Filing Under Rule 424(b)(2)
Registration Statement
File Number 333-48561
PROSPECTUS
$75,000,000
COLONIAL GAS COMPANY
Secured Medium Term Notes, Series B
Due from 9 months to 40 years from Date of Issue
_________________________
Colonial Gas Company (the "Company") may offer from time to time up to
$75,000,000 aggregate principal amount of its Secured Medium Term Notes,
Series B (the "Notes"), having various maturities from 9 months to 40 years
from their dates of issue. The Notes will be issued only in fully registered
form, without coupons, and will be denominated in U.S. dollars, in minimum
denominations of $1,000 and integral multiples thereof. The Notes will bear
interest at a fixed rate to be determined by the Company at or prior to the
sale thereof and set forth in a pricing supplement hereto relating to the
Notes (a "Pricing Supplement") and may be subject to redemption at the option
of the Company or repayment at the option of the holder thereof, in each
case, in whole or in part, prior to maturity, if specified in the applicable
Pricing Supplement. Interest on the Notes will be payable semi-annually in
arrears on the dates set forth in the applicable Pricing Supplement and at
maturity or, if applicable, upon earlier redemption or repayment.
The Notes will be issued as a new series of First Mortgage Bonds under the
Company's Second Amended and Restated First Mortgage Indenture to State
Street Bank and Trust Company, as trustee (the "Trustee"), dated as of
June 15, 1992 (as supplemented and amended from time to time, the
"Indenture"), and, pursuant to the Indenture, secured by a lien on certain
property owned by the Company. See "Description of Notes-Security."
The aggregate principal amount, interest rate, interest payment dates,
price to public, purchase price, maturity date, redemption or repayment
terms, if applicable, and the other variable terms of each Note not described
herein will be set forth in the applicable Pricing Supplement.
Each Note will be issued in book-entry form (a "Book-Entry Note or Notes")
or, if specified in the applicable Pricing Supplement, in fully registered
certificated form (a "Certificated Note or Notes"). Each Book-Entry Note
will be represented by a global note (a "Global Note or Notes") deposited
with or on behalf of The Depository Trust Company, New York, New York (the
"Depositary"), and registered in the name of the Depositary or its nominee.
Beneficial interests in a Global Note will be shown on, and transfers thereof
will be effected only through, records maintained by the Depositary (with
respect to its participants) and by its participants (with respect to
beneficial owners). Owners of beneficial interests in a Global Note will not
be considered holders thereof and will not be entitled to receive physical
delivery of Certificated Notes, except under the limited circumstances
described herein. See "Description of Notes - Book-Entry Notes."
________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR BY ANY STATE
SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS OR ANY PRICING SUPPLEMENT HERETO. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Agents'
Price to Discounts and Proceeds to the
Public (1) Commissions Company (1)(3)
(1)(2)
Per Note 100% .125% - .750% 99.875% - 99.250%
Total $75,000,000 $93,750 - $562,500 $74,906,250 - $74,437,500
(1) Salomon Brothers Inc, A.G. Edwards & Sons, Inc., Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated or other agents
selected from time to time by the Company who become parties to the
Distribution Agreement dated the date hereof (the "Distribution
Agreement") between the Company and each of the agents (the "Agents"),
individually or in a syndicate, may purchase Notes, as principal, from
the Company for resale to investors and other purchasers at varying
prices relating to prevailing market prices at the time of resale as
determined by the applicable Agent or, if so specified in the applicable
Pricing Supplement, for resale at a fixed offering price. Unless
otherwise specified in the applicable Pricing Supplement, any Note sold
to an Agent as principal will be purchased by such Agent at a price
equal to 100% of the principal amount thereof, less a percentage of the
principal amount equal to the commission applicable to an agency sale
(as described below) of a Note of identical maturity. If agreed to by
the Company and an Agent, such agent may utilize its reasonable efforts
on an agency basis to solicit offers to purchase Notes at 100% of the
principal amount thereof, unless otherwise specified in the applicable
Pricing Supplement. The Company will pay to an Agent a commission
ranging from .125% to .750% of the principal amount of any Note,
depending on maturity, sold through such Agent. Commissions with
respect to Notes with maturities in excess of 30 years that are sold
through such Agent will be negotiated between the Company and such Agent
at the time of such sale. The Notes may also be sold by the Company
directly to investors, in which case no commission will be payable to
any Agent. See "Plan of Distribution."
