<PAGE>
PROSPECTUS
Filed Pursuant to Rule 424(B)(2)
REGISTRATION NO. 033-53703
$100,000,000
[LOGO OF EQUITABLE RESOURCES, INC.]
MEDIUM-TERM NOTES, SERIES C
---------------
Due Nine Months to Forty Years from Date of Issue
---------------
Equitable Resources, Inc. (the "Company") may offer from time to time up to
$100,000,000 aggregate principal amount of its Medium-Term Notes, Series C
("Notes"). Notes of this Series will be offered on a continuing basis, and the
interest rates, maturity dates, principal amounts and other terms of such
Notes may vary, even though offered or sold at or about the same time.
Each Note will bear interest at a fixed rate established by the Company at
the date of issue of such Note and set forth in the applicable Pricing
Supplement (as hereinafter defined); the interest rate may be zero in the case
of Original Issue Discount Notes (as hereinafter defined). Unless otherwise
specified in the applicable Pricing Supplement, interest on each Note will be
payable semiannually on each July 15 and January 15 and at maturity or upon
any earlier redemption.
Each Note will mature on a date established by the Company at the date of
issue of such Note, which date shall be between nine months and forty years
from the date of issue, and Notes may be redeemed prior to maturity at the
option of the Company or pursuant to a sinking fund, in each case as set forth
in the applicable Pricing Supplement.
Notes will be issued in fully registered form in denominations of $100,000
or any amount in excess thereof which is an integral multiple of $1,000. Each
Note will be represented either by a Global Note (a "Book-Entry Note")
registered in the name of a nominee of The Depository Trust Company, New York,
New York (the "Depositary"), or by a certificate issued in definitive or
temporary form (a "Certificated Note"), as set forth in the applicable Pricing
Supplement. Beneficial interests in Global Notes representing Book-Entry Notes
will be shown on, and transfers thereof will be effected only through, records
maintained by the Depositary and its participants. Book-Entry Notes will not
be issuable as Certificated Notes except under the circumstances described
herein.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
---------------
<TABLE>
<CAPTION>
PRICE TO
PUBLIC AGENT'S PROCEEDS TO
(1)(2) COMMISSIONS (2) COMPANY (2)(3)
------------ ----------------- -----------------------
<S> <C> <C> <C>
Per Note................. 100.000% .125%-.875% 99.875%-99.125%
Total.................... $100,000,000 $125,000-$875,000 $99,875,000-$99,125,000
</TABLE>
- -------
(1) Unless otherwise specified in the applicable Pricing Supplement, Notes
will be sold at 100% of their principal amount. If the Company issues
any Note at a discount from or at a premium over its principal amount,
the Price to Public of any such Note issued at a discount or premium
will be set forth in the applicable Pricing Supplement.
(2) The Company will pay a commission to an Agent for each Note sold
through such Agent ranging from .125% to .875% of the principal amount
of such Note, depending upon such Note's maturity. The Company may
also sell Notes to any Agent, as principal, at negotiated discounts,
for resale to investors. The Company may sell Notes on its own behalf
at negotiated prices directly to purchasers purchasing Notes for their
own accounts.
(3) Before deducting expenses payable by the Company estimated at
$228,233.
---------------
Offers to purchase the Notes are being solicited from time to time by the
Company on its own behalf and on behalf of the Company by Morgan Stanley &
Co., Incorporated and Lehman Brothers, Lehman Brothers Inc. (including Lehman
Special Securities Inc.) (each an "Agent" and collectively the "Agents"). Each
Agent has agreed to use reasonable efforts to solicit and receive offers to
purchase Notes upon terms acceptable to the Company at such times and in such
amounts as the Company shall from time to time specify. The Company may also
sell Notes to any Agent acting as principal for its own account for resale to
one or more investors or other purchasers at varying prices related to
prevailing market prices at the time of such resale or otherwise, as
determined by such Agent. No termination date for the offering of the Notes
has been established. Either the Company or any Agent may reject, in whole or
in part, any offer to purchase Notes. The Notes will not be listed on any
securities exchange, and there can be no assurance that the Notes offered
hereby will be sold or that there will be a secondary market for the Notes.
See "Offering Through the Company and Agents."
---------------
MORGAN STANLEY & CO. LEHMAN BROTHERS
Incorporated
June 10, 1994
<PAGE>
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND ANY PRICING SUPPLEMENT IN CONNECTION WITH THE OFFER CONTAINED IN
THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY AGENT.
NEITHER THE DELIVERY OF THIS PROSPECTUS AND ANY PRICING SUPPLEMENT NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATES AS OF
WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS AND ANY PRICING SUPPLEMENT. THIS
PROSPECTUS AND ANY PRICING SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY SECURITIES BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------
IN CONNECTION WITH THIS OFFERING, THE AGENTS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Available Information....................................................... 2
Incorporation of Certain Documents by Reference............................. 3
The Company................................................................. 3
Use of Proceeds............................................................. 4
Ratio of Earnings to Fixed Charges.......................................... 4
Description of Notes........................................................ 4
Certain United States Federal Income Tax Considerations..................... 10
Offering Through the Company and Agents..................................... 14
Legal Matters............................................................... 15
Experts..................................................................... 15
</TABLE>
AVAILABLE INFORMATION
The Company, a Pennsylvania corporation, is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports, proxy and information
statements and other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy and information statements and other
information can be inspected and copied at the Public Reference Room of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549
and at the regional offices maintained by the Commission at 7 World Trade
Center, 13th Floor, New York, New York 10048 and Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials can be obtained at prescribed rates from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Documents
filed by the Company can also be inspected at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005, and at the offices of the
Philadelphia Stock Exchange, 1900 Market Street, Philadelphia, Pennsylvania
19103, on which exchanges certain of the Company's securities are listed. In
addition, reports, proxy statements and other information concerning the
Company can be inspected at the offices of the Company at 420 Boulevard of the
Allies, Pittsburgh, Pennsylvania 15219.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are hereby incorporated by reference in this Prospectus the following
documents heretofore filed with the Securities and Exchange Commission pursuant
to the Exchange Act:
(a)the Company's Annual Report on Form 10-K for the year ended December 31,
1993;
(b)the Company's definitive Proxy Statement dated April 12, 1994 in
connection with its Annual Meeting of Shareholders to be held on May 27,
1994;
(c)the Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1994; and
(d)the Company's Current Report on Form 8-K dated June 30, 1993 as amended;
and the Company's Amendment No. 1 to its Current Report on Form 8-K/A dated
June 30, 1993 and filed August 7, 1993.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of the offering
of the Notes shall be deemed to be incorporated by reference into this
Prospectus from the dates of filing of such documents.
