------------------
Filed Pursuant
to Rule 424B2
File No. 333-25347
------------------
Prospectus Supplement (to Prospectus dated July 11, 1997)
$400,000,000
CONSOLIDATED NATURAL GAS COMPANY
7 1/4% NOTES DUE OCTOBER 1, 2004
MATURITY
o The Notes will mature on October 1, 2004.
INTEREST
o Interest on the Notes will be payable on April 1 and October 1 of each year,
beginning April 1, 2000.
o Interest will accrue from September 24, 1999.
REDEMPTION
o We cannot redeem the Notes prior to maturity.
o There is no sinking fund.
RANKING
o The Notes will not be secured by any collateral.
o The Notes will rank equally with all of our existing and future
senior unsecured debt and senior to all of our existing and future
subordinated debt.
LISTING
o We do not intend to list the Notes on any securities exchange.
THE COMPANY
o Our principal office is located at CNG Tower, 625 Liberty Avenue,
Pittsburgh, PA 15222. Our telephone number is (412)690-1000.
---------------------------------------------------
===============================================================================
PER NOTE TOTAL
- -------------------------------------------------------------------------------
Public Offering Price 99.77% $399,080,000
Underwriting Discount 0.6% $ 2,400,000
Proceeds to Us (before expenses) 99.17% $396,680,000
- -------------------------------------------------------------------------------
Your purchase price will also include any interest that has accrued on the Notes
since September 24, 1999.
-------------------------------------------------
o The Notes will be delivered to you in global form through the book-entry
delivery system of The Depository Trust Company on September 24, 1999.
o The underwriters named below will purchase the Notes from us on a firm
commitment basis and offer them to you, subject to certain conditions.
CHASE SECURITIES INC.
BANC ONE CAPITAL MARKETS, INC.
MCDONALD INVESTMENTS INC.
MELLON FINANCIAL MARKETS, INC.
PNC CAPITAL MARKETS, INC.
-----------------------------------
The date of this Prospectus Supplement is September 21, 1999.
<PAGE>
In making your investment decision, you should rely only on the
information contained or incorporated by reference in this prospectus supplement
and the attached prospectus. We have not authorized anyone to provide you with
any other information. If you receive any unauthorized information, you must not
rely on it.
We are offering to sell the Notes only in places where sales are
permitted.
You should not assume that the information contained or incorporated by
reference in this prospectus supplement or the attached prospectus is accurate
as of any date other than the date of the information.
--------------------------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
Page
----
Recent Developments .......................... S-3
Short Term Debt and Capitalization ........... S-4
The Company .................................. S-4
Information on Dominion
Resources, Inc. ............................. S-5
Use of Proceeds .............................. S-5
Supplemental Description
of the Notes ................................ S-5
Underwriting ................................. S-6
PROSPECTUS
Page
----
Available Information ......................... 2
Incorporation of Certain Documents
by Reference ................................. 2
The Company and its Subsidiaries .............. 3
Use of Proceeds ............................... 3
Certain Terms and Description of Debt
Securities and Indenture ..................... 4
Description of Common Stock ................... 9
Description of Preferred Stock ................ 12
Book-Entry Securities ......................... 14
Plan of Distribution .......................... 15
Legal Opinions ................................ 15
Experts ....................................... 16
S-2
<PAGE>
RECENT DEVELOPMENTS
On February 22, 1999, we announced with Dominion Resources, Inc. that a
definitive merger agreement was approved by the boards of directors of both
companies. Dominion Resources is a holding company with businesses in regulated
and competitive electric power, natural gas and oil development and selected
financial services. Dominion Resources's principal business subsidiary is
Virginia Electric and Power Company, a regulated public utility engaged in the
generation, transmission, distribution and sale of electric energy in Virginia
and northeastern North Carolina.
Under the merger agreement, as amended, our shareholders would receive
a combination of Dominion Resources common stock and cash with an aggregate firm
value of $66.60 per share of common stock. Up to 60% of the consideration to our
shareholders will be in the form of Dominion Resources common stock and the
balance will be in cash. The companies anticipate that as a result of the
merger, we will become a wholly owned subsidiary of Dominion Resources.
Dominion Resources has publicly announced that it expects to obtain
required SEC approval under the Public Utility Holding Company Act of 1935 of
its plan to have us become a wholly owned subsidiary of Dominion Resources. In
the event that SEC approval of this structure is not obtained, the merger
agreement provides for an alternative structure under which we would be merged
into Dominion Resources with Dominion Resources as the surviving entity. For a
further discussion about the Dominion Resources transaction, see our joint proxy
statement/prospectus incorporated by reference in the prospectus accompanying
this prospectus supplement.
The merger transaction is conditioned, among other things, upon the
approvals of shareholders of both companies, opinions of counsel on the tax-free
nature of the stock portion of the transaction, approvals of various federal
regulatory agencies, and the completion of regulatory processes in the states
where the combined company will operate. The transaction is not conditioned upon
obtaining financing. As of now, the merger has been approved by shareholders of
both companies, the Pennsylvania Public Utility Commission and the Public
Service Commission of West Virginia. The Virginia State Corporation Commission
approved the merger on September 17, 1999 subject to certain conditions, one of
which is that the approvals issued by the SEC are not inconsistent with the
Virginia Commission's order. Decisions by the North Carolina public utility
commission and several federal agencies are pending.
Due to the pending merger, Fitch IBCA, Moody's Investors Service and
Standard & Poor's are reviewing our rated debt for a possible downgrade.
S-3
<PAGE>
SHORT-TERM DEBT AND CAPITALIZATION
The following table sets forth the consolidated short-term debt and
capitalization of the Company at June 30, 1999, and as adjusted to give effect
to the issuance of the Notes and the application of the proceeds thereof.
<TABLE>
<CAPTION>
At June 30, 1999
---------------
Actual As Adjusted
------ -----------
(In millions)
<S> <C> <C>
SHORT-TERM DEBT
Commercial Paper ...................................................... $ 450.9 $ 54.2
Current maturities on long-term Senior Debt ........................... 7.1 7.1
-------- --------
Total short-term debt .............................................. $ 458.0 $ 61.3
======== ========
CAPITALIZATION
Long-term Senior Debt, excluding current
maturities ........................................................... $1,380.3 $1,380.3
Notes offered hereby, net of underwriting discount -- 397.6
-------- --------
Total long-term debt ............................................... $1,380.3 $1,777.0
Common stockholders' equity
Common Stock, par value $2.75 per share, 95,948,802
shares issued ...................................................... 263.9 263.9
Capital in excess of par value ...................................... 567.3 567.3
Retained earnings ................................................... 1,559.6 1,559.6
Treasury stock at cost (2,865 shares) ............................... (0.2) (0.2)
-------- --------
Total common stockholders' equity (1) ............................. 2,390.6 2,390.6
-------- --------
Total capitalization .......................................... $3,770.9 $4,167.6
======== ========
</TABLE>
- ---------------
(1) At June 30, 1999, the common stockholders' equity per share was $24.92
THE COMPANY
Current information concerning us, including the our financial
statements and the related Management's Discussion and Analysis of Financial
Condition and Results of Operations, can be found in various reports we have
filed with the Securities and Exchange Commission. Our reports incorporated by
reference in the prospectus accompanying this prospectus supplement are:
o Annual Report on Form 10-K for the year ended December 31, 1998;
o Quarterly Reports on Form 10-Q for the quarters ended March 31, 1999
and June 30, 1999;
o Current Reports on Form 8-K filed on March 1, 1999, May 7, 1999,
May 20, 1999 and July 1, 1999;
o Our definitive proxy statement dated February 22, 1999; and
o Our definitive joint proxy statement/prospectus dated May 24, 1999.
We also incorporate by reference each of the following documents that we
will file with
S-4
<PAGE>
the SEC after the date of this prospectus supplement but before the end
of the offering of the Notes:
o Reports filed under Sections 13(a) and (c) of the Securities Exchange
Act of 1934;
o Definitive proxy or information statements filed under Section 14 of
the Securities Exchange Act of 1934 in connection with any
subsequent stockholders' meeting; and
o Any reports filed under Section 15(d) of the Securities Exchange Act
of 1934.
INFORMATION ON
DOMINION RESOURCES, INC.
