit by lending
institutions in the United States, (v) the commencement of a war, armed
hostilities or other international or national crisis directly or indirectly
involving the United States or (vi) in the case of any of the foregoing
existing at the time of the commencement of the Offer, in the Company's sole
judgment, a material acceleration or worsening thereof;
(e) a tender or exchange offer with respect to some or all of the Shares
(other than the Offer) or other shares of preferred stock of the Company or
some or all of the common stock of PEI, or a merger, acquisition or other
business combination proposal for PEI or any subsidiary (including the
Company), shall have been proposed, announced or made by a person other than
the Company or PEI;
(f) there shall have occurred any event or events that have resulted, or
may in the sole judgment of the Company result, in an actual or threatened
change in the business, condition (financial or other), income, operations,
stock ownership or prospects of the Company or PEI and its subsidiaries,
taken as a whole; or materially impair the contemplated benefits of the Offer
to the Company; or
(g) (i) Moody's Investors Service, Inc. or Standard & Poor's Corporation
shall have downgraded or withdrawn the rating accorded any securities of the
Company or PEI, or (ii) Moody's Investors Service, Inc. or Standard & Poor's
Corporation shall have publicly announced that it has under surveillance or
review, with possible negative implications, its rating of any securities of
the Company or PEI;
and, in the sole judgment of the Company, such event or events make it
undesirable or inadvisable to proceed with the Offer or with such acceptance for
payment or payment.
Any of the foregoing conditions may be waived by the Company, in whole or in
part, at any time and from time to time in its sole discretion. The failure by
the Company at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right and each such right shall be deemed an ongoing
right which may be asserted at any time and from time to time. Any determination
by the Company concerning the events described above will be final and binding
on all parties.
13
10. PRICE RANGE OF SHARES; DIVIDENDS; TRADING VOLUME.
The Shares are listed on NASDAQ. The following table sets forth the high and
low bid prices of the Shares on NASDAQ and the cash dividends per Share for the
quarters indicated.
BID PRICE BID PRICE CASH DIVIDENDS
FISCAL YEAR HIGH LOW PER SHARE
- - - - - ---------------------------------- ----------- ----------- ----------------
1994:
1st Quarter.................... $25.625 $25.250 $0.5625
2nd Quarter.................... $25.500 $24.750 $0.5625
3rd Quarter.................... $25.500 $25.000 $0.5625
4th Quarter.................... $25.250 $23.000 $0.5625
1995:
1st Quarter.................... $24.375 $23.250 $0.5625
2nd Quarter.................... $25.000 $24.000 $0.5625
3rd Quarter.................... $25.875 $25.000 $0.5625
4th Quarter.................... $26.375 $25.875 $0.5625
1996:
1st Quarter (through March 8,
1996)......................... $26.625 $26.125 $0.5625 (1)
- - - - - ----------
(1) On January 15, 1996, the Company declared a dividend of $0.5625 per common
share for the first quarter of 1996. The dividend is to be paid on March
15, 1996, to holders of record on March 1, 1996.
On March 8, 1996, the last trading day prior to the commencement of the
Offer, the bid price of the Shares as reported on NASDAQ was $26.00 per Share.
Stockholders are urged to obtain current market quotations for the Shares.
Stockholders should note that the average weekly trading volume of the Shares
since January 1, 1995, has been approximately 5,000 Shares.
Shares tendered and purchased by the Company will be entitled to the regular
quarterly cash dividend of $0.5625 per Share to be paid by the Company on March
15, 1996, to holders of record on March 1, 1996, regardless of when such tender
is made. Shares tendered and purchased by the Company will not be entitled to
any dividends in respect of any later dividend periods.
Pennsylvania law imposes certain legal restrictions on the Company's ability
to pay dividends. As a general matter, Pennsylvania law provides that a
distribution may not be made if after giving effect thereto (1) the corporation
would be unable to pay its debts as they become due in the usual course of its
business, or (2) the total assets of the corporation would be less than the sum
of its total liabilities plus the amount that would be needed, if the
corporation were to be dissolved at the time as of which the dividend is
measured, to satisfy the preferential rights upon dissolution of shareholders
whose preferential rights are superior to those receiving the distribution. The
Company's Restated Articles of Incorporation, as amended, do not authorize the
issuance of any class of capital stock which has preferential rights superior to
those of the Shares.
11. CERTAIN INFORMATION CONCERNING THE COMPANY.
The Company is a public utility company regulated by the Pennsylvania Public
Utility Commission which provides natural gas to approximately 141,800 customers
in ten counties in northeastern Pennsylvania.
The Company's principal executive offices are located at Wilkes-Barre
Center, 39 Public Square, Wilkes-Barre, PA 18711, and its telephone number is
(717) 829-8843.
RECENT DEVELOPMENTS
On February 16, 1996, the Company and PEI sold substantially all of the
Company's water operations to Pennsylvania-American Water Company, a
wholly-owned subsidiary of American Water Works Company, Inc., for approximately
$413.5 million (including debt assumed), subject to certain post-closing
adjustments. These operations had provided water service to approximately
133,400 customers. See "-Summary Unaudited Pro Forma Financial Information"
below.
14
Effective as of December 4, 1995, Pennsylvania Energy Resources, Inc., a
wholly-owned subsidiary of PEI, acquired all of the outstanding stock of
Keystone Pipeline Services, Inc. (formerly known as Ford Bacon & Davis Sealants
Inc.), from Ford, Bacon & Davis Companies, Inc., a wholly-owned subsidiary of
Deutsche Babcock Technologies, Inc. Keystone Pipeline Services, Inc. is engaged
in distribution pipeline construction, maintenance and rehabilitation.
