<PAGE> 1
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED DECEMBER 23, 1998)
$50,000,000
NORTHERN ILLINOIS GAS COMPANY
(DOING BUSINESS AS NICOR GAS COMPANY)
FIRST MORTGAGE BONDS, 5.37% SERIES DUE FEBRUARY 1, 2009
------------------
We will pay interest on the New Bonds semiannually on February 1 and August
1 of each year, commencing August 1, 1999. We may not redeem the New Bonds prior
to their maturity.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
<TABLE>
<CAPTION>
PER NEW BOND TOTAL
------------ -----------
<S> <C> <C>
Public Offering Price(1) 100.00% $50,000,000
Underwriting Discount 0.65% $ 325,000
Proceeds to Nicor Gas (before expenses)(1) 99.35% $49,675,000
</TABLE>
- ---------------
(1) Plus accrued interest from February 1, 1999 to date of delivery.
------------------
The underwriter is offering the New Bonds subject to various conditions.
The underwriter expects to deliver the New Bonds to purchasers on or about
February 5, 1999.
------------------
SALOMON SMITH BARNEY
January 28, 1999
<PAGE> 2
You should rely only on the information contained in or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We have
not authorized anyone to provide you with different information. We are not
making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information provided by this
prospectus supplement or the accompanying prospectus is accurate as of any date
other the date on the front of this prospectus supplement.
In this prospectus supplement and the accompanying prospectus, "Nicor Gas,"
"we," "us" and "our" refer to Northern Illinois Gas Company.
------------------
TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Recent Developments......................................... S-3
Use of Proceeds............................................. S-3
Description of New Bonds.................................... S-3
Underwriting................................................ S-4
Prospectus
About This Prospectus....................................... 2
Where You Can Find More Information......................... 2
The Company................................................. 2
Use of Proceeds............................................. 3
Description of Bonds........................................ 3
Plan of Distribution........................................ 7
Legal Matters............................................... 7
Experts..................................................... 7
</TABLE>
S-2
<PAGE> 3
RECENT DEVELOPMENTS
Recent operating results (unaudited) for Nicor Gas are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31 DECEMBER 31
------------------- -------------------
1998 1997 1998 1997
------- ------- -------- --------
<S> <C> <C> <C> <C>
Statement of Income Data (Millions):
Operating revenues...................... $362.0 $515.5 $1,229.0 $1,730.5
Net income.............................. 23.1 32.4 94.1 106.9
</TABLE>
Operating revenues decreased $153.5 million and $501.5 million for the
three- and twelve-month periods, respectively. In each period the change was due
primarily to lower natural gas supply costs, which are passed directly through
to customers.
Net income for the three-month period decreased $9.3 million due to the
adverse impact of 23 percent warmer weather and lower gains on real estate
sales. Net income for the twelve-month period decreased $12.8 million due to the
negative impact of warmer weather, partially offset by a 4 percent reduction in
operating and maintenance expenses.
USE OF PROCEEDS
We will use the net proceeds from the sale of the New Bonds, together with
other corporate funds, to redeem $50,000,000 principal amount of 7 3/8% First
Mortgage Bonds due July 1, 2023.
DESCRIPTION OF NEW BONDS
This description of the particular terms of the New Bonds supplements and
should be read in conjunction with the statements under "Description of Bonds"
in the accompanying prospectus. The description of certain provisions of the New
Bonds and the Indenture does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, the description in the
accompanying prospectus and Indenture.
General. The New Bonds will bear interest at the annual rate set forth on
the cover page of the prospectus supplement, which will accrue from February 1,
1999. We will pay interest on February 1 and August 1 of each year, beginning
August 1, 1999, to the person in whose name the New Bond is registered on the
close of business on January 15 or July 15 (whether or not a business day) next
preceding the respective interest payment date. The New Bonds will be limited to
$50,000,000 aggregate principal amount and will mature February 1, 2009. We will
issue the New Bonds in fully registered form only, in denominations of $1,000
and integral multiples of $1,000.
