<PAGE> 1
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-18965
PROSPECTUS SUPPLEMENT
(To Prospectus Dated January 9, 1997)
$250,000,000
WASHINGTON GAS LIGHT COMPANY
MEDIUM-TERM NOTES, SERIES D
DUE ONE YEAR OR MORE FROM DATE OF ISSUE
Washington Gas Light Company (the "Company") may from time to time offer its
Unsecured Notes, designated as Medium-Term Notes, Series D (the "Offered
Notes"), in the aggregate principal amount of up to $250,000,000, subject to
reduction as a result of the sale of other Securities as described in the
accompanying Prospectus. Each Offered Note will mature on any day one year or
more from its date of issue. Each Offered Note may also be subject to redemption
or repayment prior to maturity or pursuant to a sinking fund, in each case as
set forth in a pricing supplement to this Prospectus Supplement (a "Pricing
Supplement").
Each Offered Note will bear interest at a fixed rate (a "Fixed Rate Note") or at
a floating rate (a "Floating Rate Note") determined by reference to the CD Rate,
Commercial Paper Rate, LIBOR, the Federal Funds Rate, the Prime Rate, the
Treasury Rate, or any other Base Rate, as selected by the purchaser and agreed
to by the Company or as selected by the Company and agreed to by the purchaser,
adjusted by the Spread or Spread Multiplier, if any, applicable to such Offered
Note. Unless otherwise indicated in the applicable Pricing Supplement, interest
on each Fixed Rate Note will be payable semiannually in arrears on each March 15
and September 15 and at maturity or upon any earlier redemption or repayment.
The interest rate or interest rate formula, Issue Price, Stated Maturity,
Interest Payment Dates, redemption provisions, provisions for the repayment or
purchase by the Company of any Offered Note at the option of the Holder and
certain other terms with respect to each Offered Note will be established at the
time of issuance and set forth in the applicable Pricing Supplement.
Each Offered Note will be represented either by a global Offered Note ("Global
Note") registered in the name of a nominee of The Depository Trust Company, as
Depositary (such an Offered Note, so represented, being called a "Book-Entry
Note"), or by a certificate issued in definitive form (such an Offered Note, so
represented, being called a "Certificated Note"), as set forth in the applicable
Pricing Supplement. Beneficial interests in Global Notes representing Book-Entry
Notes will be shown on, and transfers thereof will be effected only through,
records maintained by the Depositary and its participants. Book-Entry Notes will
not be issuable as Certificated Notes except under the circumstances described
herein. See "Supplemental Description of the Unsecured Notes -- Book-Entry
Notes."
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, ANY PRICING SUPPLEMENT
HERETO OR THE ACCOMPANYING PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE TO AGENTS' DISCOUNTS PROCEEDS TO THE
PUBLIC(1) OR COMMISSIONS(2) COMPANY(2)(3)
<S> <C> <C> <C>
Per Note................................ 100.00% .150% - .750% 99.850% - 99.250%
Total................................... $250,000,000 $375,000 - $1,875,000 $249,625,000 - $248,125,000
</TABLE>
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(1) Unless otherwise specified in the applicable Pricing Supplement, the price
to the public will be 100% of the principal amount.
(2) The Company will pay to Salomon Brothers Inc, M.R. Beal & Company, Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, or
PaineWebber Incorporated (each an "Agent", and together, the "Agents") a
commission ranging from .150% to .750% of the principal amount of any
Offered Note, depending upon its Stated Maturity, sold through such Agent.
Commissions on any Offered Notes with a Stated Maturity greater than 30
years will be negotiated at the time of sale. See "Plan of Distribution".
(3) Before deduction of expenses payable by the Company estimated at $251,110,
including reimbursement of certain expenses of the Agents.
The Offered Notes will be offered on a continuous basis by the Company through
the Agents who have agreed to use reasonable best efforts to solicit offers to
purchase the Offered Notes. The Company may sell Offered Notes at a discount to
each Agent for its own account or for resale to one or more investors or other
purchasers at varying prices related to prevailing market prices at the time of
the resale, as determined by such Agent, or if so specified in an applicable
Pricing Supplement, for resale at a fixed public offering price. In addition,
the Agents may offer Notes purchased by them as principal to other dealers.
Unless otherwise specified in an applicable Pricing Supplement any Offered Note
purchased by an Agent as principal will be purchased at 100% of the principal
amount thereof less a percentage equal to the commission applicable to an agency
sale of an Offered Note of identical Stated Maturity. The Company may sell
Offered Notes to investors on its own behalf. Unless otherwise specified in an
applicable Pricing Supplement, the Offered Notes will not be listed on any
securities exchange, and there can be no assurance that the Offered Notes will
be sold or that there will be a secondary market for the Offered Notes. The
Company reserves the right to withdraw, cancel or modify the offer made hereby
without notice. The Company or an Agent may reject any offer, whether or not
solicited, in whole or in part. See "Plan of Distribution."
SALOMON BROTHERS INC
M.R.BEAL & COMPANY
MERRILL LYNCH & CO.
PAINEWEBBER INCORPORATED
The date of this Prospectus Supplement is January 24, 1997.
<PAGE> 2
USE OF PROCEEDS
It is expected that the Company will use net proceeds from the sale of the
Securities offered hereby for three primary purposes: (1) the refunding of
maturing long-term debt and satisfaction of sinking fund requirements; (2) the
refunding of higher-coupon long-term debt as market conditions permit; and (3)
for general corporate purposes, including capital expenditures and additional
working capital requirements. If the use of proceeds from the sale of particular
Offered Securities will be used for refunding long-term debt, the particulars of
such debt will be set forth in a Pricing Supplement.
SUPPLEMENTAL DESCRIPTION OF THE UNSECURED NOTES
The following description of the particular terms of the Offered Notes
supplements, and to the extent inconsistent therewith replaces, the description
of the general terms and provisions of the Offered Notes set forth under
"Description of the Unsecured Notes" in the accompanying Prospectus, to which
description reference is hereby made. Certain capitalized terms used herein are
defined under "Description of the Unsecured Notes" in the accompanying
Prospectus. Unless otherwise specified in an applicable pricing supplement, the
following description of the Offered Notes shall apply.
GENERAL
The Offered Notes will be issued as a series of debt securities under the
Indenture. The Offered Notes will be limited in aggregate principal amount to
$250,000,000, subject to reduction as a result of the sale of other Securities
as described in the accompanying Prospectus.
The Offered Notes will be issued in fully registered form only, without
coupons. Each Offered Note will be issued initially as either a Book-Entry Note
or a Certificated Note. Except as set forth herein under "Book-Entry Notes" or
in any Pricing Supplement relating to specific Offered Notes, the Offered Notes
will not be issuable as Certificated Notes. Unless otherwise specified in an
applicable Pricing Supplement, the authorized denominations of Global Notes will
be $1,000 and any larger amount that is an integral multiple of $1,000. Unless
otherwise specified by the Company, the authorized denominations of Certificated
Notes will be $1,000 and integral multiples thereof.
Each Offered Note will mature on any day one year or more from its date of
issue, as selected by the purchaser and agreed to by the Company. Each Offered
Note may also be subject to redemption at the option of the Company or to
repayment or purchase by the Company at the option of the Holder prior to its
Stated Maturity (as defined below). Unless otherwise specified in the Pricing
Supplement, each Floating Rate Note will mature on an Interest Payment Date (as
defined below) for such Offered Note.
The Pricing Supplement relating to an Offered Note will describe the
following terms: (i) whether such Offered Note is a Fixed Rate Note or a
Floating Rate Note; (ii) the price (expressed as a percentage of the aggregate
principal amount thereof) at which such Offered Note will be issued (the "Issue
Price"); (iii) the date on which such Offered Note will be issued (the "Original
Issue Date"); (iv) the date on which such Offered Note will mature (the "Stated
Maturity"); (v) if such Offered Note is a Fixed Rate Note, the rate per annum at
which such Offered Note will bear interest, if any, and the Interest Payment
Dates; (vi) if such Offered Note is a Floating Rate Note, the Base Rate, the
Initial Interest Rate, the Interest Reset Period, Interest Reset Dates, the
Interest Payment Dates, the Index Maturity, the Maximum Interest Rate, if any,
the Minimum Interest Rate, if any, the Spread or Spread Multiplier, if any (all
as defined below), and any other terms relating to the particular method of
calculating the interest rate for such Offered Note; (vii) whether such Offered
Note may be redeemed at the option of the Company prior to Stated Maturity as
described under "Redemption" below and, if so, the provisions relating to such
redemption; (viii) any sinking fund or other mandatory redemption provisions
applicable to such
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Offered Note, and any provisions for the repayment or purchase by the Company of
such Offered Note at the option of the Holder; (ix) the terms, if any, under
which the Offered Note may be convertible into Common Stock; and (x) any other
terms of such Offered Note not inconsistent with the provisions of the Indenture
under which such Offered Note will be issued.
"Business Day" with respect to any Offered Note means any day, other than a
Saturday or Sunday, which is (i) not a day on which banking institutions or
trust companies in New York City or the city in which is located any office or
agency maintained for the payment of principal of or premium, if any, or
interest on such Offered Note are authorized or required by law, regulation or
executive order to remain closed and (ii) if such Offered Note is a LIBOR Note
(as defined below), a London Banking Day. "London Banking Day" with respect to
any Offered Note means any day on which dealings in deposits in U.S. dollars are
transacted in the London interbank market.
The Indenture does not contain any covenants or other provisions that
specifically are intended to afford Holders of the Offered Notes special
protection in the event of a highly leveraged transaction.
PAYMENT OF PRINCIPAL AND INTEREST
Payments of interest on the Offered Notes (other than interest payable at
Maturity) will be made, except as provided below, by check mailed to the Holders
of such Offered Notes (which, in the case of Global Notes representing
Book-Entry Notes, will be a nominee of the Depositary, as hereinafter defined)
as of the Regular Record Date (as defined below) for each Interest Payment Date;
provided, however, that if the Original Issue Date of an Offered Note is after a
Regular Record Date and before the corresponding Interest Payment Date, interest
for the period from and including the Original Issue Date for such Offered Note
to but excluding such Interest Payment Date will be paid on the next succeeding
Interest Payment Date to the Holder of such Offered Note on the related Regular
Record Date.
Unless otherwise specified in the applicable Pricing Supplement, the
principal of the Offered Notes and any premium and interest thereon payable at
Maturity will be paid upon surrender thereof at the principal corporate trust
office of The Bank of New York in New York, New York. Payment of interest due on
the Maturity Date will be made to the person to whom payment of the principal
and premium, if any, shall be made.
Unless otherwise specified in the applicable Pricing Supplement, if the
principal of any Original Issue Discount Note is declared to be due and payable
immediately as described in the accompanying Prospectus under "Description of
Debt Securities -- Events of Default", the amount of principal due and payable
with respect to such Offered Note shall be limited to the sum of the aggregate
stated principal amount of such Offered Note multiplied by the Issue Price
(expressed as a percentage of the aggregate principal amount) plus the original
issue discount accrued from the date of issue to the date of declaration, which
accrual shall be calculated using the "interest method" (computed in accordance
with generally accepted accounting principles) in effect on the date of
declaration.