DIRECTOR AND EXECUTIVE OFFICERS OF THE COMPANY
Schedule A hereto sets forth the name, business address and present principal
occupation or employment and any other material occupations, positions, offices
or employments during the last five years of each director and executive officer
of the Company. Schedule A also sets forth the citizenship of each such director
and executive officer.
SUMMARY HISTORICAL FINANCIAL INFORMATION
The following selected financial information for each of the years ended
December 31, 1995, and December 31, 1994, has been derived from the Company's
audited financial statements contained in the Company's Annual Report on Form
10-K for the year ended December 31, 1995 (the "1995 10-K"), which reflect the
Company's water utility operations as "discontinued operations" effective March
31, 1995. The following selected historical financial information should be read
in conjunction with, and is qualified in its entirety by reference to, such
audited financial statements and the related notes which are incorporated herein
by reference. The 1995 10-K may be obtained from or inspected at the offices of
the Commission in the manner set forth in Section 16.
15
SUMMARY HISTORICAL FINANCIAL INFORMATION
(IN THOUSANDS OF DOLLARS, EXCEPT RATIOS AND PER SHARE AMOUNTS)
YEARS ENDED DECEMBER
31,
-----------------------
1995 1994
----------- -----------
Income Statement Data:
Operating revenues .................................. $ 152,756 $ 167,992
Cost of gas......................................... 84,372 98,653
----------- -----------
Operating margin..................................... 68,384 69,339
Other operating expenses............................. 49,462 50,211
----------- -----------
Operating income..................................... 18,922 19,128
Other income, net.................................... 301 72
----------- -----------
Income before interest charges....................... 19,223 19,200
Interest charges..................................... 10,753 9,898
----------- -----------
Income from continuing operations.................... 8,470 9,302
Income (loss) with respect to discontinued
operations.......................................... (3,834) 10,504
----------- -----------
Net income........................................... 4,636 19,806
Dividends on preferred stock......................... 2,763 4,639
----------- -----------
Net income applicable to common stock................ $ 1,873 $ 15,167
=========== ===========
Common stock:
Earnings per share of common stock.................. $ 0.34 $ 2.73
=========== ===========
Weighted average number of shares outstanding....... 5,569,765 5,189,108
=========== ===========
Ratio of earnings to fixed charges (1)............... 2.27 2.53
=========== ===========
- - - - - ---------
(1) For purposes of computing the ratio of earnings to fixed charges, earnings
are defined as the sum of pre-tax income plus fixed charges. Fixed charges
consist of all interest expense (before allowance for borrowed funds used
during construction), one-third of rent expense (which approximates the
interest component of such expense) and amortization of debt expense.
YEARS ENDED DECEMBER 31,
------------------------
1995 1994
---------- ----------
Balance Sheet Data:
ASSETS
Utility plant....................................... $295,895 $284,080
Less accumulated depreciation...................... (76,882) (74,408)
---------- ----------
Net utility plant................................... 219,013 209,672
Other property and investments...................... 5,089 2,872
Current assets...................................... 54,512 58,250
Deferred charges.................................... 34,368 44,345
Net assets of discontinued operations............... 204,250 203,196
---------- ----------
Total assets........................................ $517,232 $518,335
========== ==========
CAPITALIZATION AND LIABILITIES
Capitalization:
Common shareholder's investment ................... $208,356 $216,032
Preferred stock -
Not subject to mandatory redemption, net.......... 33,615 33,615
Subject to mandatory redemption................... 1,680 1,760
Long-term debt..................................... 55,000 170,825
---------- ----------
298,651 422,232
---------- ----------
Current liabilities:
Current portion of long-term debt and preferred
stock subject to mandatory redemption............. 115,881 3,290
Note payable to bank............................... 10,000 --
Other.............................................. 28,601 31,580
---------- ----------
154,482 34,870
---------- ----------
Deferred credits.................................... 64,099 61,233
---------- ----------
Total capitalization and liabilities................ $517,232 $518,335
========== ==========
Shareholder's equity per common share outstanding... $ 37.19 $ 39.59
========== ==========
16
SUMMARY UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following Summary Unaudited Pro Forma Balance Sheet and Summary Unaudited
Pro Forma Statement of Income have been prepared based on the Company's balance
sheet as of December 31, 1995, and the related statement of income for the year
then ended, each as adjusted to reflect the Sale of the Water Business on
February 16, 1996, and the use of the cash proceeds therefrom of $210.0 million
(after the payment of an estimated $56.7 million of federal and state income
taxes on the sale) for the purchase of Shares pursuant to the Offer and the
other purposes described in Note 3 to the Notes to Summary Unaudited Pro Forma
Balance Sheet. Pursuant to the Asset Purchase Agreement relating to the Sale of
the Water Business, the purchase price is subject to post-closing adjustment in
certain cases. The summary unaudited pro forma financial statements also reflect
certain other assumptions and related transactions as described in the notes to
such statements.
The Summary Unaudited Pro Forma Statement of Income reflects the results of
the Company's continuing operations as if the Sale of the Water Business and the
use of the proceeds therefrom, including the purchase of Shares pursuant to the
Offer, had taken place at the beginning of the period. The Summary Unaudited Pro
Forma Balance Sheet as of December 31, 1995, reflects the financial position of
the Company as if such transactions had occurred on that date. Each of the
Company's Summary Unaudited Pro Forma Statement of Income and Summary Unaudited
Pro Forma Balance Sheet include estimates which may differ from the results
ultimately incurred.