Upon written or oral request the Company will provide without charge to any
person to whom this Prospectus is delivered a copy of any or all information
incorporated by reference in this Prospectus (except exhibits to such
information, unless such exhibits are specifically incorporated by reference
herein). Such requests should be directed to Audrey C. Moeller, Vice President
and Corporate Secretary, Equitable Resources, Inc., 420 Boulevard of the
Allies, Pittsburgh, Pennsylvania 15219 (telephone number 412-553-5877).
THE COMPANY
Equitable Resources, Inc. is a diversified natural gas company actively
engaged in the exploration, development and production of natural gas and crude
oil; the storage, transportation, marketing and distribution of natural gas;
and the processing of natural gas liquids. The Company's operations balance the
higher growth potential of its Energy Resource segment with the stability of
the regulated businesses of its Utility Services segment. Energy Resources and
Utility Services each accounted for approximately 50 percent of Equitable's net
income in 1992, and approximately 52 percent and 48 percent, respectively, of
Equitable's net income in 1993 and 48 percent and 52 percent, respectively, for
the twelve months ended March 31, 1994.
Energy Resources explores for, develops and produces natural gas and oil in
the Appalachian region, the Rocky Mountain region of the United States and
Canada and the Gulf Coast region, and has oil exploration interests in
Colombia, South America. Energy Resources performs contract drilling and well
maintenance services in the Appalachian area and extracts and markets natural
gas liquids in Kentucky and Louisiana. Additionally, Energy Resources markets
natural gas on a nationwide basis and markets gas and services in the Gulf
Coast region through Louisiana Intrastate Gas Company LLC, which operates as a
single source market center.
Utility Services purchases, gathers, transports, stores and distributes
natural gas. This segment sells natural gas and provides transportation
services to approximately 265,000 customers (93 percent residential) in
southwestern Pennsylvania, northern West Virginia and eastern Kentucky. It also
sells natural gas and provides transmission and underground storage services to
customers in nine northeastern and mid-Atlantic states. In addition, Utility
Services operates gathering and transmission facilities near the Company's
producing properties in eastern Kentucky.
3
<PAGE>
USE OF PROCEEDS
The Company will apply the proceeds from the sale of the Notes to retire
equivalent principal amounts of short-term debt incurred or to be incurred as
part of the Company's business operations. The Company typically incurs short-
term debt to finance acquisitions of businesses and capital expenditures and
may also incur short term debt for ordinary business purposes from time to time
due to, among other factors, the seasonality of its businesses.
RATIO OF EARNINGS TO FIXED CHARGES
The Company's ratio of earnings to fixed charges for each of the five fiscal
years 1989-1993 and for the twelve months ended March 31, 1994 is as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS
YEAR ENDED DECEMBER 31 ENDED 3/31/94
------------------------------------------------------------------ -------------
1989 1990 1991 1992 1993
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
3.07x 3.36x 3.30x 2.86x 3.09x 3.15x
</TABLE>
Earnings used to compute the ratio of earnings to fixed charges represent the
aggregate of net income, income taxes and fixed charges. Income taxes include
current and deferred income taxes and amortization of deferred investment tax
credits. Fixed charges consist of interest, including amortization of debt
expense less premium, and one-third of all rental expenses. Reference is made
to Exhibit 12.1 to the Registration Statement of which this Prospectus is a
part for the detailed calculation of the above ratios.
DESCRIPTION OF NOTES
GENERAL
The Notes will all be part of a single series issued under an Indenture dated
as of April 1, 1983 (the "Basic Indenture") between the Company and Bankers
Trust Company, as Trustee (the "Trustee"), as amended by a 1991 Supplemental
Indenture dated as of March 15, 1991 (the "Supplemental Indenture"). The Basic
Indenture provides for the issuance from time to time of the Company's
unsecured debentures, notes or other evidences of indebtedness (the "Debt
Securities"). The Basic Indenture does not limit the amount of Debt Securities
which may be issued thereunder and provides that Debt Securities may be issued
from time to time in one or more series, which may be established by or
pursuant to one or more resolutions (a "Board Resolution") adopted by the
Company's Board of Directors or by a duly authorized committee appointed by the
Board.
The Notes may be issued from time to time up to the aggregate principal
amount of $100,000,000. The Notes will be unsecured and will rank pari passu
with all Debt Securities issued and to be issued under the Indenture, as well
as with all other unsecured debt of the Company. At the date of this Prospectus
$425 million aggregate principal amount ($420 million net of original issue
discount) of five series of previously issued Debt Securities were outstanding
under the Indenture.
The terms of particular issues of the Notes may be established either by a
Board Resolution or by an addendum (executed by a named officer) to a Board
Resolution establishing the series of Notes and specifically authorizing such
officer to establish such terms. The Basic Indenture, Supplemental Indenture,
any Board Resolutions and any such addenda are referred to herein collectively
as the "Indenture."
The Basic Indenture was filed as Exhibit 4.1 to the Company's Registration
Statement on Form S-3 (Registration No. 2-80575) filed April 24, 1986, and the
Supplemental Indenture was filed as Exhibit 4.3 to the Company's Registration
Statement on Form S-3 (Registration No. 33-39505) filed March 22, 1991. The
4
<PAGE>
Board Resolutions and the form of Board Resolution and accompanying addenda for
the Notes are filed as Exhibit 4.4 to the Registration Statement of which this
Prospectus is a part.