(2) The Company has agreed to indemnify the Agents against, and to provide
contribution with respect to, certain liabilities, including liabilities
under the Securities Act of 1933. See "Plan of Distribution".
(3) Before deduction of expenses payable by the Company estimated
at $200,000.
___________________________
The Notes are being offered on a continuing basis by the Company to or
through the Agents. The Notes will not be listed on any securities exchange,
and there can be no assurance that all or any portion of the Notes offered by
this Prospectus will be sold or, if sold, that there will be a secondary
market for any of the Notes or liquidity in the secondary market if one
develops. The Company reserves the right to withdraw, cancel or modify the
offer made hereby without notice. The Company or the Agent that solicits any
offer on an agency basis may reject such offer to purchase Notes in whole or
in part. See "Plan of Distribution."
Salomon Smith Barney A.G. Edwards & Sons, Inc. Merrill Lynch & Co.
March 30, 1998.
___________________________
Information contained herein is subject to completion or amendment. A
Registration Statement has been filed with the Securities and Exchange
Commission. These securities may not be sold nor may offers to buy be
accepted prior to the time the Registration Statement becomes effective.
This Prospectus shall not constitute an offer to sell or the solicitation
of an offer to buy nor shall there be any sale of these securities in any
jurisdiction in which such offer, solicitation or sale would be unlawful
prior to registration or qualification under the securities laws of any
such jurisdiction.
IN CONNECTION WITH AN OFFERING OF NOTES PURCHASED BY ONE OR MORE AGENTS AS
PRINCIPAL ON A FIXED PRICE BASIS, SUCH AGENT(S) MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES. SUCH
TRANSACTIONS MAY INCLUDE STABILIZING AND THE PURCHASE OF NOTES TO COVER
SYNDICATE SHORT POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"PLAN OF DISTRIBUTION."
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 other information with the
Securities and Exchange Commission (the "Commission"). Such reports and
other information can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the following regional
offices of the Commission: New York Regional Office, 7 World Trade Center,
Suite 1300, New York, New York 10048, and Chicago Regional Office, 500 W.
Madison Street, Suite 1400, Chicago, Illinois 60661; and copies of such
material can be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, the Company is required to file electronic versions of
such material with the Commission through the commission's Electronic Data
Gathering, Analysis and Retrieval (EDGAR) system. The Commission maintains
a World Wide Web site at http://www.sec.gov that contains reports, proxy
and information statements and other information regarding registrants that
file electronically with the Commission such as the Company. The Company's
common stock is listed on the New York Stock Exchange. Reports and other
information concerning the Company can be inspected at the offices of the
New York Stock Exchange, 20 Broad Street, New York, New York 10005.
This Prospectus does not contain all the information set forth in the
Registration Statement on Form S-3 (together with all amendments and
exhibits thereto, the "Registration Statement"), which the Company has
filed with the Commission under the Securities Act of 1933 (the "Securities
Act"). Statements contained or incorporated by reference herein concerning
the provisions of documents are necessary summaries of such documents, and
each statement is qualified in its entirety by reference to the
Registration Statement.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents heretofore filed with the Commission pursuant to
the Exchange Act are hereby incorporated in this Prospectus by reference
and made a part hereof:
1. The Company's Annual Report on Form 10-K for the
year ended December 31, 1997.