The summary unaudited pro forma financial statements have been included
herein as required by the rules of the Commission and are for comparative
purposes only. They should be read in conjunction with the summary historical
financial information and do not purport to be indicative of the results that
would actually have been obtained had the Sale of the Water Business, the
purchase of Shares pursuant to the Offer and the other related transactions
described in the notes to such statements been effected on the dates indicated
or the results that may be obtained in the future.
Certain statements made below relating to plans, conditions, objectives and
economic performance go beyond historical information and may provide an
indication of future results. To that extent, they are forward-looking
statements within the meaning of Section 21E of the Exchange Act, and each is
subject to factors that could cause actual results to differ from those in the
forward-looking statement.
17
SUMMARY UNAUDITED PRO FORMA STATEMENT OF
INCOME FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995
(IN THOUSANDS OF DOLLARS, EXCEPT RATIOS,
PER SHARE AMOUNTS AND SHARES OUTSTANDING)
ASSUMING A $27 PER SHARE PURCHASE PRICE
-----------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS(1) PRO FORMA
------------ ---------------- -----------
Operating revenues......................... $ 152,756 $ -- $ 152,756
Cost of gas............................... 84,372 -- 84,372
------------ ---------------- -----------
Operating margin........................... 68,384 -- 68,384
Other operating expenses................... 49,462 789 (2) 50,251
------------ ---------------- -----------
Operating income........................... 18,922 (789) 18,133
Other income, net.......................... 301 -- 301
------------ ---------------- -----------
Income before interest charges............. 19,223 (789) 18,434
------------ ---------------- -----------
Interest charges:
Interest on long-term debt................ 9,304 (1,891)(2) 7,413
Other interest............................ 1,449 (10)(2) 1,439
------------ ---------------- -----------
Total interest charges................... 10,753 (1,901) 8,852
------------ ---------------- -----------
Income from continuing operations ........ 8,470 1,112 9,582
Dividends on preferred stock............... 2,763 (2,353)(3) 410
------------ ---------------- -----------
Income from continuing operations
applicable to common stock................ $ 5,707 $ 3,465 $ 9,172
============ ================ ===========
Common stock:
Earnings per share of common stock
from continuing operations............... $ 1.02 $ 2.80
============ ===========
Weighted average number of shares
outstanding.............................. 5,569,765 (2,297,297)(4) 3,272,468
================ ===========
Ratio of earnings from continuing
operations
to fixed changes(5)....................... 2.27 2.73
============ ===========
Shareholder's equity per common share
outstanding............................... $ 37.19 $ 28.43
============ ===========
See accompanying notes to summary unaudited pro forma statement of income.
18
NOTES TO SUMMARY UNAUDITED PRO FORMA
STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995
(1) Adjustments assume that the Sale of the Water Business and the application
of the proceeds therefrom, including the purchase of Shares pursuant to the
Offer, each took place at the beginning of the period.
(2) Represents the adjustments to interest on long-term debt and amortization
of debt expense, and the related income tax effect, necessary to reflect
the interest on indebtedness outstanding during the period after (a)
application of proceeds from the Sale of the Water Business to (i) repay a
$50.0 million loan (the "Bridge Loan"), the proceeds of which were used to
redeem the $50.0 million principal amount of the Company's 9.57% Series
First Mortgage Bonds and (ii) repay $10.9 million of the Company's bank
borrowings and (b) the redemption in connection with the Sale of the Water
Business and pursuant to annual sinking fund requirements of the $3.5
million principal amount of the Company's 8% Series First Mortgage Bonds
outstanding as of January 1, 1995. The adjustments to interest on long-term
debt may be summarized as follows:
ASSUMING A $27 PER
SHARE
PURCHASE PRICE
-------------------
(THOUSANDS OF
DOLLARS)
Interest on long-term debt for the twelve months ended
December 31, 1995:
Allocated to continuing operations, as per
accompanying summary unaudited pro forma
statement of income.................................. $ 9,304
Allocated to discontinued operations.................. 12,848
--------
22,152
Deduct:
Interest on debt assumed by Pennsylvania-American
Water Company......................................... $9,529
Interest on debt redeemed or repaid in connection with
Sale of the Water Business
9.57% Series First Mortgage Bonds.................... 3,748
Bank borrowings...................................... 719
Bridge Loan.......................................... 716
8% Series First Mortgage Bonds....................... 147 (14,859)
------ --------
Add:
Interest on bank borrowings to reflect the redemption
of the Company's 8% Series First Mortgage Bonds as if
it occurred at the beginning of the period............ 120
----
Pro forma interest on long-term debt, as per
accompanying summary unaudited pro forma
statement of income................................... $ 7,413
========
(3) Represents elimination of preferred stock dividends of $2,025,000 and
$328,000 to reflect the repurchase of 225,000 shares of the Company's 9%
Cumulative Preferred Stock and 80,000 shares of the Company's 4.10%
Cumulative Preferred Stock, respectively, with proceeds from the Sale of
the Water Business.
(4) Represents the reduction in the number of shares of the Company's common
stock outstanding resulting from the application of $85.0 million of the
proceeds from the Sale of the Water Business to repurchase 2,297,297 shares
of the Company's common stock at an average price of $37.00 per share.
(5) For purposes of computing the ratio of earnings from continuing operations
to fixed charges, earnings are defined as the sum of pre-tax income plus
fixed charges. Fixed charges consist of all interest expense (before
allowance for borrowed funds used during construction), one-third of rent
expense (which approximates the interest component of such expense) and
amortization of debt expense.