While we have included in and incorporated in this prospectus
supplement by reference information concerning Dominion Resources, Inc. to the
extent it is known or reasonably available to us, Dominion Resources is not
affiliated with us. Although we have no knowledge that would indicate that
statements relating to Dominion Resources included in and incorporated by
reference in this prospectus supplement in reliance upon publicly available
information are inaccurate or incomplete, we were not involved in the
preparation of such information and statements and, for the foregoing reasons,
are not in a position to verify any such information or statements.
USE OF PROCEEDS
The proceeds from the sale of the Notes will be added to our treasury
fund and subsequently used to finance, in part, our 1999 and 2000 capital
expenditures estimated to be approximately $1.5 billion and for the repayment of
short-term debt. As of September 21, 1999, the average interest rate on our
short-term debt was 5.42% with a weighted life of 30 days.
SUPPLEMENTAL DESCRIPTION OF THE NOTES
We will issue the Notes under an Indenture dated as of April 1, 1995
(the "Indenture") between us and United States Trust Company of New York, as
Trustee. Information about the Indenture is in the prospectus under "Certain
Terms and Descriptions of Debt Securities and Indenture."
The interest rate on the Notes will be 71/4% per annum, accruing from
September 24, 1999. We will pay interest on April 1 and October 1 of each year,
starting April 1, 2000. We will pay interest to the persons in whose names the
Notes are registered at the close of business on the March 15 or September 15
preceding the payment date.
We will issue the Notes in book-entry form, as a single Note registered
in the name of the nominee of The Depository Trust Company, which will act as
Depositary, or in the name of the Depositary. Beneficial interests in book-entry
Notes will be shown on, and transfers thereof will be made only through, records
maintained by the Depositary and its participants. Except as described in the
prospectus under "Book Entry Securities", owners of beneficial interests in a
global Note will not be entitled to receive physical delivery of certificates
for the Notes.
We will not have the right to redeem the Notes before their scheduled
maturity and you will not have the right to require us to redeem the Notes
before the scheduled maturity. We are not required to make any sinking fund
payments.
The Notes will be unsecured and will rank on a parity with all other
unsecured and unsubordinated debt of the Company. If the merger with Dominion
Resources is completed utilizing the alternative structure under which we would
be merged into Dominion Resources, the Notes would also rank on a parity with
all of Dominion
S-5
<PAGE>
Resources' unsecured and unsubordinated debt and would be structurally
subordinated to the debt of its subsidiaries.
The covenants described in the accompanying prospectus under "Certain
Terms and Descriptions of Debt Securities and Indenture--Certain Covenants,"
will apply to the Notes, subject to defeasance as described therein. Future
series of Debt Securities issued under the Indenture may or may not have the
benefit of such covenants.
The Notes will be subject to defeasance under the conditions described
in the prospectus. See "Certain Terms and Descriptions of Debt Securities and
Indenture--Legal Defeasance and Covenant Defeasance" in the accompanying
prospectus.
UNDERWRITING
We and the underwriters have entered into a purchase agreement relating
to the offering and sale of the Notes. In the purchase agreement, we have agreed
to sell to each underwriter, and each underwriter has agreed to purchase from
us, the principal amount of Notes that appears opposite its name in the table
below:
Underwriter Principal Amount
----------- ----------------
Chase Securities Inc. .................................... $272,000,000
Banc One Capital Markets, Inc. ........................... 32,000,000
McDonald Investments Inc. ................................ 32,000,000
Mellon Financial Markets, Inc. ........................... 32,000,000
PNC Capital Markets, Inc. ................................ 32,000,000
------------
Total .............................................. $400,000,000
============
The obligations of the underwriters under the purchase agreement,
including their agreement to purchase Notes from us, are several and not joint.
Those obligations are also subject to certain conditions in the purchase
agreement being satisfied. The underwriters have agreed to purchase all of the
Notes if any of them are purchased.
The underwriters have advised us that they propose to offer the Notes
to the public at the public offering price that appears on the cover page of
this prospectus supplement. The underwriters may offer the Notes to selected
dealers at the public offering price minus a selling concession of up to .35% of
the principal amount. In addition, the underwriters may allow, and those
selected dealers may reallow, a selling concession of up to .25% of the
principal amount to certain other dealers. After the initial public offering,
the underwriters may change the public offering price and any other selling
terms.
In the purchase agreement, we have agreed that:
o we will pay our expenses related to the offering of the Notes,
which we estimate will be $200,000; and
o we will indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1993.
The Notes are a new issue of securities, and there is currently no
established trading market for the Notes. In addition, we do not intend to apply
for the Notes to be listed on any securities exchange or arrange for the Notes
to be quoted on any quotation system The underwriters have advised us that they
intend to make a market in the Notes, but they are not obligated to do so. The
underwriters may discontinue any market mak-
S-6
<PAGE>
ing in the Notes at any time in their sole discretion. Accordingly, we cannot
assure you that a liquid trading market will develop for the Notes, that you
will be able to sell your Notes at a particular time or that the prices that you
receive when you sell will be favorable.
In connection with the offering of the Notes, the underwriters may
engage in overallotment, stabilizing transactions and syndicate covering
transactions in accordance with Regulation M under the Securities Exchange Act
of 1934. Overallotment involves sales in excess of the offering size, which
creates a short position for the underwriters. Stabilizing transactions involve
bids to purchase the Notes in the open market for the purpose of pegging, fixing
or maintaining the price of the Notes. Syndicate covering transactions involve
purchases of the Notes in the open market after the distribution has been
completed in order to cover short positions. Stabilizing transactions and
syndicate covering transactions may cause the price of the Notes to be higher
than it would otherwise be in the absence of those transactions. If the
underwriters engage in stabilizing or syndicate covering transactions, they may
discontinue them at any time.
Certain of the underwriters or their affiliates engage from time to
time in various general financing and banking transactions with us and our
affiliates.
S-7
<PAGE>
[This Page Intentionally Left Blank]
<PAGE>
PROSPECTUS
$1,000,000,000
CONSOLIDATED NATURAL GAS COMPANY
DEBT SECURITIES
PREFERRED STOCK
COMMON STOCK
----------
Consolidated Natural Gas Company (the "Company") may offer from time to
time (i) its debt securities (the "Debt Securities"), which may be convertible
into shares of common stock, par value $2.75 per share, of the Company (the
"Common Stock"), (ii) shares of its preferred stock, par value $100.00 per share
(the "Preferred Stock"), which may be convertible into shares of Common Stock or
exchangeable for Debt Securities, and (iii) shares of its Common Stock. Each
share of Common Stock issued hereunder shall be accompanied by a Right as
described in "Description of Common Stock-Common Stock Purchase Rights". The
Preferred Stock and the Common Stock are collectively referred to as the "Equity
Securities", and the Debt Securities and the Equity Securities are collectively
referred to as the "Securities". The Securities offered pursuant to this
Prospectus may be offered separately or together in one or more series up to an
aggregate public offering price of $1,000,000,000 (or the equivalent thereof in
foreign currency or currency units) at individual prices and on terms to be
determined in light of market conditions at the time of the offering and in
conformity with the requirements of the Public Utility Holding Company Act of
1935 (the "Holding Company Act") and set forth in one or more supplements to
this Prospectus (each, a "Prospectus Supplement").
The specific terms of the Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and, among other things, will include, where applicable, (i) in the
case of Debt Securities, the specific designation, aggregate principal amount
offered, ranking, rate or rates of interest or the provisions for determining
such rate or rates and the time of payment thereof, maturity, currency of
payment, terms relating to redemption (whether mandatory, at the option of the
Company or the holder), terms for sinking fund payments, terms for conversion or
exchange, additional covenants and the initial public offering price, (ii) in
the case of shares of Preferred Stock, the number of shares, specific title and
stated value, any dividend, liquidation, redemption, conversion, exchange,
voting and other rights and restrictions and the initial public offering price
and (iii) in the case of shares of Common Stock, the number of shares of Common
Stock and the terms of the offering and sale thereof.
The applicable Prospectus Supplement will also contain information,
where applicable, about certain U.S. Federal income taxes, accounting and other
considerations relating to, and any listing on a securities exchange of, the
Securities covered by such Prospectus Supplement.