If, with respect to any Offered Note that is a Fixed Rate Note, any
Interest Payment Date, redemption or repayment date, or Stated Maturity falls on
a day that is not a Business Day, the required payment of principal, premium, if
any, and/or interest will be made on the next succeeding Business Day as if made
on the date such payment was due, and no interest will accrue on such payment
for the period from and after such Interest Payment Date, or Stated Maturity, as
the case may be, to the date of such payment on the next succeeding Business
Day. If any Interest Payment Date for any Floating Rate Note (other than the
Stated Maturity), would otherwise be a day that is not a Business Day, such
Interest Payment Date will be postponed to the next succeeding day that is a
Business Day, except that in the case of a Floating Rate Note that is a LIBOR
Note, if such Business Day falls in the next succeeding calendar month, such
Interest Payment Date will be the immediately preceding Business Day. If the
Stated Maturity, redemption date, or repayment date of
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a Floating Rate Note falls on a day that is not a Business Day, the required
payment of principal, premium, if any, and/or interest will be made on the next
succeeding Business Day as if made on the date such payment was due, and no
interest shall accrue on such payment for the period from and after the Stated
Maturity, the redemption date or repayment date to the date of such payment on
the next succeeding Business Day.
The "Regular Record Date" with respect to any Interest Payment Date for a
Floating Rate Note will be the date (whether or not a Business Day) fifteen
calendar days next preceding such Interest Payment Date, and for a Fixed Rate
Note (unless otherwise specified in the applicable Pricing Supplement) will be
the March 1 or September 1 (whether or not a Business Day) next preceding an
Interest Payment Date for Fixed Rate Notes.
FIXED RATE NOTES
Each Fixed Rate Note will bear interest from its Original Issue Date at the
rate per annum stated on the face thereof until the principal amount thereof is
paid or made available for payment. Unless otherwise set forth in the applicable
Pricing Supplement, interest on each Fixed Rate Note will be payable
semiannually in arrears on each March 15 and September 15 (each such date, an
"Interest Payment Date") and at Maturity. Each payment of interest in respect of
an Interest Payment Date shall include interest accrued through the day before
such Interest Payment Date. Interest on Fixed Rate Notes will be computed on the
basis of a 360-day year of twelve 30-day months.
FLOATING RATE NOTES
Each Floating Rate Note will bear interest from its Original Issue Date to
the first Interest Reset Date for such Offered Note at the Initial Interest Rate
set forth on the face thereof and in the applicable Pricing Supplement.
Thereafter, the interest rate on such Offered Note for each Interest Reset
Period will be determined by reference to an interest rate basis (the "Base
Rate"), plus or minus the Spread, if any, or multiplied by the Spread
Multiplier, if any. The "Spread" is the number of basis points (one basis point
equals one one-hundredth of a percentage point) that may be specified in the
applicable Pricing Supplement as being applicable to such Offered Note, and the
"Spread Multiplier" is the percentage that may be specified in the applicable
Pricing Supplement as being applicable to such Offered Note. The applicable
Pricing Supplement will designate one of the following Base Rates as applicable
to a Floating Rate Note: (i) the CD Rate (a "CD Rate Note"); (ii) the Commercial
Paper Rate (a "Commercial Paper Rate Note"); (iii) LIBOR (a "LIBOR Note"); (iv)
the Federal Funds Rate (a "Federal Funds Rate Note"); (v) the Prime Rate (a
"Prime Rate Note"); (vi) the Treasury Rate (a "Treasury Rate Note"); or (vii)
such other Base Rate or interest rate formula as is set forth in such Pricing
Supplement and in such Offered Note. As used herein, the "Index Maturity" for
any Offered Note is the period of maturity of the instrument or obligation from
which the Base Rate is calculated; "H.15(519)" means the publication entitled
"Statistical Release H.15(519), Selected Interest Rates" or any successor
publication, published by the Board of Governors of the Federal Reserve System;
and "Composite Quotations" means the daily statistical release entitled
"Composite 3:30 p.m. Quotations for U.S. Government Securities" published by the
Federal Reserve Bank of New York.
As specified in the applicable Pricing Supplement, a Floating Rate Note may
also have either or both of the following (in each case expressed as a rate per
annum on a simple interest basis): (i) a maximum limitation, or ceiling, on the
rate at which interest may accrue during any interest period ("Maximum Interest
Rate") and (ii) a minimum limitation, or floor, on the rate at which interest
may accrue during any interest period ("Minimum Interest Rate"). In addition to
any Maximum Interest Rate that may be applicable to any Floating Rate Note, the
interest rate on a Floating Rate Note will in no event be higher than the
maximum rate, if any, permitted by Virginia law, as the same may be modified by
United States law of general application. Under Virginia law currently in
effect, a business corporation may not use usury or the taking of more than the
lawful interest rate as a
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defense to any proceeding to recover damages on, or enforce payment of, any
obligation executed or effected by such corporation.
The Company will appoint, and enter into an agreement with, an agent (the
"Calculation Agent") to calculate interest rates on Floating Rate Notes. Unless
otherwise specified in the applicable Pricing Supplement, The Bank of New York
will be the Calculation Agent. All determinations of interest rates by the
Calculation Agent shall, in the absence of manifest error, be conclusive for all
purposes and binding upon the Holders of the Floating Rate Notes.
The interest rate on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semiannually or annually (such period being the "Interest
Reset Period" for such Offered Note, and the first day of each Interest Reset
Period being an "Interest Reset Date"), as specified in the applicable Pricing
Supplement. Unless otherwise specified in the applicable Pricing Supplement, the
Interest Reset Dates will be, in the case of Floating Rate Notes that reset
daily, each Business Day; in the case of Floating Rate Notes (other than
Treasury Rate Notes) that reset weekly, Wednesday of each week; in the case of
Treasury Rate Notes that reset weekly, Tuesday of each week (except as provided
below under "Treasury Rate Notes"); in the case of Floating Rate Notes that
reset monthly, the third Wednesday of each month; in the case of Floating Rate
Notes that reset quarterly, the third Wednesday of March, June, September and
December of each year; in the case of Floating Rate Notes that reset
semiannually, the third Wednesday of each of two months of each year specified
in the applicable Pricing Supplement; and, in the case of Floating Rate Notes
that reset annually, the third Wednesday of one month of each year specified in
the applicable Pricing Supplement; provided, however, that the interest rate in
effect for the ten days immediately prior to Maturity will be that in effect on
the tenth day preceding Maturity. If an Interest Reset Date for any Floating
Rate Note would otherwise be a day that is not a Business Day, such Interest
Reset Date will be postponed to the next succeeding Business Day, except that,
in the case of a LIBOR Note, if such Business Day is in the next succeeding
calendar month, such Interest Reset Date shall be the immediately preceding
Business Day.
Unless otherwise specified in the applicable Pricing Supplement, interest
payable in respect of Floating Rate Notes will be the accrued interest from and
including the Original Issue Date or the last date to which interest has been
paid, as the case may be, to but excluding the date on which interest is being
paid (or would have been paid except for the fact that such date is not a
Business Day).
With respect to a Floating Rate Note, accrued interest will be calculated
by multiplying the principal amount of such Offered Note by an accrued interest
factor. Such accrued interest factor will be computed by adding the interest
factors calculated for each day in the period for which accrued interest is
being calculated. Unless otherwise specified in the applicable prospectus
supplement, the interest factor (expressed as a decimal calculated to seven
decimal places without rounding) for each such day is computed by dividing the
interest rate in effect on such day by 360, in the case of CD Rate Notes,
Commercial Paper Rate Notes, LIBOR Notes, Federal Funds Rate Notes or Prime Rate
Notes, or by the actual number of days in the year in the case of Treasury Rate
Notes. For purposes of making the foregoing calculation, the interest rate in
effect on any Interest Reset Date will be the applicable rate as reset on such
date.
Unless otherwise specified in the applicable Pricing Supplement, all
percentages resulting from any calculation of the rate of interest on a Floating
Rate Note will be rounded, if necessary, to the nearest 1/100,000 of 1%
(.0000001), with five one-millionths of a percentage point rounded upward, and
all dollar amounts used in or resulting from such calculation on Floating Rate
Notes will be rounded to the nearest one-hundredth of a cent (with .005 of a
cent being rounded upward).
Unless otherwise indicated in the applicable Pricing Supplement and except
as provided below, interest will be payable, in the case of Floating Rate Notes
that reset daily, weekly or monthly, on the third Wednesday of each month or on
the third Wednesday of March, June, September and December of each year, as
specified in the applicable Pricing Supplement; in the case of Floating Rate
Notes that reset quarterly, on the third Wednesday of March, June, September and
December
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of each year; in the case of Floating Rate Notes that reset semiannually, on the
third Wednesday of each of two months of each year specified in the Pricing
Supplement; and in the case of Floating Rate Notes that reset annually, on the
third Wednesday of one month of each year specified in the applicable Pricing
Supplement (each such day being an "Interest Payment Date") and, in each case,
on the Maturity Date.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate applicable to each Interest Reset Period commencing on the
Interest Reset Date with respect to such Interest Reset Period will be the rate
determined as of the applicable interest determination date (the "Interest
Determination Date"). The Interest Determination Date with respect to the CD
Rate and the Commercial Paper Rate will be the second Business Day preceding
each Interest Reset Date for the related Note; the Interest Determination Date
with respect to the Federal Funds Rate and the Prime Rate, unless otherwise
specified in the applicable Pricing Supplement, will be the Business Day
immediately preceding each Interest Reset Date; and the Interest Determination
Date with respect to LIBOR will be the second London Banking Day preceding each
Interest Reset Date.
Upon the request of the Holder of any Floating Rate Note, the Calculation
Agent for such Offered Note will provide the interest rate then in effect and,
if determined, the interest rate that will become effective on the next Interest
Reset Date with respect to such Floating Rate Note.
CD RATE NOTES
Each CD Rate Note will bear interest for each Interest Reset Period at the
interest rate calculated with reference to the CD Rate and the Spread and/or
Spread Multiplier, if any, specified in such Offered Note and in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Determination Date relating to a CD Rate
Note or any Floating Rate Note for which the interest rate is determined with
reference to the CD Rate (a "CD Rate Interest Determination Date"), the rate on
such date for negotiable certificates of deposit having the Index Maturity
specified in the applicable Pricing Supplement as published in H.15(519) under
the heading "CDs (Secondary Market)" or, if not so published by 3:00 p.m., New
York City time, on such date, the rate on such CD Rate Interest Determination
Date for negotiable certificates of deposit of the Index Maturity designated in
the applicable Pricing Supplement as published by the Federal Reserve Bank of
New York in Composite Quotations or any successor publication under the heading
"Certificates of Deposit." If such rate is not yet published by either H.15(519)
or Composite Quotations by 3:00 p.m., New York City time, on the CD Rate
Interest Determination Date, then the CD Rate on such CD Rate Interest
Determination Date will be calculated by the Calculation Agent and will be the
arithmetic mean of the secondary market offered rates as of 10:00 a.m., New York
City time, on such CD Rate Interest Determination Date of three leading nonbank
dealers in negotiable U.S. dollar certificates of deposit in The City of New
York (which may include any of the Agents or their affiliates) selected by the
Calculation Agent for negotiable certificates of deposit of major United States
money market banks for negotiable certificates of deposit with a remaining
maturity closest to the Index Maturity designated in the applicable Pricing
Supplement in an amount that is representative for a single transaction in that
market at that time; provided, however, that if the dealers selected as
aforesaid by the Calculation Agent are not quoting offered rates as mentioned in
this sentence, the CD Rate determined as of such CD Rate Interest Determination
Date will be the CD Rate in effect on such CD Rate Interest Determination Date.