New Bonds of any denomination will be exchangeable for a like aggregate
principal amount of New Bonds of different authorized denominations upon
surrender of such New Bonds. You may exchange the New Bonds at Harris Trust and
Savings Bank, Corporate Trust Department, 311 West Monroe Street, Chicago,
Illinois, or at Harris Trust Company of New York, 77 Water St., 4th Floor, New
York, New York. Both principal and interest will be payable at those offices. At
our option, we may pay any installment of interest on the New Bonds by mailing
checks payable to or upon the written order of the person entitled to receive
payment to the address of that person as it appears on the registration books.
Redemption. We may not redeem the New Bonds prior to their maturity.
Sinking Fund. The New Bonds will have no sinking fund provisions.
S-3
<PAGE> 4
UNDERWRITING
Subject to the terms and conditions stated in the underwriting agreement
dated the date hereof, Salomon Smith Barney Inc., as underwriter, has agreed to
purchase, and we have agreed to sell to the underwriter all of the New Bonds.
The underwriting agreement provides that the obligation of the underwriter
to purchase the New Bonds is subject to approval of certain legal matters by
counsel and to certain other conditions. The underwriter is obligated to
purchase all the New Bonds if it purchases any of the New Bonds.
The underwriter proposes to offer some of the New Bonds directly to the
public at the public offering price set forth on the cover page of this
prospectus supplement and some of the New Bonds to certain dealers at the public
offering price less a concession not in excess of 0.30% of the principal amount
of the New Bonds. The underwriter may allow, and such dealers may reallow a
concession not in excess of 0.25% of the principal amount of the New Bonds on
sales to certain other dealers. After the initial offering of the New Bonds to
the public, the public offering price and such concessions may be changed by the
underwriter.
The following table shows the underwriting discount and commission we will
pay to the underwriter in connection with this offering (expressed as a
percentage of the principal amount of the New Bonds).
<TABLE>
<CAPTION>
PAID BY NICOR GAS
-------------------------------------
<S> <C>
Per New Bond.......................... 0.65%
</TABLE>
In order to facilitate the offering of the New Bonds, Salomon Smith Barney
Inc., may engage in transactions that stabilize, maintain or otherwise affect
the price of the New Bonds. Specifically, the underwriter may overallot in
connection with the offering, creating a short position in the New Bonds for its
own account. In addition, to cover overallotments or to stabilize the price of
the New Bonds, the underwriter may bid for, and purchase, the New Bonds in the
open market. Any of these activities may stabilize or maintain the market price
of the New Bonds above independent market levels. The underwriter is not
required to engage in these activities and may end any of these activities at
any time.
Nicor Gas estimates that its total expenses of the offering will be
$177,000.
There is presently no trading market for the New Bonds and there is no
assurance that a market will develop.
Nicor Gas has agreed to indemnify the underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, or to
contribute to payments the underwriter may be required to make in respect of any
of those liabilities.
S-4
<PAGE> 5
PROSPECTUS
NORTHERN ILLINOIS GAS COMPANY
(DOING BUSINESS AS NICOR GAS COMPANY)
$300,000,000 FIRST MORTGAGE BONDS
----------------------
We may offer for sale from time to time, in one or more series, up to
$300,000,000 aggregate principal amount of First Mortgage Bonds on terms
determined at the time or times of sale. We refer to the First Mortgage Bonds
being offered by this prospectus as the New Bonds. We will prepare and issue a
supplement to this prospectus when a particular series is offered to include:
the specific aggregate principal amount and offering price, maturity date or
dates, rate or rates of interest, time or times of payment of interest, any
redemption terms or other specific terms of such series of New Bonds, the names
of any underwriters, dealers or agents, any applicable commissions or discounts
and the resulting net proceeds to us. No sinking fund is to be provided for the
New Bonds.
We may sell the New Bonds directly to the public or through (i)
underwriters or dealers or through agents named in this prospectus (or
designated from time to time) or (ii) a group of underwriters or dealers which
may be represented by any one or more of such firms. More information about the
way we will distribute the New Bonds is under the heading "Plan of
Distribution."
----------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or determined that
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
----------------------
The date of this prospectus is December 23, 1998.