The following summaries of certain provisions of the Indenture do not purport
to be complete and are subject to, and are qualified in their entirety by
reference to, all provisions of the Indenture, including the definition therein
of certain terms. Wherever particular provisions of or defined terms used in
the Indenture are referred to, such provisions or defined terms are
incorporated herein by reference. Section numbers are those in the Basic
Indenture. Capitalized terms used under this heading are used as defined in the
Indenture unless otherwise defined in this Prospectus or the context indicates
otherwise.
TERMS OF THE NOTES; PRICING SUPPLEMENTS
The particular terms of each issue of Notes will be described in a pricing
supplement (a "Pricing Supplement") to this Prospectus, including (1) the
principal amount; (2) the date or dates on which such Notes will mature; (3)
the rate or rates at which such Notes will bear interest and the date or dates
from which such interest will accrue; (4) the dates on which such interest will
be payable and the Regular Record Dates applicable to such Interest Payment
Dates (as such terms are defined below); (5) any mandatory or optional sinking
fund or analogous provisions; and (6) the date, if any, after which, and the
price or prices at which, such series may be redeemed at the option of the
Company. The Pricing Supplement will specify the purchase price ("Issue Price")
and any other terms of the sale of each Note being sold pursuant thereto. The
terms and conditions set forth under "Description of Notes" will apply to each
Note unless otherwise specified in the applicable Pricing Supplement and in
such Note.
The Notes will be offered on a continuing basis. The Company may from time to
time accept offers to purchase Notes, which offers, even though made and
accepted at or about the same time, may differ as to principal amount, interest
rate, maturity date, mandatory and optional redemption provisions and purchase
price, all as set forth in the applicable Pricing Supplements.
Each Note will be issued initially as either a Book-Entry Note or a
Certificated Note. Except as set forth below under "Book-Entry Notes," Book-
Entry Notes will not be issuable as Certificated Notes. Except as otherwise
provided in the applicable Pricing Supplement, Notes will be issued only in
fully registered form in denominations of $100,000 or any amount in excess
thereof which is an integral multiple of $1,000.
The Notes may be presented for payment of principal and interest, transfer of
the Notes will be registrable and the Notes will be exchangeable at the agency
maintained by the Company in New York City for such purpose, except that Book-
Entry Notes will be exchangeable only in the manner and to the extent set forth
under "Book-Entry Notes" below. On the date hereof, such agency for the
payment, transfer and exchange of the Notes (the "Paying Agent") is the
Trustee.
When used in this Prospectus, the following terms shall have the meanings
indicated below:
"Business Day" means any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which banking institutions are authorized
or required by law or regulation to close in New York City.
An "Interest Payment Date" with respect to any Note means, unless otherwise
specified in the applicable Pricing Supplement, each July 15 and January 15.
The "Record Date" with respect to any Interest Payment Date means, unless
otherwise specified in the applicable Pricing Supplement, the July 1 and
January 1 preceding such Interest Payment Date, whether or not such date is a
Business Day.
5
<PAGE>
INTEREST AND PRINCIPAL PAYMENTS
Each Note will bear interest from the date of issuance at the rate per annum
stated on the face thereof, and in the applicable Pricing Supplement, until the
principal thereof is paid or made available for payment. Such interest will be
computed on the basis of a 360-day year of twelve 30-day months. Unless
otherwise specified in the applicable Pricing Supplement, payments of interest
will be made semiannually on each July 15 and January 15 and at maturity or
upon any earlier redemption.
If any Interest Payment Date would fall on a day that is not a Business Day,
the interest payment will be postponed to the next day that is a Business Day,
and no interest on such payment will accrue for the period from and after the
Interest Payment Date. If the maturity date or date of earlier redemption of
any note would fall on a day that is not a Business Day, the payment of
interest and principal (and premium, if any) may be made on the next succeeding
Business Day, and no interest on such payment will accrue for the period from
and after the maturity or redemption date.
Interest payments will include accrued interest from the date of issue or
from the last date in respect of which interest has been paid or duly provided
for, to, but excluding, the Interest Payment Date or the date of maturity or
earlier redemption, as the case may be.
Interest will be payable to the person in whose name the Note is registered
at the close of business on the applicable Record Date; provided, however, that
the interest payable at maturity or upon earlier redemption on a date which is
not an Interest Payment Date will be payable to the person to whom principal is
payable. The initial interest payment on a Note will be made on the first
Interest Payment Date falling after the date the Note is issued; provided,
however, that payment of interest on a Note issued less than 15 calendar days
before an Interest Payment Date will be paid on the next succeeding Interest
Payment Date to the holder of record on the Record Date with respect to such
succeeding Interest Payment Date.
Payments of interest, other than interest payable at maturity or earlier
redemption, will be made by check mailed to the address of the person entitled
thereto as shown on the Security Register. Payments of principal, premium, if
any, and interest upon maturity or earlier redemption will be made in
immediately available funds against presentation and surrender of the Note.
Notwithstanding the foregoing, (a) the Depositary, as holder of Book-Entry
Notes, will be entitled to receive payments of interest by wire transfer of
immediately available funds and (b) a holder of $10,000,000 or more in
aggregate principal amount of Certificated Notes having the same Interest
Payment Date will be entitled to receive payments of interest by wire transfer
of immediately available funds upon written request to the Paying Agent not
later than 15 calendar days prior to the applicable Interest Payment Date.
Certain Notes may be considered to be issued with original issue discount
("Discount Notes"), which generally must be included in income for federal
income tax purposes at a constant rate. See "Certain Federal Income Tax
Considerations--Original Issue Discount--Discount Notes" below. Special
considerations applicable to any such Discount Notes will be set forth in the
applicable Pricing Supplement.
BOOK-ENTRY NOTES
Book-Entry Notes will be represented by a Global Note issued by the Company
to and deposited with the Depositary and registered in the name of a nominee of
the Depositary. Certificated Notes will not be exchangeable for Book-Entry
Notes and, except under the circumstances described below, Book-Entry Notes
will not be exchangeable for Certificated Notes or otherwise issuable as
Certificated Notes.
