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File Number 70-8667
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
AMENDMENT NO. 1
TO
FORM U-1
APPLICATION-DECLARATION UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
By
CONSOLIDATED NATURAL GAS COMPANY
CNG Tower
625 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3199
and its subsidiary companies:
CNG COAL COMPANY CNG STORAGE SERVICE COMPANY
CNG ENERGY SERVICES CORPORATION CNG TRANSMISSION CORPORATION
CNG FINANCIAL SERVICES, INC. CONSOLIDATED NATURAL GAS
CNG POWER COMPANY SERVICE COMPANY, INC.
and its subsidiary company CONSOLIDATED SYSTEM LNG COMPANY
CNG MARKET CENTER SERVICES, INC. HOPE GAS, INC.
CNG PRODUCING COMPANY THE EAST OHIO GAS COMPANY
and its subsidiary THE PEOPLES NATURAL GAS COMPANY
company CNG PIPELINE COMPANY VIRGINIA NATURAL GAS, INC.
CNG RESEARCH COMPANY WEST OHIO GAS COMPANY
Consolidated Natural Gas Company,
a registered holding company,
is the parent of the other parties.
Names and addresses of agents for service:
STEPHEN E. WILLIAMS, Esq., N. F. CHANDLER, Esq., General Attorney
Senior Vice President and Consolidated Natural Gas Service
General Counsel Company, Inc.
Consolidated Natural Gas Company CNG Tower
CNG Tower 625 Liberty Avenue
625 Liberty Avenue Pittsburgh, PA 15222-3199
Pittsburgh, PA 15222-3199
with a copy to:
Gary W. Wolf, Esq.
Cahill Gordon & Reindel
Eighty Pine Street
New York, NY 10005
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File Number 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM U-1
APPLICATION-DECLARATION UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
Item 1. Description of Proposed Transaction
___________________________________
(a) Furnish a reasonably detailed and precise description of the proposed
transaction, including a statement of the reasons why it is desired to
consummate the transaction and the anticipated effect thereof. If the
transaction is part of a general program, describe the program and its relation
to the proposed transaction.
Consolidated Natural Gas Company (the "Company" or "Consolidated") is
a public utility holding company registered as such under the Public Utility
Holding Company Act of 1935 (the "Act" or "1935 Act"). It is engaged solely in
the business of owning and holding all of the outstanding securities of sixteen
directly owned subsidiary companies most of which are in the natural gas
business. All directly and indirectly owned subsidiaries of Consolidated are
referred to individually as "Subsidiary" and collectively as "Subsidiaries."
The Subsidiaries are principally engaged in natural gas exploration,
production, purchasing, gathering, transmission, storage, distribution,
marketing and by-product operations. Consolidated and its Subsidiaries are
referred to herein as the "Consolidated System" or "CNG System."
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I. OVERVIEW OF OMNIBUS TYPE APPLICATION
This application-declaration ("Application") contains the request of
Consolidated and certain of its Subsidiaries for authorization for financing
for the period beginning with the effective date of an order issued in this
proceeding through December 31, 2000. The Application is an omnibus type
filing and is a departure from Consolidated's traditional annual system
financing requests in several respects. The Application is believed to be in
alignment with the efforts of the Securities and Exchange Commission
("Commission") to modernize its administration of the Act.
The Application seeks to consolidate in one filing all of the financing
authorizations for the Consolidated System, and simultaneously asks for a
significant amount of flexibility as to these financings - both as to
characteristics and as to amounts. It is similar in concept to the shelf-type
registration statement filings permitted under Rule 415 promulgated under the
Securities Act of 1933 ("1933 Act"). The Application approaches financing from
a system-wide viewpoint, and does not concentrate on the details of the
individual components within the over-all system financing program. As long as
Consolidated maintains a solid financial base which is reflected objectively by
ratings of a nationally recognized statistical rating organization,
Consolidated would be allowed a great deal of discretion with respect to its
financing activities. This would allow it to be readily responsive so as to be
able to take advantage of current financial market conditions, which, in turn,
should make it more competitive with companies which are not subject to the
jurisdiction of the Act.
The Application strives to open pathways for a variety of activities which
would occur within stated ambits, but for which specific prior authorization
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would not be needed. Continuous Commission oversight would take place through
disclosures of Consolidated System activities made in the Commission's
integrated disclosure system in place for use under the 1933 Act and the
Securities Exchange Act of 1934 ("1934 Act"), and through the notification
system pursuant to this proceeding.
The following is a summary description of how the Application differs from
Consolidated's usual past annual financing applications.
Consolidated External Financings
1. The Application seeks financing for an approximate 5 year period instead
of the traditional 12 month fiscal financing period running from July 1 of
one year through June 30 of the succeeding year.
2. The Application requests authority for Consolidated to offer and sell a
variety of securities in an "out of the basket" or "off the shelf" manner,
and to sell the securities in a variety of ways in addition to the
formerly required competitive bidding process. Consolidated would have
the right to choose the amount, type and terms of an Approved Security, as
appropriate to its needs and market conditions as they exist at the time
of financing, provided (i) the aggregate amount of securities sold during
the approximate 5 year period does not exceed $3.5 billion and (ii) its
debt has an investment grade financial rating. An "Approved Security" as
used in this Application is defined as a security of a type which has
already been approved, or which may hereafter be approved, by the
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Commission pursuant to orders or approvals in other proceedings under the
Act, and any security3 which is substantially similar to such a security
in form or substance. The following are included as Approved Securities:
common stock, preferred stock the terms of which are set by the Board of
Directors, bonds, debentures, notes, other forms of indebtedness, monthly
or quarterly income preferred securities, interest rate swaps, and
guarantees of third party obligations in connection with ordinary business
transactions.
3. Consolidated seeks authority to organize and use new corporations, trusts,
partnerships or other entities (individually, a "Financing Entity") which
would be created for the purpose of facilitating financings involving the
issuance of monthly or quarterly income preferred securities.
4. Consolidated's currently effective authorization to sell up to $350
million of debt securities under its new indenture would be superseded by
the omnibus Application; the ability to sell long-term debt would
accordingly be extended as to time.
5. Consolidated would be able to amend its certificate of incorporation to
increase its authorized common stock and to authorize a new class of
preferred stock (in place of its preferred stock currently authorized)
with up-to-date terms and conditions determined by its Board of Directors
as appropriate to meet the Company's needs and market conditions as they
exist at the time of issuance. There are no shares of preferred stock
presently outstanding.
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Intra-system Financings by Consolidated
6. The Application seeks authority for Consolidated to finance certain of its
Subsidiaries through investment vehicles in addition to the traditional
common stock, open account advances and long term note financings.
7. The Application requests authority for Consolidated to finance certain of
its Subsidiaries in an aggregate amount not exceeding $1.5 billion during
the approximate 5 year period. The $1.5 billion excludes financing that
is exempt pursuant to Rules 45 and 52. Consolidated would be allowed to
use its discretion as to how much financing to give to each Subsidiary as
its needs dictate during the period.
Intra-system and External Financings by Subsidiaries
8. Second tier parent company financing of operational Subsidiaries thereof
through transactions involving Approved Securities not covered by Rule 52
is included in the Application.
9. Subsidiary external financing involving the issuance of certain Approved
Securities not falling within the compass of Rule 52 and the use of
Financing Entities in connection therewith would be authorized.
Changes in Authorized Capital
10. The Application retains the request for Subsidiaries to alter their legal
capitalization in order to engage in financing with their parent company.
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Parent Company Credit Support
11. The Application requests authority for certain parent companies in the
Consolidated System to enter guarantees, obtain letters of credit, enter
into expense agreements or otherwise provide credit support with respect
to obligations of their respective direct and indirect subsidiaries as
required to enable them to carry on their business.
The following describes which authorizations are specifically requested by
each of the Consolidated subsidiaries which are a party to this proceeding.
* Request to issue Approved Securities not covered by Rule 52, guarantee or
otherwise support subsidiary obligations and/or to form a Financing Entity.
CNG Energy Services Corporation
CNG Storage Service Company
CNG Power Company
CNG Financial Services, Inc.
These four Subsidiaries and any Financing Entity of theirs are collectively
referred to herein as the "Issuing Non-utility Subsidiaries."
* Request for utility company issuance of short-term debt to Consolidated,
which is not subject to state utility commission approval.
The East Ohio Gas Company
The Peoples Natural Gas Company
West Ohio Gas Company
These three Subsidiaries are collectively referred to herein as the "Issuing
Utility Subsidiaries."
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* Request to amend the certificate of incorporation to increase authorized
capitalization to allow for issuance of additional shares of common stock.
All Subsidiary parties
* Request to buy back shares of its common or preferred stock from its
immediate parent company.
All Subsidiary parties
All normal course of business financings by Subsidiaries will occur
pursuant to either outstanding Commission authorizations until the expiration
thereof, or under exemptive Rule 52, and are not a part of the authorizations
requested herein.
II. PARAMETERS FOR AUTHORIZATIONS
The Application makes requests for authority, without any additional prior
Commission approvals, to engage in future financing transactions for which the
specific terms and conditions are not at this time known. Accordingly, it is
appropriate that certain conditions concerning the financial status of
Consolidated exist at the time of engaging in such activities. The general
conditions for doing such financing activities without further prior approval
are given directly below; further limitations on specific types of financing
are set forth further herein.
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CONSOLIDATED DEBT OF INVESTMENT GRADE. Consolidated would be authorized
to engage in the financing activities described herein as long as its long-term
debt rating is of investment grade as established by a nationally recognized
statistical rating organization (as that term is used in Rule 15c3-1(c)2(vi)(F)
under the 1934 Act). Consolidated will at all times during the authorization
period ending December 31, 2000 strive to maintain a capital structure
sufficient to keep an investment grade rating for its debt.
EFFECTIVE COST OF MONEY ON BORROWINGS. The effective cost of money on
borrowings occurring pursuant to the authorizations granted under the
Application will not exceed 300 basis points over comparable term U. S.
Treasury securities.
EFFECTIVE COST OF MONEY ON OTHER APPROVED SECURITIES. The effective cost
of money on preferred stock and other fixed income oriented Approved Securities
will not exceed 500 basis points over 30 year term U.S. Treasury securities.
MATURITY OF DEBT. The maturity of indebtedness will not exceed 50 years.
ISSUANCE EXPENSES. The underwriting fees, commissions, or other similar
remuneration paid in connection with the non-competitive bid issue, sale or
distribution of a security pursuant to the Application will not exceed 5% of
the principal or total amount of the financing.
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AGGREGATE DOLLAR LIMIT. The aggregate amount of outstanding external
financing effected by Consolidated for purposes other than refunding of
outstanding securities during the approximate 5 year period will not exceed
$3.5 billion; for purpose of calculating the amount effected only outstanding
amounts under revolving credit arrangements will be counted. Further, credit
support of underlying Subsidiary obligations (because the same would be subject
to a separate $1.5 billion limitation) would not be included in the
calculation. Request is also made for Consolidated to effect external
financing for the purpose of refinancing outstanding securities up to an
aggregate amount not to exceed $3.5 billion during the approximate 5 year
period.
III. GENERAL FINANCING CONCEPT
Even though no dollar amounts of specific financing transactions are
discussed in this Application, Consolidated and its Subsidiaries would continue
to develop capital budgets and estimates of other financing needs on an annual
basis as they have customarily done for years. Actual financings during a
given year would occur based upon such normal financial planning.
Consolidated would continue to finance its utility Subsidiaries to achieve
a Subsidiary capital structure which would be an approximately mirror image of
that of the parent company. Certain restrictive covenants in the Indenture
dated as of May 1, 1971 between Consolidated and Chemical Bank would continue
to apply during the authorization period requested herein unless otherwise
amended or such indenture is defeased. Such covenants require, among other
things, that certain financial standards be met before dividends can be paid or
additional funded debt may be incurred.
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Consolidated would be allowed to issue and sell additional debt, preferred
stock or common stock or other Approved Securities without any additional prior
Commission approval if Consolidated has a long-term debt rating of investment
grade as established by a nationally recognized statistical rating
organization. The provisions of the securities would be determined by
Consolidated at the time of sale and would not be limited by any of the
Commission's "policies" with respect thereto.
To the extent not already exempt under Rule 52, Consolidated and its
Subsidiaries would be permitted to engage in intra-system financing of their
respective directly owned Subsidiaries without additional prior Commission
approval. However, the use of proceeds from the financings would be limited to
use in the operations of the respective businesses in which such Subsidiaries
are already authorized to engage.
In HCAR Nos. 13105 and 13106, dated February 16, 1956, as amended in
HCAR Nos. 16369 and 16758, dated June 22, 1970, the Commission adopted
statements of policy with respect to the first mortgage bonds and preferred
stock ("Statements of Policy"). To the extent that securities proposed to be
issued and sold pursuant to an authorization granted in this proceeding may
conflict with the Statements of Policy, request is hereby made for deviation
from the Statements of Policy.
Due to statutory requirements, the authorization requested herein to
engage in external or intra-system financing without additional Commission
approval do not apply in the case of any financing (other than through the use
of internally generated funds) for the purpose of investing in either an exempt
wholesale generator ("EWG") or a foreign utility company ("FUCO") as defined in
Sections 32 and 33 of the Act, respectively. Nor would any financing be
allowed under the above procedures if it would cause Consolidated to not be in
compliance with Rules 53 and 54 promulgated under the Act.