<PAGE> 6
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission (the "Commission") utilizing a "shelf"
registration process. Under this shelf process, we may sell the New Bonds
described in this prospectus in one or more offerings up to a total dollar
amount of $300,000,000. This prospectus provides you with a general description
of the New Bonds we may offer. Each time we sell New Bonds, we will provide a
prospectus supplement that will contain specific information about the terms of
that offering. The prospectus supplement may also add, update or change
information contained in this prospectus. You should read both this prospectus
and any prospectus supplement together with additional information described
under the heading "WHERE YOU CAN FIND MORE INFORMATION."
We believe we have included all information material to investors but
certain details that may be important for specific investment purposes have not
been included. To see more detail, you should read the exhibits filed with this
registration statement.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934 (the "Exchange Act") which requires us to file reports and other
information with the Commission.
You may read and copy any of these documents at the Commission's public
reference rooms in Washington, D.C., Chicago, Illinois, and New York, New York.
You may call the Commission at 1-800-SEC-0330 for more information about the
public reference rooms. We file our reports and other information electronically
with the Commission and you can access these documents from the Commission's web
site (http://www.sec.gov).
The Commission allows us to incorporate by reference the information we
file with them, which means that we can disclose important information to you by
referring you to those documents. The information we incorporate is an important
part of this prospectus and our later filings with the Commission automatically
update and supercede earlier filings. We incorporate by reference those
documents listed below and those we subsequently file with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act until we sell
all of the New Bonds:
(a) Annual Report on Form 10-K for the year ended December 31, 1997;
and
(b) Quarterly Reports on Form 10-Q for the quarters ended March 31, June
30, and September 30, 1998.
You may receive a copy of these filings at no cost, other than exhibits to
those filings, unless they are specifically incorporated by reference in the
information that the prospectus incorporates. Please direct your written
requests to:
David L. Cyranoski, Senior Vice President,
Secretary and Treasurer
Nicor Gas Company
P.O. Box 190
Aurora, Illinois 60507-0190
630/983-8676
THE COMPANY
We are a public utility engaged principally in the purchase, storage,
distribution, sale and transportation of natural gas to the public in northern
Illinois, generally outside the City of Chicago. We are subject to the
jurisdiction of the Illinois Commerce Commission ("Ill.C.C.") which has
authority to regulate substantially all phases of the public utility business in
Illinois, including our issuance of long-term debt. We are a wholly owned
subsidiary of Nicor Inc. ("Nicor"), a holding company exempt from regulation
under the Public
2
<PAGE> 7
Utility Holding Company Act of 1935. The New Bonds are not obligations of, or
guaranteed by, Nicor. The mailing address and telephone number of our general
office is:
P.O. Box 190
Aurora, Illinois 60507-0190
630/983-8676
USE OF PROCEEDS
We will use the net proceeds from the sale of the New Bonds for the
refinancing, if desirable, of certain outstanding First Mortgage Bonds, for
construction programs to the extent not provided by internally generated funds,
and for general corporate purposes.
DESCRIPTION OF BONDS
All references to us under "Description of Bonds" exclude our subsidiary.
The properties of our subsidiary, which are not material in the aggregate, are
not subject to the lien of the Indenture and do not constitute bondable property
under the Indenture.