The Company expects that, upon its issuance of a Global Note, the Depositary
will credit, on its book-entry registration and transfer system, the respective
principal amounts of the Notes represented by such Global Note to the accounts
of persons that have accounts with the Depositary ("participants"). The
accounts to be credited will be designated by the Agent participating in the
sale of such Notes. Ownership of beneficial interests in a Global Note will be
limited to participants or persons that may hold interests through
6
<PAGE>
participants. Ownership of such beneficial interests will be shown on, and the
transfer of that ownership will be effected only through, records maintained by
the Depositary (with respect to interests of participants) or by participants
or persons that hold through participants (with respect to interest of persons
other than participants).
So long as the Depositary's nominee is the registered owner of a Global Note,
such nominee will be considered to be the sole owner or holder of the Notes
represented by such Global Note for all purposes of the Indenture. Except as
set forth below, owners of beneficial interest in a Global Note will not be
entitled to have the Notes represented by such Global Note registered in their
names, will not receive or be entitled to receive physical delivery of such
Notes in definitive form, and will not be considered to be the owners or
holders thereof under the Indenture.
Payments of principal, premium, if any, and interest on Notes represented by
a Global Note registered in the name of the Depositary's nominee will be made
to the Depositary's nominee as the registered owner of such Global Note. None
of the Company, the Trustee or any paying agent for such Notes will have any
responsibility or liability for any aspect of the records relating to, or
payments made on account of, beneficial ownership interests in such Global Note
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interest.
The Company expects that the Depositary, upon receipt of any payment of
principal, premium or interest, will immediately credit participants' accounts
with payments in amounts proportionate to their respective beneficial interests
in the principal amount of the Global Notes deposited with it as shown on the
records of the Depositary. The Company also expects that payments by
participants to owners of beneficial interests in a Global Note held through
such participants will be the responsibility of such participants and will be
governed by standing instructions and customary practices as is now the case
with the securities held for the accounts of customers registered in "street
names."
If the Depositary is at any time unwilling or unable to continue to act as
Depositary, and a successor depositary is not appointed by the Company within
90 days, the Company will issue Certificated Notes in definitive form in
exchange for the Global Note or Notes previously deposited with the Depositary.
In addition, the Company may at any time in its sole discretion determine not
to have the Notes represented by one or more Global Notes and, in such event,
will issue Certificated Notes in definitive form in exchange for such Global
Note or Notes.
REDEMPTION PRIOR TO MATURITY
The applicable Pricing Supplement will indicate either that the Notes may not
be redeemed prior to maturity or will state the terms on which the Notes may be
redeemed, in whole or in part, at the option of the Company or pursuant to the
terms of any mandatory sinking fund. Notice of redemption will be provided by
mailing a notice of such redemption to each holder by first class mail, postage
prepaid, at least 30 days and not more than 60 days prior to the date fixed for
redemption to the respective address of each holder as that address appears
upon the Security Register. If a Note is redeemed in part only, a new Note or
Notes for the unredeemed portion thereof shall be issued to the holder thereof
upon the cancellation thereof. In case of a partial redemption of a Book-Entry
Note, the Depositary's practice is to determine by lot the interest of each
participant in the portion of such Note being redeemed.
REPURCHASE
The Company may purchase Notes at any price in the open market or otherwise.
Notes so purchased by the Company may, at the discretion of the Company, be
held or resold or surrendered to the Trustee for cancellation.
RESTRICTIVE COVENANTS
The Supplemental Indenture referred to above eliminated from the Indenture
certain restrictive covenants imposing limitations on liens and on additional
Funded Debt, provided that the elimination of such covenants shall become
effective only when there are no Debt Securities Outstanding of any series
created prior to the execution of the Supplemental Indenture.
7
<PAGE>
EVENT RISK
The Indenture does not contain any generally applicable covenant or provision
designed to require the Company to redeem the Debt Securities in response to a
highly leveraged buy-out transaction or other significant change to the
Company's capital structure or debt to equity ratio. Accordingly, holders of
the Debt Securities are not protected against a possible decline in the market
value of the Debt Securities as a result of such transaction or change.
The Indenture does, however, contain a covenant limiting the incurrence or
guaranteeing of Funded Debt, or the sale of capital stock by a Subsidiary.
However, this limitation (i) is in effect only so long as there remain
outstanding those series of Debt Securities created prior to the execution of
the Supplemental Indenture, and (ii) could be waived or amended with the
consent of the Holders of 66 2/3% in principal amount of all such previously
created series, taken in the aggregate. (See "Modification and Waiver" below.)
The five such previously created series of Debt Securities mature in 1996,
1999, 2013, and from 1998 through 2021 and from 1995 through 2023,
respectively. The series maturing in 2013 first becomes subject to redemption
at the option of the Company on April 15, 1998. None of the remaining series
are subject to optional redemption.
Under the aforesaid limitation, the Company will not, and will not permit any
Subsidiary to, create, incur, assume or guarantee any Funded Debt, and will not
permit any Subsidiary to sell any capital stock (other than to the Company or
to a wholly-owned Subsidiary), unless, after giving effect thereto and to the
application of the proceeds thereof, the sum of Consolidated Funded Debt and
the aggregate Minority Interests in Capital Stock of all Subsidiaries does not
exceed an amount obtained by multiplying Consolidated Net Worth by a fraction,
the denominator of which is the sum of the Net Cost of all Consolidated Utility
Property and Consolidated Non-utility Property owned by the Company and its
Subsidiaries, and the numerator of which is the sum of 150% of the net Cost of
all Consolidated Utility Property and 66 2/3% of the Net Cost of all
Consolidated Non-utility Property. (See (S) 1005.)
EVENTS OF DEFAULT
The following are Events of Default under the Indenture with respect to Debt
Securities of any series: (a) failure to pay principal of or premium on any
Debt Securities of that series when due; (b) failure to pay any interest on any
Debt Securities of that series when due, continued for 30 days; (c) failure to
deposit any sinking fund payment when due, with respect to any Debt Securities
of that series; (d) failure to perform any other covenant of the Company in the
Indenture (other than a covenant included in the Indenture solely for the
benefit of a series of Debt Securities other than that series), continued for
60 days after written notice as provided in the Indenture; (e) a default or
defaults with respect to indebtedness for money borrowed by the Company which
shall in the aggregate have resulted at any one time in more than $5,000,000
principal amount of such indebtedness becoming or being declared due and
payable prior to the date on which it would otherwise have become due and
payable, unless such acceleration or accelerations are rescinded or annulled
within 10 days after written notice as provided in the Indenture; (f) certain
events in bankruptcy, insolvency or reorganization; and (g) any other Event of
Default provided with respect to Debt Securities of that series. (See (S) 501.)
