<PAGE> 1
PROSPECTUS SUPPLEMENT Filed Pursuant to Rule 424(b)(5)
(TO PROSPECTUS DATED JUNE 8, 1995) Registration No. 33-56983
1,200,000 SHARES
(LOGO)
COMMON STOCK
------------------------
The Common Stock of the Company is traded on the Nasdaq National Market
("Nasdaq"). On June 8, 1995, the last reported sale price per share of Common
Stock, as reported by Nasdaq, was $14 1/2. See "Common Stock Dividends and Price
Ranges."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share............................... $14.50 $.57 $13.93
- -------------------------------------------------------------------------------------------------
Total................................... $17,400,000 $684,000 $16,716,000
- -------------------------------------------------------------------------------------------------
Total Assuming Full Exercise of Over-
Allotment Option(3)................... $20,010,000 $786,600 $19,223,400
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) See "Underwriting."
(2) Before deducting expenses estimated at $60,000, which are payable by the
Company.
(3) Assuming exercise in full of the 45-day option granted by the Company to the
Underwriters to purchase up to 180,000 additional shares of Common Stock
solely to cover over-allotments. See "Underwriting."
------------------------
The shares of Common Stock are offered by the Underwriters, subject to
prior sale, when, as and if delivered to and accepted by the Underwriters, and
subject to their right to reject orders in whole or in part. It is expected that
delivery of the Common Stock will be made in New York City on or about June 14,
1995.
------------------------
PAINEWEBBER INCORPORATED
EDWARD D. JONES & CO.
LEGG MASON WOOD WALKER
INCORPORATED
------------------------
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS JUNE 8, 1995.
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON
NASDAQ IN ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934.
SEE "UNDERWRITING."
S-2
<PAGE> 3
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus Supplement, the accompanying
Prospectus and in the documents incorporated therein by reference. Unless
otherwise indicated, the information in this Prospectus Supplement assumes that
the Underwriters' over-allotment option will not be exercised. See
"Underwriting."
THE COMPANY
United Cities Gas Company (the "Company") and its subsidiaries are engaged
in the distribution of natural gas for residential, commercial and industrial
use in Tennessee, Kansas, Georgia, Illinois, Virginia, Missouri, Iowa and South
Carolina, the distribution of propane in Tennessee, Virginia and North Carolina
and the operation of natural gas storage facilities in Kansas and Kentucky. The
Company and its subsidiaries also engage in other energy-related activities.
THE OFFERING
Common Stock Offered by the Company.............................1,200,000 shares
Common Stock to be Outstanding after the Offering..............12,317,920 shares
Use of Proceeds.............To repay short-term indebtedness incurred to finance
capital improvements and provide working capital
Nasdaq Symbol...............................................................UCIT
1995 Closing Price Range (through June 8, 1995)................$14 1/2 - $16 1/4
Last Reported Sale Price (June 8, 1995)..................................$14 1/2
Book Value Per Share (March 31, 1995).....................................$12.15
Current Indicated Annual Dividend Rate.....................................$1.02
SUMMARY CONSOLIDATED FINANCIAL AND OTHER INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
----------------------------------
MARCH 31, DECEMBER 31,
1995 1994
----------- ------------
(UNAUDITED)
<S> <C> <C>
INCOME STATEMENT:
Operating revenues -- utility............................... $ 262,798 $280,984
Operating revenues -- non-utility........................... 43,018 45,511
Common stock earnings....................................... 11,184 12,093
Common stock earnings per share............................. 1.07 1.16
OTHER INFORMATION (UNAUDITED):
Total natural gas through-put (MCF)(a)...................... 68,251 67,178
Weather data -- percent colder (warmer) than normal......... (14.7)% (10.2)%
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1995
-----------------------------------------
OUTSTANDING AS ADJUSTED(B)
------------------ ------------------
(UNAUDITED)
<S> <C> <C> <C> <C>
CAPITALIZATION:
Short-term notes payable to banks................... $ 18,061 $ 1,405
======== ========
Long-term debt (excluding current maturities)....... $141,829 52.1% $141,829 49.1%
Common stock equity................................. 130,298 47.9 146,954 50.9
-------- ----- -------- -----
Total capitalization (excluding short-term
notes payable to banks)................... $272,127 100.0% $288,783 100.0%
======== ===== ======== =====
</TABLE>
- ---------------
(a) Despite warmer weather during the twelve months ended March 31, 1995
compared to the twelve months ended December 31, 1994, total natural gas
through-put increased primarily as a result of an increase in transported
volumes to industrial customers, a lower margin business.
(b) Adjusted to reflect the receipt and application of the net proceeds from the
sale of the shares of Common Stock offered hereby estimated at $16,656,000,
after deducting expenses. See "Use of Proceeds."
S-3
<PAGE> 4
THE COMPANY
The Company's predominant business is the distribution of natural gas. As
of December 31, 1994, the Company supplied natural gas service to approximately
301,000 customers. In addition to its business of natural gas distribution, the
Company sells and installs gas appliances and performs certain appliance service
work. The Company's natural gas business accounted for approximately 65% of the
Company's consolidated net income in 1994.
The Company has two wholly-owned subsidiaries. One subsidiary, UCG Energy
Corporation ("UCG Energy"), is a broker procuring natural gas for the Company,
certain of the Company's industrial customers, local distribution companies and
others, and is engaged in exploration and production activities. In addition,
UCG Energy leases appliances, real estate, equipment and vehicles to the Company
and others.
UCG Energy has two wholly-owned subsidiaries, United Cities Propane Gas of
Tennessee, Inc. and UCG Leasing, Inc. United Cities Propane Gas of Tennessee,
Inc. is engaged in the retail distribution of propane (LP) gas. As of December
31, 1994, the propane operation served approximately 22,000 customers in
Tennessee, Virginia and North Carolina. UCG Leasing, Inc. leases vehicles,
equipment and real estate to the Company. UCG Energy and its subsidiaries
together accounted for approximately 31% of the Company's consolidated net
income in 1994.
The Company's other subsidiary, United Cities Gas Storage Company ("UCG
Storage"), was formed in 1989 to provide natural gas storage services. A natural
gas storage field was purchased in Kentucky to supplement natural gas used by
the Company's customers in Tennessee and Illinois. In addition, natural gas
storage fields located in Kansas and included in the Company's 1989 acquisition
of Union Gas System, Inc. were sold to UCG Storage. These fields are used to
supplement natural gas used by the Company's Kansas customers. UCG Storage
accounted for approximately 4% of the Company's consolidated net income in 1994.
During the first quarter of 1995, UCG Energy acquired a 45% equity interest
in the natural gas marketing business of Woodward Marketing, Inc. Located in
Houston, Texas, Woodward Marketing is primarily engaged in the sale and
management of gas supply for utilities and industries in the Southeast and
Midwest. UCG Energy's participation in this segment of the natural gas business
is part of the Company's strategy to assure its customers a competitively priced
gas supply. The Company believes that its alliance with Woodward Marketing will
enhance UCG Energy's prospects to produce income.
The nature of the Company's business is highly seasonal and weather
sensitive. During 1994, approximately 71% of the Company's natural gas utility
revenues were attributable to gas sold in the first and fourth quarters. In
order to moderate the impact of weather on the financial results of the utility
operation, the Company sought and received approval from the state public
utility commissions of Tennessee and Georgia to implement Weather Normalization
Adjustments ("WNAs"). The WNAs are in effect during the heating season and allow
the Company to increase the base rate portion of bills when weather is warmer
than normal and decrease the base rate portion of bills when weather is colder
than normal. The Company also seeks to minimize the quarterly variations in
sales volumes and earnings through sales to less weather-sensitive industrial
customers and through the diversified activities of its unregulated
subsidiaries.
USE OF PROCEEDS
The net proceeds from the sale of the shares of Common Stock offered
hereby, estimated to be approximately $16.7 million after deducting expenses,
will be used to repay short-term indebtedness incurred to finance capital
improvements and provide working capital. At April 30, 1995, the weighted
average annual interest rate of such indebtedness was 6.9%.
S-4
<PAGE> 5
COMMON STOCK DIVIDENDS AND PRICE RANGES
The Company has paid regular quarterly cash dividends on its Common Stock
since 1955. See "Selected Consolidated Financial and Other Data" for the
dividends declared per share of Common Stock in each of the periods covered
thereby.
It is the present intention of the Board of Directors to continue to
declare and pay dividends quarterly on the Common Stock of the Company, subject
to future economic conditions, earnings and cash requirements of the Company. At
its meeting held April 28, 1995, the Board of Directors of the Company declared
a quarterly dividend on the Common Stock of $.255 per share, payable on June 15,
1995 to shareholders of record on May 31, 1995. Holders of shares of Common
Stock offered hereby will not be entitled to receive such dividend. See
"Description of Capital Stock -- Restriction on Dividends" in the accompanying
Prospectus for a summary of certain dividend limitation provisions.