GENERAL. We will issue the New Bonds in one or more series under our
Indenture, dated as of January 1, 1954 (as supplemented by Supplemental
Indentures heretofore executed), and Supplemental Indentures (each of which is
hereafter referred to as the "New Supplemental Indenture"), creating the series
in which we will issue the New Bonds. These series will constitute the
forty-third and subsequent series of bonds issued under the Indenture. The
earlier series of bonds issued under the Indenture that are currently
outstanding are as follows:
<TABLE>
<CAPTION>
AMOUNT AUTHORIZED,
ISSUED AND OUTSTANDING
SERIES NOVEMBER 30, 1998
------ ----------------------
<S> <C>
5 7/8% due May 1, 2000...................................... $ 50,000,000
6.45% due August 1, 2001.................................... 75,000,000
6.75% due June 1, 2002...................................... 50,000,000
5 3/4% due June 1, 2003..................................... 50,000,000
8 7/8% due August 15, 2021.................................. 50,000,000
7 3/8% due July 1, 2023..................................... 50,000,000
8 1/4% due August 15, 2024.................................. 50,000,000
7.26% due October 15, 2025.................................. 50,000,000
7 3/8% due October 15, 2027................................. 50,000,000
6.58% due February 15, 2028................................. 50,000,000
------------
$525,000,000
============
</TABLE>
Each series of the New Bonds will be dated the date of the applicable New
Supplemental Indenture, and will mature on such date or dates as are set forth
in such New Supplemental Indenture. The New Bonds will bear interest at an
annual rate specified in its title. We will pay interest semiannually, once on
the date which corresponds to the date of the New Supplemental Indenture and six
months thereafter. We will begin paying interest on the date which is six months
after the date of the New Supplemental Indenture.
So long as we do not default in the payment of interest on the series of
New Bonds, we shall pay interest to the person in whose name each bond is
registered on the record dates prescribed by the New Supplemental Indenture
(whether or not a business day) next preceding the respective interest payment
dates. If and to the extent that we default in the payment of interest due we
shall pay defaulted interest to the person in whose name each bond is registered
on the record date fixed in advance by us for payment of the defaulted interest.
Both principal and interest will be payable at our office or agency in The City
of Chicago or, at the option of the registered owner, at our office or agency in
The City of New York. At our option, we may pay any installment of interest on
the bonds by mailing checks payable to or upon the written order of the person
entitled to receive payment to the address of that person as it appears on the
registration books.
3
<PAGE> 8
We will issue the New Bonds in definitive form, as registered bonds in
denominations of $1,000 each or of any authorized multiple of $1,000. You will
not be charged for any registration, transfer or exchange of bonds.
Copies of the Indenture and a copy of the applicable New Supplemental
Indenture, in substantially the form in which it is to be executed, except for
certain terms to be set forth in the prospectus supplement which will be
inserted after the sale of the series of New Bonds, are exhibits to the
Registration Statement. Reference is made to such exhibits for a complete
statement of the provisions of the Indenture and such New Supplemental
Indenture. The following statements are brief summaries of certain of such
provisions. The terms "permitted liens," "prior liens," "prior lien bonds,"
"retired" as used with respect to bonds, "property additions," "property of the
character of property additions," "mortgage date of acquisition" and "utilized
under the Indenture" are used with the meanings ascribed to such terms,
respectively, by the Indenture.
REDEMPTION AND SINKING FUND. Any redemption provisions will be set forth in
the prospectus supplement. No sinking fund is to be provided for the New Bonds.
SECURITY. The New Bonds will rank equally and ratably with all bonds,
irrespective of series, at any time outstanding under the Indenture. The
Indenture constitutes a direct first mortgage lien on substantially all gas
property and franchises (other than expressly excepted property) we now own,
subject only to permitted liens. All gas property and franchises (other than
expressly excepted property) we later acquire will, upon our recordation or
registration in accordance with our agreements under the Indenture, become
subject to the lien of the Indenture, subject only to permitted liens and liens,
if any, existing or placed on such property at the time of their acquisition.
The Indenture contains limitations upon the acquisition of property subject to a
prior lien and the transfer of all or substantially all of our property to
another corporation the property of which is subject to a prior lien. In
general, these limitations are based upon ratios of (a) principal amount of
prior lien bonds to fair value of property securing such bonds and (b) net
earnings of such property to interest charges on such bonds. We have agreed in
the Indenture to maintain and protect the mortgaged property as an operating
system.
The lien of the Indenture expressly excepts, whether now owned by us or
later acquired, (1) certain real estate not used in the gas utility business,
(2) real estate held by us in the name of a nominee, (3) cash and securities not
specifically pledged under the Indenture, (4) receivables, (5) contracts (other
than leases), (6) materials, (7) supplies, (8) all gas in storage not included
in our utility plant accounts, (9) merchandise, (10) automobiles, trucks and
other transportation equipment, (11) office furniture and equipment, (12)
natural gas wells, (13) natural gas leases, and (14) natural gas gathering
lines.