COMMERCIAL PAPER RATE NOTES
Each Commercial Paper Rate Note will bear interest for each Interest Reset
Period at an interest rate calculated with reference to the Commercial Paper
Rate and the Spread or Spread Multiplier, if any, specified in such Offered Note
and in the applicable Pricing Supplement.
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Unless otherwise specified in the applicable Pricing Supplement, the
"Commercial Paper Rate" for each Interest Reset Period will be determined by the
Calculation Agent on the Calculation Date (as defined below) and will be the
Money Market Yield (as defined below) as of the Interest Determination Date with
respect to the Commercial Paper Rate (a "Commercial Paper Rate Determination
Date") of the rate for commercial paper having the Index Maturity specified in
the applicable Pricing Supplement, as such rate shall be published in H.15(519)
under the heading "Commercial Paper." In the event that such rate is not
published prior to 9:00 a.m., New York City time, on the Calculation Date, then
the "Commercial Paper Rate" for such Interest Reset Period will be the Money
Market Yield as of such Commercial Paper Rate Determination Date of the rate for
commercial paper of the specified Index Maturity as published in Composite
Quotations under the heading "Commercial Paper." If by 9:00 a.m., New York City
time, on the Calculation Date such rate is not yet published in either H.15(519)
or Composite Quotations, then the "Commercial Paper Rate" for such Interest
Reset Period shall be the Money Market Yield of the arithmetic mean of the
offered rates, as of 11:00 a.m., New York City time, on such Commercial Paper
Rate Determination Date of three leading dealers in commercial paper in The City
of New York selected by the Calculation Agent, in its discretion, for commercial
paper of the specified Index Maturity placed for an industrial issuer whose
bonds are rated "AA", or the equivalent, by a nationally recognized rating
agency; provided, however, that if the dealers selected as aforesaid are not
quoting offered rates described in this sentence, the "Commercial Paper Rate"
for such Interest Reset Period will be deemed to be the same as the Commercial
Paper Rate for the immediately preceding Interest Reset Period (or, if there was
no such Interest Reset Period, the Initial Interest Rate).
"Money Market Yield" will be a yield calculated in accordance with the
following formula:
<TABLE>
<C> <C> <S>
D X 360
Money Market Yield = ------------------ X 100
360 - (D X M)
</TABLE>
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the specified Index Maturity.
The "Calculation Date" pertaining to any Commercial Paper Rate
Determination Date shall be the tenth calendar day after such Commercial Paper
Rate Determination Date or, if such day is not a Business Day, the next
succeeding Business Day.
LIBOR NOTES
Each LIBOR Note will bear interest for each Interest Reset Period at an
interest rate calculated with reference to LIBOR and the Spread or Spread
Multiplier, if any, specified in such Offered Note and in the applicable Pricing
Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "LIBOR"
means the determination by the Calculation Agent in accordance with the
following provisions:
(i) With respect to an Interest Determination Date relating to LIBOR,
either, as specified in the applicable Pricing Supplement, (a) the
arithmetic mean of the offered rates for deposits in U.S. dollars for the
period of the Index Maturity specified in the applicable Pricing
Supplement, commencing on the second London Banking Day immediately
following such Interest Determination Date, which appear on the Reuters
Screen LIBO Page as of 11:00 A.M., London time, on the Interest
Determination Date, if at least two such offered rates appear on the
Reuters Screen LIBO Page ("LIBOR Reuters"), or (b) the rate for deposits in
U.S. dollars having the Index Maturity designated in the applicable Pricing
Supplement, commencing on the second London Banking Day immediately
following that Interest Determination Date, that appears on the Telerate
Page 3750 as of 11:00 A.M., London time, on that Interest Determination
Date ("LIBOR Telerate"). Unless otherwise indicated in the applicable
Pricing Supplement, "Reuters Screen LIBO Page" means the display designated
as Page "LIBO" on the Reuters
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Monitor Money Rate Service (or such other page as may replace the LIBO page
on that service for the purpose of displaying London interbank offered
rates of major banks). "Telerate Page 3750" means the display designated as
page "3750" on the Telerate Service (or such other page as may replace the
3750 page on that service or such other service or services as may be
nominated by the British Bankers' Association for the purpose of displaying
London interbank offered rates for U.S. dollar deposits). If neither LIBOR
Reuters nor LIBOR Telerate is specified in the applicable Pricing
Supplement, LIBOR will be determined as if LIBOR Telerate had been
specified. In the case where (a) above applies, if fewer than two offered
rates appear on the Reuters Screen LIBO Page, or, in the case where (b)
above applies if no rate appears on the Telerate Page 3750, as applicable,
LIBOR in respect of that Interest Determination Date will be determined as
if the parties had specified the rate described in (ii) below.
(ii) With respect to an Interest Determination Date on which this
provision applies, LIBOR will be determined on the basis of the rates at
which deposits in U.S. dollars having the Index Maturity designated in the
applicable Pricing Supplement are offered at approximately 11:00 A.M.,
London time, on such Interest Determination Date by four major banks
("Reference Banks") in the London interbank market selected by the
Calculation Agent to prime banks in the London interbank market commencing
on the second London Banking Day immediately following such Interest
Determination Date and in a principal amount of not less than U.S.
$1,000,000 that is representative for a single transaction in such market
at such time. The Calculation Agent will request the principal London
office of each of the Reference Banks to provide a quotation of its rate.
If at least two such quotations are provided, LIBOR for such Interest
Determination Date will be the arithmetic mean of such quotations. If fewer
than two quotations are provided, LIBOR for such Interest Determination
Date will be the arithmetic mean of the rates quoted at approximately 11:00
A.M., New York City time, on such Interest Determination Date by three
major banks (which may include the Agents) in The City of New York selected
by Calculation Agent for loans in U.S. dollars to leading European banks
having the specified Index Maturity designated in the applicable Pricing
Supplement commencing on the second London Banking Day immediately
following such Interest Determination Date and in a principal amount equal
to an amount of not less than U.S. $1,000,000 that is representative for a
single transaction in such market at such time; provided, however, that if
the banks selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, LIBOR will be LIBOR then in effect on such
Interest Determination Date.
FEDERAL FUNDS RATE NOTES
Each Federal Funds Rate Note will bear interest for each Interest Reset
Period at the interest rate calculated with reference to the Federal Funds Rate
and the Spread and/or Spread Multiplier, if any, specified in such Offered Note
and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Interest Determination Date relating to
the Federal Funds Rate or any Floating Rate Note for which the interest rate is
determined with reference to the Federal Funds Rate (a "Federal Funds Rate
Interest Determination Date") the rate on such date for federal funds as
published in H.15(519) under the heading "Federal Funds (Effective)" or, if not
so published by 3:00 p.m., New York City time, on such date, the rate on such
Federal Funds Rate Interest Determination Date as published in Composite
Quotations under the heading "Federal Funds/ Effective Rate." If by 3:00 p.m.,
New York City time, on the Federal Funds Rate Interest Determination Date such
rate is not published in either H.15(519) or Composite Quotations, then the
Federal Funds Rate on such Federal Funds Rate Interest Determination Date will
be calculated by the Calculation Agent and will be the arithmetic mean of the
rates for the last transaction in overnight United States dollar federal funds
arranged by three leading brokers of federal funds transactions in The City of
New York (which may include any of the Agents or their affiliates) selected by
the Calculation Agent prior to 9:00 a.m., New York City time, on such Federal
Funds Rate Interest
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Determination Date; provided, however, that if the brokers selected as aforesaid
by the Calculation Agent are not quoting as mentioned in this sentence, the
Federal Funds Rate determined as of such Federal Funds Rate Interest
Determination Date will be the Federal Funds Rate in effect on such Federal
Funds Rate Interest Determination Date.
PRIME RATE NOTES
Each Prime Rate Note will bear interest for each Interest Reset Period at
an interest rate calculated with reference to the Prime Rate and the Spread
and/or Spread Multiplier, if any, specified in such Offered Note and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Interest Determination Date relating to the
Prime Rate or any Floating Rate Note for which the interest rate is determined
with reference to the Prime Rate (a "Prime Rate Interest Determination Date")
the rate on such date as such rate is published in H.15(519) under the heading
"Bank Prime Loan." If such rate is not published prior to 3:00 p.m., New York
time, on such date, then the Prime Rate shall be the arithmetic mean of the
rates of interest publicly announced by each bank that appears on the Reuters
Screen USPRIME1 Page (as defined below) as such bank's prime rate or base
lending rate as in effect for such Prime Rate Interest Determination Date. If
fewer than four such rates but more than one such rate appear on the Reuters
Screen USPRIME1 Page for such Prime Rate Interest Determination Date, the Prime
Rate shall be the arithmetic mean of the prime rates quoted on the basis of the
actual number of days in the year divided by a 360-day year as of the close of
business on such Prime Rate Interest Determination Date by four major money
center banks in The City of New York selected by the Calculation Agent. If fewer
than two such rates appear on the Reuters Screen USPRIME1 Page, the Prime Rate
will be determined by the Calculation Agent on the basis of the rates furnished
in The City of New York by three substitute banks or trust companies organized
and doing business under the laws of the United States, or any State thereof,
having total equity capital of at least $500 million and being subject to
supervision or examination by Federal or State authority, selected by the
Calculation Agent to provide such rate or rates; provided, however, that if the
banks or trust companies selected as aforesaid are not quoting as mentioned in
this sentence, the Prime Rate determined as of such Prime Rate Interest
Determination Date will be the Prime Rate in effect on such Prime Rate Interest
Determination Date.
"Reuters Screen USPRIME1 Page" means the display designated as "USPRIME1"
on the Reuters Monitor Money Rates Service (or such other page as may replace
the USPRIME1 page on that service for the purpose of displaying prime rates or
base lending rates of major United States banks).
TREASURY RATE NOTES
Each Treasury Rate Note will bear interest for each Interest Reset Period
at an interest rate calculated with reference to the Treasury Rate and the
Spread or Spread Multiplier, if any, specified in such Offered Note and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Treasury Rate" for each Interest Reset Period will be determined by the
Calculation Agent on the Calculation Date (as defined below) and will be the
rate for the auction held on the Treasury Rate Determination Date (as defined
below) for such Interest Reset Period of direct obligations of the United States
("Treasury bills") having the Index Maturity specified in the applicable Pricing
Supplement, as such rate shall be published in H.15(519) under the heading "U.S.