The Securities may be sold directly by the Company, through agents
designated by the Company from time to time or through underwriters or dealers
designated by the Company from time to time. If any agents of the Company or any
dealers or underwriters are involved in the sale of the Securities in respect of
which this Prospectus is being delivered, the names of such agents, dealers or
underwriters and any applicable agent's commission, dealer's purchase price or
underwriter's discount will be as set forth in or may be calculated from the
applicable Prospectus Supplement. The net proceeds to the Company from such sale
will be the purchase price of such Securities less such commission in the case
of an agent, the purchase price of such Securities in the case of a dealer or
the public offering price of such Securities less such discount in the case of
an underwriter and less, in each case, other attributable issuance expenses. See
"Plan of Distribution" for indemnification arrangements for agents, dealers and
underwriters.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
----------
The date of this Prospectus is July 11, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports and information with the Securities and
Exchange Commission, Washington, D.C. (the "Commission"). Certain information,
as of particular dates, concerning the directors and officers of the Company,
their remuneration and any material interests of such persons in transactions
with the Company, is disclosed in proxy statements distributed to shareholders
and filed with the Commission. The Company has filed with the Commission a
Registration Statement on Form S-3 (together with all amendments and exhibits,
the "Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the securities offered hereby. As permitted
by the rules and regulations of the Commission, this Prospectus omits certain
information contained in the Registration Statement. For such information,
reference is made to the Registration Statement and the exhibits thereto.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document referred to herein are not necessarily complete. With respect
to each such contract, agreement or other document filed as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement shall be deemed to
be qualified in its entirety by such reference.
The Registration Statement, as well as the reports, proxy statements
and other information filed by the Company with the Commission in accordance
with the Exchange Act, may be inspected without charge at the principal office
of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 and is also
available for inspection and copying at the regional offices of the Commission
located at Seven World Trade Center, New York, New York 10048 and Citicorp
Center, 500 West Madison Street, Chicago, Illinois 60661. Copies of such
material can also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission maintains a Web Site (http:/www.sec.gov) that contains
such reports, proxy statements and other information. Such reports, proxy
statements and other information also may be inspected at the office of the New
York Stock Exchange, 20 Broad Street, New York, New York 10005, on which certain
of the Company's securities are listed.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which were filed by the Company with the
Commission (File No. 1-3196), are incorporated in this Prospectus by reference:
(1) the Company's Annual Report on Form 10-K for the year ended
December 31, 1996; and
(2) the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997.
All reports and other documents filed by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of the offering shall be deemed to
be incorporated by reference into this Prospectus and to be part hereof from the
date of filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in another subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company undertakes to provide without charge to each person,
including any beneficial owner, to whom this Prospectus is delivered, on the
written or oral request of any such person, a copy of any or all of the
foregoing documents incorporated herein by reference (not including exhibits to
such documents unless exhibits are specifically incorporated by reference into
such documents). Requests should be directed to the Corporate Secretary,
Consolidated Natural Gas Company, CNG Tower, 625 Liberty Avenue, Pittsburgh, PA
15222-3199, Telephone No. (412) 690-1183.
2
<PAGE>
THE COMPANY AND ITS SUBSIDIARIES
The Company is engaged solely in the business of owning and holding the
outstanding securities of fifteen directly owned subsidiary companies. The
Company is a public utility holding company regulated under the Holding Company
Act.
The Company and its subsidiaries ("Consolidated System" or "System")
are engaged in all phases of the natural gas business -- distribution,
transmission and exploration and production. The Company's principal
subsidiaries are described below.
DISTRIBUTION
Public utility subsidiaries of the Company are The East Ohio Gas
Company, The Peoples Natural Gas Company, Virginia Natural Gas, Inc. and Hope
Gas, Inc. Principal cities served at retail are: Cleveland, Akron, Youngstown,
Canton, Warren, Lima, Ashtabula and Marietta in Ohio; Pittsburgh (a portion),
Altoona and Johnstown in Pennsylvania; Norfolk, Newport News, Virginia Beach,
Chesapeake, Hampton and Williamsburg in Virginia; and Clarksburg and Parkersburg
in West Virginia. During 1996, the distribution business accounted for 50% and
47% of the System's total operating revenues and operating income before income
taxes, respectively.
TRANSMISSION
CNG Transmission Corporation operates a regional interstate pipeline
system and provides gas transportation and storage services to each of the
Company's public utility subsidiaries and to non-affiliated utilities, end-users
and others in the Midwest, the Mid-Atlantic states and the Northeast. CNG
Transmission Corporation is subject to regulation by the Federal Energy
Regulatory Commission. During 1996, the transmission business accounted for 10%
and 32% of the System's total operating revenues and operating income before
income taxes, respectively.
EXPLORATION AND PRODUCTION
CNG Producing Company is the Company's exploration and production
subsidiary. It explores for and produces gas and oil primarily in the Gulf of
Mexico, the southern and western United States, the Appalachian region and
Canada. This segment of the business also includes the gas and oil production
activities of CNG Transmission Corporation. During 1996, the exploration and
production business accounted for 8% and 24% of the System's total operating
revenues and operating income before income taxes, respectively.
ENERGY MARKETING SERVICES
CNG Energy Services Corporation conducts activities in the unregulated
energy area, including gas and electric power marketing, and invests in power
generation facilities. During 1996, the energy marketing services business
accounted for 32% and (2)% of the System's total operating revenues and
operating income before income taxes, respectively.
INTERNATIONAL ACTIVITIES
CNG International Corporation was formed by the Company in 1996 to
invest in foreign energy activities. It currently holds interests in companies
owning and operating gas pipelines in Australia. During 1996, international
activities and other minor lines of business accounted for less than 1% and (1)%
of the System's total operating revenues and operating income before income
taxes, respectively.
The Company is a Delaware corporation organized on July 21, 1942. Its
principal executive offices are located at CNG Tower, 625 Liberty Avenue,
Pittsburgh, Pennsylvania 15222-3199, and its telephone number is (412) 690-1000.
USE OF PROCEEDS
The proceeds from the sale of the Securities will be added to the
treasury funds of the Company and subsequently used to finance System capital
expenditures, for general corporate purposes, to purchase the Company's common
stock in the open market and/or to acquire, retire or redeem debt securities
issued by the Company as authorized
3
<PAGE>
by the Commission under the Holding Company Act. The balance of funds required
for these purposes is expected to be obtained principally from internal cash
generation and the issuance of other debt or equity securities. Reference is
made to the documents incorporated by reference herein for information relating
to estimated capital expenditures.
CERTAIN TERMS AND DESCRIPTIONS OF
DEBT SECURITIES AND INDENTURE
The Debt Securities will be issued in one or more series under an
Indenture dated as of April 1, 1995 ("Indenture") between the Company and United
States Trust Company of New York, as Trustee ("Trustee"), the form of which is
filed as an exhibit to the Registration Statement. The following summaries of
certain provisions of the Indenture do not purport to be complete and are
qualified in their entirety by express reference to the Indenture and the
Securities Resolutions (as defined in the Indenture). Certain terms defined in
the Indenture are used in this summary without definition.
The Indenture does not limit the amount of Debt Securities that can be
issued thereunder and provides that the Debt Securities may be issued from time
to time in one or more series pursuant to the terms of one or more Securities
Resolutions establishing such series. As of the date of this Prospectus, there
were Debt Securities aggregating $450 million outstanding under the Indenture.
The Indenture does not restrict the amount of additional unsecured debt (whether
senior or subordinated) or secured debt which the Company may incur. See
"Certain Covenants" below for possible limitations on the Company's ability to
create Liens (as defined) and enter into Sale-Leaseback Transactions (as
defined). The Indenture also does not limit the amount which the Company may
apply to the payment of dividends or the redemption or purchase of shares of its
stock. Unless the Securities Resolution establishing the terms of Debt
Securities otherwise provides, the Indenture and the Debt Securities do not
contain any covenants which would afford Holders of Debt Securities protections
in the event of a highly leveraged transaction. If such covenants are included
in the Securities Resolution with respect to any offered Debt Securities, such
covenants will be described in the related Prospectus Supplement.
The Debt Securities will be unsecured and will rank on a parity with
all other unsecured and unsubordinated debt of the Company. Although the
Indenture provides for the possible issuance of Debt Securities in other forms
or currencies, the only Debt Securities covered by this Prospectus will be Debt
Securities denominated in U.S. dollars in registered form without coupons.
Consequently, information contained in the Indenture relating to the offer and
sale of Debt Securities in other forms or currencies is not provided in this
Prospectus.