ISSUANCE OF ADDITIONAL BONDS. We may not issue additional bonds of any of
the presently outstanding series, nor any New Bonds in addition to the
$300,000,000 principal amount of the New Bonds covered by this prospectus.
Subject to the provisions of the Indenture, we may issue additional bonds of any
other series in principal amount equal to:
(a) 66 2/3% of "net property additions" not previously utilized under
the Indenture;
(b) the amount of cash deposited with the Trustee as a basis for the
issuance of such bonds; and
(c) the amount of "bondable bond retirements" not previously utilized
under the Indenture, such term being defined, in general, to include (1)
the principal amount of bonds of any series retired otherwise than through
a sinking fund, and (2) such percentage, if any, of the principal amount of
bonds of any other series retired through a sinking fund as may be
specified in the supplemental indenture creating such series (does not
include the New Bonds or any previously issued series outstanding).
We may not issue such bonds under (a) or (b), or under (c) if the bonds to be
issued bear a higher rate of interest than that borne by the bonds retired or
being retired (except in case such bonds retired or being retired mature within
two years), unless our "net earnings" for a 12-month period within the
immediately preceding 15-month period shall have been equal to at least two and
one-half times the annual interest on all bonds then outstanding under the
Indenture, including the bonds then applied for but not including any bonds then
being retired, and on all prior lien bonds then outstanding, not including any
prior lien bonds then being retired.
4
<PAGE> 9
The term "net earnings" shall mean our earnings (including earnings or loss
of any gas utility business acquired during the period for that part of the
period prior to acquisition) computed by deducting from our revenues our
operating expenses, depreciation and taxes except: (a) charges for the
amortization, write-down or write-off of acquisition adjustments or intangibles;
(b) property losses charged to operations; (c) provisions for income and excess
or other profits taxes imposed on income after the deduction of interest
charges, or charges made in lieu of such taxes; (d) interest charges; and (e)
amortization of debt and stock discount and expense or premium. Any net profit
or net loss from merchandising and jobbing is to be deducted from operating
expenses or added to operating expenses, as the case may be. Net non-operating
income from property and securities not subject to the lien of the Indenture may
be included in revenues but only to the extent of not more than 10% of the total
of such net earnings. No profits or losses on disposition of property or
securities or on the reacquisition of securities shall be included in net
earnings.
"Net property additions" means the amount of $9,000,000, plus the cost or
fair value as of the mortgage date of acquisition thereof, whichever is less, of
property additions (which may not include additions subject to a prior lien)
after January 31, 1954, less all "current provisions for depreciation" made
subsequent to that date, after deducting from such current provisions for
depreciation the amount of the "renewal fund requirement," if any, for the year
1954 (last 11 months) and subsequent years.
"Current provisions for depreciation" for any period means the greater of:
(a) the total of the amounts appropriated for depreciation during such
period on all property of the character of property additions subject to
the lien of the Indenture but not subject to a prior lien, increased or
decreased, as the case may be, by net salvage for such period, such amounts
not to include, however, provisions for depreciation charged to surplus,
charges to income or surplus for the amortization, write-down or write-off
of acquisition adjustments or intangibles, property losses charged to
operations or surplus, or charges to income in lieu of income and excess or
other profits taxes; or
(b) an amount equal to one-twelfth of 2% for each calendar month of
such period (or such lesser percentage as may, at intervals of not less
than five years, be certified by an independent engineer as adequate) of
the original cost, as of the beginning of such month, of all depreciable
property of the character of property additions subject to the lien of the
Indenture but not subject to a prior lien.
As of November 30, 1998, net property additions available as the basis for
the issuance of additional bonds amounted to approximately $376,000,000. As of
November 30, 1998, there were $75,000,000 bondable bond retirements available as
the basis for the issuance of additional bonds. We will issue the New Bonds
first against any newly available bondable bond retirements and the balance
against net property additions.
The Indenture contains no provisions which afford holders of New Bonds
protection in the event we are involved in a highly-leveraged transaction other
than the security afforded by the lien of the Indenture and its restrictions as
to issuance of additional bonds described above.