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IV. DESCRIPTION OF SPECIFIC TYPES OF FINANCING
A. Consolidated External Financings
Consolidated currently obtains funds externally through short-term debt
financing, including commercial paper sales; long-term debt financing, such as
debentures and notes; and sales of capital stock. Debt and preferred stock
financings can be either privately placed or publicly distributed. Common
stock can be issued and sold pursuant to underwriting agreements of a type
generally standard in the industry. Public distributions can be pursuant to
private negotiation with underwriters, dealers or agents as discussed below or
effected through competitive bidding among underwriters. All such debt and
stock sales are at rates or prices and under conditions negotiated or based
upon, or otherwise determined by, competitive capital markets. Common stock is
also sold pursuant to various existing or new employee benefit plans and
dividend reinvestment plans. In addition, Consolidated now seeks to issue and
sell Approved Securities.
Consolidated may sell securities covered by this Application in any of the
following ways: (i) through underwriters or dealers; (ii) directly to a
limited number of purchasers or to a single purchaser, or (iii) through agents.
If underwriters are used in the sale of the securities, such 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. The securities may be offered to the public either through underwriting
syndicates (which may be represented by managing underwriters designated by the
Company) or directly by one or more underwriters acting alone. The securities
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may be sold directly by the Company or through agents designated by the Company
from time to time. If dealers are utilized in the sale of any of the
securities, the Company will sell such securities to the dealers, as principal.
Any dealer may then resell such securities to the public at varying prices to
be determined by such dealer at the time of resale.
If equity securities are being sold in an underwriting offering, the
Company may grant the underwriters thereof a "green shoe" option permitting the
purchase from the Company at the same price additional equity securities (an
additional 15% under present guidelines) then being offered solely for the
purpose of covering over-allotments.
If debt securities are being sold, they may be sold pursuant to "delayed
delivery contracts" which permit the underwriters to locate buyers who will
agree with the Company to buy the debt at the same price but at a later date
than the date of the closing of the sale to the underwriters. They may also be
sold through the use of medium terms note and similar programs.
1. Short-term Financing
To provide financing for general corporate purposes, including financing
gas storage inventories, other working capital requirements and construction
spending until long term financing can be obtained, Consolidated would continue
to sell commercial paper, from time to time, in established domestic or
European commercial paper markets. Such commercial paper would be sold to
dealers at the discount rate per annum prevailing at the date of issuance for
commercial paper of comparable quality and maturities sold to commercial paper
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dealers generally. It is expected that the dealers acquiring commercial paper
from Consolidated will reoffer such paper at a discount to corporate,
institutional and, with respect to European commercial paper, to individual
investors. It is anticipated that Consolidated's commercial paper will be
reoffered to investors such as commercial banks, insurance companies, pension
funds, investment trusts, foundations, colleges and universities, finance
companies and nonfinancial corporations.
Back-up bank lines of credit for 100% of the outstanding commercial paper
are required by credit rating agencies. To satisfy this requirement,
Consolidated proposes to establish back-up bank lines in an aggregate principal
amount not to exceed the amount of authorized commercial paper. Consolidated
would borrow, repay and reborrow under these lines from time to time, without
collateral, to the extent that it becomes impracticable to sell commercial
paper due to market conditions or otherwise. Loans under these lines shall
have a maturity date not more than one year from the date of each borrowing.
Consolidated may engage in other types of short-term financing as it may
deem appropriate in light of its needs and market conditions at the time of
issuance. Such short-term financing could include, without limitation, bank
lines and debt securities issued under its debt securities indenture and note
programs.
2. Long-term Financing
Consolidated was authorized to issue and sell up to $500 million of debt
securities in Commission order dated March 6, 1995, HCAR No. 26245, in File No.
70-8107. On April 12, 1995, Consolidated sold $150 million principal amount of
7 3/8% Debentures Due April 1, 2005, thus leaving $350 million of such
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authorization available for future use. The aforesaid 7 3/8% Debentures were,
and new issuances of debt securities would be, issued pursuant to a new form of
simplified indenture which was also authorized in the proceeding under File No.
70-8107. The authorization under the March 6, 1995 order expires on June 30,
1996.
Consolidated is proposing herein a fundamental change in the method by
which it would be authorized to engage in external financings, which would
supersede the above authorization. Consolidated accordingly proposes to
incorporate the specific authorization into the more general financing
authorization requested in this Application. If such is permitted,
Consolidated would issue debt securities under its new indenture (or other
securities indentures) pursuant to the authorization granted in this proceeding
and not under the earlier specific authorization. One effect of this would be
a removal of the terms and conditions and dollar amount limits in the earlier
orders to the extent not replaced by like terms and conditions or issuance
limitations imposed by an order in this proceeding. The effective date of the
authorization to issue debt securities under the indenture would accordingly be
extended, pursuant to an order issued in this proceeding, to December 31, 2000.
Consolidated may engage in other types of long-term financing with such
terms and conditions as it may deem appropriate in the context of its needs and
financial market conditions at the time of issuance. Any long-term debt or
Approved Security would have such designation, aggregate principal amount,
maturity, interest rate(s) and terms of payment of interest, redemption
provisions and sinking fund terms, conversion or put terms and other terms and
conditions as Consolidated may at the time of issuance determine. Examples of
such long-term securities would include convertible debt, medium term notes,
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monthly or quarterly income preferred securities, securities with call or put
options, etc. Consolidated may also form Financing Entities to issue Approved
Securities. In such case, Consolidated would issue debt or other securities to
such Finance Entities to back-up such entities' obligations under the Approved
Securities they issue and to capitalize such entities.
3. Stock Financing
Consolidated may also issue and sell preferred or common stock, equity
Approved Securities, or issue stock upon the exercise of convertible debt or
pursuant to rights, options, warrants and similar securities. Financing
Entities may be used in connection with the issuance of monthly or quarterly
income preferred securities, in which case Consolidated may issue its debt or
other securities to such Financing Entities to back-up the obligations of such
Financing Entities and to capitalize such entities. Consolidated may also buy
back shares of such stock, during the authorization period.
Consolidated proposes that it be allowed, subject to further Commission
approval, to (i) amend its Certificate of Incorporation to increase its
authorized capital as deemed necessary and appropriate by Consolidated for
proper corporate purposes, (ii) eliminate the current provision in its
certificate of incorporation authorizing its class of preferred stock and
substitute therefor new provisions authorizing a class of preferred stock ("New
Preferred Stock") and (iii) solicit proxies through a proxy statement, filed
under and meeting the standards of the 1934 Act, requesting shareholder
approval of such amendments to the certificate of incorporation. The New
Preferred Stock would permit the Board of Directors of Consolidated, or a
committee thereof as authorized by Delaware law, to set the terms and
conditions of each Series of New Preferred Stock as appropriate to meet the
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Company's needs and market conditions as they exist at the time of issuance.
Any New Preferred Stock issued would have such designation, liquidation
preferences, issue price(s), dividend rate(s) and terms of payment of
dividends, redemption provisions and sinking fund terms, voting or other
special rights, conversion terms and other terms and conditions as Consolidated
may at the time of issuance determine.
Proxy solicitation material relating to amendments to the certificate of
incorporation will meet the requirements of Schedule 14A under the 1934 Act,
and will be reviewed for compliance with such regulation by the Commission
before the proxy material is sent to shareholders. Such proxy solicitation
material will be incorporated by reference into this Application when it is
filed with the Commission under the 1934 Act, and request is made under Rule 62
of the Act to begin solicitation of proxies when such filing is made.
Consolidated requests retention of jurisdiction over the implementation of the
amendments pending the making of the 1934 Act filings and completion of the
record.
Consolidated obtains funds through the sale of its common stock sold
pursuant to various employee benefit plans and a dividend reinvestment plan.
From time to time in the future, other similar plans may be adopted by
Consolidated, existing plans may be changed and Consolidated may issue
securities to fund its obligations under employee benefit plans or
arrangements. For instance, Consolidated's Board of Directors recently
authorized the funding of the Company's obligations under various of it non-
qualified plans and agreements through the issuance to a trust of up to 750,000
shares of Consolidated common stock. Consolidated also acquires treasury
shares through the operations of such employee plans. Additionally, by order
dated May 8, 1992, HCAR No. 25528, File No. 70-7948, Consolidated is
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authorized through December 31, 1995 to acquire up to 4,000,000 shares of its
common stock in the open market. Details concerning all the currently
effective authorizations relating to these plans and treasury share
acquisitions are set forth in Exhibit G. Consolidated now proposes to issue,
sell, reacquire and resell shares of common stock pursuant to these existing
plans and similar plans or plan funding arrangements hereafter adopted, and to
engage in purchases of its stock and reissuances of its treasury shares for
reasonable business purposes, without any additional prior Commission order.
Stock transactions of this variety would thus be treated the same as other
stock transactions permitted pursuant to this Application. Such authorization
would supersede all prior authorizations listed on Exhibit G, thereby
simplifying considerably the extensive reporting for generally small
transactions now in place under Consolidated's filings under the Act.
B. Parent-Subsidiary Intra-System Financing
1. Rule 52 Exemption
Due to the Commission's adoption in HCAR No. 26311, dated June 20, 1995,
of amendments to its exemptive Rule 52, much of the financing transactions
between Consolidated and its Subsidiaries would now be exempt pursuant to such
rule. However, to the extent that the transaction (i) involves the issue and
sale of a short-term debt security by an Issuing Utility Subsidiary or (ii)
involves the issue and sale by an Issuing Non-utility Subsidiary of an Approved
Security not currently covered by Rule 52, Rule 52 would not apply. In order
to cover these areas not included within the ambit of Rule 52, request is made
to engage in Consolidated-Issuing Utility Subsidiary short-term debt financings
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and Consolidated-Issuing Non-utility Subsidiary Approved Security financings as
described below.
2. Intra-system Financings by Consolidated
Consolidated would continue to provide financing to each of its directly
owned Subsidiaries as required. Such financings would generally continue to be
in the form of open account advances, long-term loans and/or capital stock
purchases, as requested by the Treasurer of each such Subsidiary. Open account
advances will provide funds for general corporate purposes, including gas
storage inventories, other working capital requirements and temporarily for
capital expenditures until long-term financing is obtained and /or cash is
generated internally. Generally, Consolidated's long-term loans to, and
purchase of capital stock from, such Subsidiaries will provide financing for
their capital expenditures, and will be exempt transactions under Rule 52. The
Subsidiaries may also, from time to time as deemed appropriate by them, buy
back shares of their respective common stock or preferred stock from
Consolidated.
Open account advances by Consolidated to Issuing Utility Subsidiaries may
be made, repaid and remade on a revolving basis, with interest at the same
effective rate of interest as Consolidated's daily weighted average effective
rate of commercial paper, revolving credit and/or other short-term borrowings.
If no such borrowings are outstanding then the interest rate shall be
predicated on the Federal Funds' effective rate of interest as quoted daily by
the Federal Reserve Bank of New York. Such advances will be made through the
CNG System money pool ("Money Pool") authorized under Commission order dated
June 12, 1986, HCAR No. 24128, File No. 70-7258.
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Consolidated and its Issuing Non-utility Subsidiaries may engage in other
types of Approved Security financing of their respective Subsidiaries.
3. Changes in Capital Stock of Subsidiaries
The portion of an individual Subsidiary's aggregate financing to be
effected through the sale of stock to Consolidated or other immediate parent
company during the approximate 5 year authorization period cannot be
ascertained at this time. It may happen that the proposed sale of common stock
may in some cases exceed the currently authorized capital stock of such
Subsidiary. In addition, the Subsidiary may choose to use other forms of
capital stock. As needed to accommodate such proposed transactions and to
provide for future issues, request is made for authority to increase the amount
of any such Subsidiary's authorized common stock capitalization by an amount
deemed appropriate by Consolidated or other immediate parent company in the
instant case, but in no event to exceed twice the currently authorized amount
of common stock capitalization. A Subsidiary would be able to change the par
value, or change between par and no-par common stock, without additional
Commission approval.
C. External Financing by Issuing Non-Utility Subsidiaries
The Issuing Non-utility Subsidiaries are expected to be active in the
development and expansion of energy-related, non-utility businesses in the
Consolidated System. They will be competing with large, well-capitalized
companies in different sectors of the energy industry. In order to accomplish
investments in such competitive arenas, it will be necessary for the Issuing
Non-utility Subsidiaries to have the ability to engage in financing
<PAGE> 21
transactions which are commonly accepted for such types of investments. It is
for this reason that it is requested that the Issuing Non-utility Subsidiaries
be permitted to issue and sell Approved Securities including the use of
Financing Entities in connection therewith.
V. PARENT COMPANY GUARANTEES
Consolidated and its Issuing Non-utility Subsidiaries request
authorization to enter guarantee arrangements, obtain letters of credit, and
otherwise provide credit support with respect to obligations of their
respective Subsidiaries to third parties as may be needed and appropriate to
enable them to carry on in the ordinary course of their respective businesses.
In addition, Consolidated requests authorization to enter into expense
agreements with any Finance Entities formed by it, pursuant to which
Consolidated would agree to pay all expenses of such entities to enable them to
issue Approved Securities. The maximum aggregate limit on all such credit
support by Consolidated and by all Subsidiaries at any one time will be $1.5
billion. The $1.5 billion on guarantees is in addition to the $3.5 billion
limit on Consolidated's external financing and the $1.5 billion limit on intra-
system financing requested elsewhere herein. Such authorization of Consolidated
to provide credit support would supersede and replace the current authorization
of Consolidated to guarantee up to $750 million of obligations of CNG Energy
Services Corporation as set forth in Commission order dated November 16, 1993,
HCAR No. 25926, File No. 70-8231.