Government Securities -- Treasury bills -- auction average (investment)" or, in
the event that such rate is not published prior to 9:00 a.m., New York City
time, on the Calculation Date, the auction average rate (expressed as a bond
equivalent on the basis of a year of 365 or 366 days, as applicable, and applied
on a daily basis) on such Treasury Rate Determination Date as otherwise
announced by the United States Department of the Treasury. In the event that the
results of the auction of Treasury bills having the specified
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Index Maturity are not published or reported as provided above by 9:00 a.m., New
York City time, on such Calculation Date, or if no such auction is held on such
Treasury Rate Determination Date, then the "Treasury Rate" for such Interest
Reset Period will be calculated by the Calculation Agent and will be a yield to
maturity (expressed as a bond equivalent on the basis of a year of 365 or 366
days, as applicable, and applied on a daily basis) of the arithmetic mean of the
secondary market bid rates, as of approximately 3:30 p.m., New York City time,
on such Treasury Rate Determination Date, of three leading primary United States
Government securities dealers selected by such Calculation Agent for the issue
of Treasury bills with a remaining maturity closest to the specified Index
Maturity; provided, however, that if the dealers selected as aforesaid by the
Calculation Agent are not quoting bid rates as described in this sentence, then
the "Treasury Rate" for such Interest Reset Period will be deemed to be the same
as the Treasury Rate established for the immediately preceding Interest Reset
Date (or, if there was no such Interest Reset Date, the Initial Interest Rate).
The "Treasury Rate Determination Date" for each Interest Reset Period will
be the day of the week in which the Interest Reset Date for such Interest Reset
Period falls (except if the treasury auction is moved back to the previous
Friday as described below) on which Treasury bills would normally be auctioned.
At the date of this Prospectus Supplement, Treasury bills are normally sold at
auction on Monday of each week, unless that day is a legal holiday, in which
case the auction is normally held on the following Tuesday, except that such
auction may be held on the preceding Friday. If, as the result of a legal
holiday, an auction is so held on the preceding Friday, such Friday will be the
Treasury Rate Determination Date pertaining to the Interest Reset Period
commencing in the next succeeding week. If an auction date shall fall on any day
that would otherwise be an Interest Reset Date for a Treasury Rate Note, then
such Interest Reset Date shall instead be the Business Day immediately following
such auction date.
The "Calculation Date" pertaining to any Treasury Rate Determination Date
shall be the tenth calendar day after such Treasury Rate Determination Date or,
if such day is not a Business Day, the next succeeding Business Day.
REDEMPTION
The Pricing Supplement relating to each Offered Note will indicate either
that such Offered Note cannot be redeemed prior to Stated Maturity or that such
Offered Note will be redeemable at the option of the Company in whole or in
part, on any date on or after the date designated as the "Initial Redemption
Date" in such Pricing Supplement, at prices declining from a specified premium,
if any, to par, together with accrued interest to the date of redemption.
The Pricing Supplement relating to each Offered Note will also specify any
sinking fund or other mandatory redemption provisions applicable to such Offered
Note, and any provisions for the repayment or purchase by the Company of such
Offered Note at the option of the Holder.
Reference is made to the information contained under "Description of the
Unsecured Notes -- Redemption" in the accompanying Prospectus.
REPAYMENT
If so specified in the applicable Pricing Supplement, the Offered Notes
will be repayable by the Company in whole or in part at the option of the
Holders thereof on their respective Optional Repayment Dates specified in such
Pricing Supplement. If no Optional Repayment Date is specified with respect to
an Offered Note, such Offered Note will not be repayable at the option of the
Holder thereof prior to Stated Maturity. Any repayment in part will be in
increments of $1,000 or the minimum denomination specified in the applicable
Pricing Supplement (provided that any remaining principal amount thereof shall
be at least $1,000 or such minimum denomination). Unless otherwise specified in
the applicable Pricing Supplement, the repayment price for any Offered Note to
be repaid means an amount equal to the sum of (i) 100% of the unpaid principal
amount thereof or the
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portion thereof plus (ii) accrued interest to the date of repayment. For any
Offered Note to be repaid, such Offered Note must be received, together with the
form thereon entitled "Option to Elect Repayment" duly completed, by the Trustee
at its Corporate Trust Office (or such other address of which the Company shall
from time to time notify the Holders) not more than 60 nor less than 30 days
prior to the date of repayment. Exercise of such repayment option by the Holder
will be irrevocable.
While the Book-Entry Notes are represented by the Global Notes held by or
on behalf of the Depositary, and registered in the name of the Depositary or the
Depositary's nominee, the option for repayment may be exercised by the
applicable Participant that has an account with the Depositary, on behalf of the
beneficial owners of the Global Note or Notes representing such Book-Entry
Notes, by delivering a written notice substantially similar to the above
mentioned form to the Trustee at its Corporate Trust Office (or such other
address of which the Company shall from time to time notify the Holders), not
more than 60 nor less than 30 days prior to the date of repayment. Notices of
elections from Participants on behalf of beneficial owners of the Global Note or
Notes representing such Book-Entry Notes to exercise their option to have such
Book-Entry Notes repaid must be received by the Trustee by 5:00 p.m., New York
City time, on the last day for giving such notice. In order to ensure that a
notice is received by the Trustee on a particular day, the beneficial owner of
the Global Note or Notes representing such Book-Entry Notes must so direct the
applicable Participant before such Participant's deadline for accepting
instructions for that day. Different firms may have different deadlines for
accepting instructions from their customers. Accordingly, beneficial owners of
the Global Note or Notes representing Book-Entry Notes should consult the
Participants through which they own their interest therein for the respective
deadlines for such Participants. All notices shall be executed by a duly
authorized officer of such Participant (with signature guaranteed) and shall be
irrevocable. In addition beneficial owners of the Global Note or Notes
representing Book-Entry Notes shall effect delivery at the time such notices of
election are given to the Depositary by causing the applicable Participant to
transfer such beneficial owner's interest in the Global Note or Notes
representing such Book-Entry Notes, on the Depositary's records, to the Trustee.
See "Book-Entry Notes."
The Company may at any time purchase Offered Notes at any price in the open
market or otherwise. Offered Notes so purchased by the Company may be held or
resold or, at the discretion of the Company, may be surrendered to the Trustee
for cancellation.
BOOK-ENTRY NOTES
Except under the circumstances described below, the Offered Notes will be
issued in whole or in part in the form of one or more Global Notes that will be
deposited with, or on behalf of, The Depository Trust Company, New York, New
York ("DTC"), or such other depositary as may be subsequently designated (the
"Depositary"), and registered in the name of the Depositary.
Upon issuance, all Fixed Rate Book-Entry Notes having the same Original
Issue Date, interest rate, redemption provisions, provisions for repayment or
purchase by the Company at the option of the Holder and Stated Maturity will be
represented by one or more Global Notes, and all Floating Rate Book-Entry Notes
having the same Original Issue Date, Initial Interest Rate, Base Rate, Interest
Reset Period, Interest Reset Dates, Interest Payment Dates, Index Maturity,
Spread or Spread Multiplier, if any, redemption provisions, provisions for
repayment or purchase by the Company at the option of the Holder, Minimum
Interest Rate, if any, Maximum Interest Rate, if any, and Stated Maturity will
be represented by one or more Global Notes. Except as set forth below,
Book-Entry Notes represented by a Global Note will not be exchangeable for
Certificated Notes and will not otherwise be issuable as Certificated Notes.
So long as the Depositary, or its nominee, is the registered owner of a
Global Note, such Depositary or such nominee, as the case may be, will be
considered the sole holder of the individual Book-Entry Notes represented by
such Global Note for all purposes under the Indenture. Payments
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of principal of and premium, if any, and any interest on individual Book-Entry
Notes represented by a Global Note will be made to the Depositary or its
nominee, as the case may be, as the Holder of such Global Note. Except as set
forth below, owners of beneficial interests in a Global Note will not be
entitled to have any of the individual Book-Entry Notes represented by such
Global Note registered in their names, will not receive or be entitled to
receive physical delivery of any such Book-Entry Notes and will not be
considered the Holders thereof under the Indenture, including, without
limitation, for purposes of consenting to any amendment thereof or supplement
thereto.
If the Depositary is at any time unwilling or unable to continue as
depositary and a successor depositary is not appointed, the Company will issue
individual Certificated Notes in exchange for the Global Note or Notes
representing the corresponding Book-Entry Notes. In addition, the Company may at
any time and in its sole discretion determine not to have any Offered Notes
represented by one or more Global Notes and, in such event, will issue
individual Certificated Notes in exchange for the Global Notes representing the
corresponding Book-Entry Notes. In any such instance, an owner of a Book-Entry
Note represented by a Global Note will be entitled to physical delivery of
individual Certificated Notes equal in principal amount to such Book-Entry Note
and to have such Certificated Notes registered in its name. Individual
Certificated Notes so issued will be issued as registered Notes in
denominations, unless otherwise specified by the Company, of $1,000 and integral
multiples thereof.
DTC has confirmed to the Company and the Agents the following information:
1. DTC will act as securities depository for the Global Notes. The
Offered Notes will be issued as fully-registered securities registered in
the name of Cede & Co. (DTC's partnership nominee). One fully-registered
Global Note will be issued for each issue of the Offered Notes, each in the
aggregate principal amount of such issue, and will be deposited with DTC.
2. DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934. DTC holds securities that its
participants ("Participants") deposit with DTC. DTC also facilitates the
settlement among Participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized
book-entry changes in Participants' accounts, thereby eliminating the need
for physical movement of securities certificates. Direct Participants
("Direct Participants") include securities brokers and dealers, banks,
trust companies, clearing corporations, and certain other organizations.
DTC is owned by a number of its Direct Participants and by the New York
Stock Exchange, Inc., the American Stock Exchange, Inc., and the National
Association of Securities Dealers, Inc. Access to the DTC system is also
available to others such as securities brokers and dealers, banks, and
trust companies that clear through or maintain a custodial relationship
with a Direct Participant, either directly or indirectly ("Indirect
Participants"). The Rules applicable to DTC and its Participants are on
file with the Securities and Exchange Commission.
3. Purchases of Offered Notes under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Offered
Notes on DTC's records. The ownership interest of each actual purchaser of
each Offered Note ("Beneficial Owner") is in turn to be recorded on the
Direct and Indirect Participants' records. Beneficial Owners will not
receive written confirmation from DTC of their purchase, but Beneficial
Owners are expected to receive written confirmations providing details of
the transaction, as well as periodic statements of their holdings, from the
Direct or Indirect Participant through which the Beneficial Owner entered
into the transaction. Transfers of ownership interests in the Offered Notes
are to be accomplished by entries made on the books of Participants acting
on behalf of Beneficial Owners. Beneficial
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Owners will not receive certificates representing their ownership interest
in Offered Notes, except in the event that use of the book-entry system for
the Offered Notes is discontinued.
4. To facilitate subsequent transfers, all Offered Notes deposited by
Participants with DTC are registered in the name of DTC's partnership
nominee, Cede & Co. The deposit of Offered Notes with DTC and their
registration in the name of Cede & Co. effect no change in beneficial
ownership. DTC has no knowledge of the actual Beneficial Owners of the
Offered Notes; DTC's records reflect only the identity of the Direct
Participants to whose accounts such Offered Notes are credited, which may
or may not be the Beneficial Owners. The Participants will remain
responsible for keeping account of their holdings on behalf of their
customers.
5. Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by
Direct Participants and Indirect Participants to Beneficial Owners will be
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
6. Redemption notices shall be sent to Cede & Co. If less than all of
the Offered Notes within an issue are being redeemed, DTC's practice is to
determine by lot the amount of the interest of each Direct Participant in
such issue to be redeemed.
7. Neither DTC nor Cede & Co. will consent or vote with respect to
Offered Notes. Under its usual procedures, DTC mails an Omnibus Proxy to
the Company as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Offered Notes are credited on the record
date (identified in a listing attached to the Omnibus Proxy).
8. Principal and interest payments on the Offered Notes will be made
to DTC. DTC's practice is to credit Direct Participants' accounts on the
payment date in accordance with their respective holdings shown on DTC's
records unless DTC has reason to believe that it will not receive payment
on the payment date. Payments by Participants to Beneficial Owners will be
governed by standing instructions and customary practices, as is the case
with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such
Participant and not of DTC, the Indenture Trustee, or the Company, subject
to any statutory or regulatory requirements as may be in effect from time
to time. Payment of principal and interest to DTC is the responsibility of
the Company or the Indenture Trustee, disbursements of such payments to
Direct Participants shall be the responsibility of DTC, and disbursement of
such payments to the Beneficial Owners shall be the responsibility of
Direct and Indirect Participants.
9. DTC may discontinue providing its services as securities depository
with respect to the Offered Notes at any time by giving reasonable notice
to the Company or the Indenture Trustee. Under such circumstances, in the
event that a successor securities depository is not obtained, Certificated
Notes are required to be printed and delivered.
10. The Company may decide to discontinue use of the system of
book-entry transfers through DTC (or a successor securities depository). In
that event, Certificated Notes will be printed and delivered.
11. The information in this section concerning DTC and DTC's
book-entry system has been obtained from sources that the Company believes
to be reliable, but the Company takes no responsibility for the accuracy
thereof.
NONE OF THE COMPANY, THE INDENTURE TRUSTEE OR ANY AGENT FOR PAYMENT ON OR
REGISTRATION OF TRANSFER OR EXCHANGE OF SUCH OFFERED NOTES WILL HAVE ANY
RESPONSIBILITY OR LIABILITY FOR ANY ASPECT OF THE RECORDS RELATING TO OR
PAYMENTS MADE ON ACCOUNT OF BENEFICIAL INTERESTS IN SUCH GLOBAL NOTE OR FOR
MAINTAINING, SUPERVISING OR REVIEWING ANY RECORDS RELATING TO SUCH BENEFICIAL
INTERESTS.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary describes certain United States federal income tax
consequences of the ownership of Offered Notes as of the date hereof. Except
where noted, it deals only with Offered Notes held as capital assets by initial
purchasers excluding special situations, such as those of dealers in securities,
financial institutions, individual retirement or other tax-deferred accounts,
tax-exempt organizations, insurance companies, persons who hold Offered Notes as
a hedge against currency risk, persons who hold Offered Notes as part of a
straddle with other investments or who have otherwise hedged the risk of
ownership of the Offered Notes, or United States Holders (as defined below)
whose "functional currency" is not the U.S. dollar. Furthermore, the discussion
below is based upon provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), and regulations, rulings and judicial decisions thereunder as of
the date hereof, and such authorities may be repealed, revoked or modified so as
to result in federal income tax consequences different from those discussed
below.
UNITED STATES HOLDERS
As used herein, a "United States Holder" of an Offered Notes means a holder
that is a citizen or resident of the United States, a corporation, partnership
or other entity created or organized in or under the laws of the United States
or any political subdivision thereof, or an estate the income of which is
subject to United States federal income taxation regardless of its source or a
trust the administration over which a United States court can exercise primary
supervision and for which one or more United States fiduciaries have the
authority to control all substantial decisions. A "Non-United States Holder" is
a holder that is not a United States Holder.
Payments of Interest. Except as set forth below, interest on an Offered
Note will generally be taxable to a United States Holder as ordinary income at
the time it is paid or accrued in accordance with the holder's method of
accounting for federal income tax purposes.
Original Issue Discount. An Offered Notes will be treated as having been
issued at an "original issue discount" ("OID") if the excess of its "stated
redemption price at maturity" over its "issue price" (for these purposes the
first price at which a substantial amount of the Offered Notes is sold to the
public) equals or exceeds a de minimis amount (0.25 percent of the stated
redemption price at maturity multiplied by the number of complete years to
maturity). (Offered Notes issued with OID shall be referred to as "OID Notes.")
For this purpose, "stated redemption price at maturity" means the sum of all
payments under the Offered Notes other than "qualified stated interest"
payments. In general, "qualified stated interest" includes stated interest that
is unconditionally payable at least annually at a single fixed rate or at a
single qualified floating rate or objective rate on a "variable rate debt
instrument." In general, an Offered Note will be a "variable rate debt
instrument" only if (i) the issue price of the Offered Note does not exceed its
principal amount by more than the lesser of (a) 15 percent of the principal
amount or (b) .015 multiplied by the product of the principal amount and the
number of complete years to maturity and (ii) the interest rate on the
instrument is comprised of one or more qualified floating rates, a single fixed
rate and one or more qualified floating rates, a single objective rate, or a
single fixed rate and a single objective rate that is a qualified inverse
floating rate. (Qualified stated interest also includes interest calculated at
certain other variable rates on variable rate debt instruments.)
A multiple of a variable rate does not constitute a qualified floating rate
unless it is a fixed multiple that is greater than 0.65 but not more than 1.35,
or is the product of a floating rate and such a fixed multiple increased or
decreased by a fixed rate. Similarly, a variable rate does not constitute a
qualified floating rate if it is subject to a cap, floor or governor unless such
device: (1) is fixed throughout the term of the debt instrument or (2) is not
reasonably expected as of the issue date to cause the yield of the debt
instrument to be significantly less or more, as the case may be, than the
expected yield determined without such device.
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Unless the Offered Notes are issued with stated interest that is entirely
qualified stated interest, all payments or portions of payments of stated
interest that do not constitute qualified stated interest are treated as a part
of the stated redemption price at maturity of the Offered Notes. Any such
Offered Notes may therefore possess OID subject to the consequences described
herein, even if the issue price of the Offered Notes equals (or exceeds) the
principal amount of such Notes.
United States Holders are required to include OID in income in advance of
the receipt of some or all of the related cash payments. For OID Notes having a
term in excess of one year, OID will be included in income currently as interest
as it accrues over the life of the Offered Note under a formula based upon the
compounding of interest at a rate that provides for a constant yield to
maturity. Under this formula, United States Holders must include in income
increasingly greater amounts of OID in successive accrual periods.
The Company is required to report the amount of OID accrued on OID Notes
held of record by persons other than corporations and other exempt holders;
however, the amount reported by the Company may not equal the amount of OID
required to be included in income by a holder that is not an initial purchaser
of the Offered Notes or who does not purchase the Offered Notes at their issue
price.
In the event that the Company determines to issue Offered Notes that are
OID Notes (including certain Offered Notes not denominated in U.S. dollars or
providing for contingent payments) or to issue Offered Notes that are
convertible into shares of the Company, and the federal income tax consequences
of such features would be material to United States Holders, notice thereof and
additional information will be provided in the appropriate supplement hereto.
Short-Term Notes. In the case of Offered Notes with a maturity of not more
than one year ("Short-Term Notes"), all payments (including all stated interest
however calculated) will be included in the stated redemption price at maturity
and, thus, United States Holders will be taxable on OID in lieu of stated
interest. However, accrual method United States Holders and certain other United
States Holders, including banks and dealers in securities, are required to
include OID on a Short-Term Note in income as it accrues either on a
straight-line basis or, if the holder so elects, under the constant yield
method. In general, individuals and other cash method United States Holders are
not required to include OID in income as it accrues unless they elect to do so.
In the case of an individual or cash method holder who does not elect to include
OID on a Short-Term Note in income as it accrues, however, any gain realized on
the disposition of a Short-Term Note will be treated as ordinary income to the
extent of the OID accrued on a straight-line basis (or, if elected, on a
constant yield basis). Furthermore, such a non-electing holder will be required
to defer deductions for a portion of the holder's interest expenses attributable
to any indebtedness incurred or maintained to purchase or carry such Short-Term
Notes, in an amount not exceeding the deferred interest income, until the
deferred interest income is realized. In the case of a holder who includes OID
on a Short-Term Note in income as it accrues, the amount so included will be
added to the holder's tax basis in the Short-Term Note.
United States Holders (including holders that are not initial purchasers)
may elect to include all interest that accrues on an Offered Note by using the
constant yield method. For this purpose, "interest" includes both OID (including
OID on Short-Term Notes and de minimis OID) and stated interest (as such may be
adjusted by amortization of premium and acquisition premium, see "Amortization
of Premium" below). If the holder so elects with respect to an Offered Note that
has been purchased at a premium (as opposed to merely an acquisition premium),
this election is also treated as an election under the amortizable bond premium
provisions, described below, and the electing holder will be required to
amortize bond premium currently for all his other debt instruments with
amortizable bond premium. This election is to be made in the taxable year in
which the holder acquired the Offered Note and may not be revoked without the
consent of the Internal Revenue Service ("IRS").
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Amortization of Premium. An Offered Note may be considered to have been
issued at a "premium" to the extent that the United States Holder's tax basis in
the Offered Note immediately after purchase exceeds its principal amount. A
holder generally may elect to amortize the premium over the remaining term of
the Offered Note on a constant yield method. The amount amortized in any year
will be treated as a reduction of the holder's interest income from the Offered
Note. Unamortized premium will decrease the gain or increase the loss otherwise
recognized on disposition of the Offered Note.
An Offered Note purchased for an amount that exceeds its issue price but
not its principal amount possesses "acquisition premium." In that event, the
amount of OID otherwise includable on the Offered Note would be reduced over the
term of the Offered Note through amortization of the acquisition premium.
Alternatively, a United States Holder may elect to compute OID accruals by using
his purchase price, rather than the issue price, using the constant yield method
for accruing the discount. Such an election may not be revoked unless approved
by the IRS.
Sale, Exchange and Retirement of Offered Notes. Upon the sale, exchange or
retirement of an Offered Note, a United States Holder will recognize gain or
loss equal to the difference between the amount realized upon the sale, exchange
or retirement and the adjusted tax basis of the Offered Note. A United States
Holder's tax basis in an Offered Note will, in general, equal the United States
Holder's cost for the Offered Note, increased by OID included in income and
reduced by any amortized premium and any payments on the Offered Note other than
qualified stated interest payments. Except as otherwise described under
"Short-Term Notes", above, such gain or loss will be capital gain or loss and
will be long-term capital gain or loss for Offered Notes held for more than one
year at the time of disposition. Net capital gains of individuals are, under
certain circumstances, taxed at lower rates than items of ordinary income. A
United States Holder's ability to offset capital losses against ordinary income
is limited.