The Company's Common Stock is traded on Nasdaq under the symbol UCIT. The
high and low closing sales prices compiled from quotations supplied by the
Nasdaq National Market Statistical Report, for the periods indicated, were as
follows:
<TABLE>
<CAPTION>
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------- ----------- ----------- -----------
YEAR HIGH LOW HIGH LOW HIGH LOW HIGH LOW
--------------------------------- ---- --- ---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1993............................. 17 1/4 16 18 1/4 17 1/4 20 1/2 17 20 1/4 17 1/8
1994............................. 18 3/4 16 17 1/4 15 1/2 17 3/4 15 1/2 17 1/4 15 7/16
1995 (through June 8)............ 16 1/4 15 1/4 16 1/4 14 1/2
</TABLE>
On June 8, 1995, the last reported sale price per share, as reported by
Nasdaq, was $14 1/2.
As of March 31, 1995, the book value per share was $12.15.
As of March 20, 1995, there were 7,366 holders of record of the Common
Stock of the Company.
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND
CUSTOMERS)
<S> <C> <C> <C> <C> <C>
Operating revenues -- utility............... $280,984 $287,507 $265,460 $239,155 $224,593
Operating revenues -- non-utility........... $ 45,511 $ 47,746 $ 40,155 $ 33,443 $ 34,257
Common stock earnings....................... $ 12,093 $ 12,120 $ 10,104 $ 7,741 $ 3,211
Common stock earnings per share............. $ 1.16 $ 1.19 $ 1.07 $ 0.97 $ 0.44
Total assets................................ $421,200 $401,520 $370,150 $368,283 $338,167
Long-term debt (excluding current
maturities)............................... $144,344 $151,843 $157,734 $127,430 $ 96,521
Redeemable preferred and preference stock... -- -- -- $ 1,352 $ 1,483
Cash dividends declared per common share.... $ 1.005 $ 0.985 $ 0.965 $ 0.93 $ 0.92
Total customers (at December 31)............ 322,851 313,788 302,781 295,729 297,855
Total natural gas through-put (MCF)......... 67,178 68,543 62,713 59,109 55,278
Weather data -- percent colder (warmer) than
normal.................................... (10.2)% 2.8% (7.8)% (12.8)% (20.4)%
</TABLE>
S-5
<PAGE> 6
UNDERWRITING
The Underwriters named below, for whom PaineWebber Incorporated, Edward D.
Jones & Co. and Legg Mason Wood Walker, Incorporated are acting as
Representatives, have severally agreed, subject to the terms and conditions of
the Underwriting Agreement, to purchase from the Company the respective number
of shares set forth opposite their names in the table below:
<TABLE>
<CAPTION>
NUMBER OF
NAMES SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
PaineWebber Incorporated.................................................. 250,000
Edward D. Jones & Co. .................................................... 250,000
Legg Mason Wood Walker, Incorporated...................................... 250,000
A.G. Edwards & Sons, Inc. ................................................ 110,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated........................ 110,000
Smith Barney Inc. ........................................................ 110,000
Equitable Securities Corporation.......................................... 30,000
Interstate/Johnson Lane Corporation....................................... 30,000
Ladenburg, Thalmann & Co., Inc. .......................................... 30,000
The Robinson-Humphrey Company, Inc. ...................................... 30,000
---------
Total........................................................... 1,200,000
========
</TABLE>
The Underwriting Agreement provides that the several Underwriters are
required to take and pay for all of the shares of the Common Stock offered
hereby, if any are taken. The obligations of the Underwriters are subject to
certain conditions precedent.
The Company has been advised by the Representatives of the several
Underwriters, that the Underwriters propose to offer the shares of Common Stock
to the public initially at the offering price set forth on the cover page of
this Prospectus Supplement and to certain dealers at such price less a
concession not in excess of $.34 per share, and that the Underwriters and such
dealers may reallow a discount not in excess of $.10 per share to other dealers.
The public offering price and the concessions and discounts to dealers may be
changed by the Representatives.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, or to
contribute to payments the Underwriters may be required to make in respect
thereof.
The Company has granted an option to the Underwriters, exercisable during
the forty-five day period after the date of the initial public offering of the
shares of Common Stock offered hereby, to purchase up to an additional 180,000
shares of Common Stock at the public offering price less the underwriting
discount. The Underwriters may exercise such option only to cover any
over-allotments in the sale of the Common Stock.
The Company has agreed not to offer, sell, contract to sell or otherwise
dispose of any Common Stock of the Company or any security convertible into or
exchangeable for such Common Stock for a period of 90 days after the date of
this Prospectus Supplement without the prior written consent of the
Representatives, except pursuant to (i) any employee benefit, shareholder or
customer plan existing on the date hereof or (ii) certain acquisitions by the
Company.
In connection with the offering, certain Underwriters and selling group
members (if any) or their respective affiliates who are qualifying registered
market makers on Nasdaq, may engage in passive market making transactions in the
Common Stock on Nasdaq in accordance with Rule 10b-6A under the Securities
Exchange Act of 1934 as amended (the "Exchange Act") during the two business day
period before commencement of offers or sales of the Common Stock. The passive
market making transaction must comply with applicable volume and price limits
and be identified as such. In general, a passive market maker may display its
bid at a price not in excess of the highest independent bid for the security; if
all independent bids are lowered below the passive market maker's bid, however,
such bid must then be lowered when certain purchase limits are exceeded.
S-6
<PAGE> 7
Dwight C. Baum, Chairman of the Board of Directors of the Company, was a
Senior Vice President of PaineWebber Incorporated, one of the Representatives,
until his retirement.
Vincent J. Lewis, a member of the Board of Directors of the Company, is a
Senior Vice President of Legg Mason Wood Walker, Incorporated, one of the
Representatives.
S-7
<PAGE> 8
(LOGO)
UNITED CITIES GAS COMPANY
DEBT SECURITIES
COMMON STOCK
------------------
United Cities Gas Company (the "Company") may offer, from time to time, (i)
its First Mortgage Bonds (the "Bonds"), (ii) its notes (the "Notes" and
collectively with the Bonds, the "Debt Securities") and/or (iii) shares of its
Common Stock, without par value (the "Common Stock"), at prices and on terms to
be determined when an agreement to sell is made or at the time or times of sale,
as the case may be. The Debt Securities and the Common Stock may be issued in
one or more series or issuances, as the case may be, and the aggregate initial
offering price thereof will not exceed $200,000,000. The Debt Securities and the
Common Stock are collectively referred to herein as the "Securities."
This Prospectus will be supplemented by an accompanying prospectus
supplement or supplements ("Prospectus Supplement") that will set forth, in the
case of any Debt Securities for which this Prospectus is being delivered
("Offered Bonds" in the case of Bonds or "Offered Notes" in the case of Notes),
the form in which such Debt Securities are to be issued and the designation
thereof, their aggregate principal amount, rate or rates and times of payment of
interest, maturity or maturities, their purchase price or prices and initial
offering price or prices, redemption or repurchase provisions, if any, whether,
in the case of Offered Notes, such Offered Notes will be collateralized by the
Company's First Mortgage Bonds or convertible into Common Stock and other
specific terms of such Debt Securities and, in the case of any Common Stock for
which this Prospectus is being delivered ("Offered Stock"), the number of shares
of such Common Stock and their purchase price and the initial public offering
price or prices. See "Description of Debt Securities" and "Description of
Capital Stock" herein.
The Common Stock of the Company is traded on the Nasdaq National Market
under the symbol "UCIT." Unless otherwise specified in the applicable Prospectus
Supplement, the Offered Stock will be listed, subject to notice of issuance, on
the Nasdaq National Market.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
The Company may sell the Securities to or through underwriters, dealers or
agents, or directly to one or more purchasers. The Prospectus Supplement will
set forth the names of underwriters or agents, if any, any applicable
commissions or discounts and the net proceeds to the Company from any such sale.
See "Plan of Distribution" for possible indemnification arrangements for
underwriters, dealers and agents.
------------------
The date of this Prospectus is June 8, 1995.
<PAGE> 9
IN CONNECTION WITH THIS OFFERING THE UNDERWRITERS MAY, IF APPLICABLE,
OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE
OF THE CLASS OR SERIES OF THE SECURITIES OFFERED HEREBY AT A LEVEL ABOVE THAT
WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Company with the Commission pursuant to the
informational requirements of the Exchange Act may be inspected and copied at
the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following Regional Offices of
the Commission: Northeast Regional Office, 7 World Trade Center, Suite 1300, New
York, New York 10048; and Midwest Regional Office, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material may be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, heretofore filed by the Company with the
Commission pursuant to the Exchange Act, are hereby incorporated by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994.
2. The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of this offering shall be deemed to be incorporated by reference
in this Prospectus and to be a part hereof from the date of filing such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be modified or superseded, for purposes
of this Prospectus, to the extent that a statement contained herein or in any
subsequently filed document which is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of any such
person, a copy of any or all of the documents described above (other than
exhibits unless such exhibits are specifically incorporated by reference into
such documents). Requests for such copies should be directed to Investor
Relations/Corporate Communications, United Cities Gas Company, 5300 Maryland
Way, Brentwood, Tennessee 37027, telephone (615) 373-5310.
2
<PAGE> 10
THE COMPANY
The Company was incorporated under the laws of Illinois in 1929 and was
domesticated under the laws of Virginia in 1966. The Company's principal
executive offices are located at 5300 Maryland Way, Brentwood, Tennessee 37027,
and its telephone number is (615) 373-5310.
The Company's predominant business is the distribution of natural gas. As
of December 31, 1994 the Company supplied natural gas service to approximately
301,000 customers. In addition to its business of natural gas distribution, the
Company sells and installs gas appliances and performs certain appliance service
work.