CERTAIN TERMS OF THE DEBT SECURITIES
Reference is made to the Prospectus Supplement for the following terms,
if applicable, of the Debt Securities offered thereby: (1) the designation,
aggregate principal amount and denominations; (2) the price at which such Debt
Securities will be issued and, if an index, formula or other method is used, the
method for determining amounts of principal or interest; (3) the maturity date
and other dates, if any, on which principal will be payable; (4) the interest
rate (which may be fixed or variable), if any; (5) the date or dates from which
interest will accrue and on which interest will be payable, and the record dates
for the payment of interest; (6) the manner of paying principal or interest; (7)
the place or places where principal and interest will be payable; (8) the terms
of any mandatory or optional redemption by the Company; (9) the terms of any
redemption at the option of Holders; (10) whether or not such Debt Securities
shall be convertible into, or exchangeable for, any 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; (11) whether such Debt Securities are to be represented
in whole or in part by a Debt Security in global form and, if so, the identity
of the depositary ("Depositary") for any global Security; (12) any tax indemnity
provisions; (13) the portion of principal payable upon acceleration of a
Discounted Security (as defined below); (14) whether and upon what terms Debt
Securities may be defeased; (15) any events of default or restrictive covenants
in addition to or in lieu of those set forth in the Indenture; (16) provisions
for electronic issuance of Debt Securities or for Debt Securities in
uncertificated form; and (17) any additional provisions or other special terms
not inconsistent with the provisions of the Indenture, including any terms that
may be required or advisable under United States or other applicable laws or
regulations, or advisable in connection with the marketing of the Debt
Securities. (Section 2.01)
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The Debt Securities of a series may be issued in whole or in part in
the form of one or more global Securities that will be deposited with, or on
behalf of, a Depositary identified in the Prospectus Supplement relating to the
series. Global Securities may be issued in registered or uncertificated form and
in either temporary or permanent form. Unless and until it is exchanged in whole
or in part for Debt Securities in definitive form, a global Security may not be
transferred except as a whole by the Depositary to a nominee or a successor
depositary. (Section 2.12) See "Book-Entry Securities" below for the terms of
the depositary arrangement.
Debt Securities of any series may be issued as Registered Securities or
uncertificated securities, as specified in the terms of the series. (Section
2.01) Unless otherwise indicated in the Prospectus Supplement, Registered
Securities will be issued in denominations of $1,000 and whole multiples
thereof. One or more global Securities will be issued in a denomination or
aggregate denominations equal to the aggregate principal amount of outstanding
Debt Securities of the series to be represented by such global Security or
Securities.
Debt Securities may be issued under the Indenture as Discounted
Securities to be offered and sold at a substantial discount from the principal
amount thereof. Special United States federal income tax and other
considerations applicable thereto will be described in the Prospectus Supplement
relating to such Discounted Securities.
"Discounted Security" means a Debt Security where the amount of
principal due upon acceleration is less than the stated principal amount.
CERTAIN COVENANTS
The Debt Securities will not be secured by any properties or assets and
will represent unsecured debt of the Company. The Indenture does not limit the
amount of unsecured debt that the Company can incur.
As discussed below, the Indenture includes certain limitations on the
Company's ability to create Liens and to enter into Sale-Leaseback Transactions.
However, such limitations will apply only to the extent the Securities
Resolution establishing the terms of a series so provides and, if applicable,
the limitations are subject to a number of qualifications and exceptions.
Accordingly, the covenants described below will apply unless otherwise indicated
in a Prospectus Supplement, and any obligations thereunder are subject to
termination upon defeasance. See "Legal Defeasance and Covenant Defeasance"
below.
LIMITATION ON LIENS
Unless the Securities Resolution establishing the terms of a series
otherwise provides, the Debt Securities will be entitled to the benefit of a
covenant in the Indenture which provides that the Company shall not, and shall
not permit any Restricted Subsidiary to, incur any mortgage, pledge, security
interest or lien (collectively, "Lien") on Principal Property to secure a Debt
unless: (1) the Lien equally and ratably secures the Debt Securities and the
Debt provided that the Lien may not secure an obligation of the Company that is
subordinated to the Debt Securities; (2) the Lien secures Debt incurred to
finance all or some of the purchase price or the cost of construction or
improvement of property of the Company or a Restricted Subsidiary and does not
extend to any other Principal Property (other than to unimproved real property
used for the construction or improvement) owned by the Company or a Restricted
Subsidiary at the time the Lien is incurred and which Lien may not be incurred
more than one year after the later of the (a) acquisition, (b) completion of
construction or improvement, or (c) commencement of full operation, of the
property subject to the Lien; (3) the Lien is on property of a corporation at
the time the corporation merges into or consolidates with the Company or a
Restricted Subsidiary; (4) the Lien is on property at the time the Company or a
Restricted Subsidiary acquires the property; (5) the Lien is on property of a
corporation at the time the corporation becomes a Restricted Subsidiary; (6) the
Lien secures Debt of a Restricted Subsidiary owing to the Company or another
Restricted Subsidiary; (7) the Lien is in favor of a government or governmental
entity and secures (a) payments pursuant to a contract or statute, (b) the
ability of the Company to maintain self-insurance under or participate under any
State insurance fund under legislation designated to insure employees of the
Company against injury or occupational diseases, or (c) Debt incurred to finance
all or some of the purchase price or cost of construction or improvement of the
property subject to the Lien; (8) the Lien secures Debt which is payable, both
with respect to principal and interest, solely out of the proceeds of oil, gas,
coal or other minerals to be produced from the property subject thereto and to
be sold or delivered by the Company or a Subsidiary, including any interest of
the character commonly referred to as a "production payment"; (9) the Lien is
created or assumed by a Subsidiary on oil, gas, coal or other mineral prop-
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erty owned or leased by a Subsidiary to secure Debt of such Subsidiary for the
purposes of developing such properties, including any interest of the character
commonly referred to as a "production payment"; provided, however, that neither
the Company nor any other Subsidiary shall assume or guarantee such Debt or
otherwise be liable in respect thereof; (10) the Lien extends, renews or
replaces in whole or in part a Lien ("existing Lien") permitted by any of
clauses (1) through (9) provided that the Debt secured by the Lien may not
exceed the Debt secured at the time by the existing Lien unless the existing
Lien or a predecessor Lien was incurred under clause (1) or (6) and the Lien may
not extend beyond (a) the property subject to the existing Lien (other than
property that at the time is not Principal Property) and (b) improvements and
construction on such property; (11) the Debt plus all other Debt secured by
Liens on Principal Property at the time does not exceed 10% of Consolidated Net
Tangible Assets (excluding from all other Debt in the determination: (a) Debt
secured by a Lien permitted by any of clauses (1) through (10) and (12) and (b)
Debt secured by a Lien incurred prior to the date of the Indenture that would
have been permitted by any of those clauses if the Indenture had been in effect
at the time the Lien was incurred), provided that Attributable Debt for any
lease permitted by clause (3) under "Limitation on Sale and Leaseback" below
must be included in the determination and treated as Debt secured by a Lien on
Principal Property not otherwise permitted by any of clauses (1) through (10) or
(12); or (12) the Lien is a Permitted Lien. (Section 4.04)
"Attributable Debt" for a lease means, as of the date of determination,
the present value of net rent for the remaining term of the lease. Rent shall be
discounted to present value at a discount rate that is compounded semiannually.
The discount rate shall be 10% per annum or, if the Company elects, the discount
rate shall be equal to the weighted average Yield to Maturity of the Debt
Securities. Such average shall be weighted by the principal amount of the Debt
Securities of each series or, in the case of Discounted Securities, the amount
of principal that would be due as of the date of determination if payment of the
Debt Securities were accelerated on that date. (Section 4.01)
"Consolidated Net Tangible Assets" means total assets less (a) total
current liabilities (excluding short-term Debt and payments due within one year
on Long-Term Debt) and deferred credits, (b) intangible assets, including,
without limitation, goodwill, copyrights, trademarks, trade names, patents and
unamortized debt discount and expense, (c) reserves, including reserves for
estimated rate refunds pending the outcome of a rate proceeding to the extent
such refunds have not been finally determined, but excluding reserves for
deferred differences, (d) advances to finance oil and natural gas exploration
and development to the extent that the Debt related thereto is excluded from
Long-Term Debt, (e) an amount equal to the amount excluded from Long-Term Debt
representing "production payment" financing of oil or natural gas exploration
and development by the Company or its consolidated Subsidiaries, and (f)
minority interests in common stocks and surplus in Subsidiaries, in each case as
reflected in the Company's most recent consolidated balance sheet preceding the
date of a determination under clause (11) of the first paragraph under
"Limitation on Liens" above.