All documents filed with the Commission by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of
this Prospectus and prior to the termination of the offering of the Notes
shall be deemed to be incorporated in this Prospectus by reference and to
be part hereof from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by
reference in this Prospectus shall be deemed to be modified or superseded,
for purposes of this Prospectus, to the extent that a statement contained
in this Prospectus or in any other subsequently-filed document which also
is or is deemed to be incorporated by reference in this Prospectus modifies
or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a
part of this Prospectus.
The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, including any beneficial
owner, upon the written or oral request of any such person, a copy of any
or all of the documents referred to above which have been or may be
incorporated in this Prospectus by reference, other than certain exhibits
to such documents. Requests should be directed to Treasury Manager,
Colonial Gas Company, 40 Market Street, Lowell, Massachusetts 01852
(Telephone: (978) 322-3000).
THE COMPANY
The Company, a Massachusetts corporation formed in 1849, is primarily a
regulated natural gas distribution utility that serves approximately
151,000 utility customers in 24 municipalities located northwest of Boston,
Massachusetts and on Cape Cod. Through its wholly-owned energy trucking
subsidiary, Transgas Inc. ("Transgas"), the Company also provides over-the-
road transportation of liquified natural gas, propane and other
commodities. References in this Prospectus to the Company do not, unless
otherwise required by the context, refer to or include Transgas.
The Company's combined natural gas distribution service areas cover
approximately 622 square miles and have a year-round population of
approximately 500,000. The Company is currently serving approximately 50%
of potential customers in its service areas. Of its 151,000 customers,
approximately 90% are residential accounts. The Company added 6,101 firm
customers in 1997. Approximately 46% of such growth resulted from new
construction in its service areas and approximately 54% resulted from
conversions to gas from other energy sources for existing homes and
businesses.
The Company has proposed to create a holding company structure in which
the Company will become a separate, wholly-owned subsidiary of a new parent
company, Colonial Energy. Notwithstanding such change, the Notes and the
other Bonds (as defined below) issued under the Indenture will remain
obligations of the Company secured by the lien of the Indenture, and will
not be obligations of the new holding company. Completion of the
restructuring is subject to approval of the Company's stockholders, which
is proposed to be considered at the April 15, 1998 annual stockholders'
meeting, and to approval by the Massachusetts Department of
Telecommunications and Energy (the "DTE").
The address of the Company's principal executive office is 40 Market
Street, Lowell, Massachusetts 01852 (Telephone: (978) 322-3000).
SELECTED FINANCIAL INFORMATION
(Dollars in thousands)
Year Ended December 31,
1995 1996 1997
Operating Revenues $163,668 $169,878 $187,140
Utility Operating Income $21,525 $22,154 $22,856
Net Income $13,764 $16,478 $16,040
Ratio of Earnings to Fixed
Charges (a) 3.19 3.89 3.96
December 31, 1997
Long-term Debt (excluding current portion) $100,101
Common Equity 122,132
Total Capitalization $222,233
__________________
(a) Ratios of Earnings to Fixed Charges for the years ended
December 31, 1993 and 1994 were 3.18 and 2.92, respectively. Fixed charges
include the financing costs of the Company's gas inventories which the DTE
allows to be fully recovered through a cost of gas adjustment clause and
which are reported in the Company's consolidated statement of income as
cost of gas sold. Fuel financing costs were $390, $504, $662, $500 and
$564 for the years ended December 31, 1993, 1994, 1995, 1996 and 1997,
respectively.
USE OF PROCEEDS
The net proceeds from the sale of the Notes offered hereby will
be used for utility plant construction and, to the extent described in the
applicable Pricing Supplement, the refunding of maturing long-term
indebtedness and the repayment of short-term bank debt incurred for such
purposes.
DESCRIPTION OF NOTES
The following statements are only a summary, do not purport to be
complete, and are subject to the detailed provisions of the Indenture,
including the Fourth Supplemental Indenture thereto pursuant to which the
Notes will be issued, the form of which is filed as an exhibit to the
Registration Statement. This summary incorporates by reference the
Indenture and is qualified in its entirety by such reference. Certain of
the capitalized terms used below are used herein with the meanings ascribed
to such terms in the Indenture.