The Company has two wholly-owned subsidiaries. One subsidiary, UCG Energy
Corporation ("UCG Energy"), incorporated under the laws of Delaware in 1965, is
a broker procuring natural gas for the Company, certain of the Company's
industrial customers, local distribution companies and others, and is engaged in
exploration and production activities. In addition, UCG Energy leases
appliances, real estate, equipment and vehicles to the Company and others.
UCG Energy has two wholly-owned subsidiaries, United Cities Propane Gas of
Tennessee, Inc. and UCG Leasing, Inc. United Cities Propane Gas of Tennessee,
Inc., incorporated under the laws of Tennessee in 1976, is engaged in the retail
distribution of propane (LP) gas. As of December 31, 1994, the propane operation
served approximately 22,000 customers in Tennessee, Virginia and North Carolina.
UCG Leasing, Inc. was incorporated under the laws of Georgia in 1987 and leases
vehicles, equipment and real estate to the Company.
The other subsidiary, United Cities Gas Storage Company ("UCG Storage"),
was formed in 1989 to provide natural gas storage services. A natural gas
storage field was purchased in Kentucky to supplement natural gas used by the
Company's customers in Tennessee and Illinois. In addition, natural gas storage
fields located in Kansas and included in the Company's 1989 acquisition of Union
Gas System, Inc. were sold to UCG Storage. These fields are used to supplement
natural gas used by the Company's Kansas customers.
3
<PAGE> 11
USE OF PROCEEDS
The net proceeds to be received by the Company from the issuance and sale
of the Securities offered hereby may be used for one or more of the following
purposes: for the repayment of all or a portion of the Company's short-term debt
outstanding at the time of issuance of the Securities; for the purchase,
acquisition and construction of additional properties and facilities, as well as
improvements to the Company's existing utility plant; for the refunding of
maturing long-term debt and satisfaction of sinking fund requirements; for the
refunding of higher-coupon long-term debt as market conditions permit; and for
general corporate purposes. Reference is made to the applicable Prospectus
Supplement for a description of the long-term debt, if any, to be refunded with
the net proceeds from any issuance and sale of the Securities offered hereby.
RATIO OF EARNINGS TO FIXED CHARGES
The ratios of consolidated earnings to fixed charges for the Company and
its subsidiaries for the twelve months ended March 31, 1995 and for each of the
years ended December 31, 1994 through 1990 are 2.22, 2.30, 2.21, 2.17, 1.92 and
1.42, respectively. Earnings consist of net income to which have been added
fixed charges and taxes on income. Fixed charges consist of interest on
long-term debt and amortization of debt discount.
DESCRIPTION OF DEBT SECURITIES
DESCRIPTION OF BONDS
General
The Bonds will be issued under the Indenture of Mortgage dated as of July
15, 1959 (the "Original Mortgage") from the Company to Bank of America Illinois
(successor to Continental Bank, National Association) (the "Mortgage Trustee")
and Robert J. Donahue (successor to M.J. Kruger), as Trustees (the Mortgage
Trustee and Robert J. Donahue are hereinafter referred to as the "Mortgage
Trustees"), as amended and supplemented, and as to be further supplemented by
one or more supplemental indentures creating the Bonds (the "Supplemental
Indenture"). The Original Mortgage as so amended and supplemented is hereinafter
referred to as the "Mortgage" and all bonds issued under the Mortgage are
hereinafter referred to as the "bonds." The statements herein concerning the
Bonds do not purport to be complete and are qualified in their entirety by
express reference to the Mortgage and to the definitions therein of the terms
used herein. References to article and section numbers under this heading are to
articles and section numbers in the Mortgage.
Reference is made to the applicable Prospectus Supplement for the following
terms of the Offered Bonds (among others): (i) the designation and series of the
Offered Bonds; (ii) the percentage or percentages of their principal amount at
which such Offered Bonds will be issued; (iii) the date or dates on which the
Offered Bonds will mature; (iv) the rate or rates at which the Offered Bonds
will bear interest; (v) the times at which such interest will be payable; (vi)
the dates, if any, on which and the price or prices at which the Offered Bonds
will, pursuant to any mandatory sinking fund provisions, or may, pursuant to any
optional sinking fund provisions, be redeemed by the Company, and the other
detailed terms and provisions of any such sinking funds; (vii) the date, if any,
after which and the price or prices at which the Offered Bonds will, pursuant to
any optional redemption provisions, be redeemable at the option of the Company
or the holders thereof and the other detailed terms and provisions of such
optional redemptions; and (viii) any other special terms or provisions not
inconsistent with the terms of the Mortgage.
The Mortgage does not contain any covenants or other provisions that are
specifically intended to afford holders of the bonds special protection in the
event of a highly leveraged transaction.
4
<PAGE> 12
Form and Exchangeability
The Bonds will be issued only as fully registered bonds without coupons, in
denominations of $1,000 and multiples thereof. The Bonds will be exchangeable
for a like aggregate principal amount of other Bonds of the same series of
different authorized denominations, and may be transferred, in each case upon
surrender thereof at the principal corporate trust office of the Mortgage
Trustee in Chicago, Illinois. The Company may require the payment of a sum
sufficient to pay any stamp tax or other governmental charge imposed in relation
to any transfer or exchange of the Bonds, and in addition thereto, such charge
for any such transfer or exchange as it may deem proper, not exceeding $2.00 for
each new Bond issued upon such transfer or exchange.
Interest and Payment
Reference is made to the applicable Prospectus Supplement for the interest
rate or rates, if any, of the Offered Bonds and the date or dates on which such
interest is payable. Unless otherwise specified in the applicable Prospectus
Supplement, principal and interest on the Bonds are payable to the registered
holder thereof at the principal corporate trust office of the Mortgage Trustee
in Chicago, Illinois.
Redemption
The Supplemental Indenture will provide that the Bonds are redeemable, in
whole or in part, at any time upon notice as required in the Mortgage through
the application of cash deposited with the Mortgage Trustee in accordance with
the provisions of Section 3.14 of the Original Mortgage (relating to insurance
and certain other compensatory proceeds) or Section 7.02, 7.03 or 7.04 of the
Original Mortgage (relating to proceeds from the disposition, release or
governmental taking of mortgaged properties) at 100% of the principal amount
thereof, together with interest accrued thereon, if any, to the date of
redemption. (Art. 2, Sec. 2.03 of the Supplemental Indenture)
Any additional terms for the optional or mandatory redemption of Offered
Bonds will be set forth in the applicable Prospectus Supplement. Except as shall
otherwise be provided with respect to Offered Bonds redeemable at the option of
the holder thereof, such Offered Bonds will be redeemable only upon notice, by
mail, not less than 30 days and not more than 90 days prior to the date fixed
for redemption, postage prepaid, to each registered holder of Offered Bonds to
be redeemed. (Art. 4, Section 4.03 of the Original Mortgage) If less than all of
the Offered Bonds of any series are to be redeemed, the particular Offered Bonds
to be redeemed will be selected by such methods as the Mortgage Trustee deems
fair and appropriate. (Art. 3, Sec. 3.02 of the Supplemental Indenture)
Issuance of Additional Bonds
The Company may issue additional bonds:
(a) to a principal amount equal to 60% of the cost or fair value,
whichever is less, of net unbonded Property Additions (subject to
deductions if such net Property Additions secure Prior Lien Bonds or were
made the basis for the release of either property or cash under the
Mortgage) evidenced to the Mortgage Trustee for such purpose;
(b) to a principal amount equal to the amount of cash deposited with
the Mortgage Trustee for such purpose; and
(c) to a principal amount equal to the principal amount of any bonds
of any series voluntarily retired by the Company, by purchase or
redemption, and bonds retired by payment at their stated maturity; provided
that in case bonds described in clauses (a) and (b) above are issued, or
bonds described in this clause (c) are to be certified and delivered more
than one year prior to the maturity date of the bonds to be refunded and
are to bear a higher rate of interest than the bonds to be refunded, Net
Earnings for any period of 12 consecutive months within a 15 month period
ending not more than 60 days prior to the date of such proposed issue shall
have been at least equal to 175% of the interest requirements for a period
of
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12 months on all bonds (including Prior Lien Bonds) to be outstanding
immediately thereafter. (Art. 2, Sec. 2.02 of the Original Mortgage; Art.
5, Sec. 5.01 of the Nineteenth Supp. Ind.)
For purposes of the Mortgage, "Property Additions" is defined as all
property, with certain exceptions, of a fixed or permanent nature constructed or
acquired by the Company after July 31, 1959 and used or useful in the business
of providing natural gas service including all plants and properties constructed
or acquired and used solely for the purpose of furnishing other than natural gas
to augment the supply of natural gas in order to effect "peak shaving," all
property of the aforementioned described character in process of construction to
the extent that the Company has incurred liability therefor, and proper charges
for overhead in accordance with generally accepted principles of accounting, and
all Cushion Gas (defined as that minimum volume of natural gas necessary to be
retained in a gas storage reservoir owned by the Company in order to maintain
the integrity and viability of the geological strata and the horizons of a gas
reservoir for the storage of natural gas); provided, however, that until the
date on which no bonds of any series issued under the Mortgage and outstanding
immediately prior to January 26, 1990 are outstanding, the amount of Cushion Gas
which shall be included as Property Additions shall at no time exceed 10% of
Property Additions. (Art. 12, Sec. 12.05 of the Original Mortgage; Art. 5, Sec.