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VI. FILING OF CERTIFICATES OF NOTIFICATION
It is proposed that, with respect to Consolidated, the reporting system of
the 1933 Act and the 1934 Act be integrated with the reporting system under the
1935 Act. This would eliminate duplication of filings with the Commission that
cover essentially the same subject matters, resulting in a reduction of expense
for both the Commission and Consolidated. To effect such integration, the
portion of the 1933 Act and 1934 Act reports containing or reflecting
disclosures of transactions occurring pursuant to the authorization granted in
this proceeding would be incorporated by reference into this proceeding through
Rule 24 certificates of notification. Such certificate of notification would
be filed within 60 days after the end of the calendar quarter in which the
transaction occurs.
VII. DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed with the Commission before or during the
period of effectiveness of an order issued in this proceeding shall be deemed
to be incorporated into this Application and to be a part hereof from the date
of filing of such documents with the Commission, or if filed before the date of
filing of this Application, from the date of the filing hereof.
1933 Act
Consolidated's currently effective Form S-3 Registration Statements Nos.
33-49469 and 33-52585 heretofore filed with the Commission pursuant to the
1933 Act, and each Registration Statement and other filings made under the
1933 Act from the date hereof through December 31, 2000.
<PAGE> 23
1934 Act
Consolidated's most recent Form 10-K Annual Report heretofore filed with
the Commission, its Form 10-Q Quarterly Reports filed heretofore
subsequent to the filing of the aforesaid Form 10-K, and all documents
filed by Consolidated pursuant to Section 13(a), 13(c), 14 or 15(d) of the
1934 Act subsequent to the date of filing of this Application. (File No.
1-3196).
1935 Act
Consolidated's most recent Form U5S Annual Report, File No. 30-203,
heretofore filed with the Commission pursuant to the Act, and each Form
U5S filed from the date hereof through December 31, 2000.
VIII. CURRENTLY EFFECTIVE SYSTEM FINANCING FORM U-1 SUPERSEDED
On April 28, 1995 Consolidated and certain of its Subsidiaries filed a
Form U-1 application-declaration, File No. 70-8619, seeking Commission
authorization for Consolidated System financing for the fiscal period July 1,
1995 through June 30, 1996. The Form U-1 in such earlier proceeding is in the
traditional format used by Consolidated over many years in seeking intra-system
financing on an annual basis. An order dated June 29, 1995, HCAR No. 26321,
was issued by the Commission in the File No. 70-8619 proceeding. An order
issued in this proceeding would supersede and replace the authorizations
granted in the June 29, 1995 order.
<PAGE> 24
(b) Describe briefly, and where practicable state the approximate amount
of, any material interest in the proposed transaction, direct or indirect, of
any associate company or affiliate of the applicant or declarant or any
affiliate of any such associate company.
None, except as set forth in Item 1.(a) above.
(c) If the proposed transaction involves the acquisition of securities
not listed by a registered holding company or a subsidiary thereof, describe
briefly the business and property, present or proposed, of the issuer of such
securities.
Inapplicable.
(d) If the proposed transaction involves the acquisition or disposition
of assets, describe briefly such assets setting forth original cost, vendor's
book cost (including the basis of determination) and applicable valuation and
qualifying reserves.
Inapplicable.
Item 2. Fees, Commissions and Expenses
______________________________
(a) State (1) the fees, commissions and expenses paid or incurred, or to
be paid or incurred, directly or indirectly, in connection with the proposed
transaction by the applicant or declarant or any associate company thereof, and
(2) if the proposed transaction involves the sale of securities at competitive
bidding, the fees and expenses to be paid to counsel selected by
applicant or declarant to act for the successful bidder.
It is estimated that underwriting fees and expenses in a transaction
not involving competitive bidding will not exceed 5% of the proceeds. The
fees and expenses involved with a competitively bid transaction are deemed to
be reasonable and are estimated to not exceed approximately 0.5% of the
proceeds
<PAGE> 25
Since the authorization period request is for approximately five years and
it is currently difficult to estimate with any precision future counsels' fees,
no separate memorandum of services of counsel selected by an applicant to act
for the successful bidder in a transaction involving competitive bidding needs
to be filed.
(b) If any person to whom fees or commissions have been or are to be paid
in connection with the proposed transaction is an associate company or an
affiliate of the applicant or declarant, or is an affiliate of an associate
company, set forth the facts with respect thereto.
Charges of Consolidated Natural Gas Service Company, Inc. in
connection with the preparation of this application-declaration on Form U-1 and
other related documents and papers required to consummate the proposed
transactions are included in the information stated above.
Item 3. Applicable Statutory Provisions
_______________________________
(a) State the sections of the Act and the rules thereunder believed to
be applicable to the proposed transaction. If any section or rule would be
applicable in the absence of a specific exemption, state the basis of
exemption.
Applicable Statutory
Transactions Provisions or Rules
____________ ____________________
Issuance of securities by Section 6(a) and 7
Consolidated to non-associ-
ate parties
Issuance of Approved Section 6(a) and 7;
Securities by Issuing Non- Rule 43
utility Subsidiaries to
Consolidated.
<PAGE> 26
Acquisition of Approved Section 9(a), 10 and
Securities of Issuing Non- 12(b); Rule 45
utility Subsidiaries by
Consolidated.
Issuance of securities by Section 6(a) and 7;
a Financing Entity to its Rule 43
parent.
Acquisition of securities Section 9(a), 10 and
of a Financing Entity by 12(b); Rule 45
its parent.
Issuance of short-term debt Section 6(a) and 7;
by Issuing Utility Subsidiar- Rule 43
ies to Consolidated.
Acquisition of short-term Section 9(a), 10 and
debt securities of Issuing and 12(b); Rule 45
Utility Subsidiaries by
Consolidated.
Amendment of the certificate Section 6(a); Rule 62
of incorporation of Consoli-
dated and Subsidiaries to
increase their respective
capitalization.
Amendment of the certificate Section 6(a); Rule 62
of incorporation of Consoli-
dated to eliminate the current
preferred stock provision and
to substitute therefor new
provisions authorizing a class
of preferred stock with up-to-
date provisions.
Acquisition of shares of Section 9(a) and 10:
their own respective outstand- Rule 42
ing stock by Consolidated and
the Subsidiaries.
Guarantees, expense agreements Section 6(a), 7 and
and other credit support given 12(b); Rule 45
by Consolidated and the
Subsidiaries to their
respective Subsidiaries.
<PAGE> 27
(b) If an applicant is not a registered holding company or a subsidiary
thereof, state the name of each public utility company of which it is an
affiliate, or of which it will become an affiliate as a result of the proposed
transaction, and the reasons why it is or will become such an affiliate.
Inapplicable.
Item 4. Regulatory Approval
___________________
(a) State the nature and extent of the jurisdiction of any State
commission or any Federal commission (other than the Securities and Exchange
Commission) over the proposed transaction.
The Public Service Commission of West Virginia has jurisdiction over
the purchase by Hope Gas Inc. of its capital stock from Consolidated.
The Virginia State Corporation Commission has jurisdiction over the
purchase by Virginia Natural Gas, Inc. of its capital stock from Consolidated.
The Pennsylvania Public Utility Commission has jurisdiction over the
purchase by The Peoples Natural Gas Company of its capital stock from
Consolidated.
No other State commission and no Federal commission other than the
Securities and Exchange Commission has jurisdiction over any of the proposed
transactions.
(b) Describe the action taken or proposed to be taken before any
commission named in answer to paragraph (a) of this item in connection with the
proposed transaction.
Required applications as needed will be filed with the commissions
mentioned above.
<PAGE> 28
Item 5. Procedure
_________
(a) State the date when Commission action is requested. If the date is
less than 40 days from the date of the original filing, set forth the reasons
for acceleration.
It is requested that Commission action with respect to the
transaction set forth in this application-declaration become effective on or
before December 31, 1995.
(b) State (i) whether there should be a recommended decision by a hearing
officer, (ii) whether there should be a recommended decision by any other
responsible officer of the Commission, (iii) whether the Office of
Public Utility Regulation of the Division of Investment Management may assist
in the preparation of the Commission's decision, and (iv) whether there should
be a 30-day waiting period between the issuance of the Commission's order and
the date on which it is to become effective.
It is submitted that a recommended decision by a hearing or other
responsible officer of the Commission is not needed with respect to the
proposed transactions. The Office of Public Utility Regulation of the Division
of Investment Management may assist in the preparation of the Commission's
decision. There should be no waiting period between the issuance of the
Commission's order and the date on which it is to become effective.
<PAGE> 29
Item 6. Exhibits and Financial Statements
_________________________________
The following exhibits and financial statements are filed as a part
of this statement:
(a) Exhibits
A-1 The certificate of incorporation and by-laws
of Consolidated as filed as exhibits to
Consolidated's Form U5S, File No. 30-203,
are hereby incorporated by reference.
A-2 Form of provisions to be included in an
amendment to the certificate of incorporation
of Consolidated creating New Preferred Stock.
A-3 Form of Commercial Paper notes.
(Incorporated by reference to Files No. 70-6153
and 70-7393.)
A-4 Form of Indenture.
(Incorporated by reference to Exhibit A of File No. 70-8107)
B-1 Standard Purchase Agreement Provisions - Debt Securities
including Form of Purchase Agreement
(Incorporated by reference to Exhibit B of File No. 70-8107)
B-2 Standard Purchase Agreement Provisions - Stock
including Form of Purchase Agreement
C-1 Form S-3 Registration Statement.
(Incorporated by reference to Registration
Statement No. 33-49469 filed via EDGAR on
April 6, 1993)
C-2 Form S-3 Registration Statement.
(Incorporated by reference to Registration
Statement No. 33-52585 filed via EDGAR on
March 9, 1994)
F-1 Opinion of Counsel for Consolidated
(To be filed by amendment)
<PAGE> 30
F-2 Combined Opinion of Counsel for
CNG Coal Company, CNG Energy Services Corporation,
CNG Financial Services, Inc., CNG Power Company,
CNG Market Center Services, Inc., CNG Producing Company,
CNG Pipeline Company, CNG Research Company,
CNG Storage Service Company, CNG Transmission
Corporation, Consolidated Natural Gas Service
Company, Inc., Consolidated System LNG Company,
Hope, Gas, Inc., The East Ohio Gas Company,
The Peoples Natural Gas, Virginia Natural Gas, Inc.,
and West Ohio Gas Company
(To be filed by amendment)
G - Currently effective authorizations for sale of stock to
employee benefit plans and dividend reinvestment plan, and
for acquisition of treasury shares on the open market.
O - Proposed notice pursuant to Rule 22(f).
(b) Financial Statements
Financial statements included in Consolidated's Form 10-K for the
year ended December 31, 1994 and in Consolidated's Form 10-Q for the quarters
ended March 31 and June 30, 1995 are hereby incorporated by reference to
File No. 1-3196 under the 1934 Act.
Item 7. Information as to Environmental Effects
_______________________________________
(a) Describe briefly the environmental effects of the proposed
transaction in terms of the standards set forth in Section 102(2)(c) of the
National Environmental Policy Act (42 U.S.C. 4332(2)(C)). If the response to
this item is a negative statement as to the applicability of Section 102(2)(C)
in connection with the proposed transaction, also briefly state the reasons for
that response.
<PAGE> 31
As more fully described in Item 1(a), the proposed transactions
subject to the jurisdiction of this Commission relate to financing proposals
and involve no major federal action significantly affecting the human
environment.
(b) State whether any other federal agency has prepared or is preparing
an environmental impact statement ("EIS") with respect to the proposed
transaction. If any other federal agency has prepared or is preparing an EIS,
state which agency or agencies and indicate the status of that EIS preparation.
None.
SIGNATURES
__________
Pursuant to the requirements of the Public Utility Holding Company
Act of 1935, the undersigned companies have duly caused this statement to be
signed on their behalf by the undersigned thereunto duly authorized.
CONSOLIDATED NATURAL GAS COMPANY
By L. D. Johnson, Vice Chairman and
Chief Financial Officer
CNG COAL COMPANY
CNG ENERGY SERVICES CORPORATION
CNG FINANCIAL SERVICES, INC.
CNG POWER COMPANY
CNG MARKET CENTER SERVICES, INC.
CNG PRODUCING COMPANY
CNG PIPELINE COMPANY
CNG RESEARCH COMPANY
CNG STORAGE SERVICE COMPANY
CNG TRANSMISSION CORPORATION
CONSOLIDATED NATURAL GAS SERVICE
COMPANY, INC.
CONSOLIDATED SYSTEM LNG COMPANY
HOPE GAS, INC.
THE EAST OHIO GAS COMPANY
THE PEOPLES NATURAL GAS COMPANY
VIRGINIA NATURAL GAS, INC.
WEST OHIO GAS COMPANY
By N. F. Chandler, Their Attorney
Dated: November 13, 1995
<PAGE> 1
Exhibit A-2
Form of "Blank Check" Preferred Stock Provisions
The Board of Directors shall have authority by resolution to divide the
Preferred Stock into one or more series, to issue shares of any such series
and, within the limitations set forth in this Certificate of Incorporation or
prescribed by law, to fix and determine the relative rights and preferences of
the shares of any series so established including, without limitation, the
following:
(1) the maximum number of shares to constitute such series, which may
subsequently be increased or decreased (but not below the number of
shares of such series then outstanding) by resolution of the Board of
Directors, the distinctive designation thereof and the stated value
thereof if different than the par value thereof.