19
SUMMARY UNAUDITED PRO FORMA
BALANCE SHEET AS OF DECEMBER 31, 1995
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
ASSUMING A $27 PER SHARE PURCHASE PRICE
PRO FORMA
HISTORICAL ADJUSTMENTS(1) PRO FORMA
------------ --------------- -----------
ASSETS
Utility plant.......................... $295,895 $ -- $295,895
Accumulated depreciation.............. (76,882) -- (76,882)
------------ --------------- -----------
Net utility plant...................... 219,013 -- 219,013
Other property and investments......... 5,089 -- 5,089
Current assets......................... 54,512 266,670 (2a)
(56,710)(2c)
(209,960)(3)
13 (3j) 54,525
Deferred charges....................... 34,368 -- 34,368
Net assets of discontinued operations.. 204,250 (204,250)(2e) --
------------ --------------- -----------
Total assets........................... $517,232 $ (204,237) $312,995
============ =============== ===========
CAPITALIZATION AND LIABILITIES
Capitalization:
Common shareholder's investment....... $208,356 $ (790)(2b)
(85,000)(3a)
(1,800)(3b)
4,000 (3c)
(30,000)(3d)
(1,000)(3e)
(722)(4) $ 93,044
Preferred stock-
Not subject to mandatory redemption,
net................................. 33,615 (22,500)(3b)
(8,000)(3c)
1,247 (4) 4,362
Subject to mandatory redemption ..... 1,680 -- 1,680
Long-term debt........................ 55,000 -- 55,000
------------ --------------- -----------
298,651 (144,565) 154,086
------------ --------------- -----------
Current liabilities:
Current portion of long-term debt and
preferred stock subject to mandatory
redemption........................... 115,881 (50,000)(3f)
(10,861)(3g) 55,020
Note payable to bank.................. 10,000 -- 10,000
Other................................. 28,601 6,500 (2d)
(5,947)(3h)
(525)(4) 28,629
------------ --------------- -----------
154,482 (60,833) 93,649
------------ --------------- -----------
Deferred credits....................... 64,099 1,161 (3i) 65,260
------------ --------------- -----------
Total capitalization and liabilities... $517,232 $ (204,237) $312,995
============ =============== ===========
20
NOTES TO SUMMARY UNAUDITED PRO FORMA
BALANCE SHEET AS OF DECEMBER 31, 1995
(1) Adjustments assume that the Sale of the Water Business and the application
of the proceeds therefrom, including the purchase of the Shares pursuant to
the Offer, each took place as of the date of the balance sheet.
(2) Represents (a) receipt of cash proceeds of $266.7 million from the Sale of
the Water Business, (b) elimination from common shareholders' investment of
the $790,000 of estimated income from the Water Business during the period
from January 1, 1996, to February 16, 1996, the date on which the water
operations were sold to Pennsylvania-American Water Company, that was
reflected as of December 31, 1995, as an element of income with respect to
discontinued operations, (c) payment of the estimated federal and state
income tax liability of $56.7 million on the Sale of the Water Business,
(d) recording of the $6.5 million premium of the purchase price over the
book value of the assets acquired by Pennsylvania-American Water Company as
a credit to other current liabilities, the account to which it was charged
as of December 31, 1995, as an offset against the liability for the
estimated expenses on the Sale of the Water Business and (e) elimination of
the $204.3 million of net assets of the Water Business.
(3) Reflects the application of the proceeds from the Sale of the Water
Business of $210.0 million, after the payment of the estimated federal and
state income tax liability of $56.7 million on the Sale of the Water
Business, in the following manner: (a) the repurchase (for an aggregate
consideration of $85.0 million) of 2,297,297 shares of the Company's common
stock at an average price of $37.00 per share, (b) the repurchase (for an
aggregate consideration of $24.3 million) of 225,000 Shares (having an
aggregate book value of $22.5 million), which includes a premium of $8.00
per share ($1.8 million in the aggregate), (c) the repurchase (for an
aggregate consideration of $4.0 million) of 80,000 shares of the Company's
4.10% Cumulative Preferred Stock (having an aggregate book value of $8.0
million) at a price of $50.00 per share, which reflects a $4.0 million
aggregate ($50.00 per share) discount from book value, (d) payment of a
$30.0 million common stock dividend by the Company to PEI, (e) payment of
an estimated $1.0 million of costs in connection with the repurchase of
shares of the Company's preferred stock, including the repurchase of Shares
pursuant to the Offer, (f) the repayment of the Bridge Loan, the proceeds
of which were used to redeem the $50.0 million principal amount of the
Company's 9.57% Series First Mortgage Bonds, (g) repayment of $10.9 million
of the Company's bank borrowings, (h) payment of transaction costs of $5.9
million relative to the Sale of the Water Business, (i) recording of the
$1.2 million net tax benefit resulting from transaction costs and the
premium over book value on the Sale of the Water Business and (j) the
addition of the remaining proceeds of $13,000 to the Company's cash
accounts. The repurchases and costs referred to in items (b), (c) and (e)
involve voluntary sales to the Company by holders of the Shares and other
series of preferred stock of the Company. Therefore, the number and price
of the securities purchased and the related expenses may vary depending on
market conditions at the time of the repurchases.
(4) Reflects the write-off of $1.2 million ($722,000 after related income tax
benefits of $525,000) of issuance costs relative to the 225,000 Shares
which the Company intends to repurchase pursuant to the Offer with proceeds
from the Sale of the Water Business.
12. SOURCE AND AMOUNT OF FUNDS.
Assuming that the Company purchases all outstanding Shares pursuant to the
Offer at the Purchase Price, the total amount required by the Company to
purchase such Shares will be $27.0 million, exclusive of fees and other
expenses. The Company expects to fund the purchase of such Shares from part of
the proceeds from the Sale of the Water Business. See Sections 1 and 11.