(Section 4.01)
"Permitted Liens" includes, among other items, the pledge or assignment
in the ordinary course of business of gas inventory, accounts receivable or
customers' installment paper. (Section 4.01)
"Principal Property" means any property or asset used in connection
with or relating to the transmission, distribution, exploration or production of
natural gas whether now or hereafter owned, located in the United States
(excluding territories and possessions), the net depreciated book value of which
on the date as of which the determination is being made exceeds 3% of the
Consolidated Net Tangible Assets of the Company, except any such property or
asset that in the opinion of the Board or Company management (evidenced by a
certified Board resolution or an Officers' Certificate delivered to the Trustee)
is not of material importance to the total business conducted by the Company and
its consolidated Subsidiaries. (Section 4.01)
"Restricted Subsidiary" means a Wholly Owned Subsidiary that has
substantially all of its assets located in the United States (excluding
territories and possessions) and owns a Principal Property. (Section 4.01)
LIMITATION ON SALE AND LEASEBACK
Unless the Securities Resolution establishing the terms of a series
otherwise provides, the Debt Securities will be entitled to the benefit of a
covenant in the Indenture which provides that the Company shall not, and shall
not permit any Restricted Subsidiary to, enter into a Sale-Leaseback Transaction
with respect to any Principal Property acquired or placed into service more than
180 days before the effective date of such lease unless: (1) the lease has a
term of three years or less; (2) the lease is between the Company and a
Restricted Subsidiary or between Restricted
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Subsidiaries; (3) the Company or a Restricted Subsidiary under any of clauses
(2) through (11) under "Limitation on Liens" above could create a Lien on the
property to secure Debt at least equal in amount to the Attributable Debt for
the lease; or (4) the Company or a Restricted Subsidiary within 180 days of the
effective date of the lease retires Long-Term Debt of the Company or a
Restricted Subsidiary at least equal in amount to the Attributable Debt for the
lease. A Debt is retired when it is paid or cancelled. However, the Company or a
Restricted Subsidiary may not receive credit for retirement of: (1) Debt of the
Company that is subordinated to the Debt Securities; or (2) Debt, if paid in
cash, that is owned by the Company or a Restricted Subsidiary. (Section 4.05)
"Sale-Leaseback Transaction" means an arrangement pursuant to which the
Company or a Restricted Subsidiary now owns or hereafter acquires a Principal
Property, transfers it to a person, and leases it back from the person. (Section
4.01)
SUCCESSOR OBLIGOR
Unless the Securities Resolution establishing the terms of a series
otherwise provides, the Debt Securities will be entitled to the benefit of a
covenant in the Indenture which provides that the Company will not consolidate
with or merge into, or transfer all or substantially all of its assets to, any
person, unless: (1) the person is organized under the laws of the United States
or a State thereof; (2) the person assumes by supplemental indenture all the
obligations of the Company under the Indenture and the Debt Securities; (3)
immediately after the transaction no Default (as defined) exists; and (4) if as
a result of the transaction, a Principal Property would become subject to a Lien
not permitted by the provisions described under "Limitation on Liens" above, to
the extent applicable, the Company or such person secures the Debt Securities
equally and ratably with or prior to all obligations secured by the Lien. The
successor will be substituted for the Company, and thereafter all obligations of
the Company under the Indenture and the Debt Securities shall terminate.
(Section 5.01)
EXCHANGE OF SECURITIES
Registered Securities may be exchanged for an equal aggregate principal
amount of Registered Securities of the same series and date of maturity in such
authorized denominations as may be requested upon surrender of the Registered
Securities at an agency of the Company maintained for such purpose and upon
fulfillment of all other requirements of the Transfer Agent. (Section 2.07)
DEFAULTS AND REMEDIES
Unless the Securities Resolution establishing the terms of a series
otherwise provides (in which event the Prospectus Supplement for such series
shall so indicate), an "Event of Default" with respect to the series of Debt
Securities will occur if: (1) the Company defaults in any payment of interest on
any Debt Securities of the series when the same becomes due and payable and the
Default continues for a period of 60 days; (2) the Company defaults in the
payment of the principal of any Debt Securities of the series when the same
becomes due and payable at maturity or upon redemption, acceleration or
otherwise; (3) the Company defaults in the payment or satisfaction of any
sinking fund obligation with respect to any Debt Securities of a series as
required by the Securities Resolution establishing the terms of such series and
the Default continues for a period of 60 days; (4) the Company defaults in the
performance of any of its other agreements applicable to the series and the
Default continues for 120 days after the notice specified in the Indenture; (5)
the Company pursuant to or within the meaning of any Bankruptcy Law: (a)
commences a voluntary case, (b) consents to the entry of an order for relief
against it in an involuntary case, (c) consents to the appointment of a
Custodian for it or for all or substantially all of its property, or (d) makes a
general assignment for the benefit of its creditors; or (6) a court of competent
jurisdiction enters an order or decree under any Bankruptcy Law that: (a) is for
relief against the Company in an involuntary case, (b) appoints a Custodian for
the Company or for all or substantially all of its property, or (c) orders the
liquidation of the Company; and the order or decree remains unstayed and in
effect for 60 days. (Section 6.01)
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal or State law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or a similar official under any
Bankruptcy Law.
A Default under clause (4) is not an Event of Default until the Trustee
or the Holders of at least 25% in principal amount of the series notify the
Company of the Default and the Company does not cure the Default within the time
specified after receipt of the notice. The Trustee may require indemnity
satisfactory to it before it enforces the
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Indenture or the Debt Securities of the series. Subject to certain limitations,
Holders of a majority in principal amount of the Debt Securities of the series
may direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the series notice of any continuing default (except a
default in payment of principal or interest) if it determines that withholding
notice is in their interest.
The failure to redeem any Debt Security subject to a Conditional
Redemption is not an Event of Default if any event on which such redemption is
so conditioned does not occur before the redemption date.
The Indenture does not have a cross-default provision. Thus, a default
by the Company on any other debt (including any other series of Debt Securities
outstanding under the Indenture) would not constitute an Event of Default.
AMENDMENTS AND WAIVERS
The Indenture and the Debt Securities may be amended, and any default
may be waived as follows: The Debt Securities and the Indenture may be amended
with the consent of the Holders of a majority in principal amount of the Debt
Securities of all series affected voting as one class. (Section 9.02) A default
on a series may be waived with the consent of the holders of a majority in
principal amount of the Debt Securities of the series. (Section 6.04) However,
without the consent of each Holder affected, no amendment or waiver may (1)
reduce the amount of Debt Securities whose Holders must consent to an amendment
or waiver, (2) reduce the interest on or change the time for payment of interest
on any Debt Security, (3) change the fixed maturity of any Debt Security, (4)
reduce the principal of any Debt Security or reduce the amount of principal of
any Discounted Security that would be due on acceleration thereof, (5) change
the currency in which principal or interest on a Debt Security is payable or
(6), waive any default in payment of interest on or principal of a Debt
Security. (Section 9.02) Without the consent of any Holder, the Indenture or the
Debt Securities may be amended (1) to cure any ambiguity, omission, defect or
inconsistency, (2) to provide for assumption of Company obligations to Holders
in the event of a merger or consolidation requiring such assumption, (3) to
provide that specific provisions of the Indenture not apply to a series of Debt
Securities not previously issued, (4) to create a series and establish its
terms, (5) to provide for a separate Trustee for one or more series, or (6) to
make any change that does not materially adversely affect the rights of any
Holder. (Section 9.01)
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Debt Securities of a series may be defeased in accordance with their
terms and, unless the Securities Resolution establishing the terms of the series
otherwise provides, as set forth below. The Company at any time may terminate as
to a series all of its obligations (except for certain obligations with respect
to the defeasance trust and obligations to register the transfer or exchange of
a Debt Security, to replace destroyed, lost or stolen Debt Securities and to
maintain agents in respect of the Debt Securities) with respect to the Debt
Securities of the series and the Indenture ("legal defeasance"). The Company at
any time may terminate as to a series its obligations with respect to the Debt
Securities of the series under the covenants described under "Certain Covenants"
or other covenants which may be added for the benefit of a particular series of
Debt Securities ("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding
its prior exercise of its covenant defeasance option. If the Company exercises
its legal defeasance option, a series may not be accelerated because of an Event
of Default. If the Company exercises its covenant defeasance option, a series
may not be accelerated by reference to the covenants described under "Certain
Covenants" or other covenants which may be added for the benefit of a particular
series of Debt Securities. (Section 8.01)
To exercise its legal defeasance option as to a series, the Company
must deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal, premium, if any, and
interest on the Debt Securities of the series to redemption or maturity and must
comply with certain other conditions. In particular, the Company must obtain an
opinion of tax counsel that the defeasance will not result in recognition of any
gain or loss to Holders for Federal income tax purposes.