(2) whether the shares of such series shall have voting powers, and if
any, the terms of such voting powers;
(3) the dividend rates, if any, on the shares of such series or the
manner in which such rate or rates shall be determined, the
conditions and dates upon which such dividends shall be payable, and
the preference or relation which such dividends shall bear to the
dividends payable on any other class or classes or on any other
series of capital stock and whether such dividends shall be
cumulative or noncumulative;
(4) whether the shares of such series shall be subject to redemption by
the corporation, and, if made subject to redemption, the times,
prices and other terms, limitations, restrictions or conditions of
such redemption;
(5) the relative amounts, and the relative rights or preferences, if any,
of payment in respect of shares of such series, which the holders of
shares of such series shall be entitled to receive upon the
liquidation, dissolution or winding-up of the corporation;
(6) whether or not the shares of such series shall be subject to the
operation of a retirement or sinking fund and, if so, the extent to
which and the manner in which any such retirement or sinking funds
shall be applied to the purchase or redemption of the shares of such
series for retirement or to other corporate purposes, and the terms
and provisions relative to the operation of such retirement or
sinking fund;
(7) whether or not the shares of such series shall be convertible into,
or exchangeable for, shares of any other class, classes or series, or
other securities, whether or not issued by the corporation, and if so
convertible or exchangeable, the price or prices or the rate or rates
of conversion or exchange and the method, if any, of adjusting the
same;
<PAGE> 2
(8) the limitations and restrictions, if any, to be effective while any
shares of such series are outstanding upon the payment of dividends
or the making of other distributions on, and upon the purchase,
redemption or other acquisition by the Corporation of, the Common
Stock or any other class or classes of stock of the corporation
ranking junior to the shares of such series either as to dividends or
upon liquidation, dissolution or winding-up of the corporation.
(9) the conditions or restrictions, if any, upon the creation of
indebtedness of the corporation or upon the issuance of any
additional stock (including additional shares of such series or of
any other class) ranking on a parity with or prior to the shares of
such series as to dividends or distribution of assets upon
liquidation, dissolution or winding-up of the corporation; and
(10) any other preference, relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions
thereof, as shall not be inconsistent with law, this Article or any
resolution of the Board of Directors pursuant hereto.
<PAGE> 1
EXHIBIT B-2
CONSOLIDATED NATURAL GAS COMPANY
[COMMON] [CUMULATIVE PREFERRED] STOCK
STANDARD PURCHASE AGREEMENT PROVISIONS
INCLUDING
FORM OF PURCHASE AGREEMENT
<PAGE> 2
Exhibit ___
CONSOLIDATED NATURAL GAS COMPANY
STANDARD PURCHASE AGREEMENT PROVISIONS --
[COMMON] [CUMULATIVE PREFERRED] STOCK
From time to time, Consolidated Natural Gas Company, a Delaware
corporation (the "Company"), may enter into purchase agreements that provide
for the sale of designated securities to the purchaser or purchasers named
therein. The standard provisions set forth herein may be incorporated by
reference in any such purchase agreement (the "Purchase Agreement"). The
Purchase Agreement, including the provisions incorporated therein by reference,
is herein sometimes referred to as "this Agreement." The term "Purchased
Stock" shall mean the [common stock, par value $2.75 per share] [cumulative
preferred stock, par value $_____ per share] (the "Registered Stock"), of the
Company to be sold by the Company pursuant to the applicable Purchase
Agreement. Unless otherwise defined herein, terms defined in the Purchase
Agreement are used herein as therein defined.
The Company has filed ("filing" as used herein shall be deemed to
include electronic filings pursuant to the EDGAR program), in accordance with
the provisions of the Securities Act of 1933, as amended, and the rules and
regulations of the Securities and Exchange Commission thereunder (collectively
called the "Act"), with the Securities and Exchange Commission (the
"Commission"), a registration statement on Form S-3 (including a prospectus),
relating to the Registered Stock, which pursuant to Item 12 of Form S-3
incorporates by reference documents which the Company has filed in accordance
with the provisions of the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder (collectively called the "Exchange
Act"). Such registration statement has been declared effective by the
Commission. Promptly upon the execution of this Agreement, the Company will
prepare a prospectus supplement relating to the Purchased Stock (the
"Prospectus Supplement").
<PAGE> 3
The Company has furnished to you, for use by the Purchasers (as defined herein)
and dealers if the Purchased Stock is to be sold to the public, copies of one
or more preliminary prospectuses and the documents so incorporated therein
(each thereof, including the documents so incorporated therein, is herein
called the "Preliminary Prospectus"). The terms Registration Statement and
Prospectus shall have the meanings ascribed to them in Section 2(a) of this
Agreement.
Section 1. Introductory. The Company proposes to issue and sell
from time to time Registered Stock registered under an effective registration
statement. The shares of Registered Stock referred to on Schedule A of the
Purchase Agreement are hereinafter referred to as the "Firm Stock." The
Purchase Agreement may provide for an additional number of shares of Registered
Stock (the "Additional Stock") which the purchasers may purchase on the terms
and conditions set forth in this Agreement for the sole purpose of covering
over-allotments. The Firm Stock and the Additional Stock, if any, are
collectively referred to as the "Purchased Stock." The firm or firms, as the
case may be, which agree to purchase the Purchased Stock are hereinafter
referred to as the "Purchasers" of such Purchased Stock. The terms "you" and
"your" refer to those Purchasers (or the Purchaser) who sign the Purchase
Agreement either on behalf of themselves (or itself) only or on behalf of the
several Purchasers named in Schedule A thereto, as the case may be.
Section 2. Representations and Warranties of the Company. The
Company represents and warrants to and agrees with each Purchaser that:
<PAGE> 4
(a) A registration statement on Form S-3 relating to the Registered
Stock including a prospectus and all documents incorporated by reference
therein has been filed with the Commission and has become effective. Such
registration statement, including the prospectus set forth therein, as amended
by a prospectus supplement with respect to the offering of Purchased Stock
referred to in Section 1 and all prior amendments and supplements thereto
(other than supplements and amendments relating to securities that are not
Purchased Stock), including all documents filed as a part thereof or
incorporated therein, is hereinafter referred to as the "Registration
Statement," and such prospectus, as so amended or supplemented (including all
material incorporated by reference therein), is hereinafter referred to as the
"Prospectus";
(b) The Registration Statement and the Prospectus in all material
respects comply with the provisions of the Act; the Registration Statement does
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and the Prospectus does not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and all documents incorporated
therein by reference pursuant to Item 12 of Form S-3 as of the respective dates
on which they were filed complied in all material respects with the
requirements of the Exchange Act and, on said dates, and at the time of
purchase, when read together with the Prospectus, or the Prospectus as it may
be otherwise amended or supplemented, will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of circumstances under
which they were made, not misleading, except that the Company makes no warranty
or representation to any Purchaser with respect to any statement contained in
or any
<PAGE> 5
matter omitted from the Registration Statement or Prospectus, which statements
were made, or matters omitted, in reliance upon and in conformity with
information furnished in writing to the Company through you for use in the
Registration Statement and Prospectus;
(c) The Commission has issued an order under the Public Utility
Holding Company Act of 1935, as amended ("PUHCA"), permitting to become
effective the Form U-1 Declaration filed by the Company with respect to the
issue and sale of the securities covered thereby (including the Registered
Stock), such order being subject, however, to such supplemental orders, if any,
as the Commission may issue under PUHCA. A copy of such order heretofore
issued by the Commission has been or will be delivered to the Purchasers;
(d) Except as otherwise contemplated herein, no approval,
authorization, consent, certificate or order of any State commission or
regulatory authority is necessary with respect to the issuance or the sale of
the Registered Stock by the Company;
(e) Since the respective dates as of which information is given in
the Registration Statement and Prospectus, there has been no material and
unfavorable change in the condition of the Company and its subsidiaries, on a
consolidated basis, financial or otherwise, other than as referred to in the
Registration Statement and Prospectus; and
(f) The consummation of the transactions herein contemplated and the
performance by the Company of the terms of this Agreement will not result in
the breach by the Company of any terms of, or constitute a default under, any
other agreement or undertaking of the Company.
<PAGE> 6
Section 3. Delivery and Payment. Payment for the Firm Stock shall
be made to the Company or its order by certified or official bank check or
checks payable in New York Clearinghouse funds (unless otherwise specified in
the Purchase Agreement, in which case payment shall be made as so specified) at
the office of the Company, 44 Wall Street, New York, New York 10005 (unless
another place is specified in the Purchase Agreement, in which case such
payment shall be made at the place so specified), against the delivery of the
Firm Stock at said office to the Purchasers or you for the respective accounts
of the Purchasers. Such payment and delivery shall be made at 10:00 A.M., New
York City Time, on the date set forth in the Purchase Agreement, unless another
time shall be agreed to by the Company and by you or unless postponed in
accordance with the provisions of Section 8 hereof. The time at which payment
and delivery are actually made may hereinafter be called the "time of
purchase".
You shall specify the number of shares of the Firm Stock to be
delivered and the name and address in which each share of Firm Stock is to be
registered, by written notice delivered to the Company not later than
10:00 A.M., New York City Time, on the third business day preceding the time of
purchase. For the purpose of expediting the checking of the Firm Stock by you,
the Company agrees to make the Firm Stock available to you, at an office in New
York City designated in the Purchase Agreement, not later than 2:00 P.M., New
York City Time, on the first business day preceding the time of purchase, or if
no such request is made, registered in the names of the several Purchasers as
set forth in Schedule A to the Purchase Agreement.
If there is any Additional Stock, the Purchasers shall also have the
option to purchase, severally and not jointly, from the Company, ratably in
accordance with the number of shares of Firm Stock to be purchased by each of
them (subject to such adjustment as you shall determine to avoid fractional
shares),
<PAGE> 7
all or a portion of the Additional Stock, if any, as may be necessary to cover
over-allotments made in connection with the offering of the Firm Stock, at the
same purchase price per share to be paid by the Purchasers to the Company for
the Firm Stock, all subject to the terms and conditions set forth in this
Agreement. This option may be exercised at any time (but not more than once)
on or before the thirtieth day following the date of the Purchase Agreement, by
your written notice to the Company. Such notice shall set forth the aggregate
number of shares of Additional Stock as to which the option is being exercised,
and the date and time when the Additional Stock is to be delivered (such date
and time being herein referred to as the "additional time of purchase");
provided, however, that the additional time of purchase shall not be earlier
than the time of purchase nor earlier than the third business day after the
date on which the option shall have been exercised nor later than the eighth
business day after the date on which the option shall have been exercised. The
number of shares of Additional Stock to be sold to each Purchaser shall be the
number which bears the same proportion to the aggregate number of shares of
Additional Stock being purchased as the number of shares of Firm Stock set
forth opposite the name of such Purchaser on Schedule A to the Purchase
Agreement bears to the total number of shares of Firm Stock (subject, in each
case, to such adjustment as you may determine to eliminate fractional shares).
Payment of the purchase price for the Additional Stock, if any, shall
be made at the additional time of purchase in the same manner and at the same
office as the payment for the Firm Stock, unless another manner or time shall
be agreed to by the Company and by you. The Company agrees to make available
to you for inspection and packaging at the place set forth in the Purchase
Agreement, at least one full business day prior to the additional time of
purchase, the Additional Stock so to be delivered in such denominations and
registered in such names as
<PAGE> 8
you shall have requested, all such requests to have been made in writing at
least three full business days prior to the additional time of purchase, or if
no such request is made, registered in the names of the several Purchasers as
set forth in Schedule A to the Purchase Agreement.
If the additional time of purchase occurs after the time of purchase,
then the obligation of the Purchasers to purchase the Additional Stock shall be
conditioned upon receipt of supplemental opinions, certificates and letters
confirming as of the additional time of purchase the opinions, certificates and
letters delivered at the time of purchase pursuant to Section 5 hereof, except
that in paragraph (a)(i), under the subheading (D), "Additional Stock" will
replace "Purchased Stock".