13. TRANSACTIONS AND AGREEMENTS CONCERNING THE SHARES AND OTHER SECURITIES OF
THE COMPANY.
Based upon the Company's records and upon information provided to the Company
by its directors and executive officers, neither the Company nor, to the
Company's knowledge, any of its associates, subsidiaries, directors, executive
officers or any associate of any such director or executive officer, or any
21
director or executive officer of its subsidiaries, has engaged in any
transactions involving the Shares or shares of any other series of preferred
stock of the Company since January 11, 1996. Neither the Company nor, to the
Company's knowledge, any of its directors or executive officers is a party to
any contract, arrangement, understanding or relationship relating directly or
indirectly to the Offer with any other person with respect to any securities of
the Company.
Schedule B hereto sets forth the name and title of each director and
executive officer of the Company, and the name and address of each associate
thereof, beneficially owning Shares or shares of any other series of preferred
stock of the Company as of March 7, 1996, the number of shares so owned and the
percentage of outstanding shares of the particular series such shares represent.
Schedule C hereto sets forth the amount of any purchases of Shares or shares
of any other series of preferred stock of the Company made by the Company and
its affiliates (including the directors of the Company) since January 1, 1994
and the range of prices paid for such shares.
14. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS.
The Company expressly reserves the right, in its sole discretion and at any
time or from time to time, to extend the period of time during which the Offer
is open by giving oral or written notice of such extension to the Depositary.
There can be no assurance, however, that the Company will exercise its right to
extend the Offer. During any such extension, all Shares previously tendered will
remain subject to the Offer, except to the extent that such Shares may be
withdrawn as set forth in Section 7. The Company also expressly reserves the
right, in its sole discretion, (i) to terminate the Offer and not accept for
payment any Shares not theretofore accepted for payment or, subject to Rule
13e-4(f)(5) under the Exchange Act, which requires the Company either to pay the
consideration offered or to return the Shares tendered promptly after the
termination or withdrawal of the Offer, to postpone payment for Shares upon the
occurrence of any of the conditions specified in Section 9 hereof by giving oral
or written notice of such termination to the Depositary and making a public
announcement thereof and (ii) at any time or from time to time, to amend the
Offer in any respect. Amendments to the Offer may be effected by public
announcement. Without limiting the manner in which the Company may choose to
make public announcement of any termination or amendment, the Company shall have
no obligation (except as otherwise required by applicable law) to publish,
advertise or otherwise communicate any such public announcement, other than by
making a release to the Dow Jones News Service, except in the case of an
announcement of an extension of the Offer, in which case the Company shall have
no obligation to publish, advertise or otherwise communicate such announcement
other than by issuing a notice of such extension by press release or other
public announcement, which notice shall be issued no later than 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date. Material changes to information previously provided to holders
of the Shares in this Offer or in documents furnished subsequent thereto will be
disseminated to holders of Shares in compliance with Rule 13e-4(e)(2)
promulgated under the Exchange Act.
If the Company materially changes the terms of the Offer or the information
concerning the Offer, or if it waives a material condition of the Offer, the
Company will extend the Offer to the extent required by Rules 13e-4(d)(2) and
13e-4(e)(2) under the Exchange Act. Those rules require that the minimum period
during which an offer must remain open following material changes in the terms
of the offer or information concerning the offer (other than a change in price,
change in dealer's soliciting fee or change in percentage of securities sought)
will depend on the facts and circumstances, including the relative materiality
of such terms or information. In a published release, the Commission has stated
that in its view, an offer should remain open for a minimum of five business
days from the date that notice of such a material change is first published,
sent or given. The Offer will continue or be extended for at least ten business
days from the time the Company publishes, sends or gives to holders of Shares a
notice that it will (a) increase or decrease the price it will pay for Shares or
the amount of the dealer's soliciting fee or (b) decrease the number of Shares
it seeks.
22
15. FEES AND EXPENSES.
Legg Mason Wood Walker, Incorporated will act as Dealer Manager for the
Company in connection with the Offer. The Company has agreed to pay the Dealer
Manager, upon acceptance for payment of Shares pursuant to the Offer, a fee of
$0.15 per Share purchased by the Company pursuant to the Offer. The Dealer
Manager will also be reimbursed by the Company for its reasonable out-of-pocket
expenses and will be indemnified against certain liabilities and expenses,
including liabilities under the federal securities laws, in connection with the
Offer.
The Dealer Manager has rendered, is currently rendering and is expected to
continue to render various investment banking and other advisory services to the
Company. It has received, and will continue to receive, customary compensation
from the Company for such services.
The Company will pay a solicitation fee of $0.50 per Share for any Shares
tendered and accepted for payment and paid for pursuant to the Offer, covered by
a Letter of Transmittal which designates, as having solicited and obtained the
tender, the name of (i) any broker or dealer in securities, including the Dealer
Manager in its capacity as a broker or dealer, who is a member of any national
securities exchange or of the National Association of Securities Dealers, Inc.
(the "NASD"), (ii) any foreign broker or dealer not eligible for membership in
the NASD which agrees to conform to the NASD's Rules of Fair Practice in
soliciting tenders outside the United States to the same extent as though it
were an NASD member, or (iii) any bank or trust company (each of which is
referred to herein as a "Soliciting Dealer"). No such fee shall be payable to a
Soliciting Dealer if such Soliciting Dealer is required for any reason to
transfer the amount of such fee to a depositing holder (other than itself). No
such fee shall be payable to a Soliciting Dealer with respect to Shares tendered
for such Soliciting Dealer's own account. No broker, dealer, bank, trust company
or fiduciary shall be deemed to be the agent of the Company, the Depositary, the
Information Agent or the Dealer Manager for purposes of the Offer.