General
The Notes will be issued as a new series of additional First
Mortgage Bonds (the "Bonds") under the Indenture. The Notes will be
limited in aggregate principal amount to $75,000,000, subject to the prior
authorization of the DTE. By an order issued December 9, 1997 (the "DTE
Order"), the DTE has authorized the issuance of up to $45,896,060 aggregate
principal amount of Notes, subject to reduction in the event of the
issuance of certain other securities of the Company. As of the date
hereof, $705,931 of such other securities have been issued by the Company.
The Company may not issue and sell Notes at any time in excess of
the amount then authorized by the DTE without further DTE authorization.
The Notes will be issued in fully registered form only, without
coupons and, unless otherwise specified in the applicable Pricing
Supplement, will be issued as Book-Entry Notes. The minimum denominations
of the Notes will be $1,000 and integral multiples thereof.
The Notes will be offered on a continuing basis and will mature
from 9 months to 40 years from their issue dates. Each Note will bear
interest at a fixed rate. The Notes will not have any conversion rights.
Each Pricing Supplement relating to the Notes will describe the
following terms: (i) the purchase price and price to the public of such
Notes which may be expressed as a percentage of the principal amount at
which such Notes will be issued; (ii) the date on which such Notes will be
issued; (iii) the date on which the principal of such Notes will become due
and payable; (iv) the rate per annum at which such Notes will bear interest
and the dates such interest will be paid; (v) the date or dates from which
any such interest shall accrue; (vi) the terms for redemption or repayment,
if any; and (vii) any other variable terms of such Notes not inconsistent
with the Indenture.
Payment of Principal and Interest
The Notes will bear interest at a fixed rate from their date of
issue for the first interest period or from the most recent date on which
any interest has been paid or duly provided for all subsequent interest
periods to but excluding the next interest, if applicable, payment
date, the maturity date or date of earlier redemption or repayment
at the fixed rate per annum specified therein and in the applicable
Pricing Supplement until the principal of such Notes is paid or made
available for payment. Interest on the Notes will be payable semi-
annually in arrears on the dates set forth in the applicable Pricing
Supplement and at maturity or, if applicable, upon earlier
redemption or repayment. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
Payments of principal of and premium, if any, and interest on
Book-Entry Notes will be made by the Company in immediately available funds
through the Trustee to the Depositary. See "-- Book-Entry Notes."
Payments of principal of and premium, if any, and interest on Certificated
Notes will be payable in immediately available funds to registered holders
thereof on dates that will be set forth in the applicable Pricing
Supplement at the principal corporate trust office in Boston, Massachusetts
of the Trustee, or, at the option of such registered holder, at such other
office or agency of the Trustee or the Company in New York, New York or
otherwise pursuant to the Indenture.
Interest rates offered by the Company with respect to the Notes
may differ depending upon, among other things, the aggregate principal
amount of Notes purchased in any transaction. Notes with similar variable
terms but different interest rates may be offered concurrently at any time.
The Company may also concurrently offer Notes having different variable
terms (as are described herein or in the applicable Pricing Supplement).
Redemption at the Option of the Company
To the extent set forth in the applicable Pricing Supplement, the
Notes may be redeemable, at the option of the Company, in whole or in part,
at the redemption prices set forth therein plus unpaid accrued interest
thereon to the redemption date. The Notes are also subject to redemption
at the principal amount thereof, in whole or in part, through the
application of eminent domain moneys (as defined in the Indenture) or
proceeds of insurance arising from loss or casualty each as specified in
the Indenture. Except as may otherwise be specified in the applicable
Pricing Supplement, notice of redemption shall be published or mailed to
the registered holders of the Notes to be redeemed at least 30 days but not
more than 60 days prior to the redemption date and in accordance with the
provisions of the Indenture.