If an Event of Default with respect to any series of Outstanding Debt
Securities occurs and is continuing, either the Trustee or the Holders of at
least 25% in principal amount of the Outstanding Debt Securities of that series
may declare the principal amount of all Debt Securities of that series to be
due and payable immediately. At any time after a declaration of acceleration
with respect to Debt Securities of any series has been made, but before a
judgment or decree based on acceleration has been obtained, the Holders of a
majority in principal amount of the Outstanding Debt Securities of that series
may, under certain circumstances, rescind and annul such acceleration. (See (S)
502.)
The Indenture provides that the Trustee will be under no obligation, subject
to the duty of the Trustee during default to act with the required standard of
care, to exercise any of its rights or powers under the Indenture at the
request or direction of any of the Holders, unless such Holders shall have
offered to the Trustee such reasonable indemnity as it may require. (See (S)
603.) Subject to such provisions for indemnification of the Trustee, the
Holders of a majority in principal amount of the Outstanding Debt
8
<PAGE>
Securities of any series will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, with respect to the
Debt Securities of that series. (See (S) 512.)
The Company will be required to furnish to the Trustee annually a statement
as to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance. (See (S) 1009.)
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company may consolidate or merge with or into, or transfer or lease its
assets substantially as an entirety to, any corporation, provided that the
corporation formed by such consolidation or into which the Company is merged or
which acquires or leases the assets of the Company substantially as an entirety
assumes the Company's obligations on the outstanding Debt Securities and under
the Indenture and that, after giving effect to any such transaction, there
shall not exist any mortgage or other lien on or security interest in the
property of such corporation, including any subsidiaries thereof, which would
violate the Limitation on Liens covenant in the Indenture applicable to Debt
Securities outstanding as of the date of the Supplemental Indenture, and such
corporation shall not have outstanding any Funded Debt, or any subsidiary
thereof any Funded Debt or Minority Interests in Capital Stock, which would
violate the Limitation upon Additional Funded Debt covenant in the Indenture
applicable to Debt Securities outstanding as of the date of the Supplemental
Indenture.
MODIFICATION AND WAIVER
With the consent of the Holders of 66 2/3% in principal amount of the
outstanding Debt Securities of all series affected thereby, taken in the
aggregate without regard to separate series of Outstanding Debt Securities, the
Company and the Trustee may enter into one or more indentures supplemental to
the Indenture for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of the Indenture with respect to
Debt Securities of such series affected or of modifying in any manner the
rights of the Holders of Debt Securities of such series affected, provided that
no such amendment or modification may, without the consent of the Holder of
each outstanding Debt Security affected thereby, (a) change the stated maturity
date of the principal of, or any installment of principal of or interest on,
any Debt Security, (b) reduce the principal amount of, or premium or interest
on, any Debt Security, (c) change the place or currency of payment of principal
of, or premium or interest on, any Debt Security, (d) impair the right to
institute suit for the enforcement of any payment on or with respect to any
Debt Security, or (e) reduce the percentage in principal amount of outstanding
Debt Securities of any series, the consent of whose Holders is required for
modification or (f) amend the Indenture or waive compliance with certain
provisions of the Indenture or waive certain defaults. (See (S) 902.)
The Holders of 66 2/3% in principal amount of the outstanding Debt Securities
of any series may on behalf of the Holders of all Debt Securities of that
series waive, insofar as that series is concerned, compliance by the Company
with certain restrictive provisions of the Indenture. (See (S) 1010.) The
Holders of a majority in principal amount of the outstanding Debt Securities of
any series may on behalf of the Holders of all Debt Securities of that series
waive any past default under the Indenture with respect to that series, except
a default in the payment of the principal of, or premium or interest on, any
Debt Security of that series or in respect of a provision which under the
Indenture cannot be modified or amended without the consent of the Holder of
each outstanding Debt Security of that series affected. (See (S) 513.)
EXTINGUISHMENT OF DEBT
The Company may extinguish its indebtedness on the Notes by irrevocably
placing sufficient cash or other essential risk-free monetary assets (including
direct obligations of the United States government, obligations guaranteed by
the United States government and/or certain securities backed by United States
government obligations as collateral under an arrangement by which the interest
and principal payments on the collateral generally flow immediately through to
the holder of the security) with the Trustee solely for satisfying such
indebtedness. Upon such deposit with the Trustee, and given that the
possibility that the
9
<PAGE>
Company will be required to make further payments is remote, the Company is
considered to have extinguished the indebtedness on the Notes for financial
reporting purposes. Generally accepted accounting principles (as currently
pronounced and interpreted) would allow the Company to remove such indebtedness
from its balance sheet, subject to certain footnote disclosures.
Such extinguishment of indebtedness on the Notes would give rise to the
recognition of gain or loss by the Company in the year of extinguishment. Gain
or loss would be calculated by subtracting the net carrying amount of the Notes
(i.e. the amount due at maturity, adjusted for unamortized premium discount and
costs associated with issuing the Notes) on the date of extinguishment, from
the reacquisition price paid by the Company to the Holder(s), including all
costs associated with the extinguishment.
Should the gain or loss recognized by the Company with respect to the
extinguishment represent a material amount, such gain or loss will be reported
as an extraordinary item (net of income tax effect) on the Company's financial
statements.