Section 4. Covenants of the Company. The Company covenants and
agrees with the several Purchasers:
(a) To advise you promptly of any proposal to amend or supplement
the Registration Statement or the Prospectus with respect to any Purchased
Stock at any time when a prospectus relating to such Purchased Stock is
required to be delivered under the Act and will furnish to you a copy of each
such proposed amendment or supplement prior to the filing thereof;
(b) If at any time when a Prospectus relating to the Purchased Stock
is required to be delivered under the Act any event occurs as a result of which
the Prospectus as then amended or supplemented would include an untrue
statement of a material fact, or omit to state any material fact necessary to
make the statements therein, in the light of circumstances under which they
were made, not misleading, or if it is necessary at any time to amend or
supplement the Registration Statement or such Prospectus to comply with the
Act, to promptly prepare and file with the Commission an amendment or
supplement which will correct such statement or omission or an amendment which
will effect such compliance;
<PAGE> 9
(c) To furnish to you copies of the registration statement relating
to the securities covered thereby (including the Purchased Stock) as originally
filed and all amendments thereto (at least one of which will be as filed with
the Commission via EDGAR and will include all exhibits except those
incorporated by reference to previous filings with the Commission), a copy of
each consent and certificate of independent accountants and of each other
person whose profession gives authority to statements made by him and who is
named in the Registration Statement as having prepared, certified or reviewed
any part thereof, each related prospectus, the Prospectus, and all amendments
and supplements to such documents (except supplements relating to securities
that are not Purchased Stock) as filed with the Commission via EDGAR, in each
case as soon as available and in such quantities as you may reasonably request
for the purpose contemplated by the Act and to furnish to you sufficient copies
of the foregoing (including copies of the Registration Statement (other than
exhibits and consents filed as exhibits to the Registration Statement)) for
distribution of two copies of the Registration Statement and a sufficient
number of copies of the Prospectus to each of the other Purchasers;
(d) To furnish such proper information as may be required and
otherwise to cooperate in qualifying the Purchased Stock for sale and in
determining their eligibility for investment under the laws of such
jurisdictions as you may designate and to pay or reimburse you for expenses and
reasonable legal fees incurred in connection therewith, provided, that the
Company shall not be required to qualify as a foreign corporation or to file a
consent to service of process in any jurisdiction;
(e) To advise you promptly (confirming such advice in writing) of
any request made by the Commission for amendments to the Registration Statement
or Prospectus or for additional information with respect thereto or of notice
of institution of proceedings for, or the entry of, a stop order suspending the
<PAGE> 10
effectiveness of the Registration Statement, and if such a stop order should be
entered by the Commission, to make every reasonable effort to obtain the
lifting or removal thereof as soon as possible;
(f) For a period of five years from the date hereof to furnish to
you and to each other Purchaser who may so request (i) as soon as practicable
after the close of each fiscal year a copy of the Company's annual report to
stockholders for such year and (ii) as soon as available, a copy of each report
or definitive proxy statement of the Company filed with the Commission under
the Exchange Act or mailed to stockholders;
(g) During such period of time after the effective date of the
Registration Statement as the Purchasers are required by law to deliver a
prospectus in connection with any sale of the Purchased Stock contemplated by
the Prospectus, if any event relating to or affecting the Company or of which
the Company shall be advised in writing by you shall occur which in the
Company's opinion should be set forth in a supplement or amendment to the
Prospectus in order to make the Prospectus not misleading in the light of the
circumstances when it is delivered to a Purchaser, to amend or supplement the
Prospectus by either (i) preparing and filing with the Commission and
furnishing to you at the Company's expense a reasonable number of copies of a
supplement or supplements or an amendment or amendments to the Prospectus or
(ii) making an appropriate filing pursuant to Section 13 or 14 of the Exchange
Act, which will supplement or amend the Prospectus so that, as supplemented or
amended, it will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances when the
Prospectus is delivered to a Purchaser, not misleading; provided that should
such event relate solely to the activities of any of the Purchasers, then the
Purchasers shall assume the expense of preparing any such amendment or
supplement;
<PAGE> 11
(h) During such period of time after the date hereof as a prospectus
relating to the Purchased Stock is required to be delivered under the Act, to
file promptly all documents required to be filed with the Commission pursuant
to Section 13 or 14 of the Exchange Act;
(i) To make generally available to its stockholders (as contemplated
by Rule 158 of the Rules and Regulations or otherwise) a consolidated earnings
statement of the Company and its subsidiaries covering a twelve-month period
beginning the first day of the first fiscal quarter occurring after the
effective date of the Registration Statement, as soon as reasonably practicable
after the termination of such twelve-month period;
(j) To pay all expenses, fees and taxes, other than transfer taxes,
in connection with (i) the preparation and filing of the Registration Statement
and Prospectus, any documents incorporated by reference therein at or after the
date thereof and any amendments or supplements thereto, (ii) the issue, sale
and delivery of the Purchased Stock to the Purchasers, (iii) the qualification
of the Purchased Stock for sale and the determination of their eligibility for
investment under laws as aforesaid, (iv) the furnishing of the opinions (other
than the opinion of Counsel for the Purchasers) and certificates referred to in
Section 5 hereof, (v) the registration of the Purchased Stock with the N.A.S.D,
and (vi) any listing of the Purchased Stock on any securities exchange;
(k) To pay the fees and expenses of Cahill Gordon & Reindel (herein
called "Counsel for the Purchasers") and to reimburse the Purchasers for their
reasonable out-of-pocket expenses incurred in contemplation of the performance
of this Agreement, in the event that the Purchased Stock is not delivered to
and taken up and paid for by the Purchasers hereunder for any
<PAGE> 12
reason whatsoever except the failure or refusal of any Purchaser to take up and
pay for Purchased Stock for some reason not permitted by the terms of this
Agreement. The Purchasers agree to pay the fees and expenses of Counsel for
the Purchasers in any other event;
(l) To apply the net proceeds from the sale of the Purchased Stock,
together with other funds of the Company, as set forth under the heading "Use
of Proceeds" in the Prospectus; [and]
(m) If a public offering of Purchased Stock which is common stock
(or convertible into or exchangeable for common stock) is to be made, not to
offer or sell any of the Company's Registered Stock prior to ten business days
after the later of the time of purchase or the additional time of purchase
without your consent[.][; and]
[(n) If a public offering of Purchased Stock which is common stock is
to be made, to use its best efforts to list the Purchased Stock on the New York
Stock Exchange.]
Section 5. Conditions of Purchasers' Obligations. The several
obligations of the Purchasers hereunder to purchase the Firm Stock are subject
to the following conditions:
(a) That at the time of purchase you shall be furnished with signed
copies of the following, addressed to the Purchasers and with Photostat copies
or signed or conformed counterparts thereof for each of the other Purchasers:
(i) An opinion of counsel to the Company, stating in substance:
<PAGE> 13
(A) That the Company has been duly incorporated and is at
the time of purchase validly existing as a corporation in good standing under
the laws of the State of Delaware, with charter power to carry on the business
in which it is now engaged;
(B) That the subsidiaries of the Company named in the
Prospectus are validly organized and existing under the laws of the respective
jurisdictions in which they are incorporated and that all of the outstanding
capital stock of each such subsidiary company is owned by the Company and is
not subject to any lien or encumbrance;
(C) That this Agreement has been duly authorized, executed
and delivered by the Company;
(D) That the Purchased Stock has been duly authorized and,
when issued and paid for by the Purchasers in accordance with the terms of this
Agreement, shall be fully paid and nonassessable;
(E) That the Purchased Stock conforms in all material
respects as to legal matters with the statements concerning the Purchased Stock
in the Prospectus;
(F) That the statements of the law and legal conclusions
in the Prospectus set forth in the section "The Company and Its Subsidiaries,"
["Certain Terms and Description of Registered Stock"] and in the Annual Report
of the Company on Form 10-K incorporated by reference in the Prospectus (in the
sections "[insert appropriate sections of 10-K]") are to the best of the
knowledge of said counsel true and accurate and do not omit to state any
material facts required to be stated therein or necessary to make such
statements not misleading;
<PAGE> 14
(G) That (i) the Registration Statement and the Prospectus
and any amendment or supplement thereto (other than the financial statements
and other financial and statistical information contained therein, as to which
such counsel need express no opinion) comply as to form with the requirements
of Form S-3 and the Rules and Regulations, and (ii) the documents incorporated
by reference in the Prospectus at the time the Registration Statement became
effective and at the time of purchase (other than the financial statements and
other financial and statistical information contained therein, as to which such
counsel need express no opinion) complied when filed pursuant to the Exchange
Act as to form with the requirements of the Exchange Act and the Exchange Act
Rules and Regulations;
(H) (i) The original order of the Commission referred to
in subsection (c) of Section 2 of this Agreement has been obtained and, to the
best of the knowledge of said counsel, is in full force and effect; (ii) any
required supplemental order of the Commission, referred to in subsection (c) of
Section 2 of this Agreement, has been duly issued and, to the best of the
knowledge of said counsel, is in full force and effect; and (iii) no further
approval, authorization, consent, certificate or order of any Federal
commission or regulatory authority is necessary with respect to the issue and
sale of the Purchased Stock by the Company as contemplated in this Agreement;
(I) That all contracts of the Company and its subsidiaries
that are required to be filed as exhibits to the Registration Statement under
the Act and the Rules and Regulations have been so filed, and that to the
extent required all material contracts of the Company and its subsidiaries have
been properly described in the Registration Statement and Prospectus; and
<PAGE> 15
(J) That such counsel has participated in the preparation
of the Registration Statement and Prospectus and no facts have come to the
attention of such counsel to lead such counsel to believe that either the
Registration Statement or the Prospectus at the time the Registration Statement
or any amendment thereto became effective, or the Prospectus or any amendment
or supplement thereto when the Prospectus or such amendment or supplement was
filed or the Prospectus as it may be amended or supplemented as of the time of
purchase, contains an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statement
therein not misleading;
(ii) An opinion of Counsel for the Purchasers as to matters
referred to in paragraph (a)(i) of this Section 5 under the subheadings (C),
(D), (E) and (H) (except for the third clause, in lieu of which such counsel
shall state that they are not aware of any approval of any other regulatory
body being so required), and that the Registration Statement and the
Prospectus, as of the date the Registration Statement became effective (other
than the financial statements and other financial and statistical information
contained therein and Exhibit 12 to the Registration Statement, as to which
such counsel need express no opinion), appear to comply as to form in all
material respects with the requirements of Form S-3 and the Rules and
Regulations. In addition such counsel shall state that they have participated
in conferences with officers and other representatives of the Company, counsel
for the Company and representatives of the independent accountants of the
Company at which the contents of the Registration Statement and Prospectus and
related matters were discussed and, although such counsel is not passing upon
and does not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement and
Prospectus (except as to the matters referred to in paragraph (a)(i) of this
Section 5 under
<PAGE> 16
subheading (E)), on the basis of the foregoing (relying as to materiality to a
large extent upon the opinions of officers, counsel and other representatives
of the Company), no facts have come to the attention of such counsel which lead
them to believe that the Registration Statement or any amendment thereto when
such Registration Statement or amendment became effective or the Prospectus or
any supplement thereto when such supplement was filed contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading (it being understood that
such counsel need make no comment with respect to the financial statements and
other financial and statistical data included in the Registration Statement or
Prospectus or Exhibit 12 to the Registration Statement; and
(iii) A letter, dated the time of purchase addressed to the
Purchasers from the independent accountants for the Company to the effect that:
(A) they are independent accountants within the meaning of
the Act and the applicable rules and regulations thereunder;
(B) in their opinion, the consolidated financial
statements audited by them and incorporated by reference in the Registration
Statement comply as to form in all material respects with the applicable
accounting requirements of the Act, the Exchange Act and the rules and
regulations with respect to registration statements on Form S-3;
(C) on the basis of procedures (but not an examination in
accordance with generally accepted auditing standards) consisting of:
<PAGE> 17
(1) reading the minutes of meetings of the stockholders
and the Board of Directors of the Company and its consolidated subsidiaries
since December 31, of the most recent preceding year as set forth in the minute
books, but in no event through a specified date not more than five business
days prior to the date of delivery of such letter;
(2) reading the unaudited consolidated balance sheets and
the unaudited consolidated statements of income, of cash flows and of retained
earnings for the periods included in the Company's quarterly reports on Form
10-Q for the current year (for the quarters ended March 31, June 30 and
September 30, as the case may be), incorporated by reference in the
Registration Statement;
(3) reading the unaudited consolidated financial data of
the Company and subsidiaries for the period from the latest quarterly reporting
period to the date of the latest available interim data, furnished by the
Company, officials of the Company having advised them that no such consolidated
financial data as of any date or for any period subsequent to such latest date
were available; and
(4) making inquiries of certain officials of the Company
who have responsibility for financial and accounting matters regarding the
specific items for which representations are requested below;
nothing has come to their attention as a result of the foregoing
procedures that caused them to believe that:
(a) the unaudited condensed consolidated financial statements
incorporated by reference in the Registration Statement do not comply as to
form in all material respects with the applicable accounting requirements of
the Exchange Act as it applies to Form 10-Q and the Exchange Act Rules and
Regulations
<PAGE> 18
or said financial statements are not stated on a basis substantially consistent
with that of the audited financial statements incorporated by reference in the
Registration Statement;
(b) for the period from the date of the latest quarterly report on
Form 10-Q to the date of the latest available unaudited consolidated income
statement read by such accountants, there were any decreases, as compared with
the corresponding period of the prior year, in consolidated total operating
revenue, in operating income or in net income, except in all instances for
changes or decreases which the Registration Statement discloses have occurred
or may occur, or they shall state any specific decreases;
(c) at the date of the latest available balance sheet read by such
accountants, and at a subsequent specified date not more than five days prior
to the date of delivery of such letter, there was any change in common stock or
long-term debt of the Company, or any decrease in total stockholders' equity as
compared with amounts shown on the latest unaudited condensed consolidated
balance sheet included in the Registration Statement (including documents
incorporated by reference), [except as to dividends on common stock that have
been declared in the normal course of business, amortization of long-term debt
discount or premium, the retirement of long-term debt to satisfy mandatory
sinking fund requirements, and the issuance of common stock in connection with
the Company's long-term incentive plans and thrift plans,](1) or, from the date
of the latest available unaudited condensed consolidated income statement read
by such accountants to the subsequent specified date, any decreases, as
compared with the corresponding period in the preceding year, in consolidated
total operating revenues, in operating income or in
____________________
(1) To be omitted, or completed and included, as appropriate.
<PAGE> 19
net income, except in all instances for changes or decreases which the
Registration Statement (including documents incorporated by reference)
discloses have occurred or may occur, or except as otherwise noted in such
letter.