5.01 of the Nineteenth Supp. Ind.)
Two series of bonds issued under the Mortgage and outstanding immediately
prior to January 26, 1990 remain outstanding on June 8, 1995.
"Net Earnings" is defined, for any period, as the amount obtained by
deducting from the gross earnings derived from the operation of the mortgaged
property all operating expenses of the Company, and by adding to the remainder
all net non-operating earnings not in excess of 15% of such remainder; provided,
however, that the Supplemental Indenture will provide that each holder of the
Bonds and bonds of any subsequent series shall agree that effective on the
earlier of (i) the date on which the holders of the bonds of each series issued
under the Mortgage and outstanding immediately prior to January 26, 1990 consent
to such amendment, or (ii) the date on which no bonds of any series issued under
the Mortgage and outstanding immediately prior to January 26, 1990 remain
outstanding, the definition of Net Earnings shall be amended to replace the
words "not in excess of 15% of such remainder" with "other than any portion of
such earnings which represents the net gain arising from any sale or other
disposition of capital assets, or any other items, which would, in accordance
with generally accepted accounting principles, require separate treatment or
classification in the preparation of the Company's financial statements as
'extraordinary items'." (Art. 12, Sec. 12.05 of the Original Mortgage; Art. 5,
Sec. 5.01 of the Supplemental Indenture)
As of March 31, 1995, unbonded net Property Additions available as a basis
for the issuance of bonds were approximately $366,479,000 and unbonded bond
retirements available as a basis for the issuance of bonds were approximately
$292,607,000. It is expected that the Bonds will be issued primarily upon the
basis of unbonded net Property Additions.
Withdrawal of Certain Cash
Cash deposited with the Mortgage Trustee as a basis for the issuance of
additional bonds may be withdrawn by the Company against net unbonded Property
Additions (subject to deductions if such net Property Additions secure Prior
Lien Bonds or were made the basis for the release of either property or cash
under the Mortgage) in an amount equal to at least 166 2/3% of the amount of
such cash. (Art. 2, Sec. 2.04 of the Original Mortgage)
Cash deposited with the Mortgage Trustee pursuant to Section 3.14, 7.02,
7.03 or 7.04 of the Original Mortgage may be withdrawn by the Company against
gross unbonded Property Additions (subject to deductions if such gross Property
Additions secure Prior Lien Bonds or were made the basis for the release of
either property or cash under the Mortgage) in an amount equal to 100% of the
amount of such cash; provided, however, such cash shall be withdrawn by the
Company within twelve months, if such cash was deposited pursuant to Section
3.14 (relating to insurance and certain other compensatory proceeds), or two
years, if such cash was deposited pursuant to Section 7.02, 7.03 or 7.04
(relating to proceeds from the disposition, release or governmental taking of
mortgaged properties), from the date of deposit of such cash if
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<PAGE> 14
the Company shall have gross Property Additions available for such purpose.
(Art. 3 and 7 of the Original Mortgage; Art. 4, Sec. 4.02 of the Supplemental
Indenture)
Limitations on Liens
The Company will not, directly or indirectly, create, assume, incur or
suffer to exist any lien upon any of its property or assets, whether now owned
or hereafter acquired, other than the lien of the Mortgage and permitted liens
and encumbrances described in the Mortgage, including, without limitation, Prior
Liens subject to the restrictions described below. (Art. 3, Sec. 3.09 of the
Original Mortgage)
The Mortgage provides that the Company will not acquire any property
subject to Prior Liens if the aggregate amount of Prior Lien Bonds outstanding
after such acquisition will:
(i) be in excess of 10% of the aggregate amount of bonds at the time
outstanding under the Mortgage, or
(ii) exceed 60% of the cost or fair value of such property, whichever
is less, unless there shall be filed with the Mortgage Trustee a
certificate evidencing gross Property Additions in an amount not less than
166-2/3% of such excess and all Property Additions certified for such
purpose shall constitute Funded Property. (Art. 3, Sec. 3.17 of the
Original Mortgage)
For purposes of the Mortgage, "Prior Liens" are defined as any mortgages or
other instruments constituting a lien upon property acquired by the Company
prior to the lien of the Mortgage. "Prior Lien Bonds" are defined as any bonds,
notes or other evidences of indebtedness secured by Prior Liens. (Art. 12, Sec.
12.05 of the Original Mortgage)
Maintenance of Net Earnings
The Company will, so long as the bonds of any series issued and outstanding
under the Mortgage immediately prior to January 26, 1990 remain outstanding,
maintain its Net Earnings for any period of 12 consecutive months within a 15
month period ending March 31 and September 30 of each year, at least equal to
175% of the interest requirements for a period of 12 months on all bonds
(including Prior Lien Bonds) outstanding as of such March 31 and September 30 of
each year. (Art. 5, Sec. 5.01 of the Nineteenth Supp. Ind.)
Dividend Restrictions
For so long as any of the bonds issued under the Mortgage prior to January
26, 1990 remain outstanding, the Company will not declare or pay any dividends
or directly or indirectly purchase, redeem or otherwise acquire any shares of
Common Stock (except out of the net cash proceeds derived from the issuance of
other shares of Common Stock), or make any other distribution on shares of
Common Stock (such non-excepted declarations, payments, purchases, redemptions
or other acquisitions and distributions, hereinafter referred to as "Restricted
Payments"), unless after giving effect thereto the aggregate amount of all such
Restricted Payments made during the period from December 31, 1985 to and
including the date of the making of the Restricted Payment in question does not
exceed the sum of $9,000,000 plus (or minus in case of a deficit) the amount of
Consolidated Net Income Available for Common Stock Dividends for such period.
The supplemental indentures, including, unless otherwise stated in the
applicable Prospectus Supplement, the Supplemental Indenture, creating each
series of bonds issued on and after January 26, 1990 contain or will contain a
similar dividend covenant but prohibit the making of Restricted Payments during
the period from December 31, 1988 in excess of the sum of $15,038,000 plus (or
minus in case of a deficit) the amount of Consolidated Net Income Available for
Common Stock Dividends for such period.
"Consolidated Net Income Available for Common Stock Dividends" for any
period is defined under the Mortgage as the net income of the Company and its
subsidiaries for such period available for dividends on capital stock, after
deducting therefrom dividends paid and accrued during such period on preferred
stock, determined on a consolidated basis in accordance with generally accepted
accounting principles; provided, however, that no effect shall be given to any
gains or losses or other additions or deductions arising by reason of
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<PAGE> 15
the issue, purchase, sale, conversion or retirement by the Company or any
subsidiary of any of its or their securities, or arising by reason of any
purchases, sales, write-ups, write-downs, increase or decrease in book value, or
other transactions or changes in respect of capital assets, tangible or
intangible, and deductions for income taxes shall be adjusted by giving effect
to any change in the amount thereof resulting from the elimination of any of the
capital transactions or changes referred to above. (Art. 5 of the Fourteenth and
Eighteenth Supplemental Indentures; Art. 4 of the Fifteenth, Sixteenth,
Seventeenth, Nineteenth and Twentieth Supplemental Indentures; Art. 4, Sec. 4.03
of the Supplemental Indenture)
Under the foregoing provisions, none of the Company's retained earnings at
March 31, 1995 was unavailable to pay dividends on the Common Stock.