RENEWAL FUND REQUIREMENT. Under the Indenture, we are required to pay to
the Trustee in each year an amount of cash, as a renewal fund, equal to the
excess, if any, of current provisions for depreciation for that year over the
cost or fair value as of the mortgage date of acquisition, whichever is less, of
property additions for such year. Such amount, which will be the renewal fund
requirement for that year, is subject to reduction by an amount equal to the
amount, certified to the Trustee, of net property additions or bondable bond
retirements, or both, not previously utilized under the Indenture. There was no
renewal fund requirement for any of the years 1954 through 1995. The amounts of
the renewal fund requirement for the years 1996 and 1997 were approximately
$7,000,000 and $18,000,000, respectively, which amounts were reduced by the
utilization of an equivalent amount of net property additions.
RELEASE OF PROPERTY AND WITHDRAWAL CASH. We may sell or otherwise dispose
of and secure the release of any part of the mortgaged property upon deposit
with the Trustee of cash in an amount equal to the fair value of the property
released, which in no event may be less than the consideration received. If,
however, the property to be released is subject to a prior lien, then that
property may be released upon a showing that it has been released from the prior
lien upon due compliance with the release provisions. Cash to be deposited upon
the release of mortgaged property may, subject to certain limitations, be
reduced by an amount not in excess of
5
<PAGE> 10
(a) the principal amount of purchase money obligations secured by purchase money
mortgage upon the property to be released, and (b) the principal amount of any
prior lien bonds secured by a prior lien on the property to be released, where
the purchaser has assumed the payment of the bonds. Cash to be deposited may
also be reduced by an amount equal to the amount of net property additions or
bondable bond retirements, or both, not previously utilized under the Indenture.
Cash deposited with the Trustee as a basis for the issuance of bonds may be
withdrawn in an amount equal to 66 2/3% of the amount of net property additions
not previously utilized under the Indenture, or in an amount equal to the amount
of bondable bond retirements not previously utilized under the Indenture, or
both. All other cash (except sinking fund cash) deposited with the Trustee to be
held as part of the mortgaged property may be withdrawn in an amount equal to
the amount of net property additions or bondable bond retirements, or both, not
previously utilized under the Indenture.
MODIFICATION OF INDENTURE. In general, we and the trustee may modify or
alter the Indenture and supplemental indentures and our rights and obligations
along with those of the bondholders, and obtain waivers of compliance with the
Indenture and supplemental indentures upon the affirmative vote of holders of
66 2/3% in principal amount of the bonds entitled to vote with respect to the
matter involved. No modifications or alterations or waivers of compliance are
permitted with respect to the following certain basic matters: (1) terms of
payment of principal, premium, if any, and interest on bonds (but not including
sinking fund requirements), (2) creation of liens ranking prior to or on a
parity with the lien of the Indenture with respect to any of the mortgage
property (other than as permitted by the Indenture) or the deprivation of any
bondholder of his lien, or (3) any reduction of the vote necessary to take such
actions.
DEFAULTS. The following are deemed "completed defaults" under the
Indenture:
- default in the payment of principal on any bonds issued under the
Indenture, including the New Bonds, when due and payable at maturity or
upon redemption or by declaration or as otherwise provided in the
Indenture;
- default for 60 days in the payment of interest on any of such bonds;
- default for 30 days after written notice to us in the payment of
principal or interest (after the expiration of any applicable grace
period) on prior lien bonds;
- default for 90 days after written notice to us in the performance of any
other covenant of the Indenture, including any covenant relating to
sinking fund obligations;
- certain events of bankruptcy and insolvency.
We furnish annually to the Trustee a certificate in respect of our
compliance or noncompliance with the covenants of the Indenture.
If one or more completed defaults occurs and continues, the Trustee or the
holders of not less than 25% in principal amount of the bonds then outstanding
may declare the principal of all such bonds, together with all accrued and
unpaid interest thereon, if not already due, to be due and payable immediately.