(D) the specified dollar amounts (or percentages derived
from such dollar amounts) under captions specified by the Purchasers and agreed
to by such independent accountants contained in the Registration Statement
(including documents incorporated by reference), in each case to the extent
that such dollar amounts and percentages are obtained from the general
accounting records of the Company and its subsidiaries subject to the internal
controls of the Company's accounting system or are derived directly from such
records by analysis or computation, is in agreement with such records or
computations made therefrom, except as otherwise specified in such letter;
(b) That no amendment to the Registration Statement in the form in
which the Registration Statement is effective at the date of this Agreement,
filed subsequent to the execution of this Agreement, or supplement to the
Prospectus constituting a part of such Registration Statement, filed
subsequently to the execution of this Agreement, shall contain information
substantially different from that contained in such Registration Statement or
Prospectus which shall be unsatisfactory in substance to you or unsatisfactory
in form to Counsel for the Purchasers;
(c) That prior to the time of purchase, no stop order with respect
to the effectiveness of the Registration Statement shall have been issued under
the Act by the Commission or proceedings therefor initiated or threatened; that
at the time of purchase the Registration Statement, as amended or supplemented,
shall not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that
<PAGE> 20
the Prospectus, as amended or supplemented, shall not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(d) That since the respective dates as of which information is given
in the Registration Statement and Prospectus and prior to the time of purchase,
no material and unfavorable change in the condition of the Company and its
subsidiaries on a consolidated basis, financial or otherwise, shall have taken
place (other than as referred to in the Registration Statement and Prospectus);
and the Company will, at the time of purchase, deliver to you, with Photostat
copies for delivery to each of the Purchasers, a certificate of its Chairman of
the Board or its President or a Vice President and its Treasurer or an
Assistant Treasurer that such a change has not occurred;
(e) That subsequent to the date of this Agreement and prior to the
time of purchase there shall not have occurred (i) any downgrading in the
rating of any debt securities of the Company by any "nationally recognized
statistical rating organization" (as defined for purposes of Rule 436(g) under
the Act); (ii) any banking moratorium declared by Federal or New York
authorities; or (iii) any outbreak or escalation of major hostilities in which
the United States is involved, any declaration of war by Congress or any other
substantial national or international calamity or emergency if, in your
reasonable judgment, the effect of any such outbreak, escalation, declaration,
calamity or emergency makes it impractical or inadvisable to proceed with
completion of the sale of and payment for the Purchased Stock; and
<PAGE> 21
(f) That the Company shall have performed such of its obligations
under this Agreement as are to be performed by the terms hereof at or before
the time of purchase.
Section 6. Conditions of Company's Obligations. The obligations of
the Company with respect to the delivery of the Purchased Stock shall be
subject to the following conditions:
(a) That prior to the time of purchase, no stop order with respect
to the effectiveness of the Registration Statement shall have been issued under
the Act by the Commission or proceedings therefor initiated or threatened; and
(b) That no order or supplement to any order of the Commission
relating to the issue or sale of the Purchased Stock or to the application of
the proceeds thereof shall contain any conditions or provisions that are not
acceptable to the Company, it being understood that no order in effect as of
the date of this Agreement contains any such unacceptable conditions or
provisions.
Section 7. Termination of Agreement. If a public offering of the
Purchased Stock is to be made by the Purchasers, this Agreement may be
terminated at any time prior to 5:30 P.M., New York City Time, on the first
business day following the date of this Agreement (but not after the initial
public offering of the Purchased Stock) by you with the consent of the
Purchasers (including you) who have agreed to purchase in the aggregate 50% or
more of the number of shares of the Purchased Stock agreed to be purchased
hereunder, if trading in common stock on the New York Stock Exchange shall have
been suspended or limited (other than a temporary suspension in trading to
provide for an orderly market), or minimum prices shall have been established
on such exchange, or a banking moratorium shall have been declared by
<PAGE> 22
either Federal or New York State authorities. This Agreement may also be
terminated by you, with like consent whether or not a public offering of the
Purchased Stock has been made, at any time prior to the time of purchase, if
the Company or any of its subsidiaries shall have sustained a loss by fire,
flood, accident or other calamity that is substantial with respect to the
property of the Company and its subsidiaries as a whole and that, in your
judgment, shall render it inadvisable to proceed with the delivery of the
Purchased Stock, whether or not such loss shall have been insured.
The time of the "initial public offering," for the purposes of this
Section 7, shall mean the time, after the execution of this Agreement, of the
release by you for publication of the first newspaper advertisement referring
to the Purchased Stock, or the time, after the execution of this Agreement, at
which the Purchased Stock is first generally offered by the Purchasers to the
public or to dealers by letter or telegram or otherwise, whichever shall first
occur.
If this Agreement is terminated as provided in this Section 7, the
Company and each other Purchaser shall be notified promptly by telephone or
telegram, confirmed by letter. If this Agreement shall not be carried out by
any Purchaser for any reason permitted under this Agreement or if the sale of
the Purchased Stock to the Purchasers as herein contemplated shall not be
carried out because the Company shall be unable in good faith to comply with
any of the terms of this Agreement or if the Company shall not deliver the
Purchased Stock for any reasons specified in Section 6 hereof, the Company
shall not be under any obligation under this Agreement (except that the Company
shall remain liable to the extent provided in Sections 4(j), 4(k), 9 and 11
hereof) and the Purchasers (except any Purchasers in default hereunder) shall
be under no liability to the Company nor be under any liability under this
Agreement to one another.
<PAGE> 23
Section 8. Default of Purchasers. If any Purchaser or Purchasers
default in their obligations to purchase Purchased Stock hereunder and the
aggregate number of shares of Purchased Stock which such defaulting Purchaser
or Purchasers agreed but failed to purchase is 10% of the total number of
shares of Purchased Stock or less, you may make arrangements satisfactory to
the Company for the purchase of such Purchased Stock by other persons,
including any of the Purchasers, but if no such arrangements are made by the
time of purchase, the non-defaulting Purchasers shall be obligated severally,
in proportion to their respective commitments hereunder, to purchase the
Purchased Stock which such defaulting Purchasers agreed but failed to purchase.
If any Purchaser or Purchasers so default and the aggregate number of shares of
Purchased Stock with respect to which such default or defaults occurs is more
than the above percentage and arrangements satisfactory to you and the Company
for the purchase of such Purchased Stock by other persons are not made within
thirty-six (36) hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Purchaser or the Company, except as
provided in Sections 4(j), 4(k), 10(b) and 11. In the event that any Purchaser
or Purchasers default in their obligation to purchase Purchased Stock
hereunder, the Company may, by prompt written notice to the non-defaulting
Purchasers, postpone the time of purchase for a period of not more than five
(5) full business days in order to effect whatever changes may thereby be made
necessary in the Registration Statement or the Prospectus or in any other
documents, and the Company will promptly file any amendments to the
Registration Statement or supplements to the Prospectus which may thereby be
made necessary. Nothing in this Section 8, however, shall obligate any
Purchaser to purchase or find purchasers for any number of shares of Purchased
Stock in excess of that agreed to be purchased by such Purchaser under the
terms of this Agreement; nor shall anything herein operate to limit any rights
which the Company may have against any Purchaser who shall
<PAGE> 24
for any reason other than a reason permitted hereunder fail to purchase the
number of shares of Purchased Stock purchasable by it upon tender thereof in
accordance with the terms of this Agreement. The term "Purchaser" as used in
this Agreement shall refer to and include each Purchaser substituted under this
Section 8, with like effect as if said substituted Purchaser had originally
been named in Schedule A.
Section 9. Indemnity by the Company. The Company agrees to
indemnify, defend and hold harmless each Purchaser and each person, if any, who
controls any Purchaser within the meaning of Section 15 of the Act or Section
20 of the Exchange Act, from and against any loss, expense, liability or claim
(including the reasonable cost of investigation) which, jointly or severally,
any such Purchaser or person may incur under the Act or otherwise, insofar as
such loss, expense, liability or claim arises out of or is based upon any
alleged untrue statement of a material fact contained in the Registration
Statement (or in the Registration Statement as amended by any post-effective
amendment thereof) or in the Prospectus (the term "Prospectus" for the purpose
of this Section 9 shall be deemed to include any preliminary prospectus, the
prospectus included in the Registration Statement at the time it became
effective, the Prospectus, the Prospectus as amended or supplemented and any
document incorporated by reference therein pursuant to Item 12 of Form S-3), or
arises out of or is based upon any alleged omission to state a material fact
required to be stated in either such Registration Statement or such Prospectus
or necessary to make the statements made in such Registration Statement not
misleading or necessary to make the statements in such Prospectus, in the light
of the circumstances under which they were made, not misleading, except insofar
as any such loss, expense, liability or claim arises out of or is based upon
any alleged untrue statement of a material fact contained in information
furnished in writing to the Company through you for use in such
<PAGE> 25
Registration Statement or in such Prospectus or arises out of or is based upon
any alleged omission from information furnished in writing to the Company on
behalf of any Purchaser through you to state a material fact in connection with
such information required to be stated therein or necessary to make such
information when used in such Registration Statement not misleading, or
necessary to make such information when used in such Prospectus, in the light
of the circumstances under which it was used, not misleading. The Company's
agreement to indemnify or reimburse any such Purchaser or person with respect
to any such loss, expense, liability or claim is expressly conditioned upon its
being notified of the action in connection therewith brought against such
Purchaser or person by letter or telegram addressed to the Company within ten
days after the summons or other first legal process which discloses the nature
of the liability or claim shall have been personally served upon such Purchaser
or person (or after he shall have received notice of such service upon any
agent designated by him) but failure so to notify the Company shall not relieve
the Company from any liability which it may have to such Purchaser or person
otherwise than on account of the indemnity agreement contained in this Section
9. The Company shall be entitled to assume the investigation of any liability
or claim or the defense of any suit brought to enforce any such liability or
claim and the Purchaser or person against whom such suit is brought shall be
entitled to participate in such investigation and defense. If the Company
assumes the investigation and defense, such investigation and defense shall be
conducted by counsel of good standing chosen by the Company and satisfactory
to such Purchaser or person, and in such case such Purchaser or person shall
bear the expense of its or such person's investigation and the fees and
expenses of any additional counsel retained by such Purchaser or person, except
those incurred after notifying the Company of such claim and prior to being
advised by the Company of its intention to assume such investigation or
defense. If the Company does not assume the investigation of any such claim
<PAGE> 26
or the defense of any such suit, or if the Company shall agree in writing to
pay such fees and expenses, or if such Purchaser or person shall reasonably
conclude that there may be defenses available to it or such person which are
different from or in addition to those available to the Company, the Company
will reimburse such Purchaser or person for the reasonable fees and expenses of
any counsel retained by such Purchaser or person; provided, however, that in
such event the Company shall be entitled, at its own expense, to participate in
the investigation or defense.
The Company's indemnity agreement contained in this Section 9 and its
warranties and representations in this Agreement shall remain in full force and
effect regardless of any investigation made by or on behalf of any Purchaser or
controlling person, and shall survive any termination of this Agreement or the
issue and delivery of the Purchased Stock.
The Company agrees promptly to notify the Purchasers of the
commencement of any litigation or proceedings against the Company or any of its
officers or directors in connection with the issue and sale of the Purchased
Stock, or such Registration Statement or Prospectus.
Section 10. Warranties of and Indemnity by Purchasers. (a) Each
Purchaser warrants and represents that the information furnished in writing to
the Company through you for use in the Registration Statement or in the
Prospectus does not contain an untrue statement of a material fact and does not
omit to state a material fact in connection with such information required to
be stated therein or necessary to make such information when used in such
Registration Statement not misleading, or necessary to make such information
when used in such Prospectus, in the light of the circumstances under which it
was used, not misleading. Each Purchaser, in addition to any other information
furnished to the Company through you for use in the Registration Statement
<PAGE> 27
and Prospectus, hereby authorizes you to furnish to the Company the information
with regard to the terms of offering of the Purchased Stock by such Purchaser,
for use in the Registration Statement.
(b) Each Purchaser severally agrees to indemnify, defend and hold
harmless the Company and its directors and officers and each person, if any,
who controls the Company within the meaning of Section 15 of the Act or Section
20 of the Exchange Act, from and against any loss, expense, liability or claim
(including the reasonable cost of investigation) which, jointly or severally,
the Company or any such person may incur under the Act or otherwise, insofar as
such loss, expense, liability or claim arises out of or is based upon any
alleged untrue statement of a material fact contained in information furnished
in writing to the Company through you for use in the Registration Statement (or
in the Registration Statement as amended by any post-effective amendment
thereof), or in the prospectus (or in the Prospectus as amended or
supplemented), or arises out of or is based upon any alleged omission from
information furnished in writing to the Company on behalf of any Purchaser
through you to state a material fact in connection with such information
required to be stated therein or necessary to make such information when used
in such Registration Statement not misleading, or necessary to make such
information when used in such Prospectus, in the light of the circumstances
under which it was used, not misleading. The agreement of such Purchaser to
indemnify or reimburse the Company or any such person with respect to any such
loss, expense, liability or claim is expressly conditioned upon such Purchaser
being notified of the action in connection therewith brought against the
Company or any such person, by letter or telegram addressed to you, within ten
days after the summons or other first legal process which
<PAGE> 28
discloses the nature of the liability or claim shall have been personally
served upon the Company or any such person (or after the Company or any such
person shall have received notice of such service on any agent designated by
the Company or any such person), but failure so to notify such Purchaser shall
not relieve such Purchaser from any liability which it may have to the Company
or any such person otherwise than on account of the indemnity agreement
contained in this Section 10(b). Such Purchaser shall be entitled to assume
the investigation of any liability or claim and the defense of any suit brought
to enforce any such liability or claim, if such liability or claim is based
solely upon such alleged misstatement or omission on the part of such
Purchaser, and the Company or any person against whom such action is brought
shall be entitled to participate in such investigation and defense. If such
Purchaser shall be entitled to assume and does assume the investigation and
defense, such investigation and defense shall be conducted by counsel of good
standing chosen by such Purchaser and satisfactory to the Company or such
person, and in such case the Company or such person shall bear the expense of
its investigation and the fees and expenses of any additional counsel retained
by the Company or such person except those incurred after notifying such
Purchaser of such claim and prior to being advised by such Purchaser of its
intention to assume such investigation or defense. If such Purchaser shall be
entitled to assume but does not assume the investigation of any such claim or
the defense of any such suit, or if such Purchaser shall agree in writing to
pay such fees and expenses, or if the Company or such person shall reasonably
conclude that there may be defenses available to it or such person which are
different from or in addition to those available to such Purchaser, such
Purchaser will reimburse the Company or such person for the reasonable fees and
expenses of any counsel retained by the Company or such person; provided,
however, that in such event, such Purchaser shall be entitled, at its own
expense, to participate in the investigation or defense.