NON-UNITED STATES HOLDERS
Non-United States Holders will not be subject to United States federal
income taxes, including withholding taxes, on the interest income (including any
OID) on, or gain from the sale or disposition of, any Offered Note provided that
(1) the interest income or gain is not effectively connected with the conduct by
the Non-United States Holder of a trade or business within the United States,
(2) the Non-United States Holder is not a controlled foreign corporation related
to the Company through stock ownership, (3) with respect to any gain, the
Non-United States Holder, if an individual, is not present in the United States
for 183 days or more during the taxable year and (4) the Non-United States
Holder provides the correct certification of his status (which may generally be
satisfied by providing an Internal Revenue Service Form W-8 certifying that the
beneficial owner is not a United States Holder and providing the name and
address of the beneficial owner).
An individual holder of an Offered Note who is not a citizen or resident of
the United States at the time of the holder's death will not be subject to
United States federal estate tax as a result of the holder's death, as long as
any interest received on the Offered Note, if received by the holder at the time
of the holder's death, would not be effectively connected with the conduct of a
trade or business by such individual in the United States.
BACKUP WITHHOLDING
In general, if a non-corporate holder fails to furnish a correct taxpayer
identification number or certification of foreign or other exempt status, fails
to report dividend and interest income in full, or fails to certify that such
holder has provided a correct taxpayer identification number and is not subject
to backup withholding, a 31 percent federal backup withholding tax may be
withheld on amounts paid to the holder. An individual's taxpayer identification
number is his or her social security number. The backup withholding tax is not
an additional tax and may be credited against a
S-16
<PAGE> 17
holder's regular federal income tax liability or refunded by the Internal
Revenue Service where applicable.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. PERSONS CONSIDERING THE PURCHASE, OWNERSHIP, OR
DISPOSITION OF OFFERED NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT
TO THE TAX CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION OF THE NOTES, INCLUDING
THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE
POSSIBLE EFFECTS OF CHANGES IN UNITED STATES OR OTHER TAX LAWS.
PLAN OF DISTRIBUTION
The Offered Notes are being offered on a continuous basis by the Company
through the Agents, who have agreed to use reasonable best efforts to solicit
purchases of the Offered Notes. Initial purchasers may propose certain terms of
the Offered Notes, but the Company will have the sole right to accept offers to
purchase Offered Notes and may reject proposed purchases in whole or in part.
Each Agent will also have the right, in its discretion reasonably exercised and
without notice to the Company, to reject any proposed purchase of Offered Notes
in whole or in part. The Company will pay each Agent a commission ranging from
.150% to .750% of the principal amount of Offered Notes sold through such Agent,
depending upon Stated Maturity. Commissions on Offered Notes with a Stated
Maturity greater than 30 years will be negotiated at the time of sale.
The Company may sell Offered Notes directly to investors on its own behalf.
In the case of sales made directly by the Company, no commission or discount
will be paid or allowed. In addition, the Company may accept (but not solicit)
offers from additional agents for the sale of particular Offered Notes; provided
that any such solicitation and sale of Offered Notes shall be on terms
substantially similar (including the same commission schedule) as agreed to by
the Agents. Such additional agents will be named in the applicable Pricing
Supplement.
The Company may also sell Offered Notes to an Agent as principal. Unless
otherwise specified in an applicable Pricing Supplement, any Offered Note sold
to an Agent as principal will be purchased by such Agent at a price equal to
100% of the principal amount thereof, less a percentage equal to the commission
applicable to an agency trade of identical Stated Maturity. Notes may be resold
by an Agent to investors or other purchasers from time to time in one or more
transactions, including negotiated transactions, at a fixed public offering
price or at varying prices determined by such Agent at the time of sale, or may
be sold to certain dealers as described below. After the initial public offering
of Offered Notes to be resold to investors or other purchasers, the public
offering price (in the case of Offered Notes to be resold at a fixed offering
price), the concession and discount may be changed. In addition, any Agent may
sell Offered Notes to any dealer at a discount and, unless otherwise specified
in an applicable Pricing Supplement, such discount allowed to any dealer will
not be in excess of the discount to be received by the Agent from the Company.
No Offered Note will have an established trading market when issued. The
Offered Notes will not be listed on any securities exchange. The Agents may make
a market in the Offered Notes, but the Agents are not obligated to do so and may
discontinue any market-making at any time without notice. There can be no
assurance of a secondary market for any Offered Notes, or that the Offered Notes
will be sold.
Each Agent, whether acting as agent or principal, may be deemed to be an
"underwriter" within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"). The Company has agreed to indemnify the Agents against
certain liabilities, including liabilities under the Securities Act, or to
contribute to payments that the Agents may be required to make in respect
thereof.
S-17
<PAGE> 18
Salomon Brothers, Inc, M.R. Beal & Company, Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, and PaineWebber Incorporated and
certain affiliates thereof engage in transactions with and perform services for
the Company and its affiliates in the ordinary course of business.
LEGAL OPINIONS
Certain legal matters in connection with the legality of the securities
offered hereby will be passed upon for the Company by John K. Keane, Jr., Esq.
Mr. Keane, Senior Vice President and General Counsel for the Company, is
regularly employed by the Company and owns 16,394 shares of the Company's Common
Stock as of December 30, 1996. The legality of any Offered Securities will be
passed upon for agents, underwriters or dealers by Winthrop, Stimson, Putnam &
Roberts, New York, N.Y.
S-18
<PAGE> 19
PROSPECTUS
$250,000,000
WASHINGTON GAS LIGHT COMPANY
UNSECURED NOTES
------------------
Washington Gas Light Company (the "Company") may offer, from time to time,
its Unsecured Notes (the "Unsecured Notes", or "Securities") in one or more
series, at prices and on terms to be determined at the time of sale. The
Securities offered pursuant to this Prospectus may be issued in one or more
series or issuances and will be limited to a principal amount of $250,000,000.
All specific terms of the offering and sale of any Securities (the "Offered
Securities", or "Offered Notes"), including whether any Offered Notes are senior
or subordinated, the currencies or composite currencies in which any Offered
Notes are denominated, the aggregate principal amount, the maturity, rate and
time of payment of interest applicable thereto, any conversion, exchange,
redemption, or sinking fund provisions, initial public offering price, listing
on any securities exchange, and the agents, dealers, or underwriters, if any, to
be utilized in connection with the sale of any Offered Securities, will be set
forth in an accompanying Prospectus Supplement ("Prospectus Supplement").
------------------
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. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
The Securities will be sold in accordance with the plan of distribution
described in "Plan of Distribution" herein.
------------------
THE DATE OF THIS PROSPECTUS IS JANUARY 9, 1997.
<PAGE> 20
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act") and in accordance therewith
files reports and other information with the Securities and Exchange Commission
(the "Commission"). Certain information, as of particular dates, concerning
directors and officers, their remuneration, the principal holders of securities
of the Company and any material interest of such persons in transactions with
the Company is disclosed in proxy statements distributed to shareholders of the
Company and filed with the Commission. Such reports, proxy statements and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the Commission's regional offices at Northwest Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and at Seven World
Trade Center, New York, N.Y. 10048. Copies of such material can also be obtained
from the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. The Commission maintains a Web Site
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission
(HTTP://WWW.SEC.GOV). The Company's common stock (the "Common Stock") is listed
on the New York Stock Exchange and on the Philadelphia Stock Exchange (under the
symbol "WGL"), where reports, proxy material and other information concerning
the Company may also be inspected. The Company's preferred stock (the "Preferred
Stock") is listed on the Philadelphia Stock Exchange.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There is hereby incorporated by reference in this Prospectus the Company's
Annual Report on Form 10-K for the year ended September 30, 1996.
All documents filed by the Company pursuant to Sections 13, 14, or 15(d) of
the 1934 Act after the date of this Prospectus and prior to the termination of
the offering of the Securities shall be deemed to be incorporated by reference
in this Prospectus and to be a part hereof from the date of filing of such
documents (such documents, and the documents enumerated above, being hereinafter
referred to as the "Incorporated Documents"; provided, however, in each year
during which an offering is made by this Prospectus, all documents filed by the
Company pursuant to Sections 13, 14 or 15(d) of the 1934 Act prior to the filing
with the Commission of the Company's Annual Report on Form 10-K covering such
year shall not be Incorporated Documents or be incorporated by reference in this
Prospectus or be a part hereof from and after such filing of such Annual Report
on Form 10-K).
Any statement contained in an Incorporated Document shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed Incorporated
Document or in an accompanying Prospectus Supplement modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
UPON WRITTEN OR ORAL REQUEST, THE COMPANY WILL PROVIDE WITHOUT CHARGE TO
ANY PERSON TO WHOM A COPY OF THIS PROSPECTUS HAS BEEN DELIVERED A COPY OF ANY OR
ALL OF THE INCORPORATED DOCUMENTS WHICH HAVE BEEN OR MAY BE INCORPORATED IN THIS
PROSPECTUS BY REFERENCE, OTHER THAN EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH
EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS).
WRITTEN OR ORAL REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO: SHAREHOLDER
SERVICES, WASHINGTON GAS LIGHT COMPANY, 1100 H STREET, N.W., WASHINGTON, D.C.
20080, (TELEPHONE NUMBERS: 202-624-6558 OR 1-800-221-WGAS). THE INFORMATION
RELATING TO THE COMPANY CONTAINED IN THIS DOCUMENT DOES NOT PURPORT TO BE
COMPREHENSIVE AND SHOULD BE READ TOGETHER WITH THE INFORMATION CONTAINED IN THE
INCORPORATED DOCUMENTS.
2
<PAGE> 21
THE COMPANY
The Company is a public utility that delivers and sells natural gas to
metropolitan Washington, D.C. and adjoining areas in Maryland and Virginia. A
distribution subsidiary serves portions of Virginia and West Virginia. The
Company has been engaged in the gas distribution business for 148 years, having
been originally incorporated by an Act of Congress in 1848. It became a domestic
corporation of the Commonwealth of Virginia in 1953 and a corporation of the
District of Columbia in 1957.
As of September 30, 1996, the Company and its distribution subsidiary
served 772,281 customer meters. A listing of meters served and therms delivered
as of and for the twelve months ended September 30, 1996 by jurisdiction is
shown in the table below. A therm of gas contains 100,000 British Thermal Units
of heat, the heat content of approximately 100 cubic feet of natural gas.
<TABLE>
<CAPTION>
THERMS DELIVERED
JURISDICTION METERS SERVED (MILLIONS)
-------------------------------------- ------------- ----------------
<S> <C> <C>
District of Columbia.................. 143,160 337
Maryland.............................. 322,554 671
Virginia.............................. 303,718 511
West Virginia......................... 2,849 25
---------- -------
Total............................ 772,281 1,544
========== =======
</TABLE>
Of the 1,544 million therms delivered in fiscal year 1996, 91% was sold by
the Company and its distribution subsidiary and 9% was delivered to various
customers that acquired their gas from others. Of the therms sold and delivered
by the Company, 53% was sold to firm residential customers, 34% was sold to firm
commercial and industrial customers and 13% was sold to interruptible
commercial, industrial and electric generation customers. Therms delivered by
the Company amounted to 95% of the total consolidated deliveries. In 1996, the
Company sold gas outside of its service territory. These off-system sales
totalled 40.5 million therms.