Prospective investors are urged to consult their tax advisors as to the
specific tax consequences of such debt extinguishment.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of the principal United States federal income tax
considerations of ownership and disposition of the Notes has been furnished by
Doepken Keevican Weiss & Medved, counsel to the Company. This summary is based
on the Internal Revenue Code of 1986, as amended to the date hereof (the
"Code"), and existing and proposed Treasury regulations, revenue rulings,
revenue procedures and judicial decisions. This summary deals only with Notes
held as capital assets within the meaning of Section 1221 of the Code and which
are purchased for cash. It does not discuss all of the tax considerations that
may be relevant to a holder in light of his particular circumstances or to
holders subject to special rules, such as persons other than Holders, as
defined below, tax-exempt entities, life insurance companies, dealers in
securities or foreign currencies, persons holding Notes as a hedge against
currency risks, persons who have hedged the interest rate risks of ownership of
a Note, persons who have acquired the Notes in transactions (other than
purchases for cash) in which gain is not recognized for federal income tax
purposes or Holders whose functional currency (as defined in Section 985 of the
Code) is not the United States dollar. Persons considering the purchase of
Notes should consult with their own tax advisors with regard to the application
of the federal income tax laws to their particular situations as well as any
tax consequences arising under the laws of any state, local or foreign tax
jurisdiction.
As used herein, the term "Holder" means a beneficial owner of a Note that is,
for federal income tax purposes, (i) a citizen or resident of the United
States, (ii) a corporation, partnership or other entity created or organized in
or under the laws of the United States or of any political subdivision thereof,
or (iii) an estate or trust the income of which is subject to federal income
taxation regardless of its source.
INTEREST PAID ON NOTES AND DISCOUNT NOTES
Interest actually received by, credited to or constructively received by a
Holder pursuant to a Note, other than a Discount Note, generally constitutes
gross income which is fully taxable to the Holder. The taxable year in which
the Holder includes interest in gross income is determined by, among other
things, the method of accounting of the Holder (e.g. cash receipts and
disbursements or accrual methods).
With respect to a Discount Note, the aforementioned gross income inclusion
rules are applicable to Qualified Stated Interest (as defined herein) on such
Discount Note. Any amounts received by the Holder which do not constitute
Qualified Stated Interest will not be includible in gross income as interest
income even if such amounts are characterized as interest by the Company.
ORIGINAL ISSUE DISCOUNT--DISCOUNT NOTES
The following discussion is a summary of the principal federal income tax
consequences of the ownership and disposition of Discount Notes by Holders and
is based upon the Code and Final Treasury Regulations ("Final Regulations")
relating to original issue discount ("OID"). The Final Regulations are
effective for debt instruments issued on or after April 4, 1994.
10
<PAGE>
Under the Final Regulations, a Note which has an "issue price" that is less
than its "stated redemption price at maturity" will generally be considered to
have been issued bearing OID for federal income tax purposes, unless such
difference is less than a specified de minimis amount (defined generally as 1/4
of one percent of the stated redemption price at maturity times the number of
complete years from the date of issue to the date of maturity). If a
substantial amount of the Notes in an issue are sold for money, the issue price
of each Note in the issue generally is the first price at which a substantial
amount of the Notes is sold to the public. For this purpose, the public does
not include persons or organizations acting as brokers, underwriters, bond
houses or wholesalers. Such issue price will not change even if a portion of
such similar Notes is subsequently sold at a different price. If an issue
consists of a single Note sold for money, the issue price of the Notes is the
amount of cash paid for the Note. The stated redemption price at maturity of a
Note is the total of all payments required to be made under the Note other than
payments of Qualified Stated Interest. The term Qualified Stated Interest is
defined as stated interest that is unconditionally payable in cash or in
property (other than debt instruments of the Company) or that will be
constructively received by a Holder under Section 451 of the Code, at least
annually at a single fixed rate that appropriately takes into account the
length of the interval between payments.
In the case of a Note or Discount Note with a term that is not more than one
(1) year from the date of issue, no payments of interest are treated as
Qualified Stated Interest payments.
Holders of Discount Notes are required to include Qualified Stated Interest
payments in income at the time they are received or accrued, in accordance with
the Holder's method of accounting. In addition, a Holder of a Discount Note
will be required to include OID in income periodically over the term of a
Discount Note without regard to when the cash or other payments attributable to
such income are received. In general, a Holder must include in gross income for
federal income tax purposes the sum of the daily portions of OID with respect
to the Discount Note for each day during the taxable year on which such Holder
holds the Discount Note ("Accrued OID"). The daily portion is determined by
allocating to each day of any accrual period within a taxable year a pro rata
portion of the OID allocable to such accrual period. The amount of such OID is
equal to the adjusted issue price of the Discount Note at the beginning of the
accrual period multiplied by the yield to maturity of the Discount Note. For
purposes of computing OID, the Company will use six-month accrual periods that
end on the day in the calendar year corresponding to the maturity date of the
Discount Notes and the date six months prior to such maturity date, with the
exception of an initial short accrual period. The adjusted issue price of a
Discount Note at the beginning of any accrual period is the issue price of the
Discount Note increased by the Accrued OID for all prior accrual periods and
decreased by any cash payments on the Discount Notes (other than payments of
Qualified Stated Interest, if any.) Under these rules, Holders will generally
include in gross income increasingly greater amounts of OID in each successive
accrual period. Each payment made under a Discount Note (except for payments of
Qualified Stated Interest, if any, and certain early redemption payments
discussed below) will be treated first as payment of OID (which was previously
includable in income) to the extent of OID that has accrued as of the date of
payment and has not been allotted to prior payments, and second as a payment of
principal (which is not includable in income).
The Company expects that it will report its interest deductions, and prepare
information returns, with respect to Discount Notes in accordance with the
Final Regulations. Any Certificated Note that is issued as a Discount Note will
bear a legend stating (i) the total amount of OID, (ii) the issue date of the
Note, (iii) the yield to maturity of the Note and the method used to determine
the yield to maturity if there is a short accrual period and (iv) in the case
of a Discount Note which has a short interest accrual period, the amount of OID
allocable to such short period.
OPTIONAL REDEMPTION
As set forth in the Basic Indenture, certain of the Discount Notes may be
redeemable prior to maturity (a "Redeemable Discount Note") at the option of
the Company (a "Call Option"). Under the Final Regulations, the Company will
exercise the Call Option if, by utilizing the date of exercise of the Call
Option as the maturity date and the redemption price payable on exercise of the
Call Option (the "Redemption
11
<PAGE>
Price") as the stated redemption price at maturity, the yield on the Redeemable
Discount Notes would be lower than such yield would be if the Call Option were
not exercised.