Repayment at the Option of the Holder
To the extent set forth in the applicable Pricing Supplement, the
Notes may be repayable by the Company, at the option of the registered
holder thereof. If so specified, such holder shall have the option to
require repayment of the Notes held by it in whole or in part at the
repayment prices set forth in the applicable Pricing Supplement plus unpaid
accrued interest thereon to the repayment date set forth therein upon
return to the Trustee of (i) a duly completed "Option to Elect Repayment"
form on such Note or (ii) a telegram, telex, facsimile transmission or
letter from a member of a national securities exchange or the National
Association of Securities Dealers, Inc., or a commercial bank or a trust
company in the United States of America, setting forth the name of the
registered holder of the Note, the principal amount of the Note, the
principal amount of the Note to be repaid, a statement that the option to
elect repayment is being exercised thereby and a guarantee that the Note to
be repaid with the "Option to Elect Repayment" form as set forth in clause
(i) duly executed will be received by the Company not later than three
business days after the date of such telegram, telex, facsimile
transmission or letter and such Note and form duly completed are received
by the Company by such third business day, in either case, not less than 30
nor more than 60 days prior to the repayment date (unless otherwise
provided in the applicable Pricing Supplement) at the office maintained for
such purpose in Boston, Massachusetts, currently the corporate trust office
of the Trustee. The repayment option may be exercised by a registered
holder of Notes for less than the entire principal amount held by it,
provided the principal amount which is to be repaid to such holder is equal
to $1,000 or an integral multiple of $1,000. Such exercise by a registered
holder to tender Notes for repayment will be irrevocable. All questions as
to the validity, eligibility (including time of receipt) and the acceptance
of any Note for repayment will be determined by the Company, whose
determination will be final and binding.
So long as the Notes are issued as Book-Entry Notes represented
by Global Notes, the Depositary or its nominee, Cede & Co., as registered
holder of the Notes, will be entitled to tender the Notes on the date for
repayment by the Company and any such tenders will be effected by means of
the Depositary's repayment option procedures. During the period from and
including the date 60 days prior to the repayment date to and including the
date 30 days prior to the repayment date or, if the date thirty days prior
to the repayment date is not a business day, the next succeeding business
day, the Depositary participants who are acting on behalf of owners of
beneficial interests in the Global Notes, must provide instructions to the
Depositary to tender the Notes for repayment under the Depositary's
repayment option procedures. Such tenders for repayment will be made by
the Depositary by means of a book-entry credit of the applicable Book-Entry
Notes to the account of the Trustee. Promptly after the recording of any
such book-entry credit, the Depositary will provide the Trustee with an
agent put daily activity report in accordance with its repayment option
procedures, identifying the Book-Entry Notes and the aggregate principal
amount thereof as to which such tenders for repayment have been made.
OWNERS OF BENEFICIAL INTERESTS IN GLOBAL NOTES WHO WISH TO EFFECTUATE THE
TENDER AND REPAYMENT OF SUCH NOTES MUST SO INSTRUCT THEIR RESPECTIVE
DEPOSITARY PARTICIPANT OR PARTICIPANTS A REASONABLE PERIOD OF TIME IN
ADVANCE OF THE DATE 30 DAYS PRIOR TO THE REPAYMENT DATE.
Security
The Indenture constitutes a first mortgage lien upon
substantially all of the fixed property and franchises of the Company
consisting principally of gas distribution property, real estate and
buildings, subject to permitted liens. The lien of the Indenture secures
all Bonds (including the Notes) from time to time issued and outstanding
under the Indenture, equally and ratably and without distinction as to
series (except as to sinking funds and other analogous funds established
for the exclusive benefit of a particular series). At December 31, 1997,
the Company had $110,000,000 aggregate principal amount of Bonds
outstanding, consisting of 3 separate series. Two of these outstanding
series of Bonds, and any future series of Bonds to the extent so designated
at the time of their issue, are referred to in the Indenture as Prior
Series Bonds, and as such are entitled, so long as they are outstanding, to
approve certain actions and to waive certain restrictions under the
Indenture. The third outstanding series of Bonds, designated as Secured
Medium Term Notes, Series A, of the Company, and the Notes have been
designated as Prior Series Bonds only for purposes of the debt restrictions
described under "--Restrictive Covenants - Debt Restrictions."