Merger, Consolidation and Sale
The Mortgage does not prevent any consolidation or merger of the Company
with or into, or any conveyance or transfer of all or substantially all of the
mortgaged property as an entirety to, any corporation lawfully entitled to
acquire and operate the same; unless such consolidation, merger, conveyance or
transfer shall impair the lien of the Mortgage, or any of the rights or powers
of the Mortgage Trustees or the bondholders thereunder. (Art. 8, Sec. 8.01 of
the Original Mortgage)
In the Supplemental Indenture, the Company will covenant that so long as
any of the Bonds remain outstanding, any of the provisions of Article 8 of the
Original Mortgage to the contrary notwithstanding, the Company will not
consolidate or merge with or into, or convey or transfer all or substantially
all of the mortgaged property to, any other entity if at the time thereof or
after giving effect thereto any event of default shall or would exist under the
Mortgage. (Art. 4, Sec. 4.04 of the Supplemental Indenture)
Modification of the Mortgage
The Mortgage may be modified with the written consent of the holders of not
less than 66 2/3% in aggregate principal amount of each series of bonds then
outstanding, and not less than 66 2/3% in principal amount of the bonds of any
particular series then outstanding can waive any right specifically applicable
to that series, provided that no such modification or waiver shall be effective
against any bondholder that changes the obligation of the Company in respect of
the amount or time of the payment of principal, interest, or premium on any bond
outstanding, or reduces the percentage in principal amount of the bonds required
to approve any such modification or waiver, or subordinates the bonds or the
lien of the Mortgage in favor of other creditors of the Company, without the
consent of such bondholder; and no modification of any of the rights or
obligations of the Mortgage Trustees under the Mortgage shall be effective
against the Mortgage Trustees without their consent. (Art. 12, Sec. 12.08 of the
Original Mortgage)
The Mortgage may be modified without the written consent of the holders of
the bonds to set out the provisions of an additional series of bonds, to subject
other property to the lien of the Mortgage, to add further covenants and
conditions of the Company for the further security of the bondholders, to limit
the amount of any bond or all bonds of any series that may be issued under the
Mortgage, to conform to the requirements of the Trust Indenture Act of 1939 and
the regulations thereunder as the same may from time to time be amended, or to
cure any ambiguity or to correct any defective or inconsistent provisions in the
Mortgage or in any supplemental indenture thereto. (Art. 12, Sec. 12.08 of the
Original Mortgage)
Default and Notice Thereof
The Mortgage Trustees or the holders of a majority in aggregate principal
amount of bonds outstanding may declare the principal and interest of the bonds
immediately due and payable if any of the following events of default exist: (a)
a default in the payment of any installment of interest on any of the bonds when
due and payable and such default continues for a period of 10 days; (b) a
default in the payment of any installment of sinking fund payments when due and
payable; (c) a default in the payment of the principal of or premium on any bond
when due and payable whether at its stated maturity, by call for redemption, by
declaration or otherwise; (d) a violation of covenants or conditions in the
Mortgage or any bonds which have not been cured within 60 days after written
notice by the Mortgage Trustee; or (e) the insolvency of the Company or the
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<PAGE> 16
occurrence of certain bankruptcy, insolvency or receivership proceedings;
provided, however, at any time before a sale of the mortgaged property, the
holders of a majority in aggregate principal amount of bonds outstanding may
annul such declaration. (Art. 6 of the Original Mortgage) The holders of a
majority in aggregate principal amount of bonds outstanding have the right to
direct and control the time, method and place of any action of the Mortgage
Trustees to be taken upon the occurrence of a default. (Art. 6, Sec. 6.08 of the
Original Mortgage) The Mortgage Trustees are not required to act under the
Mortgage, whether or not requested to do so by the bondholders, unless they
shall have received indemnity satisfactory to them. (Art. 10, Sec. 10.01 of the
Original Mortgage) The Mortgage Trustees may withhold notice of an event of
default (except in the payment of principal, interest or sinking fund
installments on any bond) if they determine in good faith that the withholding
of such notice is in the interests of the holders of the bonds.
The Company is required to file annually with the Mortgage Trustee a
certificate as to compliance with all terms and conditions of the Mortgage.
(Art. 3, Sec. 3.08 of the Original Mortgage)
Defeasance
The Mortgage provides that when the principal of all bonds at the time
outstanding under the Mortgage shall have become payable, or will become payable
within six months, by their terms, on redemption, by declaration or in any other
manner, and the Company irrevocably deposits or causes to be deposited with the
Mortgage Trustee for the account of the holders of such bonds, a sum sufficient,
with any other moneys then held by the Mortgage Trustee applicable to that
purpose, to pay the whole amount of the principal, premium, if any, and interest
due or to become due on all of the bonds then outstanding, immediately upon such
irrevocable deposit and, in case of redemption, upon furnishing to the Mortgage
Trustee proof satisfactory to the Mortgage Trustee that the notice of redemption
has been given or waived as provided in the Mortgage or when there shall be or
shall have been delivered to the Mortgage Trustee, for immediate cancellation,
all bonds then outstanding, and, in such case, immediately upon such delivery,
then and in any such case the bonds shall cease to be entitled to any benefit or
security under the Mortgage except the right to receive payment of the moneys
deposited and held for the payment thereof and the lien of the Mortgage shall be
released and/or the mortgaged property shall revert to the Company. (Art. 11,
Sec. 11.01 of the Original Mortgage)
Security and Priority
The Bonds will rank pari passu as to security with the bonds of the other
series outstanding under the Mortgage, which, in the opinion of counsel to the
Company, is a valid first lien on substantially all the properties, franchises
and contract rights used by or useful to the Company in the operation of its
business, whether now owned or hereafter acquired by the Company (except as
noted below), subject to permitted liens and encumbrances described in the
Mortgage and, with respect to property hereafter acquired, to Prior Liens.
There are excepted from the lien of the Mortgage all cash, notes and bills,
accounts receivable, not specifically pledged, all stocks, bonds and securities
not specifically pledged, all merchandise held for resale and consumable
materials and supplies (other than Cushion Gas), all automotive equipment and
all inventory of pipe, meters and equipment. (Granting Clauses of the Original
Mortgage; Art. 5, Sec. 5.01 of the Nineteenth Supp. Ind.)
The Mortgage contains provisions subjecting to the lien thereof all
property, real, personal and mixed (other than property of the kind excepted
from the lien as described above) acquired by the Company after the date of the
delivery of the Original Mortgage.
Release and Substitution of Property
Unless an event of default shall have occurred and is continuing, the
Company may sell, exchange or dispose of, free from the lien of the Mortgage,
any property (other than real property) which has become worn out,
unserviceable, undesirable or unnecessary for use in the conduct of its
business; provided that the Company shall replace such property, if necessary
for the efficient and proper operation of its business, by other property of
equal or greater value or utility to the Company, or if not so necessary, the
Company shall
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<PAGE> 17
deposit the proceeds of the disposition of such property with the Mortgage
Trustee. (Art. 7, Sec. 7.02 of the Original Mortgage)
DESCRIPTION OF NOTES
General
The Notes will be issued under an Indenture (the "Indenture") to be entered
into between the Company and Bank of America Illinois, as trustee (the
"Indenture Trustee"). The summaries under this heading do not purport to be
complete and are qualified in their entirety by express reference to the
detailed provisions of the Indenture. References to article and section numbers
under this heading are to articles and section numbers in the Indenture. Terms
used under this heading or in any Prospectus Supplement relating to the Offered
Notes which are defined under this heading are so defined solely with reference
to the Offered Notes.
The Indenture provides that debt securities (including both interest
bearing and original issue discount securities), including the Notes, may be
issued thereunder, without limitation as to the aggregate principal amount.
(Art. Three, Sec. 301) The Notes and all other debt securities issued under the
Indenture are collectively referred to herein as the "Indenture Securities." The
Indenture does not limit the amount of other debt, secured or unsecured, which
may be issued by the Company. The Notes will rank pari passu with all other
unsecured indebtedness of the Company; provided, however, that if specified in
the applicable Prospectus Supplement, a particular series of Offered Notes may
be collateralized by the Company's First Mortgage Bonds. See "Description of
Capital Stock -- Restriction on Issuance of Funded Debt" for a description of
provisions contained in the Company's Amended Articles of Incorporation, as
amended, which may restrict the Company's ability to issue Indenture Securities
under the Indenture.
Reference is made to the applicable Prospectus Supplement for the following
terms of the Offered Notes (among others): (i) the title of such Offered Notes;
(ii) the limit, if any, upon the aggregate principal amount of such Offered
Notes; (iii) the rate or rates, or the method of determination thereof, at which
such Offered Notes will bear interest, if any, and the date or dates from which
such interest will accrue; (iv) the dates on which such interest will be payable
(each an "Interest Payment Date") and the regular record dates for the interest
payable on such Interest Payment Dates; (v) the obligation, if any, of the
Company to redeem or purchase such Offered Notes pursuant to any sinking fund or
analogous provisions or at the option of the holder thereof and the periods
within which or the dates on which, the prices at which and the terms and
conditions upon which such Offered Notes will be redeemed or purchased, in whole
or in part, pursuant to such obligation; (vi) the periods within which or the
dates on which, the prices at which and the terms and conditions upon which such
Offered Notes may be redeemed, if any, in whole or in part, at the option of the
Company; (vii) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which such Offered Notes will be issuable; (viii)
whether such Offered Notes are to be issued in whole or in part in the form of
one or more global Notes and, if so, the identity of the depositary for such
global Notes; (ix) the terms, if any, under which the Offered Notes may be
convertible into Common Stock; (x) whether such Offered Notes will be
collateralized by the Company's First Mortgage Bonds and (xi) any other terms of
such Offered Notes not inconsistent with the provisions of the Indenture.
The Indenture does not contain any covenants or other provisions that are
specifically intended to afford holders of the Notes special protection in the
event of a highly leveraged transaction.
Payment of Notes; Transfers; Exchanges
Except as may be provided in the applicable Prospectus Supplement,
interest, if any, on each Offered Note payable on each Interest Payment Date
will be paid by check mailed to the person in whose name such Note is registered
(the registered holder of any Indenture Security being herein called a "Holder")
as of the close of business on the regular record date relating to such Interest
Payment Date; provided, however, that interest payable at maturity (whether at
stated maturity, upon redemption or otherwise, hereinafter "Maturity") will be
paid to the person to whom principal is paid. However, if there has been a
default in the payment of interest on any Note, such defaulted interest may be
payable to the Holder of such Note as of the
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close of business on a date selected by the Indenture Trustee not more than 15
days and not less than 10 days prior to the date proposed by the Company for
payment of such defaulted interest.
Principal of and premium, if any, and interest, if any, on the Notes at
maturity will be payable upon presentation of the Notes at the principal
corporate trust office of the Indenture Trustee in Chicago, Illinois. The
Company may change the place of payment on the Notes, may appoint one or more
paying agents (including the Company) and may remove any paying agent, all in
its discretion. The applicable Prospectus Supplement will identify any new place
of payment and any paying agent appointed, and will disclose the removal of any
paying agent effected, prior to the date of such Prospectus Supplement.