"U.S. Government Obligations" are direct obligations of the United
States of America which have the full faith and credit of the United States of
America pledged for payment and which are not callable at the issuer's option,
or certificates representing an ownership interest in such obligations. (Section
8.02)
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TRUSTEE
United States Trust Company of New York will act as Trustee and
Registrar for Debt Securities issued under the Indenture and, unless otherwise
indicated in a Prospectus Supplement, the Trustee will also act as Transfer
Agent and Paying Agent with respect to the Debt Securities. (Section 2.03) The
Company may remove the Trustee with or without cause if the Company so notifies
the Trustee six months in advance and if no Default occurs or is continuing
during the six-month period. (Section 7.07)
DESCRIPTION OF COMMON STOCK
The following outline of certain provisions of the Company's
Certificate of Incorporation, as amended (the "Certificate"), and the Company's
By-laws, as amended (the "Bylaws"), each of which is incorporated by reference
as an exhibit to the Registration Statement, does not purport to be complete and
is qualified in its entirety by express reference thereto. The Company is
authorized to issue 400,000,000 shares of Common Stock.
DIVIDENDS
All shares of Common Stock are entitled to participate equally with
other shares of Common Stock in dividends, subject to the express terms and
preferences of any outstanding series of Preferred Stock with respect to
dividends and other distributions.
The indentures and supplemental indentures pursuant to which the
Company's outstanding senior debentures have been issued contain restrictions on
dividends and the Company's acquisition of its capital stock. Such documents
provide that the Company cannot declare or pay any dividend or make any other
distribution upon any of its capital stock or purchase or redeem or otherwise
acquire for consideration any of its capital stock (excluding from such
restriction and from the calculation dividends paid in capital stock and capital
stock purchased, redeemed or otherwise acquired to the extent that it was so
acquired in exchange for or with the proceeds of the issue of other capital
stock) if, after giving effect to such dividend, distribution, purchase,
redemption or other acquisition, the cumulative aggregate amount of all
dividends and distributions declared or paid on its capital stock and the amount
paid for the purchase, redemption or acquisition of its capital stock subsequent
to a date specified in each such document by the Company exceeds the amount of
the consolidated net income available for dividends after such date, plus an
additional amount specified in each such document plus such additional amounts
as shall, upon application by the Company, be authorized or approved by the
Commission, or by any successor commission or authority administering the
Holding Company Act. Under the most limiting of these provisions, $614 million
was available for the payment of cash dividends on, and acquisitions of, capital
stock at December 31, 1996.
VOTING RIGHTS
Each share of Common Stock has one vote. Holders of a series of
Preferred Stock possess those voting powers, if any, specified in the
certificate of designation which establishes the terms and conditions for such
series of Preferred Stock. In addition, in accordance with the General
Corporation Law for the State of Delaware, the consent of holders of a series of
Preferred Stock is required before certain corporate actions, particularly
certain amendments to the Certificate adversely affecting the rights of holders
of any such series of Preferred Stock, may be taken.
PREEMPTIVE RIGHTS
The holders of the Common Stock have no preemptive rights of any kind.
PREFERENCES ON LIQUIDATION, DISSOLUTION OR WINDING-UP
Upon liquidation, dissolution or winding-up of the Company, a series of
Preferred Stock shall have preference over the Common Stock as set forth in the
certificate of designation for such series of Preferred Stock. Generally, after
payment of creditors, holders of shares of a series of the Preferred Stock
outstanding shall be entitled to be paid the amounts fixed by the Board of
Directors of the Company in the resolutions creating such series, including full
cumulative dividends, before any payments are made to holders of Common Stock.
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OTHER
The Company's Common Stock is listed on the New York Stock Exchange and
is also listed on the Basle, Geneva, Zurich and Lausanne stock exchanges. The
First Chicago Trust Company of New York ("First Chicago") is Transfer Agent and
Registrar for the Common Stock. The Shares of Common Stock offered, when issued,
will be validly issued, fully paid and nonassessable.
PROVISIONS OF THE CERTIFICATE AND BYLAWS WHICH MAY HAVE ANTI-TAKEOVER EFFECTS
The Certificate requires certain conditions to be met for mergers and
other business combinations (collectively "Business Combinations") with any
beneficial holder of 5% or more of outstanding shares of the Common Stock (a
"Substantial Stockholder"). In consummating any Business Combination with a
Substantial Stockholder, the amount paid per share to holders of Common Stock by
a Substantial Stockholder must be no less than the highest per share price which
the Substantial Stockholder paid for any shares of the Common Stock acquired by
it after it acquired 5% of the outstanding Common Stock. Also, the consideration
paid in such Business Combination must be either cash or the same form as the
consideration paid by the Substantial Stockholder for any shares of the Common
Stock acquired by it after it acquired its 5% interest.
The Certificate also provides for the Company's Board of Directors to
be divided into three classes as nearly equal in number as possible, with the
term of one class to expire each year.
The Certificate requires that holders of seventy-five percent or more
of outstanding shares of Common Stock must approve any action requiring a
stockholder vote when such action is to be taken upon written consent of
stockholders. The Company's Bylaws provide that, unless recommended by the Board
of Directors, no person shall be elected a director unless notice in writing of
such person's nomination by a stockholder is received by the Company not more
than sixty nor less than thirty calendar days before the date of the meeting at
which the election is to take place. The Bylaws require that a special meeting
of stockholders called at the request of stockholders must be so requested by
holders of at least seventy-five percent of the outstanding shares of Common
Stock. The provisions described under this caption may be amended or repealed
only with a two-thirds or greater vote of the Continuing Directors (generally
directors before the time a Substantial Stockholder becomes such) or by
affirmative vote of the holders of seventy-five percent or more of the
outstanding Common Stock.
COMMON STOCK PURCHASE RIGHTS
Each holder of the Company's Common Stock, including shares issued
pursuant to this Prospectus, holds one right ("Right") for each outstanding
share of Common Stock held. Rights are issued pursuant to a shareholder rights
plan which was approved by the Board of Directors on November 13, 1995. Each
Right entitles the registered holder to purchase from the Company one-half of
one share of Common Stock at a price of $175 per share (the "Rights Purchase
Price"), being $87.50 per half share, subject to adjustment. The description and
terms of the Rights are set forth in a rights agreement (the "Rights Agreement")
between the Company and First Chicago, as rights agent (the "Rights Agent")
which is incorporated by reference as an exhibit to the Registration Statement.
The following outline of certain provisions with respect to the Rights does not
purport to be complete and is qualified in its entirety by express reference to
the Rights Agreement.
DISTRIBUTION DATE; TRANSFER OF RIGHTS
Until the earlier to occur of (i) ten days following the date (the
"Shares Acquisition Date") of the public announcement that a person or group of
affiliated or associated persons (an "Acquiring Person") has acquired, or
obtained the right to acquire, beneficial ownership of Common Stock or other
voting securities ("Voting Stock") that have 10% or more of the voting power of
the outstanding shares of Voting Stock or (ii) ten days following the
commencement or announcement of an intention to make a tender offer or exchange
offer the consummation of which would result in such person acquiring, or
obtaining the right to acquire, beneficial ownership of Voting Stock having 10%
or more of the voting power of the outstanding shares of Voting Stock (the
earlier of such dates being called the "Rights Distribution Date"), the Rights
will be evidenced by such Common Stock certificate. The Rights Agreement
provides that, until the Rights Distribution Date, the Rights will be
transferred with and only with the Company's Common Stock. Until the Rights
Distribution Date (or earlier redemption or expiration of the Rights), new
Common
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Stock certificates issued after February 28, 1996 (the "Rights Record Date")
upon transfer or new issuance of the Company's Common Stock will contain a
notation incorporating the Rights Agreement by reference. Until the Rights
Distribution Date (or earlier redemption or expiration of the Rights), the
surrender for transfer of any of the Company's Common Stock certificates
outstanding as of the Rights Record Date will also constitute the transfer of
the Rights associated with the Common Stock represented by such certificate. As
soon as practicable following the Rights Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be mailed to
holders of record of the Company's Common Stock as of close of business on the
Rights Distribution Date and such separate Right Certificates alone will
evidence the Rights.