If it is presumed that the Company will exercise the Call Option on a given
date (the "Presumed Exercise Date"), the Redeemable Discount Notes would bear
OID in an amount equal to the excess of the Redemption Price over their issue
price. For purposes of calculating the current inclusion of such OID, the yield
on the Redeemable Discount Notes would be computed on their issue date by
treating the Presumed Exercise Date as the maturity date of the Redeemable
Discount Notes and the Redemption Price as their stated redemption price at
maturity. If it was presumed that the Company would exercise the Call Option,
but the Company did not in fact exercise the Call Option on the Presumed
Exercise Date, the Redeemable Discount Notes would be treated, for certain
purposes, as if the Call Option had been exercised and new debt instruments had
been issued on the Presumed Exercise Date for an amount of cash equal to the
Redemption Price. These new debt instruments would also be subject to the OID
Rules with the amount of OID, if any, determined as of the Presumed Exercise
Date in the manner described above.
MARKET DISCOUNT
If a Holder purchases a Note (other than a Discount Note) for an amount that
is less than its stated redemption price at maturity or, in the case of a
Discount Note, its "revised issue price", the amount of the difference will be
treated as "market discount" for federal income tax purposes, unless such
difference is less than a specified de minimis amount (defined as 1/4 of one
percent of the stated redemption price at maturity times the number of complete
years to maturity after acquisition). The "revised issue price" of a Discount
Note generally equals its issue price, plus the aggregate amount of OID
includable (without regard to any reduction for amortized acquisition premium,
as discussed below) in the gross income of all previous holders of the Discount
Note, less any cash payments (other than Qualified Stated Interest) made to all
previous holders on such Discount Note. It should be noted that although the
reduction for previous cash payments is generally consistent with provisions of
the Code and the Final Regulations governing OID, technical corrections may be
necessary to correct what appears to be an erroneous omission of the reduction
for previous cash payments from the definition of revised issue price under the
Code.
Under the market discount rules of the Code, a Holder will be required to
treat any partial principal payment (or, in the case of a Discount Note, any
payment that does not constitute Qualified Stated Interest) on, or any gain
realized on the sale, exchange, retirement or other disposition of, a Note as
ordinary income to the extent of the lesser of (i) the amount of such payment
or realized gain or (ii) the market discount which has not previously been
included in income and is treated as having accrued on such Note at the time of
such payment or disposition. If such Note is disposed of in an otherwise
nontaxable transaction (other than certain nonrecognition transactions to be
excluded under yet-to-be released regulations pursuant to section 1276(d) of
the Code), such as by gift, the amount of gain realized on such disposition for
purposes of the market discount rules will be determined as if such Holder had
sold the Note at its then fair market value. Market discount will be considered
to accrue ratably during the period from the date of acquisition to the
maturity date of the Note, unless the Holder elects to accrue on the basis of
semiannual compounding.
A Holder may be required to defer the deduction of all or a portion of the
interest paid or accrued on any indebtedness incurred or maintained to purchase
or carry a Note with market discount until the maturity of the Note or its
earlier disposition in a taxable transaction. A Holder may elect to include
market discount in income currently as it accrues (on either a ratable or
semiannual compounding basis), in which case the rules described above
regarding the treatment as ordinary income of gain upon the disposition of the
Note and upon the receipt of certain cash payments and regarding the deferral
of interest deductions will not apply.
ACQUISITION AT A PREMIUM
A Holder who purchases a Discount Note for an amount that is greater than its
adjusted issue price will be considered to have purchased such Note at an
"acquisition premium" within the meaning of the Code.
12
<PAGE>
Under the acquisition premium rules of the Code, the amount of OID which such
Holder must include in gross income with respect to such Note for any taxable
year will be reduced (but not below zero) by the portion of such acquisition
premium properly allocable to such year.
If a Holder purchases a Note for an amount that is greater than its stated
redemption price at maturity, such Holder will be considered to have purchased
such Note with "amortizable bond premium" equal in amount to such excess and
may elect (in accordance with applicable Code provisions) to amortize such
premium, using a constant yield method over the remaining term of the Note and
to offset interest otherwise required to be included in income in respect of
such Note during any taxable year by the amortized amount of such excess for
such taxable year. However, if such Note may be optionally redeemed after the
Holder acquires it at a price in excess of its stated redemption price at
maturity, special rules would apply which could result in a deferral of the
amortization of some bond premium until later in the term of such Note.
SALE, EXCHANGE OR RETIREMENT OF THE NOTES--GAIN OR LOSS
Upon the sale, exchange or retirement of a Note, a Holder will recognize
taxable gain or loss equal to the difference between the amount realized on the
sale, exchange or retirement and such Holder's adjusted tax basis in the Note.
A Holder's adjusted tax basis in a Note generally will equal the cost of the
Note to such Holder, increased by the amounts of any Market Discount and OID
previously included in income by the Holder with respect to such Note and
reduced by any amortized bond premium and any principal payments received by
the Holder and, in the case of a Discount Note, by the amounts of any other
payments that do not constitute Qualified Stated Interest.
Gain or loss recognized on the sale, exchange or retirement of a Note will be
capital gain or loss (except to the extent of any accrued Market Discount which
the Holder has not previously included in income), and will generally be long-
term capital gain or loss if at the time of sale, exchange or retirement the
Note has been held for more than one year. Although for corporations capital
gains are currently taxed at the same rates as taxable income, the distinction
between capital gain or loss and ordinary income or loss is relevant for
purposes of, among other things, limitations on the deductibility of capital
losses. For individuals, estates and trusts, net capital gain, that is, the
excess of net long-term capital gain over net short-term capital loss, will be
subject to a maximum tax rate of 28 percent. The excess of net short-term
capital gain over net long-term capital loss will be taxed at the rates
applicable to ordinary income, that is up to a maximum tax rate of 39.6
percent. For noncorporate taxpayers, losses from the sale or exchange of
capital assets, whether short-term or long-term, may offset capital gains and
up to $3,000 of ordinary income in any one taxable year. Any unused net capital
loss for a taxable year is available as a carryover to offset capital gains and
ordinary income in subsequent taxable years, subject to certain limitations and
adjustments.