The transfer of Notes may be registered, and Notes may be exchanged for
other Notes of authorized denominations and of like tenor and aggregate
principal amount, at the principal corporate trust office of the Indenture
Trustee in Chicago, Illinois. The Company may change the place for registration
of transfer of the Notes, may appoint one or more additional security registrars
or transfer agents (including the Company) and may remove any security registrar
or transfer agent, all in its discretion. The applicable Prospectus Supplement
will identify any new place for registration of transfer and any additional
security registrar or transfer agent appointed, and will disclose the removal of
any security registrar or transfer agent effected, prior to the date of such
Prospectus Supplement. No service charge will be made for any transfer or
exchange of the Notes, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
(Art. Three, Sec. 305) The Company will not be required (a) to issue, register
the transfer of or exchange Notes during a period of 15 days prior to giving any
notice of redemption or (b) to issue, register the transfer of or exchange any
Note selected for redemption in whole or in part, except the unredeemed portion
of any Note being redeemed in part.
Redemption
Any terms for the optional or mandatory redemption of Offered Notes will be
set forth in the applicable Prospectus Supplement. Except as may otherwise be
provided in the applicable Prospectus Supplement with respect to Offered Notes
redeemable at the option of the Holder, such Offered Notes will be redeemable
only upon notice, by mail, not less than 30 or more than 60 days prior to the
date fixed for redemption and, if less than all of the Offered Notes of any
series, or any tranche thereof, are to be redeemed, the particular Offered Notes
will be selected by such methods as the Indenture Trustee deems fair and
appropriate. (Art. Four, Sec. 403 and 404)
Any notice of optional redemption may state that such redemption shall be
conditional upon the receipt by the Indenture Trustee, on or prior to the date
fixed for such redemption, of money sufficient to pay the principal of and
premium, if any, and interest, if any, on such Notes and that if such money has
not been so received, such notice will be of no force or effect and the Company
will not be required to redeem such Notes. (Art. Four, Sec. 404)
Conversion Rights
The applicable Prospectus Supplement will provide whether the Offered Notes
will consist of convertible Notes and, if so, the initial conversion price per
share at which such convertible Notes will be convertible into Common Stock.
Subject to prior redemption of the convertible Notes, the Holders of such Notes
will be entitled at any time on or before the close of business on the maturity
date thereof to convert such Notes (or, in the case of convertible Notes of
denominations in excess of $1,000 any portion of which is $1,000 or an integral
multiple of $1,000) into shares of Common Stock at the initial conversion price
set forth in the applicable Prospectus Supplement. No adjustment will be made on
conversion of any convertible Notes for interest accrued thereon or, except as
set forth below, for dividends on any securities issued upon such conversion.
In order to exercise the right of conversion, the Holder of any such
convertible Notes must surrender such convertible Notes to the Company at any
office or agency of the Company maintained for such purpose. The convertible
Notes to be surrendered must be accompanied by written notice to the Company
that the Holder elects to convert such Notes.
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If any convertible Note, whether or not called for redemption, is converted
between a record date for the payment of interest and the next succeeding
Interest Payment Date, such convertible Note must be accompanied by funds
payable to the Company equal to the interest payable to the registered Holder on
such Interest Payment Date on the principal amount so converted. In the case of
any convertible Note or portion thereof called for redemption, conversion rights
expire at the close of business on the Redemption Date, even if such redemption
occurs at a time when conversion of such Note or portion thereof is in the best
interests of the Holder.
No fractional shares of Common Stock will be issued upon conversion but, in
lieu thereof, an adjustment in cash will be made based on the market price at
the close of business on the date of conversion.
The Conversion Price will be subject to adjustment in the event of: (i) the
payment of certain stock dividends on the Common Stock; (ii) the issuance of
certain rights or warrants to all holders of the Common Stock entitling them to
subscribe for or purchase Common Stock at a price less than the market price;
(iii) the subdivision of Common Stock into a greater number of shares of Common
Stock; (iv) the distribution by the Company to all holders of the Common Stock
of evidences of indebtedness or assets of the Company (excluding rights or
warrants and any dividends or distributions mentioned above); and (v) the
reclassification of Common Stock into other securities. (Art. Five)
Events of Default
The following constitute Events of Default under the Indenture with respect
to each series of Indenture Securities outstanding thereunder:
(a) failure to pay any interest on any Indenture Security of such
series within 30 days after the same becomes due and payable;
(b) failure to pay any principal of any Indenture Security of such
series when the same becomes due and payable;
(c) failure to perform or breach of any covenant or warranty of the
Company in the Indenture (other than a covenant or warranty of the Company
in the Indenture solely for the benefit of one or more series of Indenture
Securities other than the Notes), for 60 days after written notice to the
Company by the Indenture Trustee, or to the Company and the Indenture
Trustee by the Holders of at least 25% in principal amount of the Indenture
Securities of such series outstanding under the Indenture as provided in
the Indenture;
(d) an event of default as defined in any mortgage, indenture or
instrument under which there may be issued any indebtedness for borrowed
money of the Company (including bonds issued under the Mortgage and
Indenture Securities of other series issued under the Indenture), which
event of default either (i) results in such indebtedness in an amount in
excess of $15,000,000 becoming or being declared due and payable prior to
maturity or (ii) results from the failure by the Company to make any
payment in excess of $15,000,000 of the principal of such indebtedness on
the date it becomes due and payable (after the expiration of any applicable
grace periods), and such acceleration shall not have been rescinded or
annulled or such failure to make payment shall not have been cured, as the
case may be, or such indebtedness shall not have been otherwise discharged,
within 90 days after notice shall have been given as provided in the
Indenture;
(e) certain events of bankruptcy, insolvency or reorganization with
respect to the Company; and
(f) any other Event of Default specified with respect to Indenture
Securities of such series. (Art. Eight, Sec. 801)
No Event of Default with respect to the Notes necessarily constitutes an Event
of Default with respect to the Indenture Securities of any other series issued
under the Indenture.
Remedies
If an Event of Default with respect to any series of Indenture Securities
occurs and is continuing, then either the Indenture Trustee or the Holders of
not less than 25% in principal amount of the outstanding Indenture Securities of
such series may declare the principal amount (or if the Indenture Securities of
such
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<PAGE> 20
series are discount notes or similar Indenture Securities, such portion of the
principal amount of such Indenture Securities as may be specified in the terms
thereof) of all of the Indenture Securities of such series to be due and payable
immediately; provided, however, that if an Event of Default occurs and is
continuing with respect to more than one series of Indenture Securities, the
Indenture Trustee or the Holders of not less than 25% in aggregate principal
amount of the outstanding Indenture Securities of all such series, considered as
one class, may make such declaration of acceleration and not the Holders of the
Indenture Securities of any one of such series.
At any time after the declaration of acceleration with respect to the
Indenture Securities of any series has been made and before a judgment or decree
for payment of the money due has been obtained, the Event or Events of Default
giving rise to such declaration of acceleration will, without further act, be
deemed to have been waived, and such declaration and its consequences will,
without further act, be deemed to have been rescinded and annulled, if
(a) the Company has paid or deposited with the Indenture Trustee a sum
sufficient to pay
(1) all overdue interest on all Indenture Securities of such
series;
(2) the principal of and premium, if any, on any Indenture
Securities of such series which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate or rates
prescribed therefor in such Indenture Securities;
(3) interest upon overdue interest at the rate or rates prescribed
therefor in such Indenture Securities, to the extent that payment of
such interest is lawful; and
(4) all amounts due to the Indenture Trustee under the Indenture;
and
(b) any other Event or Events of Default with respect to the Indenture
Securities of such series, other than the nonpayment of the principal of
the Indenture Securities of such series which has become due solely by such
declaration of acceleration, have been cured or waived as provided in the
Indenture. (Art. Eight, Sec. 802)
If an Event of Default with respect to the Indenture Securities of any
series occurs and is continuing, the Holders of a majority in principal amount
of the outstanding Indenture Securities of such series will have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Indenture Trustee, or exercising any trust or power conferred
on the Indenture Trustee, with respect to the Indenture Securities of such
series; provided, however, that if an Event of Default occurs and is continuing
with respect to more than one series of Indenture Securities, the Holders of a
majority in aggregate principal amount of the outstanding Indenture Securities
of all such series, considered as one class, will have the right to make such
direction, and not the Holders of the Indenture Securities of any one of such
series. (Art. Eight, Sec. 812) The Indenture Trustee is not required to exercise
any of the rights and powers vested in it under the Indenture at the request or
direction of any Holder unless such Holder shall have offered to the Indenture
Trustee reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with such request or
direction. (Art. Nine, Sec. 903) The right of a Holder of any Indenture Security
of such series to institute a proceeding with respect to the Indenture is
subject to certain conditions precedent, but each Holder has an absolute right
to receive payment of principal and premium, if any, and interest, if any, when
due and to institute suit for the enforcement of any such payment. (Art. Eight,
Sec. 807 and 808) The Indenture provides that the Indenture Trustee, within 90
days after the occurrence of any default thereunder with respect to the
Indenture Securities of a series, is required to give the Holders of the
Indenture Securities of such series notice of any default known to it, unless
cured or waived; provided, however, that, except in the case of a default in the
payment of principal of or premium, if any, or interest, if any, on any
Indenture Securities of such series, the Indenture Trustee may withhold such
notice if the Indenture Trustee determines that it is in the interest of such
Holders to do so; and provided, further, that in the case of a default of the
character specified above in clause (c) under "Events of Default," no such
notice shall be given to such Holders until at least 75 days after the
occurrence thereof. (Art. Nine, Sec. 902)
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<PAGE> 21
The Company will be required to furnish annually to the Indenture Trustee a
statement as to the performance by the Company of certain of its obligations
under the Indenture and as to any default in such performance. (Art. Six, Sec.