<PAGE> 29
The indemnity agreement on the part of such Purchaser contained in
this Section 10(b) and the warranties and representations of such Purchaser
contained in this Agreement shall remain in full force and effect regardless of
any investigation made by or on behalf of the Company or such person, and shall
survive any termination of this Agreement or the issue and delivery of the
Purchased Stock.
Each Purchaser agrees promptly to notify the Company and each other
Purchaser of the commencement of any litigation or proceedings against such
Purchaser in connection with the issue and sale of the Purchased Stock, or such
Registration Statement or Prospectus.
Section 11. Contribution by the Company and the Purchasers. (a)If
the indemnification provided for in Section 9 or Section 10 is unavailable to
an indemnified party under such Sections in respect of any losses, expenses,
liabilities or claims referred to therein, then each applicable indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
expenses, liabilities or claims (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and the
Purchasers on the other hand from the offering of the Purchased Stock or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault
of the Company on the one hand and of the Purchasers on the other in connection
with the statements or omissions which resulted in such losses, expenses,
liabilities or claims, as well as any other relevant equitable consideration.
The relative benefits received by the Company on the one hand and the
Purchasers on the other shall be deemed to be in the same proportion as the
total proceeds from the offering (net of underwriting discounts and commissions
<PAGE> 30
but before deducting expenses) received by the Company bear to the underwriting
discounts and commissions received by the Purchasers, in each case as set forth
in the table on the cover page of the Prospectus or Prospectus Supplement with
respect to the Purchased Stock if the same be so set forth. The relative fault
of the Company on the one hand and of the Purchasers on the other shall be
determined by reference to, among other things, whether the untrue statement or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or by
the Purchasers through you and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or
omission. The amount paid or payable by a party as a result of the losses,
claims, damages and liabilities referred to above shall be deemed to include
any legal or other fees or expenses reasonably incurred by such party in
connection with investigating or defending any claim or action.
(b) The Company and Purchasers agree that it would not be just and
equitable if contribution pursuant to this Section 11 were determined by pro
rata allocation (even if the Purchasers were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 11, no Purchaser
shall be required to contribute any amount in excess of the amount by which the
total price at which the Purchased Stock purchased by it and distributed to the
public were offered to the public exceeds the amount of any damages which such
Purchaser has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Purchasers' obligations to contribute
pursuant to this Section 11 are several in proportion to their respective
underwriting commitments and not joint.
<PAGE> 31
(c) The contribution agreement contained in this Section 11 shall
remain in full force and effect regardless of any investigation made by or on
behalf of any Purchaser, or any person who controls any Purchaser within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, or by or on
behalf of the Company, its directors and officers or any person who controls
the Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, and shall survive any termination of this Agreement or the
issuance and delivery of the Purchased Stock.
Section 12. Notices. All notices hereunder shall, unless otherwise
expressly permitted, be in writing and be delivered at or mailed to the
following address, or be sent by telegram to the following address: if to the
Purchasers or you, to you at your address as it appears in the Purchase
Agreement, and if to the Company, to the Company at 625 Liberty Avenue, CNG
Tower, Pittsburgh, Pennsylvania 15222-3199.
Section 13. Parties in Interest. The Agreement herein set forth has
been and is made solely for the benefit of the Purchasers and the Company, and
the directors, officers and controlling persons referred to in Sections 9, 10
and 11 hereof, and their respective successors, assigns, executors and
administrators and no other person shall acquire or have any right under or by
virtue of this Agreement.
The section headings in this Agreement have been inserted as a matter
of convenience of reference and are not part of this Agreement. The term
"Purchasers", "persons", "firms" and "corporations" as used herein shall
include the singular of such terms as well as the plural. The term "successor"
to any Purchaser shall not include any subsequent holder of the Purchased Stock
merely by reason of such holding.
<PAGE> 32
Section 14. Construction. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.
Section 15. Counterparts. This Agreement may be executed in one or
more counterparts and it is not necessary that the signatures of all parties
appear on the same counterpart, but such counterparts together shall constitute
but one and the same agreement.
<PAGE> 33
CONSOLIDATED NATURAL GAS COMPANY
PURCHASE AGREEMENT
[COMMON STOCK
(par value $2.75 per share)]
[CUMULATIVE PREFERRED STOCK
(par value $_____ per share)](1)
Dated: _____________, 199__
Consolidated Natural Gas Company
625 Liberty Avenue
CNG Tower
Pittsburgh, Pennsylvania 15222-3199
Dear Sirs:
Referring to the [Common Stock, par value $2.75 per share]
[Cumulative Preferred Stock, par value $_____ per share](1) (the "Registered
Stock"), of Consolidated Natural Gas Company (the "Company") covered by a
registration statement on Form S-3 (No. 33- ) (as defined in Section
2(a) of this Agreement, the "Registration Statement"), on the basis of the
representations, warranties and agreements contained in this Agreement, but
subject to the terms and conditions herein set forth, the purchasers named in
Schedule A hereto (the "Purchasers") agree to purchase, severally, and the
Company agrees to sell to the Purchasers, severally, the number of shares of
the Company's Registered Stock (the "Firm Stock") set forth opposite the names
of the Purchasers on Schedule A hereto.
The Company also grants to the Purchasers an option to purchase
additional shares of the Company's Registered Stock (the "Additional Stock") on
the terms and conditions contained in this
_________________________
(1) Appropriate designation to be inserted.
(2) To be omitted, or completed and included, as appropriate.
<PAGE> 34
Agreement for the sole purpose of covering over-allotments. The Firm Stock and
the Additional Stock are collectively referred to as the "Purchased Stock".
The price at which the Purchased Stock shall be purchased from the
Company by the Purchasers shall be $_____ per share [plus accrued dividends, if
any, from _____________,
199__].(1) The initial public offering price shall be $_____ per share [plus
accrued dividends, if any, from _____________, 199__].(2) The Purchased Stock
will be offered as set forth in the Prospectus Supplement relating to such
Registered Stock.
All of the provisions contained in the document entitled
"Consolidated Natural Gas Company, [Common Stock (par value $2.75 per share)]
[Cumulative Preferred Stock (par value $_____ per share)](1), Standard Purchase
Agreement Provisions," a copy of which has been filed as Exhibit ___ to the
Registration Statement and has been previously furnished to us, are hereby
incorporated by reference in their entirety and shall be deemed to be a part of
this Agreement to the same extent as if such provisions had been set forth in
full herein.
The "time of purchase" (as defined in Section 3 of the aforementioned
Standard Purchase Agreement Provisions) shall be ____________________.(2)
[The payment for the Purchased Stock shall be made in
________________________ funds.](2)
[The place to which the Purchased Stock may be checked and packaged
shall be _________________.](2)
[The place at which the Purchased Stock shall be purchased shall be
_______________.](2)
Notices to the [Purchasers] [Representatives](1) shall be sent to the
following addresses:
________________________
(1) Appropriate designation to be inserted.
(2) To be omitted, or completed and included, as appropriate.
<PAGE> 35
[We represent that we are authorized to act for the several
Purchasers named in Schedule A hereto in connection with this financing and any
action under this Agreement by any of us will be binding upon all the
Purchasers.](3)
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed duplicate hereof,
whereupon it will become a binding agreement between the Company and the
several Purchasers in accordance with its terms.
Very truly yours,
By_____________________________
By______________________________
[Acting on behalf of and as
Representative of the several
Purchasers named in Schedule
A hereto.](1)
The foregoing Purchase Agreement
is hereby confirmed as of the
date first above written.
CONSOLIDATED NATURAL GAS COMPANY
By______________________________
Title:
___________________________
(1) Appropriate designation to be inserted.
(2) To be omitted, or completed and included, as appropriate.
(3) To be included if the Purchase Agreement is being executed by one or more
Purchasers acting as Representatives for purposes of this Agreement.
(4) To be included if the Purchase Agreement is being executed by one or more
Purchasers acting as Representatives for purposes of this Agreement.
<PAGE> 36
SCHEDULE A
Number of
Name of Purchaser Shares of Firm Stock
_________________ ____________________
<PAGE> 1
EXHIBIT O
Proposed Notice
Pursuant to Rule 22(f)
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35- )
Filings Under the Public Utility Holding Company Act of 1935 ("Act")
November , 1995
Notice is hereby given that the following filing(s) has/have been made
with the Commission pursuant to provisions of the Act and rules promulgated
thereunder. All interested persons are referred to the application(s) and/or
declaration(s) for complete statements of the proposed transaction(s)
summarized below. The application(s) and/or declaration(s) and any amendments
thereto is/are available for public inspection through the Commission's Office
of Public Reference.
Interested persons wishing to comment or request a hearing on the
application(s) and/or declaration(s) should submit their views in writing by
November , 1995 to the Secretary, Securities and Exchange Commission,
Washington, D.C. 20549, and serve a copy on the relevant applicant(s) and/or
declarant(s) at the address(es) specified below. Proof of service (by
affidavit or, in case of an attorney at law, by certificate) should be filed
with the request. Any request for hearing shall identify specifically the
issues of fact or law that are disputed. A person who so requests will be
notified of any hearing, if ordered, and will receive a copy of any notice or
order issued in the matter. After said date, the application(s) and/or
declaration(s), as filed or as amended, may be granted and/or permitted to
become effective.
_____________________________
<PAGE> 2
EXHIBIT O
Consolidated Natural Gas Company, Et Al. (70- )
________________________________________
Consolidated Natural Gas Company ("Consolidated"), a registered holding
company, CNG Tower, Pittsburgh, Pennsylvania 15222-3199, and its wholly owned
nonutility subsidiary companies, Consolidated System LNG Company, CNG Research
Company, CNG Financial Services, Inc. and Consolidated Natural Gas Service
Company, Inc., located at CNG Tower, Pittsburgh, Pennsylvania 15222-3199; CNG
Coal Company, CNG Producing Company, and its subsidiary CNG Pipeline Company,
CNG Tower, 1450 Poydras Street, New Orleans, Louisiana 70112-6000; CNG
Transmission Corporation and CNG Storage Service Company, 445 West Main Street,
Clarksburg, West Virginia 26301; CNG Energy Services Corporation, CNG Power
Company and its subsidiary CNG Market Center Services, Inc., One Park Ridge
Center, P.O. Box 15746, Pittsburgh, PA 15244-0746; and Consolidated's wholly
owned public-utility subsidiary companies, The Peoples Natural Gas Company, CNG
Tower, Pittsburgh, Pennsylvania 15222-3199; The East Ohio Gas Company, 1717
East Ninth Street, Cleveland, Ohio 44115; Virginia Natural Gas, Inc., 5100 East
Virginia Beach Boulevard, Norfolk, Virginia 23501-3488; Hope Gas, Inc., P.O.
Box 2868 Clarksburg, West Virginia 26302-2868; and West Ohio Gas Company, 319
West Market Street, Lima Ohio 45802, have filed an application-declaration
("Application") under Sections 6(a), 7, 9(a), 10 and 12(b) of the Act and Rules
43 and 45 thereunder. All directly and indirectly owned subsidiaries of
Consolidated are referred to individually as "Subsidiary" and collectively as
"Subsidiaries." Consolidated and its Subsidiaries are referred to herein as
the "Consolidated System."
<PAGE> 3
I. OVERVIEW OF OMNIBUS TYPE APPLICATION
The Application contains the request of Consolidated and its Subsidiaries
for authorization for financing of the Consolidated System for the period
beginning with the effective date of an order issued in this proceeding through
December 31, 2000. The Application seeks to consolidate in one filing all of
the routine-type financing authorizations for the Consolidated System, and
simultaneously asks for a significant amount of flexibility as to these
financings - both as to characteristics and as to amounts. The Application
approaches financing from a system-wide viewpoint, and does not concentrate on
the details of the individual components within the over-all system financing
program.
Consolidated and its subsidiaries would also be limited to issuing only
Approved Securities, which are securities of a type which have already been
approved, or which may heretofore be approved, by the Commission pursuant to
orders in other proceedings under the Act. Consolidated also seeks to organize
and use new corporations trusts, partnerships or other entities (individually a
"Financing Entity") which would be created for the purpose of facilitating
financings involving the issuance of monthly or quarterly income preferred
securities.
Consolidated and its Subsidiaries would also be limited to issuing only
Approved Securities, which are securities of a type which have already been
approved, or which may be hereafter be approved, by the Commission pursuant to
orders or approvals in other proceedings under the Act, and any security which
is substantially similar to such a security in form or substance.
<PAGE> 4
The following describes which authorizations are specifically requested by
each of the Consolidated subsidiaries which are a party to this proceeding.
* Request to issue Approved Securities not covered by Rule 52, guarantee or
otherwise support subsidiary obligations and/or to form a Financing Entity.
CNG Energy Services Corporation
CNG Storage Service Company
CNG Power Company
CNG Financial Services, Inc.
These four Subsidiaries and any Financing Entity of theirs are collectively
referred to herein as the "Issuing Non-utility Subsidiaries."
* Request for utility company issuance of short-term debt to Consolidated,
which is not subject to state utility commission approval.
The East Ohio Gas Company
The Peoples Natural Gas Company
West Ohio Gas Company
These three Subsidiaries are collectively referred to herein as the "Issuing
Utility Subsidiaries."
* Request to amend the certificate of incorporation to increase authorized
capitalization to allow for issuance of additional shares of common stock.
All Subsidiary parties
* Request to buy back shares of its common or preferred stock from its
immediate parent company.