SUBSIDIARIES
The Company has four wholly-owned active subsidiaries which are described
below. Frederick Gas Company, Inc., previously a wholly-owned distribution
subsidiary, was merged into the parent company effective January 1, 1996.
Shenandoah Gas Company ("Shenandoah") is engaged in the distribution and
sale of natural gas at retail in the Shenandoah Valley, including Winchester,
Middletown, Strasburg, Stephens City and New Market, Virginia, and Martinsburg,
West Virginia. Deliveries of natural gas for the twelve months ended September
30, 1996 totalled 62 million therms, of which 13% was sold to firm residential
customers, 39% was sold to firm commercial and industrial customers, 43% was
sold to interruptible commercial and industrial customers, and 5% was delivered
to various customers that acquired their gas from others.
Hampshire Gas Company ("Hampshire") operates an underground gas storage
field in the vicinity of Augusta, West Virginia on behalf of the Company under a
cost of service tariff regulated by the Federal Energy Regulatory Commission
(FERC).
Crab Run Gas Company ("Crab Run") is an exploration and production
subsidiary whose assets are being managed by an Oklahoma-based limited
partnership. At September 30, 1996, Crab Run's investment in this partnership
was not material. The Company expects that any additional investments in the
partnership will be minimal.
Washington Gas Energy Services, Inc. ("WGES"), was formerly known as
Washington Resources Group, Inc., and is a non-utility subsidiary that holds the
Company's diversified
3
<PAGE> 22
operations, except for Crab Run, to more clearly delineate non-utility
operations from the regulated utility businesses. This subsidiary is primarily
engaged in the unregulated sale of gas in competition with third-party suppliers
such as gas marketers or other gas utilities. WGES has also received a power
certificate from the FERC and plans to market electricity in the near future.
WGES' subsidiaries are described below.
Washington Gas Energy Systems, Inc. previously supplied and installed
residential and commercial energy conservation products and services. The
company is currently engaged in commercial energy services, including the design
and renovation of mechanical heating, air conditioning and ventilation systems.
Brandywood Estates, Inc. ("Brandywood") is a general partner, along with a
major developer, in a venture designed to develop 1,600 acres in Prince George's
County, Maryland for sale or lease. This acreage was contributed to the
Brandywood Development Limited Partnership by Brandywood in 1992. In March 1996,
the partnership submitted to Prince George's County a rezoning application for
790 acres of its property. The mixed-use development plan proposes approximately
1,600 homes, 100,000 square feet of retail space and 105,000 square feet of
office space. Final review of the development proposal is expected in 1997.
Brandywood continues to have sole ownership of approximately 1,000 additional
acres adjacent to this property that are not being currently developed or
otherwise utilized.
Advanced Marketing Concepts, Inc. previously provided services primarily in
the area of energy-related home improvements. This subsidiary is currently
inactive.
USE OF PROCEEDS
The use of proceeds realized from the sale of particular Offered Securities
will be set forth in an accompanying Prospectus Supplement. It is expected that
the Company will use net proceeds from the sale of the Securities offered hereby
for three primary purposes: (1) the refunding of maturing long-term debt and
satisfaction of sinking fund requirements; (2) the refunding of higher-coupon
long-term debt as market conditions permit; and (3) for general corporate
purposes, including capital expenditures and additional working capital
requirements.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical ratio of earnings to fixed
charges for the period indicated:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED SEPTEMBER 30
- ----------------------------------------
1996 1995 1994 1993 1992
- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
5.3 4.2 4.1 4.1 4.0
</TABLE>
For the purpose of computing the historical ratio of earnings to fixed
charges in the above table, "earnings" consist of net income from continuing
operations plus income taxes and fixed charges. "Fixed charges" consist of (i)
interest, (ii) amortization of debt discount, premium and expense and (iii) a
portion of operating lease payments considered to represent an interest factor.
DESCRIPTION OF THE UNSECURED NOTES
GENERAL
The Unsecured Notes will be issued under an Indenture, dated as of
September 1, 1991 (the "Indenture"), between the Company and The Bank of New
York, as trustee (the "Indenture Trustee"). The following summaries under this
heading do not purport to be complete and are
4
<PAGE> 23
subject to the detailed provisions of the Indenture, a form of which is filed as
an exhibit to the Registration Statement of which this Prospectus is a part.
Wherever particular provisions of the Indenture or terms defined therein are
referred to, such provisions or definitions are incorporated by reference as a
part of the statements made herein and such statements are qualified in their
entirety by such reference. References to article and section numbers are to
articles and sections in the Indenture or supplemental indentures. 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, in addition to the Unsecured Notes, additional
debt securities (including both interest-bearing and original issue discount
securities) may be issued thereunder, without limitation as to the aggregate
principal amount (See Section 301). The Unsecured Notes and all other debt
securities hereafter issued under the Indenture or supplemental indentures are
collectively referred to 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 Unsecured Notes will rank pari passu with all other unsecured and
non-subordinated indebtedness of the Company, unless such Unsecured Notes are
themselves subordinated.
The Company executed a supplemental indenture (the "MTN Supplemental
Indenture") dated as of September 1, 1993, to The Bank of New York, as Indenture
Trustee. The MTN Supplemental Indenture limits the issuance of new first
mortgage bonds by the Company (Art. VI, Sec. 608). The Supplemental Indenture
provides that the Company will not issue any new bonds under the Mortgage and
Deed of Trust, dated January 1, 1933, (the "First Mortgage") between the Company
and The Bank of New York, as successor trustee (the "Mortgage Trustee"), as
amended and supplemented, in addition to its bonds outstanding under the First
Mortgage as of September 1, 1993, without making effective provision, and the
Company covenants that in any such case effective provision will be made,
whereby the Unsecured Notes shall be secured by the First Mortgage equally and
ratably with any and all other obligations and indebtedness thereby secured.
Reference is made to the applicable Prospectus Supplement for a description
of the following terms of the Offered Notes in respect of which this Prospectus
is being delivered: (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; the date or dates from which such interest will accrue;
the dates on which such interest will be payable ("Interest Payment Date"); and
the regular record dates for the interest payable on such Interest Payment
Dates; (iv) 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 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; (v)
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; (vi) if other than denominations
of $1,000 and any integral multiple thereof, the denominations in which such
Offered Notes will be issuable; (vii) whether such Offered Notes are to be
issued in whole or in part in the form of one or more global Unsecured Notes
and, if so, the identity of the depositary for such global Unsecured Notes;
(viii) the terms under which the Offered Notes may be convertible into Common
Stock; (ix) whether such Offered Notes are to be subordinated and (x) any other
terms of such Offered Notes not inconsistent with the provisions of the
Indenture.
PAYMENT OF NOTES; TRANSFERS; EXCHANGES
Except as may be provided in the applicable Prospectus Supplement,
interest, if any, on each Unsecured Note payable on each Interest Payment Date
will be paid by check mailed to the person in whose name such Unsecured 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
5
<PAGE> 24
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 Unsecured Note, such
defaulted interest may be payable to the Holder of such Unsecured Note as of the
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 Unsecured
Notes at maturity will be payable upon presentation of the Unsecured Notes at
the principal corporate trust office of The Bank of New York in New York, New
York. The Company may change the place of payment on the Unsecured 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, or a
supplement thereto, 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 or supplement thereto.
The transfer of Unsecured Notes may be registered, and Unsecured Notes may
be exchanged for other Unsecured Notes of authorized denominations and of like
tenor and aggregate principal amount, at the principal corporate trust office of
The Bank of New York in New York, New York. The Company may change the place for
registration of transfer of the Unsecured 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, or a supplement thereto, 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 or supplement thereto. No service charge will be made for any
transfer or exchange of the Unsecured Notes, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith (See Section 305). The Company will not be required: (a) to
issue, register the transfer of or exchange Unsecured 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 Unsecured Note selected for redemption in whole or
in part, except the unredeemed portion of any Unsecured 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 shall otherwise be
provided 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 nor 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
Security Registrar deems fair and appropriate (See Sections 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 Unsecured 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 Unsecured Notes (See Section
404).
CONVERSION RIGHTS
The applicable Prospectus Supplement will provide whether the Offered Notes
will consist of convertible Unsecured Notes and, if so, the initial conversion
price per share at which such convertible Unsecured Notes will be convertible
into Common Stock. Subject to prior redemption of the convertible Unsecured
Notes, the Holders of such Unsecured Notes will be entitled at any time
6
<PAGE> 25
on or before the close of business on the maturity date thereof to convert such
Unsecured Notes (or, in the case of convertible Unsecured 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 Unsecured 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 Unsecured Notes must surrender such convertible Unsecured Notes to
the Company at any office or agency of the Company maintained for such purpose.
The convertible Unsecured Notes to be surrendered must be accompanied by written
notice to the Company that the Holder elects to convert such Securities.
If any convertible Unsecured 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 Unsecured 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 Unsecured 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 the
Unsecured 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 of
the Common Stock 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.
EVENTS OF DEFAULT
The following constitute events of default under the Indenture (an "Event
or Events of Default") with respect to each series of Indenture Securities
outstanding thereunder:
(a) failure to pay any interest on any Indenture Security of such
series within 60 days after the same becomes due and payable;
(b) failure to pay any principal of or premium on any Indenture
Security of such series within three business days after 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 Unsecured Notes), for a period of 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 33% in principal
amount of the Indenture Securities of such series outstanding under the
Indenture as provided in the Indenture;
(d) certain events of bankruptcy, insolvency or reorganization; and
(e) any other Event of Default specified with respect to Indenture
Securities of such series (See Section 801).
7
<PAGE> 26
No Event of Default with respect to the Unsecured 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 33% in principal amount of the outstanding Indenture Securities of
such series may declare the principal amount (or if the Indenture Securities of
such series are discount notes or similar Indenture Securities, such portion of
the principal amount as may be specified in the applicable Prospectus
Supplement) 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 33% 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 (See Section 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; and provided, further, that (a) such direction will not be in conflict
with any rule of law or with the Indenture and would not involve the Indenture
Trustee in personal liability in circumstances where reasonable indemnity could
not be adequate and (b) the Indenture Trustee may take any other action it deems
proper which is not inconsistent with such direction (See Section 812). 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
8
<PAGE> 27
such payment (See Sections 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 an Event of
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 (See Section 902).
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 (See Section 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 (See Section 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 does not adversely affect the interests of the
Holders in any material respect (See Section 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 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 (See Section 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; or
9
<PAGE> 28
(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 the Indenture Securities; or
(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 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 (See Section 1201).
Without limiting the generality of the foregoing, if the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"), is amended after the date
of the Indenture to require changes to the Indenture or the incorporation
therein of additional provisions or permit changes to, or the elimination of,
provisions which, at the date of the Indenture or at any time thereafter, are
required by the Trust Indenture Act to be contained in the Indenture, the
Company and the Trustee may, without the consent of any Holders, enter into one
or more supplemental indentures to effect or reflect any such change,
incorporation or elimination.