No bondholder may enforce the Indenture unless that holder gives the Trustee
written notice of some existing and continuing default and the holders of not
less than 25% in principal amount of the bonds then outstanding request in
writing that the Trustee act and they have given the Trustee a reasonable
opportunity to act. The Trustee is entitled to be indemnified before enforcing
the lien at the request of the bondholders.
If, at any time after the occurrence of a completed default and before the
sale of the mortgage property, we have paid or collected and paid out of the
mortgage property all arrears of principal and interest, together with other
amounts described in the Indenture and we have remedied or cured all other
defaults, if any, to the reasonable satisfaction of the Trustee, then the
Trustee, upon the written request of the holders of a majority in principal
amount of the bonds then outstanding, shall waive any such default.
CONCERNING THE TRUSTEE. Harris Trust and Savings Bank ("Harris") is the
Trustee under the Indenture. We and certain of our affiliates borrow from, and
utilize many of the banking services offered by, Harris in the normal course of
business.
6
<PAGE> 11
PLAN OF DISTRIBUTION
We may sell the New Bonds, in one or more series, for reoffering at fixed
or varying prices to the public through underwriting syndicates led by one or
more managing underwriters or through one or more of such firms acting alone.
ABN AMRO Incorporated, Credit Suisse First Boston Corporation, Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated,
PaineWebber Incorporated, Prudential Securities Incorporated and Salomon Smith
Barney Inc. are among the firms which may act as managing underwriters. The
prospectus supplement will name the managing underwriter or underwriters for
each series of New Bonds, together with the members of the underwriting
syndicate, if any. If we use an underwriter in the sale, we will execute an
underwriting agreement providing that the obligations of the underwriters are
subject to certain conditions precedent and that the underwriters will be
obligated to purchase all the New Bonds of the series being sold if they
purchase any.
We may sell the New Bonds directly to the public or through agents
designated by us from time to time. Any agent involved in the offer or sale of
the New Bonds of any series will be named in the relevant prospectus supplement.
Unless otherwise indicated in the prospectus supplement, any agent will act on a
best efforts basis for the period of its appointment.
In connection with the sale of any series of the New Bonds, we may
compensate underwriters or agents in the form of discounts, concessions or
commissions. Underwriters, agents or dealers that participate in the
distribution of any series of the New Bonds may be deemed to be underwriters of
such series, and any discounts or commissions received by them from us and any
profit on the resale of the New Bonds of such series by them may be deemed to be
underwriting discounts and commissions under the Securities Act of 1933, as
amended (the "Securities Act"). The prospectus supplement will describe the
discounts and commissions, all other underwriting compensation, and discounts
and concessions to be allowed or paid to dealers. Underwriters or agents may be
entitled under agreements entered into with us to indemnification by us against
certain civil liabilities, including liabilities under the Securities Act.
Underwriters or agents may be customers of, engage in transactions with, or
perform services for us in the ordinary course of business.
If we use a dealer in the sale of any series of the New Bonds, we will sell
the New Bonds of such series to the dealer as principal. The dealer may then
resell the New Bonds of such series to the public at varying prices to be
determined by that dealer at the time of resale. Other sales may be made,
directly or through agents, to purchasers outside existing trading markets.
LEGAL OPINIONS
Certain legal matters in connection with the offering of the New Bonds will
be passed upon for us by Mayer, Brown & Platt, 190 South LaSalle Street,
Chicago, Illinois 60603, and by Wildman, Harrold, Allen & Dixon, 225 West Wacker
Drive, Chicago, Illinois 60606 for any underwriter, dealer or agent named in the
prospectus supplement.
EXPERTS
The consolidated financial statements and schedule included in the Annual
Report on Form 10-K for the year ended December 31, 1997, incorporated by
reference in this Registration Statement, have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report, and are
incorporated in reliance upon the authority of said firm as experts in giving
said report.
7
<PAGE> 12
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$50,000,000
NORTHERN ILLINOIS GAS COMPANY
FIRST MORTGAGE BONDS
5.37% SERIES
DUE FEBRUARY 1, 2009
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PROSPECTUS SUPPLEMENT
JANUARY 28, 1999
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SALOMON SMITH BARNEY
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