The Indenture subjects to the lien thereof property of the
character initially mortgaged which is subsequently acquired by the
Company. Such after-acquired property may be subject to prior liens which
are outstanding or created at the time of such acquisition in an amount not
in excess of 60% of the cost or fair value, whichever is less, of such
after-acquired property, subject to an overall limit on debt secured by
such prior liens. The property excepted from the lien of the Indenture
consists principally of: cash and securities (unless deposited with the
Trustee); contracts, accounts receivable, leases and operating agreements;
equipment, spare parts, tools, materials, supplies and fuel held for sale,
lease, use or distribution in the ordinary course of business of the
Company; vehicles; leasehold interests and leasehold improvements; and
other real and personal property that is not an integral part of the gas
distribution operations of the Company. Neither the capital stock of
Transgas nor any assets of Transgas are subject to the lien of the
Indenture.
The Company's principal plants and properties, insofar as they
constitute real estate, are owned in fee, certain other facilities of the
Company are located on premises held by the Company under leases, permits
or easements and the Company's gas distribution systems (which constitute a
substantial portion of the Company's investment in physical property) are
for the most part located under highways, streets, other public places or
property owned by others for which permits, grants, easements, licenses or
franchises (deemed satisfactory but without examination of underlying land
titles) have been obtained.
The Indenture provides that the Trustee shall have a lien on the
mortgaged property, prior to the Bonds, for the payment of its reasonable
compensation and expenses and for indemnity against certain liabilities.
Issuance of Additional Bonds
The maximum principal amount of Bonds which may be issued under
the Indenture is not limited. Additional Bonds of any series may be issued
from time to time, upon meeting the requirements of the Indenture, in
principal amounts equal to:
(1) 60% of the lesser of the cost or fair value of the net amount of
additional property not previously funded, which means, in general
terms, the fixed assets of the Company constituting "gas utility
property" less any retirements;
(2) the principal amount of Bonds which have been or are then being
retired, and which have not previously been funded, plus certain
excess sinking fund and similar payments; or
(3) the amount of cash deposited with the Trustee for such purpose up
to a maximum of $2,000,000 of cash held by the Trustee at any
time.
In order to issue Bonds based on additional property or cash, the
Company must have net earnings during a 12 month period equal to at least
twice the annual interest payments on all outstanding Bonds (including the
Bonds proposed to be issued) and any other debt secured by a lien equal or
superior to the lien of the Indenture, and at least 90% of the required net
earnings must be from the Company's gas utility operations. This net
earnings requirement also must be met for the issue of Bonds based on
retired Bonds unless the Bonds being issued bear interest at a rate no
higher than the retired Bonds or are issued no later than 3 years after the
stated maturity of the retired Bonds.
In addition to the foregoing, without the approval of the holders
of 66 2/3% of the outstanding principal amount of each series of Prior
Series Bonds, secured long-term debt of the Company, which would include
Bonds with a maturity of more than one year, may not exceed 55% of the
total capitalization of the Company. Total capitalization consists of long-
term debt, preferred stock and common equity of the Company.
The Company expects to issue the Notes primarily on the basis of
additional property subject to receipt of any necessary DTE approvals that
may be required. At December 31, 1997, the Company had approximately
$88,309,676 net amount of additional property and $4,550,000 of retired
Bonds, entitling it in accordance with the provisions of the Indenture to
issue approximately $57,500,000 of additional Bonds.