SHORT-TERM NOTES
A Note, or Discount Note, which has a fixed maturity date of no more than one
(1) year after the date of issue is considered a short-term note ("Short-Term
Note"). On the sale or exchange of such Short-Term Note, any gain realized is
treated as ordinary income to the Holder to the extent of the Holder's ratable
share of OID, based on the number of days the Note is held by the Holder.
However, at the election of the Holder, which election is deemed irrevocable,
the Holder may accrue OID by using a constant interest rate method.
The aforementioned Short-Term Note rules do not apply to certain Short-Term
Notes governed under Section 1281 of the Code, which Section applies to Short-
Term Notes held by a Holder using the accrual method of accounting, held by a
bank, held primarily for sale to customers in the ordinary course of a Holder's
trade or business, or held by a common trust fund or regulated investment
company, among others. Prospective investors who may fall into such categories
are urged to consult their tax advisors as to the specific tax consequences of
the purchase of Short-Term Notes.
13
<PAGE>
BACKUP WITHHOLDING
A Holder may be subject, under certain circumstances, to backup withholding
at a 31% rate with respect to payments received with respect to the Notes. This
withholding generally applies only if the Holder (i) fails to furnish his or
her social security or other taxpayer identification number ("TIN"), (ii)
furnishes an incorrect TIN, (iii) is notified by the Internal Revenue Service
(the "Service") that he or she has failed to properly report payments of
interest and dividends and the Service has notified the Company that he or she
is subject to backup withholding, or (iv) fails, under certain circumstances,
to provide a certified statement, signed under penalty of perjury, that the TIN
provided is his or her correct number and that he or she is not subject to
backup withholding. Any amount withheld from a payment to a Holder, under the
backup withholding rules is allowable as a credit against such Holder's federal
income tax liability, provided that the required information is furnished to
the Service. Certain Holders (including, among others, corporations and tax
exempt organizations) are not subject to backup withholding. Holders should
consult their tax advisors as to their qualifications for exemption from backup
withholding and the procedure for obtaining such an exemption.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A
HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS
WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE OWNERSHIP AND DISPOSITION
OF THE NOTES, INCLUDING THE TAX CONSEQUENCES UNDER THE STATE, LOCAL, FOREIGN
AND OTHER TAX LAWS AND JURISDICTIONS AND THE POSSIBLE EFFECTS OF CHANGES IN
UNITED STATES OR SUCH OTHER TAX LAWS.
OFFERING THROUGH THE COMPANY AND AGENTS
The Notes are being offered on a continuing basis by the Company through its
own direct efforts and through the Agents, who have agreed to use reasonable
efforts to solicit offers to purchase the Notes. The Company will have the sole
right to accept offers to purchase Notes and may reject, in whole or in part,
any offer to purchase Notes. Each Agent will also have the right to reject, in
whole or in part, any offer to purchase Notes solicited by it. Payment of the
purchase price of the Notes will be required to be made in immediately
available funds. The Company will pay each Agent, in connection with each sale
of Notes resulting from a solicitation made or an offer to purchase received by
such Agent, a commission ranging from .125% (in the case of Notes maturing in
less than twelve months) to .875% (in the case of Notes maturing in 30 years or
more) of the principal amount of Notes sold, depending upon the maturity of
such Notes. The Company may solicit offers and receive offers directly from
purchasers to purchase Notes and any direct sales made by the Company resulting
therefrom will not give rise to any such commissions; provided that such
purchasers are purchasing the Notes for their own accounts and without the use
of any intermediary other than an Agent (who would be entitled to such
commissions).
The Company may sell Notes to any Agent acting as principal for its own
account, at prices to be agreed upon at the time of sale, for resale to
investors or other purchasers at varying prices related to prevailing market
prices at the time of such resale or otherwise, as determined by such Agent.
In addition, an Agent may offer Notes it has purchased as principal to other
dealers. An Agent may sell Notes to any dealer at a discount and, unless
otherwise specified in the applicable Pricing Supplement, such discount allowed
to any dealer will not be in excess of 66 2/3% of the discount to be received
by such Agent from the Company. After any initial public offering of Notes to
be resold to investors and other purchasers at a fixed public offering price,
the public offering price, concession and discount may be changed.
Each Agent may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). The Company and each
Agent have agreed to indemnify each other against
14
<PAGE>
certain liabilities, including liabilities under the Securities Act, or to
contribute to payments made in respect thereof. The Company has also agreed to
reimburse the Agents for certain expenses.
No Note will have an established trading market when it is issued. The
Company does not intend to apply for the listing of the Notes on a national
securities exchange, but has been advised by the Agents that the Agents intend
to make a market in the Notes, as permitted by applicable laws and regulations.
The Agents are not obligated to do so, however, and the Agents may discontinue
making a market at any time without notice. There can be no assurance that
there will be a secondary market for the Notes or that any particular amount of
Notes will be issued.
The Agents do not intend to make sales of Notes to accounts over which they
exercise discretionary authority.
LEGAL MATTERS
Legal matters in connection with the Notes will be passed upon for the
Company by Augustine A. Mazzei, Jr., Esq., employed by the Company as its
Senior Vice President and General Counsel, and by Doepken Keevican Weiss &
Medved, Professional Corporation, Pittsburgh, Pennsylvania, counsel to the
Company. On April 30, 1994, Mr. Mazzei beneficially owned 15,348 shares of the
Company's common stock and held stock options to purchase an additional 8,700
shares of such stock.
Certain legal matters relating to the Notes will be passed upon for the
Agents by Kirkpatrick & Lockhart, Pittsburgh, Pennsylvania, counsel to the
Agents.
EXPERTS
The consolidated financial statements of the Company and its subsidiaries
appearing in the Company's Annual Report on Form 10-K for the year ended
December 31, 1993 have been audited by Ernst & Young, independent auditors, as
set forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in auditing and accounting.
15