The Company has retained Chemical Mellon Shareholder Services, L.L.C. as
Depositary and D.F. King & Co., Inc. as Information Agent in connection with the
Offer. The Information Agent may contact stockholders by mail, telephone,
facsimile transmission and personal interviews, and may request brokers, dealers
and other nominee stockholders to forward materials relating to the Offer to
beneficial owners. The Depositary and the Information Agent will receive
reasonable and customary compensation for their services and will also be
reimbursed for certain out-of-pocket expenses. The Company has agreed to
indemnify the Depositary and the Information Agent against certain liabilities,
including certain liabilities under the federal securities laws, in connection
with the Offer. Neither the Information Agent nor the Depositary has been
retained to make solicitations or recommendations in connection with the Offer.
Certain directors or executive officers of the Company may, from time to
time, contact stockholders to provide them with information regarding the Offer.
Such directors and executive officers will not make any recommendation to any
stockholder as to whether to tender all or any Shares and will not solicit the
tender of any Shares. The Company will not compensate any director or executive
officer for this service.
Other than as described above, the Company will not pay any solicitation fees
to any broker, dealer, bank, trust company or other person for any Shares
purchased in connection with the Offer. The Company will reimburse such persons
for customary handling and mailing expenses incurred in connection with the
Offer.
The Company will pay all stock transfer taxes, if any, payable on account of
the acquisition of the Shares by the Company pursuant to the Offer, except in
certain circumstances where special payment or delivery procedures are utilized
pursuant to Instruction 6 of the Letter of Transmittal.
23
The expenses incurred, or estimated to be incurred, by the Company in
connection with the Offer are set forth below. The Company will be responsible
for paying all such expenses.
Dealer Manager Fees................ $135,000
Solicitation Fees.................. 450,000
Printing and Mailing Fees.......... 25,000
Filing Fees........................ 5,400
Legal, Accounting and
Miscellaneous ..................... 184,600
----------
Total.............................. $800,000
==========
16. MISCELLANEOUS.
The Company is subject to the informational requirements of the Exchange Act
and in accordance therewith files reports and other information with the
Commission relating to its business, financial condition and other matters.
Certain information as of particular dates concerning the Company's directors
and officers, their remuneration, the principal holders of the Company's and
PEI's securities and any material interest of such persons in transactions with
the Company is filed with the Commission. The Company has also filed a
Transaction Statement on Schedule 13E-3 and an Issuer Tender Offer Statement on
Schedule 13E-4 with the Commission, which include certain additional information
relating to the Offer. Such reports, as well as such other material, may be
inspected and copies may be obtained at the Commission's public reference
facilities at 450 Fifth Street, N.W., Washington, D.C. 20549, and should also be
available for inspection and copying at the regional offices of the Commission
located at 7 World Trade Center, 13th Floor, New York, New York 10048, and Suite
1400, Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois
60661. Copies of such material may be obtained by mail, upon payment of the
Commission's customary fees, from the Commission's Public Reference Section at
450 Fifth Street, N.W., Washington, D.C. 20549. The Company's Schedules 13E-3
and 13E-4 may not be available at the Commission's regional offices.
The Offer is being made to all holders of Shares. The Company is not aware of
any state where the making of the Offer is prohibited by administrative or
judicial action pursuant to a valid state statute. If the Company becomes aware
of any valid state statute prohibiting the making of the Offer, the Company will
make a good faith effort to comply with such statute. If, after such good faith
effort, the Company cannot comply with such statute, the Offer will not be made
to, nor will tenders be accepted from or on behalf of, holders of Shares in such
state. In those jurisdictions whose securities, blue sky or other laws require
the Offer to be made by a licensed broker or dealer, the Offer shall be deemed
to be made on behalf of the Company by the Dealer Manager or one or more
registered brokers or dealers licensed under the laws of such jurisdictions.
PG ENERGY INC.
March 11, 1996
24
SCHEDULE A
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the name, business address, present principal
occupation or employment and any other material occupations, positions, offices
or employments during the last five years of the directors and executive
officers of the Company. Unless otherwise indicated, all occupations, positions,
offices or employments listed opposite any individual's name were held by such
individual during the course of the last five years. Each individual listed
below is a citizen of the United States.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
AND OTHER MATERIAL OCCUPATIONS, POSITIONS,
OFFICES OR EMPLOYMENTS DURING
NAME AND BUSINESS ADDRESS THE LAST FIVE YEARS
- - - - - --------------------------- -------------------------------------------
Kenneth L. Pollock Chairman of the Board of Directors of the Company and PEI
PG Energy Inc. since June, 1987; Director of the Company since 1972 and of
Wilkes-Barre Center PEI since 1974; President and Chief Executive Officer of the
39 Public Square Company and PEI from March, 1991, to August, 1991; Director
Wilkes-Barre, PA 18711-0601 and sole stockholder, Susquehanna Coal Company and Ken L.
Pollock, Inc., Nanticoke, PA, since prior to 1990.
Dean T. Casaday President, Chief Executive Officer, and Director of the
PG Energy Inc. Company and PEI since September 1, 1991; Vice President of
Wilkes-Barre Center National Fuel Gas Supply Corporation from 1989 to August,
39 Public Square 1991.
Wilkes-Barre, PA 18711-0601
William D. Davis Vice Chairman of the Board of Directors of the Company
Commonwealth Plaza and PEI since March, 1991; Director of the Company
33 W. Third Street and PEI since 1981; Chairman of the Board of the Commonwealth
Williamsport, PA 17703 Bank Division of Meridian Bank, Williamsport, PA, from
September, 1993 to December 31, 1995; Director, Meridian
Bancorp, Inc., and Meridian Bank, Reading, PA, since September, 1993;
Chairman of the Board and Chief Executive Officer of Commonwealth
Bancshares Corporation, Williamsport, PA, from April, 1987, to
June, 1993.