The Rights are not exercisable until the Rights Distribution Date. The
Rights will expire at the close of business on February 28, 2006, unless earlier
redeemed or exchanged by the Company as described below.
EXERCISE OF RIGHTS FOR COMMON STOCK OF THE COMPANY
In the event that a Person becomes an Acquiring Person at any time
following the Rights Distribution Date, each holder of a Right will thereafter
have the right to receive, upon exercise, Common Stock (or, in certain
circumstances, cash, property or other securities of the Company) having a value
equal to two times the Rights Purchase Price of the Right then in effect.
Notwithstanding any of the foregoing, following the occurrence of such event set
forth in this paragraph, all Rights that are, or (under certain circumstances
specified in the Rights Agreement) were, beneficially owned by any Acquiring
Person will be null and void.
EXERCISE OF RIGHTS FOR SHARES OF THE ACQUIRING COMPANY
In the event that, at any time following the Shares Acquisition Date,
(i) the Company is acquired in a merger or other business combination
transaction, or (ii) 50% or more of the Company's assets or earning power is
sold or transferred, each holder of a Right (except Rights which previously have
been voided as set forth above) shall thereafter have the right to receive, upon
exercise, Common Stock of the acquiring company having a value equal to two
times the Rights Purchase Price of the Right then in effect.
ADJUSTMENTS TO RIGHTS PURCHASE PRICE
The Rights Purchase Price payable, and the number of shares of Common
Stock (or other securities, as the case may be) issuable upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution (i) in
the event of a stock dividend on, or a subdivision, combination or
reclassification or, the Common Stock, (ii) upon the grant to holders of the
Common Stock of certain rights or warrants to subscribe for or purchase shares
of the Common Stock or convertible securities at less than the then current
market price of the Common Stock or (iii) upon the distribution to holders of
the Common Stock of evidences of indebtedness or assets (excluding regular
periodic cash dividends or dividends payable in the Common Stock) or of
subscription rights or warrants (other than those referred to above). Prior to
the Rights Distribution Date, the Board of Directors of the Company may make
such equitable adjustments as it deems appropriate in the circumstances in lieu
of any adjustment otherwise required by the foregoing.
With certain exceptions, no adjustment in the Rights Purchase Price
will be required until the earlier of (i) three years from the date of the event
giving rise to such adjustment or (ii) the time at which cumulative adjustments
require an adjustment of at least 1% in such Rights Purchase Price. No
fractional shares of Common Stock will be issued and, in lieu thereof, an
adjustment in cash will be made based on the market price of the Common Stock on
the last trading date prior to the date of exercise.
REDEMPTION AND EXCHANGE OF RIGHTS
At any time prior to 5:00 P.M. New York City time on the tenth day
following the Shares Acquisition Date, the Company may redeem the Rights in
whole, but not in part, at a price of $.01 per Right (the "Redemption Price").
Under certain circumstances set forth in the Rights Agreement, the decision to
redeem shall require the concurrence of a majority of the Independent Directors.
Immediately upon the action of the Board of Directors of the Company electing to
redeem the Rights with, if required, the concurrence of the Independent
Directors, the Company shall make announcement thereof, and upon such action,
the right to exercise the Rights will terminate and the only right of the
holders of Rights will be to receive the Rights Redemption Price.
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At any time after the occurrence of the event set forth under the
heading "Exercise of Rights for Common Stock of the Company" above, the Board of
Directors may exchange the Rights (other than Rights owned by an Acquiring
Person, which have become void), in whole or in part, at an exchange ratio of
one share of Common Stock, and/or other securities, cash or other assets deemed
to have the same value as one share of Common Stock, per Right, subject to
adjustment.
Until a Right is exercised or exchanged for Common Stock, the holder
thereof, as such, will have no rights as a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends. While
the distribution of the Rights will not be taxable to stockholders or to the
Company, stockholders may, depending upon the circumstances, recognize taxable
income in the event that the Rights become exercisable for Common Stock or other
consideration of the Company or for the stock of the Acquiring Person as set
forth above, or are exchanged as provided in the preceding paragraph.
AMENDMENTS TO TERMS OF THE RIGHTS
Any of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Company without the consent of the holders of the
Rights prior to the Rights Distribution Date. Thereafter, the provisions of the
Rights Agreement may be amended by the Board of Directors in order to cure any
ambiguity, defect or inconsistency, or to make changes which do not adversely
affect the interests of holders of Rights (excluding the interest of any
Acquiring Person); provided, however, that no supplement or amendment may be
made on or after the Rights Distribution Date which changes those provisions
relating to the principal economic terms of the Rights. The Board of Directors
may also, with the concurrence of a majority of the Independent Directors,
extend the redemption period for up to an additional 20 days.
The term "Independent Directors" means any member of the Board of
Directors of the Company who was a member of the Board prior to the date of the
Rights Agreement, and any person who is subsequently elected to the Board if
such person is recommended or approved by a majority of the Independent
Directors, but shall not include an Acquiring Person or any representative
thereof.
DESCRIPTION OF PREFERRED STOCK
Shares of Preferred Stock may be issued from time to time in one or
more series. The Board of Directors is authorized to create and provide by
resolution for the issuance of up to 5,000,000 shares of Preferred Stock in
series and, by filing a certificate of designation pursuant to the applicable
law of the State of Delaware, to establish from time to time the number of
shares to be included in each such series, and to fix the designations, powers,
preferences and rights of the shares of each such series and the qualifications,
limitations or restrictions thereof. Such terms of shares of Preferred Stock
offered hereby shall be more fully set forth in the Prospectus Supplement with
respect to such shares. As of the date hereof, no shares of Preferred Stock are
issued or outstanding.
The authority of the Board of Directors with respect to each series
shall include, but not be limited to, determination of the following:
(a) 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;
(b) whether the shares of such series shall have voting powers and,
if any, the terms of such voting powers;
(c) the dividend rate or 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;
(d) whether the shares of such series shall be subject to redemption
by the Company, and, if made subject to redemption, the times,
prices and other terms, limitations, restrictions or conditions
of such redemption;
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(e) 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 Company;
(f) 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
fund 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;
(g) 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 Company
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;
(h) 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 Company of, the
Common Stock or any other class or classes of stock of the
Company ranking junior to the shares of such series either as to
dividends or upon liquidation, dissolution or winding-up of the
Company;
(i) the conditions or restrictions, if any, upon the creation of
indebtedness of the Company 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 Company; and
(j) any other preference, relative, participating, optional or other
special rights, and the qualifications, limitations or
restrictions thereof, as shall not be inconsistent with law, the
Certificate or any resolution of the Board of Directors pursuant
thereto.
DIVIDENDS
In addition to terms and conditions set forth in a certificate of
designation with respect to a series of Preferred Stock, the indentures and
supplemental indentures pursuant to which the Company's outstanding senior
debentures have been issued contain restrictions on dividends and the Company's
acquisition of its capital stock. See "Description of Common Stock-Dividends".
VOTING RIGHTS
Holders of a series of Preferred Stock possess those voting powers, if
any, specified in the certificate of designation which establishes the terms and
conditions for such series of Preferred Stock. In addition, in accordance with
the General Corporation Law for the State of Delaware, the consent of holders of
a series of Preferred Stock is required in varying proportions before certain
corporate actions, particularly certain amendments to the Certificates adversely
affecting the rights of holders of any such series of Preferred Stock, may be
taken.
PREEMPTIVE RIGHTS
The holders of a series of Preferred Stock have no preemptive rights of
any kind unless otherwise provided under the certificate of designation for such
series of Preferred Stock.