All Subsidiary parties
All normal course of business financings by Subsidiaries will occur
pursuant to either outstanding Commission authorizations until the expiration
<PAGE> 5
thereof, or under exemptive Rule 52, and are not a part of the authorizations
requested herein.
Due to statutory requirements, the authorization requested herein to
engage in external or intra-system financing without additional Commission
approval do not apply in the case of any financing (other than through the use
of internally generated funds) for the purpose of investing in either an exempt
wholesale generator ("EWG") or a foreign utility company ("FUCO") as defined in
Sections 32 and 33 of the Act, respectively. Nor would any financing be
allowed under the above procedures if it would cause Consolidated to not be in
compliance with Rules 53 and 54 promulgated under the Act.
II. PARAMETERS FOR AUTHORIZATIONS
The Application makes requests for authority, without any additional prior
Commission approvals, to engage in future financing transactions for which the
specific terms and conditions are not at this time known. The general
conditions for doing such financing activities without further prior approval
are as follows.
CONSOLIDATED DEBT OF INVESTMENT GRADE. Consolidated would be authorized
to engage in the financing activities described herein as long as its long-term
debt rating is of investment grade as established by a nationally recognized
statistical rating organization.
EFFECTIVE COST OF MONEY ON BORROWINGS. The effective cost of money on
borrowings occurring pursuant to the authorizations granted under the
Application will not exceed 300 basis points over comparable term U. S.
Treasury securities.
<PAGE> 6
EFFECTIVE COST OF MONEY ON OTHER APPROVED SECURITIES. The effective cost
of money on preferred stock and other fixed income oriented Approved Securities
will not exceed 500 basis points over 30 year term U.S. Treasury securities.
MATURITY OF DEBT. The maturity of indebtedness will not exceed 50 years.
ISSUANCE EXPENSES. The underwriting fees, commissions, or other
remuneration paid in connection with the non-competitive bid issue, sale or
distribution of a security pursuant to the Application will not exceed 5% of
the principal or total amount of the financing.
AGGREGATE DOLLAR LIMIT. The aggregate amount of external financing
effected by Consolidated during the approximate 5 year period will not exceed
$3.5 billion; for purpose of calculating the amount effected only outstanding
amounts under revolving credit arrangements will be counted. Further, credit
support of underlying Subsidiary obligations (because the same would be subject
to a separate limitation) would not be included in the calculation.
Consolidated also requests to engage in external financing for the purpose of
refinancing outstanding securities up to an aggregate amount not to exceed $3.5
billion during the approximate 5 year period.
III. DESCRIPTION OF SPECIFIC TYPES OF FINANCING
A. Consolidated External Financings
Consolidated obtains funds externally through short-term debt financing,
including commercial paper sales; long-term debt financing, such as debentures
and notes; and sales of capital stock. Debt and preferred stock financings can
<PAGE> 7
be either privately placed or publicly distributed. Common stock can be issued
and sold pursuant to underwriting agreements of a type generally standard in
the industry. Public distributions can be pursuant to private negotiation with
underwriters, dealers or agents as discussed below or effected through
competitive bidding among underwriters. All such debt and stock sales are at
rates or prices and under conditions negotiated or based upon, or otherwise
determined by, competitive capital markets. Common stock is also sold pursuant
to various existing or new employee benefit plans and dividend reinvestment
plans.
Consolidated may sell the debt or equity securities covered by this
Application in any of the following ways: (i) through underwriters or dealers;
(ii) directly to a limited number of purchasers or to a single purchaser, or
(iii) through agents. If underwriters are used in the sale of the securities,
such 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. The securities may be offered to the public
either through underwriting syndicates (which may be represented by managing
underwriters designated by the Company) or directly by one or more underwriters
acting alone. The securities may be sold directly by the Company or through
agents designated by the Company from time to time. If dealers are utilized in
the sale of any of the securities, the Company will sell such securities to the
dealers, as principal. Any dealer may then resell such securities to the
public at varying prices to be determined by such dealer at the time of resale.
If equity securities are being sold in an underwriting offering, the
Company may grant the underwriters thereof a "green shoe" option permitting the
<PAGE> 8
purchase from the Company at the same price additional equity securities (an
additional 15% under present guidelines) then being offered solely for the
purpose of covering over-allotments.
If debt securities are being sold, they may be sold pursuant to "delayed
delivery contracts" which permit the underwriters to locate buyers who will
agree with the Company to buy the debt at the same price but at a later date
than the date of the closing of the sale to the underwriters.
1. Short-term Financing
To provide financing for general corporate purposes, including financing
gas storage inventories, other working capital requirements and construction
spending until long term financing can be obtained, Consolidated would continue
to sell commercial paper, from time to time, in established domestic or
European commercial paper markets. Such commercial paper would be sold to
dealers at the discount rate per annum prevailing at the date of issuance for
commercial paper of comparable quality and maturities sold to commercial paper
dealers generally. It is expected that the dealers acquiring commercial paper
from Consolidated will reoffer such paper at a discount to corporate,
institutional and, with respect to European commercial paper, to individual
investors.
Back-up bank lines of credit for 100% of the outstanding commercial paper
are required by credit rating agencies. To satisfy this requirement,
Consolidated proposes to establish back-up bank lines in an aggregate principal
amount not to exceed the amount of authorized commercial paper. Consolidated
would borrow, repay and reborrow under these lines from time to time, without
collateral, to the extent that it becomes impracticable to sell commercial
<PAGE> 9
paper due to market conditions or otherwise. Loans under these lines shall
have a maturity date not more than one year from the date of each borrowing.
Consolidated may engage in other types of short-term financing as it may
deem appropriate in light of its needs and market conditions at the time of
issuance. Such short-term financing could include, without limitation, bank
lines and debt securities issued under its debt securities indenture.
2. Long-term Financing
Consolidated would engage in long-term financing with such terms and
conditions as it may deem appropriate in the context of its needs and financial
market conditions at the time of issuance. Any long-term debt would have such
designation, aggregate principal amount, maturity, interest rate(s) and terms
of payment of interest, redemption provisions and sinking fund terms,
conversion or put terms and other terms and conditions as Consolidated may at
the time of issuance determine. Examples of such long-term securities would
include convertible debt, medium term notes, monthly income debt securities,
securities with call or put options, etc.
3. Stock Financing
Consolidated may also issue and sell preferred or common stock, equity
Approved Securities, or issue stock upon the exercise of convertible debt or
pursuant to rights, options, warrants and similar securities. Financing
Entities may be used in connection with the issuance of monthly or quarterly
income preferred securities, in which case Consolidated may issue its debt or
other securities to such Financing Entities to back-up the obligations of such
Financing Entities and to capitalize such entities. Consolidated may also buy
back shares of such stock, during the authorization period.
<PAGE> 10
Consolidated proposes that it be allowed, subject to further Commission
approval, to (i) amend its Certificate of Incorporation to increase its
authorized capital as deemed necessary and appropriate by Consolidated for
proper corporate purposes, (ii) eliminate the current provision in its
certificate of incorporation authorizing its class of preferred stock and
substitute therefor new provisions authorizing a class of preferred stock ("New
Preferred Stock") and (iii) solicit proxies through a proxy statement, filed
under and meeting the standards of the 1934 Act, requesting shareholder
approval of such amendments to the certificate of incorporation. The New
Preferred Stock would permit the Board of Directors of Consolidated, or a
committee thereof as authorized by Delaware law, to set the terms and
conditions of each Series of New Preferred Stock as appropriate to meet the
Company's needs and market conditions as they exist at the time of issuance.
Any New Preferred Stock issued would have such designation, liquidation
preferences, issue price(s), dividend rate(s) and terms of payment of
dividends, redemption provisions and sinking fund terms, voting or other
special rights, conversion terms and other terms and conditions as Consolidated
may at the time of issuance determine.
Proxy solicitation material relating to amendments to the certificate of
incorporation will meet the requirements of Schedule 14A under the 1934 Act,
and will be reviewed for compliance with such regulation by the Commission
before the proxy material is sent to shareholders. Such proxy solicitation
material will be incorporated by reference into this Application when it is
filed with the Commission under the 1934 Act, and request is made under Rule 62
of the Act to begin solicitation of proxies when such filing is made.
Consolidated requests retention of jurisdiction over the implementation of the
amendments pending the making of the 1934 Act filings and completion of the
record.
<PAGE> 11
Consolidated obtains funds through the sale of its common stock sold
pursuant to various employee benefit plans and a dividend reinvestment plan.
From time to time in the future, other similar plans may be adopted by
Consolidated, existing plans may be changed and Consolidated may issue
securities to a trust to fund non-qualified employee benefit plans and
agreements. Consolidated also acquires treasury shares through the operations
of such employee plans. Additionally, Consolidated is authorized through
December 31, 1995 to acquire up to 4,000,000 shares of its common stock in the
open market. Consolidated now proposes to sell, reacquire and resell shares of
common stock pursuant to these existing plans and similar plans or arrangements
hereafter adopted, and to engage in purchases of its stock and reissuances of
its treasury shares for reasonable business purposes, without any additional
prior Commission order. Stock transactions of this variety would thus be
treated the same as other stock transactions permitted pursuant to this
Application.
B. Parent-Subsidiary Intra-System Financing
1. Rule 52 Exemption
Due to the Commission's adoption in HCAR No. 26311, dated June 20, 1995,
of amendments to its exemptive Rule 52, most of the financing transactions
between Consolidated and its Subsidiaries would now be exempt pursuant to such
rule. However, to the extent that the transaction (i) involves the issue and
sale of a short-term debt security by an Issuing Utility Subsidiary or (ii)
involves the issue and sale by an Issuing Non-utility Subsidiary of an Approved
Security not currently covered by Rule 52, Rule 52 would not apply. In order
to cover these areas not included within the ambit of Rule 52, request is made
<PAGE> 12
to engage in Consolidated-Issuing Utility Subsidiary short-term debt financings
and Consolidated-Issuing Non-utility Subsidiary Approved Security financings as
described below.
2. Intra-system Financings by Consolidated
Consolidated would continue to provide financing to each of its directly
owned Subsidiaries as required. Such financings would generally continue to be
in the form of open account advances, long-term loans and/or capital stock
purchases, as requested by the Treasurer of each such Subsidiary. Open account
advances will provide funds for general corporate purposes, including gas
storage inventories, other working capital requirements and temporarily for
capital expenditures until long-term financing is obtained and /or cash is
generated internally. Generally, Consolidated's long-term loans to, and
purchase of capital stock from, such Subsidiaries will provide financing for
their capital expenditures, and will be exempt transactions under Rule 52. The
Subsidiaries may also, from time to time as deemed appropriate By them, buy
back shares of their respective common stock from Consolidated.
Open account advances may be made, repaid and remade on a revolving basis,
with interest at the same effective rate of interest as Consolidated's daily
weighted average effective rate of commercial paper, revolving credit and/or
other short-term borrowings. If no such borrowings are outstanding then the
interest rate shall be predicated on the Federal Funds' effective rate of
interest as quoted daily by the Federal Reserve Bank of New York. Such
advances will be made through the CNG System money pool ("Money Pool")
authorized under Commission order dated June 12, 1986, HCAR No. 24128, File No.
70-7258.
<PAGE> 13
Consolidated and its Subsidiaries may engage in other types of Approved
Security financing of their respective Subsidiaries.
3. Changes in Capital Stock of Subsidiaries
The portion of an individual Subsidiary's aggregate financing to be
effected through the sale of stock to Consolidated or other immediate parent
company during the 5 year authorization period cannot be ascertained at this
time. It may happen that the proposed sale of common stock may in some cases
exceed the currently authorized capital stock of such Subsidiary. In addition,
the Subsidiary may chose to use other forms of capital stock. As needed to
accommodate such proposed transactions and to provide for future issues,
request is made for authority to increase any such Subsidiary's authorized
common stock capitalization by an amount deemed appropriate by Consolidated or
other immediate parent company in the instant case, but in no event to exceed
twice the currently authorized amount of common stock capitalization. A
Subsidiary would be able to change the par value, or change between par and no-
par common stock, without additional Commission approval.
C. External Financing by Issuing Non-Utility Subsidiaries
The Issuing Non-utility Subsidiaries are expected to be active in the
development and expansion of energy-related, non-utility businesses in the
Consolidated System. They will be competing with large, well-capitalized
companies in different sectors of the energy industry. In order to accomplish
investments in such competitive arenas, it will be necessary for the Issuing
Non-utility Subsidiaries to have the ability to engage in financing
<PAGE> 14
transactions which are commonly accepted for such types of investments. It is
for this reason that it is requested that the Issuing Non-utility Subsidiaries
be permitted to issue and sell Approved Securities.
V. PARENT COMPANY GUARANTEES
Consolidated and its Subsidiaries request authorization to enter guarantee
arrangements, obtain letters of credit, and otherwise provide credit support
with respect to obligations of their respective Subsidiaries to third parties
as may be needed and appropriate to enable them to carry on in the ordinary
course of their respective businesses. In addition, Consolidated and its
Subsidiaries request authorization to enter into expense agreements with any
Finance Entities formed by them, pursuant to which they would respectively
agree to pay all expenses of such entities to enable them to issue Approved
Securities. The maximum aggregate limit on all such credit support by
Consolidated at any one time will be $1.5 billion. Such authorization of
Consolidated to provide credit support would supersede and replace the current
authorization of Consolidated to guarantee up to $750 million of obligations of
CNG Energy Services Corporation as set forth in Commission order dated November
16, 1993, HCAR No. 25926, File No. 70-8231.
_____________________________
For the Commission, by the Division of Investment Management, pursuant
to delegated authority.
Jonathan G. Katz
Secretary