Paul R. Freeman Director of the Company and PEI since November, 1995;
200 East Front Street Controller of HUD, Inc., trading as Emerald Anthracite II,
P.O. Box 27 since 1988.
Nanticoke, PA 18634
Robert J. Keating Director of the Company and PEI since 1974; Former Chairman
Avanti Cigar Co. of the Board of Parodi Industries, Inc., Scranton, PA, from
1015 N. Main Avenue January, 1985, to February, 1994.
Scranton, PA 18508
A-1
John D. McCarthy Director of the Company and PEI since 1991; President of
McCarthy Tire Service Company McCarthy Tire Service Company, Wilkes-Barre, PA, since 1968;
340 Kidder Street President of McCarthy Realty, Inc., since 1988.
P.O. Box 1125
Wilkes-Barre, PA 18703-1125
John D. McCarthy, Jr. Director of the Company and PEI since November, 1995; Vice
McCarthy Tire Service Company President of McCarthy Tire Service Company, Wilkes-Barre, PA,
340 Kidder Street since 1989; President of McCarthy Tire Service Company of
P.O. Box 1125 Allentown, Reading and Lancaster, since 1992; Vice President
Wilkes-Barre, PA 18703-1125 of McCarthy Realty, Inc., since 1988.
Kenneth M. Pollock Director of the Company and PEI since October, 1993; Vice
200 East Front Street President of HUD, Inc., trading as Emerald Anthracite II;
P.O. Box 27 Vice President of Susquehanna Coal Company and Susquehanna
Nanticoke, PA 18634 Mt. Carmel, Inc., since prior to 1987.
Richard A. Rose, Jr. Director of the Company and PEI since November, 1995;
454 South Main Street President of Petroleum Sales Company, Inc., since 1992; Vice
P.O. Box 454 President of Petroleum Service Company, Inc., Wilkes-Barre,
Wilkes-Barre, PA 18703-0454 PA, since 1987.
James A. Ross Director of the Company and PEI since May, 1978; Independent
Old Windmill Road financial consultant since prior to 1988; Chairman,
Clarks Summit, PA 18411 Priestgate, Limited, since 1991.
Ronald W. Simms Inc., Director of the Company and PEI since March, 1991; President
454 South Main Street and Chief Executive Officer of Petroleum Service Company,
P.O. Box 454 Wilkes-Barre, PA, since 1980; Chairman of the Board of
Wilkes-Barre, PA 18703-0454 Directors since 1994, and Chief Executive Officer since 1984,
of Mountain Productions, Inc.; Chairman of the Board of
Directors of First Heritage Bank since March, 1994.
Thomas F. Karam Executive Vice President of the Company and PEI since 39
PG Energy Inc. October, 1995; Vice President, Legg Mason Wood Walker,
Wilkes-Barre Center Incorporated from 1986 to September, 1995.
Public Square
Wilkes-Barre, PA 18711-0601
A-2
Vincent A. Bonaddio Vice President, Operations and Engineering Services of the
PG Energy Inc. Company and PEI since March, 1996; Vice President, Operations
Wilkes-Barre Center and Engineering of the Company and PEI since May, 1995;
39 Public Square Director of Field Operations of the Company from May, 1991 to
Wilkes-Barre, PA 18711-0601 April, 1995; General Superintendent, North Division, of the
Company from 1988 to May, 1991.
Harry E. Dowling Vice President, Customer Services, of the Company and PEI
PG Energy Inc. since March, 1996; Vice President of Human Resources and
Wilkes-Barre Center Customer Services of the Company and PEI from October, 1992
39 Public Square to February, 1996; Vice President of Customer Affairs of the
Wilkes-Barre, PA 18711-0601 Company and PEI from 1987 to October, 1992.
John F. Kell, Jr. Vice President, Financial Services, of the Company and PEI
PG Energy Inc. since March, 1996; Vice President, Finance, of the Company
Wilkes-Barre Center and PEI from October, 1992 to February, 1996; Vice President
39 Public Square and Controller of the Company and PEI from 1978 to October,
Wilkes-Barre, PA 18711-0601 1992.
Joseph F. Perugino Vice President, Energy Services, of the Company and PEI since
PG Energy Inc. March, 1996; Vice President, Marketing and Gas Supply of the
Wilkes-Barre Center Company and PEI from October, 1992 to February, 1996; Vice
39 Public Square President, Administration and Marketing of the Company and
Wilkes-Barre, PA 18711-0601 PEI from November, 1989 to October, 1992.
Thomas J. Ward Vice President, Administrative Services, and Secretary, of
PG Energy Inc. the Company and PEI since March, 1996; Vice President,
Wilkes-Barre Center Administration, and Secretary, of the Company and PEI from
39 Public Square October, 1992 to February, 1996; Secretary of the Company and
Wilkes-Barre, PA 18711-0601 PEI from September, 1988 to October, 1992.
Thomas J. Koval Controller and Assistant Treasurer of the Company and PEI 39
PG Energy Inc. since November, 1992; Accounting Manager of the Company from
Wilkes-Barre Center February, 1987 to November, 1992.
Public Square
Wilkes-Barre, PA 18711-0601
A-3
Richard N. Marshall Treasurer and Assistant Secretary of the Company and PEI
PG Energy Inc. since February, 1996; Treasurer of the Company and PEI from
Wilkes-Barre Center May, 1994 to January, 1996; Assistant Treasurer of the
39 Public Square Company and PEI from June, 1993 to May, 1994; Manager, Rates
Wilkes-Barre, PA 18711-0601 and Finance, of the Company from March, 1988 to June, 1993.