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,
10
<PAGE> 29
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 premium
thereon, (b) reduce the percentage in principal amount of the Indenture
Securities outstanding under such series required to consent to any supplemental
indenture or waiver under the Indenture or to reduce the requirements 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 (See
Section 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 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 (See Section 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.
As a condition to defeasing the Offered Notes as described above, the
Company is obligated to obtain a legal opinion to the effect that the defeasance
of the Offered Notes will be tax free to the Holders of the Offered Notes to be
defeased.
REGARDING THE INDENTURE TRUSTEE
The Bank of New York, Indenture Trustee and Mortgage Trustee, extends
credit to the Company, along with other banks, under revolving credit
agreements. From time to time the Company has entered into contracts with The
Bank of New York for the sale, on a recourse basis, of certain non-utility
accounts receivable. The Bank of New York also serves as transfer agent and
registrar for the Company's Common Stock and Preferred Stock.
11
<PAGE> 30
COMMON STOCK DIVIDENDS AND PRICE RANGE
The year 1996 was the 145th consecutive year for which the Company has paid
dividends on its Common Stock, one of the longest dividend records of companies
listed on the New York Stock Exchange. In addition, the Company has increased
dividends annually for the past 20 years. Dividends are declared on a quarterly
basis, and a formal review of dividend policy is undertaken annually. Future
dividends are subject to factors that ordinarily affect dividend policy, such as
future earnings and the financial condition of the Company.
The Company's Common Stock is listed on the New York Stock Exchange and the
Philadelphia Stock Exchange. Quarterly high and low prices and dividends paid
for the Common Stock for fiscal years 1995 and 1996 are as follows (source: The
Wall Street Journal):
COMMON STOCK PRICE RANGE AND DIVIDENDS PAID
<TABLE>
<CAPTION>
DIVIDENDS PAID DIVIDEND
HIGH LOW PER SHARE PAYMENT DATE
---- ---- -------------- ------------
<S> <C> <C> <C> <C>
Fiscal Year 1996
Fourth Quarter............................... $22 7/8 $20 3/8 $.285 8/1/96
Third Quarter................................ 22 19 1/8 .285 5/1/96
Second Quarter............................... 22 1/2 20 1/2 .280 2/1/96
First Quarter................................ 22 3/8 18 1/2 .280 11/1/95
Fiscal Year 1995
Fourth Quarter............................... 20 1/2 17 5/8 .280 8/1/95
Third Quarter................................ 21 18 1/2 .280 5/1/95
Second Quarter............................... 20 1/4 16 1/8 .2775 2/1/95
First Quarter................................ 19 3/8 16 .2775 11/1/94
</TABLE>
DIVIDEND REINVESTMENT AND COMMON STOCK PURCHASE PLAN
The Company has a Dividend Reinvestment and Common Stock Purchase Plan (the
"Plan") under which holders of the Company's Common Stock and Preferred Stock
may elect to receive dividends in the form of additional shares of the Company's
Common Stock in lieu of cash. Shareholders and employees may also invest
optional cash payments, no greater than $20,000 per quarter, in such shares.
Additional information on the Plan is contained in the Plan prospectus
which may be obtained from Shareholder Services, Washington Gas Light Company,
1100 H Street, N.W., Washington, D.C. 20080, 1-(202)-624-6558 or
1-(800)-221-WGAS.
DESCRIPTION OF THE ADDITIONAL COMMON STOCK
The following is a summary of, and is qualified by reference to, the
provisions of the Company's Charter, as amended, relating to its Common Stock,
$1 par value and the Additional Common Stock.
In addition to the amount outstanding as of September 30, 1996, the Company
is authorized by its regulatory commissions to: (a) issue up to 3,500,000 shares
of its Common Stock through one or more public offerings, (b) issue up to
2,500,000 shares of Common Stock under the Plan (see above) and other employee
benefit plans, and (c) issue up to 3,000,000 additional shares of Common Stock
to support the potential issuance of debt securities or Preferred Stock shares
which are convertible into shares of Common Stock. On September 30, 1996, the
Company had 43,703,476 shares of Common Stock outstanding, which does not
reflect the issuance of any shares of Additional Common Stock, or issuance of
any shares pursuant to any conversion feature applicable to any Unsecured Notes
offered hereby. The presently outstanding shares of Common
12
<PAGE> 31
Stock of the Company are, and any shares of Common Stock issued in connection
with any conversion rights pertaining to the Unsecured Notes will be, validly
issued, fully paid and nonassessable.
DIVIDEND RIGHTS
Subject to the preferential rights of the holders of the Preferred Stock to
receive full cumulative dividends, both past and current, and the restrictions
set forth below, the holders of the Common Stock are entitled to receive such
dividends as may be declared by the Board of Directors out of funds legally
available therefor.
VOTING, LIQUIDATION AND OTHER RIGHTS
Common stockholders of record are, together with holders of record of
shares of voting Preferred Stock, entitled to one vote for each share on matters
voted upon by stockholders except that whenever dividends on Preferred Stock are
in arrears in an aggregate amount equal to four full quarterly dividends on all
outstanding shares of such stock, the holders of the Preferred Stock (whether
voting or non-voting) have the right, as a class, until all dividends then in
default have been paid, to elect the largest number of directors that does not
exceed 25% of the Board of Directors, but in no event less than two directors;
and the holders of Common Stock will be entitled to elect the remaining
directors.
Upon liquidation, the holders of Common Stock shall be entitled to share
ratably in the distribution of the remaining assets available for distribution
after satisfaction of the preferential liquidation requirements of, and
accumulated unpaid dividends on, the Preferred Stock. The Common Stock and all
series of Preferred Stock have no preemptive rights. Upon issuance, pursuant to
any conversion rights applicable to any Unsecured Notes or New Preferred Stock,
the shares of Additional Common Stock so issued will be fully paid and
nonassessable.
FAIR PRICE PROVISION
The Company's Charter includes a "fairness provision" which is intended to
assure fair treatment of each stockholder in the event of specified corporate
actions. The fairness provision of Article VIII of the Charter is triggered when
the Company's shareholders are asked to approve certain business combinations
between the Company (or a subsidiary of the Company) and a holder ("interested
shareholder") of ten percent (10%) or more of the outstanding stock of the
Company entitled to vote generally in the election of directors (the "Stock") or
any affiliate of the interested shareholder. The business combinations covered
include a merger of the Company and certain other business combinations with an
interested shareholder. Under the fairness provision, these business
combinations with an interested shareholder must be approved by the holders of
at least eighty percent (80%) of the Stock unless either (i) the business
combination is approved by at least a majority of the members of the board of
directors who are unaffiliated with the interested shareholder and were
directors before the interested shareholder became an interested shareholder, or
(ii) a minimum price condition and other specified conditions are met. The
minimum price condition generally requires that in a business combination,
shareholders receive a price per share (in the same form, i.e., the same
combination of cash and securities) at least equal to (a) the highest per-share
price paid by the interested shareholder during the two years preceding the
first public announcement of the proposed business combination or in the
transaction in which the interested shareholder became an interested
shareholder, or (b) the fair market value per share on those dates.
The Company's Charter provides that amendment or repeal of the fairness
provision requires the affirmative vote of the holders of at least eighty
percent (80%) of the Stock. Other provisions of the Company's Charter may be
amended or repealed by the affirmative vote of the holders of at least
two-thirds (2/3) of the Stock.
13
<PAGE> 32
The foregoing is only a summary of certain significant conditions of the
fairness provision. Reference is hereby made to Article VIII of the Company's
Charter which contains the full text of the fairness provision.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is The Bank
of New York. The Bank of New York, also Indenture Trustee and Mortgage Trustee,
extends credit to the Company, along with other banks, under revolving credit
agreements. From time to time the Company has entered into contracts with The
Bank of New York for the sale, on a recourse basis, of certain non-utility
accounts receivable. The Bank of New York also serves as transfer agent and
registrar for the Company's Preferred Stock.
PLAN OF DISTRIBUTION
The Company may sell any series of the Unsecured Notes in any of three
ways: (i) through underwriters or dealers; (ii) directly to one or more
purchasers; or (iii) through agents designated by the Company. The applicable
Prospectus Supplement will set forth the terms of the offering of any Offered
Securities, including the names of any underwriters or agents, the purchase
price of such Offered 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 Offered Securities may be listed.
If underwriters are used in the sale, Offered 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 Offered
Securities may be offered to the public either through underwriting syndicates
represented by one or more managing underwriters, or directly by one or more
underwriters without a syndicate. Unless otherwise set forth in the applicable
Prospectus Supplement, the obligations of the underwriters to purchase such
Offered Securities will be subject to certain conditions precedent, and the
underwriters will be obligated to purchase all of such Offered Securities if any
of such Offered Securities are purchased. Any initial public offering price and
any discounts or concessions allowed or reallowed or paid to dealers may be
changed from time to time.
Unsecured Notes 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 Unsecured Notes 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.
Any underwriters, dealers or agents participating in the distribution of
Unsecured Notes may be deemed to be underwriters and any discounts or
commissions received by them on the sale or resale of Unsecured Notes 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 to indemnification by the Company
against certain liabilities, including certain 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.
14
<PAGE> 33
LEGAL OPINIONS
Certain legal matters in connection with the legality of the securities
offered hereby will be passed upon for the Company by John K. Keane, Jr., Esq.
Mr. Keane, Senior Vice President and General Counsel for the Company, is
regularly employed by the Company and owns 13,333 shares of the Company's Common
Stock as of December 30, 1996. The legality of any Offered Securities will be
passed upon for agents, underwriters or dealers by Winthrop, Stimson, Putnam &
Roberts, New York, N.Y.
EXPERTS
The financial statements and schedules included (incorporated by reference)
in the Company's most recent Annual Report on Form 10-K, which are incorporated
herein by reference, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
so incorporated herein in reliance upon the authority of said firm as experts in
giving said reports.
15
<PAGE> 34
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT (INCLUDING ANY PRICING SUPPLEMENT HERETO) AND THE
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY AGENT. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT (INCLUDING ANY PRICING SUPPLEMENT HERETO) AND THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATES AS OF
WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS SUPPLEMENT (INCLUDING ANY PRICING
SUPPLEMENT HERETO) AND THE PROSPECTUS. THIS PROSPECTUS SUPPLEMENT (INCLUDING ANY
PRICING SUPPLEMENT HERETO) AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Use of Proceeds...................... S- 2
Supplemental Description of the
Unsecured Notes.................... S- 2
Certain United States Federal Income
Tax Consequences................... S-14
Plan of Distribution................. S-17
Legal Opinions....................... S-18
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 the Unsecured Notes... 4
Common Stock Dividends and Price
Range.............................. 12
Description of the Additional Common
Stock.............................. 12
Plan of Distribution................. 14
Legal Opinions....................... 15
Experts.............................. 15
</TABLE>
$250,000,000
[WASHINGTON GAS LOGO]
MEDIUM-TERM NOTES, SERIES D
DUE ONE YEAR OR MORE
FROM DATE OF ISSUE
SALOMON BROTHERS INC
M.R.BEAL & COMPANY
MERRILL LYNCH & CO.
PAINEWEBBER INCORPORATED
PROSPECTUS SUPPLEMENT
DATED JANUARY 24, 1997