PREFERENCES ON LIQUIDATION, DISSOLUTION OR WINDING-UP
Upon liquidation, dissolution or winding-up of the Company, a series of
Preferred Stock shall have preference over the Common Stock as set forth in the
certificate of designation for such series of Preferred Stock. See "Description
of Common Stock-Preferences on Liquidation, Dissolution or Winding-up".
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BOOK-ENTRY SECURITIES
The Securities may be issued in the form of one or more global
certificates (collectively, with respect to each series or issue of Securities,
the "Global Security") registered in the name of a depositary or a nominee of a
depositary. Unless otherwise specified in the applicable Prospectus Supplement,
the depositary will be The Depository Trust Company ("DTC"). The Company has
been informed by DTC that its nominee will be Cede & Co. ("Cede"). Accordingly,
Cede is expected to be the initial registered holder of the Securities that are
issued in global form. No person that acquires an interest in such Securities
will be entitled to receive a certificate representing such person's interest in
such Securities except as set forth herein or in the accompanying Prospectus
Supplement. Unless and until definitive Securities are issued under the limited
circumstances described herein, all references to actions by holders of
Securities issued in global form shall refer to actions taken by DTC upon
instructions from its Participants (as defined below), and all references herein
to payments and notices to such holders shall refer to payments and notices to
DTC or Cede, as the registered holder of such Securities.
DTC has informed the Company that it is a limited purpose trust company
organized under the New York Banking Law, a "banking organization" within the
meaning of the New York Banking Law, that it is a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code and a "clearing agency" registered pursuant to Section 17A of
the Exchange Act, and that it was created to hold securities for its
participating organizations ("Participants") and to facilitate the clearance and
settlement of securities transactions among Participants through electronic
book-entry, thereby eliminating the need for physical movement of certificates.
Participants include securities brokers and dealers, banks, trust companies and
clearing corporations, and may include certain other organizations. Indirect
access to the DTC system also is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("Indirect
Participants").
Holders that are not Participants or Indirect Participants but that
desire to purchase, sell or otherwise transfer ownership of, or other interests
in, Securities may do so only through Participants and Indirect Participants.
Under a book-entry format, holders may experience some delay in their receipt of
payments, as such payments will be forwarded by the agent designated by the
Company to Cede, as nominee for DTC. DTC will forward such payments to its
Participants, which thereafter will forward them to Indirect Participants or
holders. Holders will not be recognized by the applicable Trustee or the Company
as registered holders of the Securities entitled to the benefits of the
applicable Indenture or the terms of the Securities. Holders that are not
Participants will be permitted to exercise their rights as such only indirectly
through and subject to the procedures of Participants and, if applicable,
Indirect Participants.
Under the rules, regulations and procedures creating and affecting DTC
and its operations as currently in effect (the "Rules"), DTC will be required to
make book-entry transfers of Securities among Participants and to receive and
transmit payments to Participants. Participants and Indirect Participants with
which holders have accounts with respect to the Securities similarly are
required by the Rules to make book-entry transfers and receive and transmit such
payments on behalf of their respective holders.
Because DTC can act only on behalf of Participants, who in turn act
only on behalf of holders or Indirect Participants, and on behalf of certain
banks, trust companies and other persons approved by it, the ability of a holder
to pledge Securities to persons or entities that do not participate in the DTC
system, or to otherwise act with respect to such Securities, may be limited due
to the absence of physical certificates for such Securities.
DTC has advised the Company that DTC will take any action permitted to
be taken by a registered holder of any Securities under the applicable Indenture
or the terms of the Securities only at the direction of one or more Participants
to whose accounts with DTC such Securities are credited.
A Global Security will be exchangeable for the relevant definitive
Securities registered in the names of persons other than DTC or its nominee only
if (i) DTC notifies the Company that it is unwilling or unable to continue as
depository for such Global Security or if at any time DTC ceases to be a
clearing agency registered under the Exchange Act at a time when DTC is required
to be so registered in order to act as such depository, (ii) the Company
executes and delivers to the applicable Trustee an order complying with the
requirements of the applicable Indenture that such Global Security shall be so
exchangeable or (iii) in the case of Debt Securities, there has occurred and is
continuing a default in the payment of principal of, premium, if any, or
interest on, the Debt Securities or an Event of Default or an
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event that, with the giving of notice or lapse of time, or both, would
constitute an Event of Default with respect to such Debt Securities. Any Global
Security that is exchangeable pursuant to the preceding sentence will be
exchangeable for Debt Securities or definitive Securities registered in such
names as DTC directs.
Upon the occurrence of any event described in the immediately preceding
paragraph, DTC is generally required to notify all Participants of the
availability through DTC of definitive Securities. Upon surrender by DTC of the
Global Security representing the Securities and delivery of instructions for
re-registration, the Trustee or the applicable registrar, as the case may be,
will reissue the Securities as definitive Debt Securities, and thereafter such
Trustee or the applicable registrar will recognize the holders of such
definitive Securities as registered holders of Securities entitled to the
benefits of the applicable Indenture or the terms of the Securities, as the case
may be.
Except as described above, the Global Security may not be transferred
except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or
another nominee of DTC or a successor depositary appointed by the Company.
Except as described above, DTC may not sell, assign, transfer or otherwise
convey any beneficial interest in a Global Security evidencing all or part of
the Securities unless such beneficial interest is in an amount equal to an
authorized denomination for the Securities.
PLAN OF DISTRIBUTION
The Company may solicit offers from time to time to sell the Securities
to, for reoffer to the public through, underwriting syndicates led by one or
more managing underwriters or through one or more underwriters acting alone. The
Securities may be sold upon receipt of proposals pursuant to competitive
bidding, or as may otherwise be permitted, under the Holding Company Act. The
Company has also been authorized by the Commission acting under the Holding
Company Act to sell the Securities through negotiated transactions in public
offerings through underwriters and investment bankers, or to institutional
investors in private placements. The Company may also sell the Securities
through dealers or agents.
Any specific managing underwriter or underwriters with respect to the
offer and sale of the Securities and the members of the underwriting syndicate,
if any, will be named in a Prospectus Supplement. Underwriters will not be
obligated to make a market in any of the Securities. Unless otherwise set forth
in a Prospectus Supplement, underwriters will be obligated to purchase all of
the Securities offered, subject to certain conditions precedent.
The Prospectus Supplement will describe the discounts and commissions
to be allowed or paid to underwriters, if any, all other items constituting
underwriting compensation, the discounts and commissions to be allowed or paid
to dealers and agents, if any, and the exchanges, if any, on which the
Securities will be listed.
Underwriters, dealers and agents may be entitled, under agreements to
be entered into with the Company, to indemnification against or to contribution
with respect to certain civil liabilities, including liabilities under the
Securities Act of 1933, as amended.
LEGAL OPINIONS
The legality of the Securities will be passed upon for the Company by
Stephen E. Williams, Senior Vice President and General Counsel of the Company
and of its subsidiary, Consolidated Natural Gas Service Company, Inc., ("Service
Company") and Norbert F. Chandler, counsel for the Company and a General
Attorney of Service Company. At December 31, 1996, Mr. Williams owned directly
and/or beneficially 13,009 shares of Common Stock and has been granted pursuant
and subject to the terms of the Company's long-term incentive plans, restricted
stock awards of 23,554 shares and options on 125,181 shares of Common Stock. As
of the same date, Mr. Chandler directly and/or beneficially owned 2,809 shares
of Common Stock and options on 16,866 shares of Common Stock under such
long-term incentive plans. Certain legal matters in connection with the
Securities will be passed upon by Cahill Gordon & Reindel, a partnership
including a professional corporation, New York, New York, for the underwriters
or purchasers. Cahill Gordon & Reindel represents the Company in various other
legal matters.
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EXPERTS
The consolidated financial statements of Consolidated Natural Gas
Company and its subsidiaries incorporated in this Prospectus by reference to the
Company's Annual Report on Form 10-K for the year ended December 31, 1996, have
been so incorporated in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The estimates of gas and oil reserves included in the aforesaid 1996
Annual Report are incorporated in this Prospectus by reference thereto in
reliance upon the report of Ralph E. Davis Associates, Inc., independent
geologists, as experts.
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CNG (R) CONSOLIDATED
NATURAL GAS
COMPANY