606)
Covenants; Consolidation, Merger, etc.
The Company will cause (or, with respect to property owned in common with
others, make reasonable effort to cause) all its properties used or useful in
the conduct of its business to be maintained and kept in good condition, repair
and working order and will cause (or, with respect to property owned in common
with others, make reasonable effort to cause) to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as, in the
judgment of the Company, may be necessary so that the business carried on in
connection therewith may be properly conducted; provided, however, that the
foregoing shall not prevent the Company from discontinuing, or causing the
discontinuance of, the operation and maintenance of any of its properties if
such discontinuance is, in the judgment of the Company, desirable in the conduct
of its business. (Art. Six, Sec. 605)
Subject to the provisions described in the next paragraph, the Company will
do or cause to be done all things necessary to preserve and keep in full force
and effect its corporate existence and rights (charter and statutory) and
franchises of the Company; provided, however, that the Company not be required
to preserve any such right or franchise if, in the judgment of the Company,
preservation thereof is no longer desirable in the conduct of the business of
the Company and the loss thereof will not adversely affect the interests of the
Holders in any material respect. (Art. Six, Sec. 604)
The Company will not consolidate with or merge into any other corporation
or corporations or convey, transfer or lease its properties and assets
substantially as an entirety to any Person or Persons unless (a) the corporation
or corporations formed by such consolidation or into which the Company is merged
or the Person or Persons which acquires by conveyance or transfer, or which
leases, the property and assets of the Company substantially as an entirety,
expressly assumes, by supplemental indenture, the due and punctual payment of
the principal of and premium, if any, and interest, if any, on all the Indenture
Securities and the performance of all of the covenants of the Company under the
Indenture, (b) immediately after giving effect to such transactions no Event of
Default, and no event which after notice and lapse of time or both would become
an Event of Default, will have occurred and be continuing, and (c) the Company
will have delivered to the Indenture Trustee an opinion of counsel as provided
in the Indenture. (Art. Eleven, Sec. 1101)
Modification of Indenture
Without the consent of any Holders of Indenture Securities, the Company and
the Indenture Trustee may enter into one or more supplemental indentures for any
of the following purposes:
(a) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company in the
Indenture and the Indenture Securities pursuant to a consolidation, merger
or conveyance of substantially all of the Company's assets as described
above; or
(b) to add to the covenants of the Company for the benefit of the
Holders of all or any series of outstanding Indenture Securities or to
surrender any right or power conferred upon the Company by the Indenture;
or
(c) to add any additional Events of Default with respect to all or any
series of outstanding Indenture Securities; or
(d) to change or eliminate any provision of the Indenture or to add
any new provision to the Indenture; provided that if such change,
elimination or addition will adversely affect the interests of the Holders
of Indenture Securities of any series in any material respect, such change,
elimination or addition will become effective with respect to such series
only when there is no Indenture Security of such series remaining
outstanding under the Indenture; or
(e) to provide collateral security for all series of Indenture
Securities; or
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<PAGE> 22
(f) to establish the form or terms of Indenture Securities of any
series as permitted by the Indenture; or
(g) to evidence and provide for the acceptance of the appointment of a
successor Indenture Trustee under the Indenture with respect to the
Indenture Securities of one or more series and to add to or change any of
the provisions of the Indenture as shall be necessary to provide for or to
facilitate the administration of the trusts under the Indenture by more
than one trustee; or
(h) to provide for the procedures required to permit the utilization
of a noncertificated system of registration for any series of Indenture
Securities; or
(i) to change any place where (1) the principal of and premium, if
any, and interest, if any, on Indenture Securities of any series, or any
tranche thereof, shall be payable, (2) any Indenture Securities of any
series, or any tranche thereof, may be surrendered for registration of
transfer, (3) Indenture Securities of any series, or any tranche thereof,
may be surrendered for exchange and (4) notices and demands to or upon the
Company in respect of the Indenture Securities of any series, or any
tranche thereof, and the Indenture may be served; or
(j) to cure any ambiguity or inconsistency or to make any other
provisions with respect to matters and questions arising under the
Indenture, provided such provisions shall not adversely affect the
interests of the Holders of Indenture Securities of any series in any
material respect. (Art. Twelve, Sec. 1201)
Except as described above, the consent of the Holders of not less than a
majority in principal amount of the Indenture Securities of all series then
outstanding under the Indenture, considered as one class, is required for the
purpose of adding any provisions to, or changing in any manner or eliminating
any of the provisions of, the Indenture pursuant to an indenture or supplemental
indenture; provided, however, that if less than all of the series of Indenture
Securities outstanding under the Indenture are directly affected by a
supplemental indenture, then the consent only of the Holders of a majority in
aggregate principal amount of the outstanding Indenture Securities of all series
so directly affected, considered as one class, will be required; and provided,
further, that if the Indenture Securities of any series shall have been issued
in more than one tranche and if the proposed supplemental indenture shall
directly affect the rights of the Holders of Indenture Securities of one or
more, but less than all, of such tranches, then the consent only of the Holders
of a majority in aggregate principal amount of the outstanding Indenture
Securities of all tranches so directly affected, considered as one class, shall
be required; and provided, further, that no such supplemental indenture will,
without the consent of the Holder of each Indenture Security outstanding under
the Indenture of each such series directly affected thereby, (a) change the
stated maturity of, or any installment of principal of or the rate of interest
on (or the amount of any installment of interest on), any Indenture Security, or
reduce the principal thereof or redemption premium thereon, if any, or change
the amount payable upon acceleration of a discount note or method of calculating
the rate of interest thereon, or otherwise modify certain terms of payment of
the principal thereof or interest or yield or premium thereon, (b) reduce the
percentage in principal amount of the Indenture Securities outstanding of such
series required to consent to any supplemental indenture or waiver under the
Indenture or to reduce the requirement for quorum and voting, or (c) modify
certain of the provisions in the Indenture relating to supplemental indentures,
waivers of certain covenants and waivers of past defaults.
A supplemental indenture which changes or eliminates any covenant or other
provision of the Indenture which has expressly been included solely for the
benefit of one or more particular series of Indenture Securities, or which
modifies the rights of the Holders of Indenture Securities of such series with
respect to such covenant or other provision, shall be deemed not to affect the
rights under the Indenture of the Holders of any other Indenture Securities.
(Art. Twelve, Sec. 1202)
Defeasance
The Indenture Securities of any series, or any portion of the principal
amount thereof, will be deemed to have been paid for purposes of the Indenture
(except as to any surviving rights of registration of transfer or exchange
expressly provided for in the Indenture), and the entire indebtedness of the
Company in respect
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<PAGE> 23
thereof will be deemed to have been satisfied and discharged, if there shall
have been irrevocably deposited with the Indenture Trustee, in trust: (a) money
in the amount which will be sufficient, or (b) Government Obligations (as
defined below), which do not contain provisions permitting the redemption or
other prepayment thereof at the option of the issuer thereof, the principal of
and the interest on which when due, without any regard to reinvestment thereof,
will provide monies which, together with the money, if any, deposited with or
held by the Indenture Trustee, will be sufficient, or (c) a combination of (a)
and (b) which will be sufficient, to pay when due the principal of and premium,
if any, and interest, if any, due and to become due on such Indenture Securities
or portions thereof on and prior to the maturity thereof. (Art. Seven, Sec. 701)
For this purpose, "Government Obligations" include direct obligations of, or
obligations unconditionally guaranteed by, the United States of America entitled
to the benefit of the full faith and credit thereof and certificates, depositary
receipts or other instruments which evidence a direct ownership interest in such
obligations or in any specific interest or principal payments due in respect
thereof.
While there is no legal precedent on point, it is possible that, for
federal income tax purposes, any deposit contemplated in the preceding paragraph
could be treated as a taxable exchange of the related Notes for an issue of
obligations of the trust or a direct interest in the case of securities held in
the trust. In that case, Holders of such Notes would recognize gain or loss as
if the trust obligations or the cash or securities deposited, as the case may
be, had actually been received by them in exchange for their Notes. Such Holders
thereafter would be required to include in income a share of the income, gain or
loss of the trust. The amount so required to be included in income could be
different from the amount that would be includable in the absence of such
deposit. Prospective investors are urged to consult their own tax advisors as to
the specific consequences to them of such deposit.
DESCRIPTION OF CAPITAL STOCK
General
The authorized capital stock of the Company consists of 40,000,000 shares
of Common Stock, without par value and 200,000 shares of Preferred Stock,
without par value (the "Preferred Stock"). For a complete description of the
relative rights and preferences of the Company's capital stock, reference is
made to the Company's Amended Articles of Incorporation, as amended (the
"Articles"), a copy of which is an exhibit to the Registration Statement of
which this Prospectus is a part.
Each share of Common Stock and Preferred Stock has one vote on all matters
upon which shareholders are entitled to vote and all classes vote as a single
class except as provided by law or the Articles. The holders of Common Stock and
Preferred Stock are entitled to cumulative voting for the election of directors.