A-4
SCHEDULE B
INTEREST IN PREFERRED STOCK OF THE COMPANY
The following table sets forth the name and title of each director and
executive officer of the Company, and the name and address of each associate
thereof, beneficially owning Shares or shares of any other series of preferred
stock of the Company (including, without limitation, the 4.10% Cumulative
Preferred Stock (the "4.10% Preferred Shares") and the 1966 Cumulative Preferred
Stock (the "1966 Preferred Shares")) as of March 7, 1996, the number of shares
so owned and the percentage of outstanding shares of the particular series such
shares represent.
The Shares:
NUMBER OF THE PERCENTAGE OF
NAME AND TITLE OF SHARES OUTSTANDING
BENEFICIAL OWNER BENEFICIALLY OWNED SHARES
------------------ -------------------- ------------------
William D. Davis, Director........................ 2,000 *
Robert J. Keating, Director....................... 500 (1) *
Thomas J. Koval, Controller and Assistant
Treasurer......................................... 60 *
Joseph F. Perugino, Vice President................ 400 *
The 4.10% Preferred Shares:
NUMBER OF 4.10% PERCENTAGE
NAME AND TITLE OF PREFERRED SHARES OF OUTSTANDING
BENEFICIAL OWNER BENEFICIALLY OWNED 4.10% PREFERRED SHARES
-------------------- ---------------------- --------------------------
NONE N/A N/A
The 1966 Preferred Shares:
NUMBER OF PERCENTAGE
NAME AND TITLE OF 1966 PREFERRED SHARES OF OUTSTANDING
BENEFICIAL OWNER BENEFICIALLY OWNED 1966 PREFERRED SHARES
--------------------- ------------------------- -------------------------
NONE N/A N/A
- - - - - --------------
* Less than 1%.
(1) Includes 100 Depositary Preferred Shares owned by Mr. Keating's wife.
N/A Not applicable.
B-1
SCHEDULE C
PURCHASES OF PREFERRED STOCK OF THE COMPANY
BY THE COMPANY OR ITS AFFILIATES SINCE JANUARY 1, 1994
The following table sets forth the amount of any purchases of Shares or
shares of any other series of preferred stock of the Company (including, without
limitation, the 4.10% Preferred Shares, the 1966 Preferred Shares, the 9.50%
1988 Series Cumulative Preferred Shares (the "9.50% Preferred Shares") and the
8.90% Cumulative Preferred Shares (the "8.90% Preferred Shares")) made by the
Company and its affiliates (including the Directors of the Company) since
January 1, 1994, and the range of prices paid for such shares.
The Shares:
PURCHASER DATE OF PURCHASE NUMBER OF SHARES PURCHASED PRICE PAID PER SHARE
- - - - - -------------- --------------------- ------------------------------- -------------------------
None ......... N/A N/A N/A
The 4.10% Preferred Shares:
PURCHASER DATE OF PURCHASE NUMBER OF SHARES PURCHASED PRICE PAID PER SHARE
- - - - - -------------- --------------------- ------------------------------- -------------------------
None N/A N/A N/A
The 1966 Preferred Shares:
PURCHASER DATE OF PURCHASE NUMBER OF SHARES PURCHASED PRICE PAID PER SHARE
- - - - - -------------- ----------------- --------------------------------- ---------------------
The Company June 15, 1994 800 $100.00
The Company June 15, 1995 800 $100.00
The 9.50% Preferred Shares:
PURCHASER DATE OF PURCHASE NUMBER OF SHARES PURCHASED PRICE PAID PER SHARE
- - - - - -------------- ----------------- ----------------------------------- ---------------------
The Company May 31, 1994 150,000 $103.5625
The 8.90% Preferred Shares:
PURCHASER DATE OF PURCHASE NUMBER OF SHARES PURCHASED PRICE PAID PER SHARE
- - - - - -------------- ------------------ --------------------------------- ---------------------
The Company December 16, 1994 150,000 $102.97
N/A Not applicable
C-1
Facsimile copies of the Letter of Transmittal will be accepted from Eligible
Institutions. The Letter of Transmittal and certificates for Shares should be
sent or delivered by each stockholder of the Company or his or her broker,
dealer, bank or trust company to the Depositary at one of its addresses set
forth below.
THE DEPOSITARY:
CHEMICAL MELLON SHAREHOLDER SERVICES, L.L.C.
TO: CHEMICAL MELLON SHAREHOLDER SERVICES, L.L.C., DEPOSITARY
By Mail: By Facsimile Transmission: By Hand or Overnight Courier:
Reorganization Department (For Eligible Institutions Only) Reorganization Department
P.O. Box 837 (201) 296-4293 120 Broadway
Midtown Station To Confirm Receipt of Facsimile: 13th Floor
New York, NY 10018 (201) 296-4100 New York, NY 10271
Any questions or requests for assistance may be directed to the Information
Agent at the telephone number and address listed below. Requests for additional
copies of this Offer to Purchase, the Letter of Transmittal or other tender
offer materials may be directed to the Information Agent and such copies will be
furnished promptly at the Company's expense. Stockholders may also contact
their local broker, dealer, commercial bank or trust company for assistance
concerning the Offer.
The Information Agent:
D.F. KING & CO., INC.
77 Water Street
New York, NY 10005
(800) 714-3313
The Dealer Manager:
LEGG MASON WOOD WALKER
INCORPORATED
7 East Redwood Street, 6th Floor
Baltimore, MD 21202
(410) 528-2231