The Company's Board of Directors is divided into three classes serving staggered
three-year terms.
Of the total number of authorized shares of Common Stock, 11,117,920 were
issued and outstanding on May 25, 1995. In addition, as of May 25, 1995, 195,893
shares of Common Stock were reserved for issuance under the Employee Stock
Purchase Plan, 187,055 shares were reserved for issuance under the Dividend
Reinvestment and Stock Purchase Plan, 193,000 shares were reserved for issuance
under the Long-Term Stock Plan of 1989, 959,025 shares were reserved for
issuance under the Customer Stock Purchase Plan, 100,000 shares were reserved
for issuance under the Non-Employee Director Stock Plan, and 81,157 shares were
reserved for issuance under the 401(k) Savings Plan.
The Preferred Stock may be issued from time to time in one or more series,
and the Board of Directors, without further approval of the shareholders, is
authorized to fix the dividend rights and terms, redemption rights and terms,
liquidation preferences, conversion rights, special series voting rights and
sinking fund provisions applicable to each such series of Preferred Stock. If
the Company issues a series of Preferred Stock in the future that has special
voting rights or preferences over the Common Stock with respect to the payment
of dividends and upon the Company's liquidation, dissolution or winding up, the
rights of the holders of the Common Stock may be adversely affected. The
issuance of shares of Preferred Stock could be utilized, under certain
circumstances, in an attempt to prevent an acquisition of the Company and may
adversely affect the voting and other rights of the holders of Common Stock. As
of May 31, 1995, there were no issued and outstanding shares of Preferred Stock.
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<PAGE> 24
Dividend Reinvestment and Stock Purchase Plan
The Company has a Dividend Reinvestment and Stock Purchase Plan (the
"Plan") under which participating shareholders may have cash dividends on all or
a portion of their shares of Common Stock automatically reinvested and/or may
invest optional cash payments of not less than $25 or more than $10,000 per
quarter to purchase additional shares of Common Stock. Under the Plan, the price
of shares of Common Stock purchased through reinvestment of cash dividends is
95% of the average of the closing sale price of Common Stock for the period of
five trading days ending on the dividend payment date, and optional cash
payments are invested at 100% of such average. No commission or service charge
is paid by participants in connection with purchases under the Plan. Shares of
Common Stock are offered for sale under the Plan only by means of a separate
prospectus available upon request from the Company.
Restriction on Dividends
Under the provisions of the Articles, the Company is not permitted to
declare or pay dividends on the Common Stock until full cumulative dividends on
any outstanding shares of the Preferred Stock have been paid.
The Common Stock is entitled to dividends when, as and if declared by the
Company's Board of Directors, subject to various limitations on the declaration
or payment of dividends imposed by the provisions of the Mortgage and, for so
long as any shares of Preferred Stock remain outstanding, the restriction
described in the prior paragraph. See "Description of Debt Securities --
Description of Bonds -- Dividend Restrictions."
Liquidation
In the event of liquidation, dissolution or winding up of the Company, the
holders of the Common Stock are entitled to receive pro rata such assets as may
remain upon discharge of all indebtedness and liabilities of the Company after
payment of the amounts payable on all the then outstanding shares of Preferred
Stock.
Other
The Common Stock has no conversion rights, redemption provisions or
pre-emptive rights and is not liable for any further calls or assessments. The
Preferred Stock has no pre-emptive rights.
The Articles contain provisions which may deter changes in control or
significant restructurings of the Company. In addition to providing for a
classified board of directors as described above, the Articles (i) require that
certain business combinations be approved by holders of at least 80% of the
outstanding shares of voting stock of the Company unless all Disinterested
Directors (as defined in the Articles) have approved the transaction or certain
procedural and minimum price requirements are met; (ii) require that the
transfer during a twelve-month period of assets equaling 10% or more of the book
value of the assets of the Company be approved by at least 66 2/3% of the
Company's directors; and (iii) impose supermajority voting requirements for
amending certain of the foregoing provisions. The Illinois Business Corporation
Act and the Virginia Stock Corporation Act also contain provisions requiring a
supermajority vote to approve certain transactions. Further, the Company's
Long-Term Stock Plan of 1989 provides that certain restrictions on options or
restricted stock granted to officers and employees of the Company will be
removed or waived if a change in control (as defined therein) of the Company
occurs.
One of the effects of the existence of authorized but unissued and
unreserved Common Stock and Preferred Stock may be to enable the Board of
Directors to issue shares in circumstances which could render more difficult or
discourage an attempt to obtain control of the Company by means of a merger,
tender offer, proxy contest or otherwise. Such additional shares also could be
used to dilute the stock ownership of persons seeking to obtain control of the
Company.
Transfer Agent and Registrar
The Transfer Agent and Registrar for the Common Stock is Harris Trust and
Savings Bank, 311 W. Monroe Street, Chicago, Illinois 60690.
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<PAGE> 25
LEGAL OPINIONS
Certain legal matters in connection with the legality of the Securities
offered hereby will be passed upon for the Company by Chapman and Cutler,
Chicago, Illinois, and for any agents, underwriters or dealers by Jones, Day,
Reavis & Pogue, Chicago, Illinois. The statements as to matters of law and legal
conclusions made under "Description of Debt Securities -- Description of Bonds
- -- Security and Priority" are made on the authority of Chapman and Cutler, which
has relied, in part, on the opinions of local counsel.
EXPERTS
The consolidated financial statements and schedules included in the
Company's most recent Annual Report on Form 10-K, incorporated herein by
reference, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are so
incorporated herein in reliance upon the authority of said firm as experts in
giving said report. Reference is made to said report which includes an
explanatory paragraph with respect to the change in the method of accounting for
postretirement benefits other than pensions and income taxes effective January
1, 1993 as discussed in the notes to consolidated financial statements.
PLAN OF DISTRIBUTION
The Company may sell Securities through underwriters or dealers, directly
to one or more purchasers or through agents. The applicable Prospectus
Supplement will set forth the terms of the offering of any Securities, including
the names of any underwriters or agents, the purchase price of such Securities
and the proceeds to the Company from such sale, any underwriting discounts and
other items constituting underwriters' compensation, any initial public offering
price, any discounts or concessions allowed or reallowed or paid to dealers and
any securities exchanges on which such Securities may be listed.
If underwriters are used in the sale, Securities will be acquired by the
underwriters for their own account and may be resold from time to time in one or
more transactions, including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of sale. Such Securities may
be offered to the public either through underwriting syndicates represented by
managing underwriters or by underwriters without a syndicate. Unless otherwise
set forth in the applicable Prospectus Supplement, the obligations of the
underwriters to purchase such Securities will be subject to certain conditions
precedent, and the underwriters will be obligated to purchase all of such
Securities if any of such Securities are purchased. Any initial offering price
and any discounts or concessions allowed or reallowed or paid to dealers may be
changed from time to time. Only underwriters named in a Prospectus Supplement
are deemed to be underwriters in connection with the Securities offered thereby.
Securities may also be sold directly by the Company or through agents
designated by the Company from time to time. Any agent involved in the offer or
sale of Securities will be named, and any commissions payable by the Company to
such agent will be set forth in the applicable Prospectus Supplement. Unless
otherwise indicated in the applicable Prospectus Supplement, any such agent will
act on a best efforts basis for the period of its appointment.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase Securities at the public offering price set forth in
such Prospectus Supplement pursuant to delayed delivery contracts providing for
payment and delivery on a future date specified in such Prospectus Supplement.
Such contacts will be subject only to those conditions set forth in the
applicable Prospectus Supplement and such Prospectus Supplement will set forth
the commissions payable for solicitation of such contracts.
Any underwriters, dealers or agents participating in the distribution of
Securities may be deemed to be underwriters and any discounts or commissions
received by them on the sale or resale of Securities may be deemed to be
underwriting discounts and commissions under the Securities Act of 1933, as
amended (the "Securities Act"). Agents and underwriters may be entitled under
agreements entered into with the Company
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<PAGE> 26
to indemnification by the Company against certain liabilities, including
liabilities under the Securities Act or to contribution with respect to payments
that the agents or underwriters may be required to make in respect thereof.
Agents and underwriters may be customers of, engage in transactions with, or
perform services for, the Company or its affiliates in the ordinary course of
business.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE,
SUCH OTHER INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
REGISTERED SECURITIES TO WHICH THEY RELATE. THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL.
------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... S-3
The Company........................... S-4
Use of Proceeds....................... S-4
Common Stock Dividends and Price
Ranges.............................. S-5
Selected Consolidated Financial and
Other Data.......................... S-5
Underwriting.......................... S-6
PROSPECTUS
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
The Company........................... 3
Use of Proceeds....................... 4
Ratio of Earnings to Fixed Charges.... 4
Description of Debt Securities........ 4
Description of Capital Stock.......... 16
Legal Opinions........................ 18
Experts............................... 18
Plan of Distribution.................. 18
</TABLE>
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1,200,000 SHARES
(LOGO)
COMMON STOCK
------------------------
PROSPECTUS SUPPLEMENT
------------------------
PAINEWEBBER INCORPORATED
EDWARD D. JONES & CO.
LEGG MASON WOOD WALKER
INCORPORATED
------------------------
JUNE 8, 1995
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