The issuance by the Company of debt securities with maturities of
greater than one year requires the approval of the DTE. The DTE Order
authorizes the issuance of up to $45,896,060 aggregate principal amount of
Notes, subject to reduction in the event of the issuance of certain other
securities of the Company. As of the date hereof, the $705,931 of such other
securities have been issued by the Company. The Company may not issue and
sell Notes at any time in excess of the amount authorized by the DTE without
further DTE authorization.
Release of Property
The Indenture provides for the release of property of the Company
from the lien of the Indenture under various circumstances, so long as no
default exists, based, in most circumstances, on the net proceeds received
in connection with the disposition of the property being applied to acquire
other gas utility property of at least equal value which becomes subject to
the lien of the Indenture on being deposited with the Trustee.
Restrictive Covenants
The Indenture contains the following covenants for the benefit of
the holders of all Bonds:
Limitation on Encumbrances. The Company will not create or
suffer any other encumbrance or lien upon the property subject to the
lien of the Indenture except (i) certain routine permitted liens; (ii)
liens on after-acquired property which do not exceed 60% of the cost
or fair value, whichever is less, of the acquired property and which
existed at the time of acquisition or were contemporaneously created
to secure the purchase price, provided that such liens may not, except
in certain circumstances, exceed 15% of the principal amount of
outstanding Bonds without the consent of the holders of at least 66
2/3% of the principal amount of outstanding Bonds; and (iii) liens on
after-acquired property acquired through a sale and leaseback
transaction which complies with the debt restrictions described below.
Reserve for Depreciation. The Company will maintain an
annual reserve for depreciation of not less than 2% of its depreciable
property (excluding certain discontinued gas manufacturing
facilities).
The Indenture also provides, for the benefit of holders of Prior
Series Bonds, that, so long as any Prior Series Bonds are outstanding, the
Company will not, without the consent of the holders of at least 66 2/3% of
the principal amount of each series of Prior Series Bonds then outstanding:
Dividend Restrictions. Make any restricted distributions to
common stockholders unless the sum of restricted payments made on or
after January 1, 1992 will not exceed 100% of the Company's net income
available for common dividends from that date (reduced by certain
stock repurchases in excess of net proceeds of stock sales), plus
$12,500,000.
Debt Restrictions. Incur (i) any indebtedness for money
borrowed unless all indebtedness for money borrowed (taking into
account the proposed transaction) would not exceed 63% of the sum of
short-term debt plus total capitalization of the Company or (ii) any
secured long-term debt unless all secured long-term debt (taking into
account the proposed transaction) would not exceed 55% of total
capitalization.
Operating Lease Restrictions. Become liable as lessee or
purchaser under any operating lease or installment purchase contract
having a term of more than 3 years if the aggregate payments under all
such operating leases and contracts in any 12 month period would
exceed 3% of total capitalization of the Company. The determination
of the status of leases in existence on December 31, 1991 as operating
or capital leases is made as of that date.
For purposes of the debt restrictions set forth above, but not
otherwise, the Notes will be considered Prior Series Bonds, and the holders
of the Notes will have the benefit of such debt restrictions.
Events of Default
The Indenture provides generally that the following events
constitute a default: (i) failure by the Company to pay the principal of
any Bond when due; (ii) failure by the Company to pay interest on any Bond
for a period of ten days after such payment is due; (iii) failure of the
Company to pay any sinking, replacement or analogous fund installment when
due; (iv) breach of certain representations, warranties and covenants of
the Company (in the case of certain covenants, after a 30 day grace
period); (v) failure to pay certain other indebtedness or failure to
perform any covenant with respect to such indebtedness after any applicable
grace period, the effect of which causes, or permits the holders thereof to
cause, such indebtedness in an amount in excess of 3/4 of 1% of tangible
net worth of the Company to become due prior to its stated maturity or
permits the holders of such indebtedness to elect a majority of the board
of directors of the Company; (vi) failure to perform any covenant relating
to preferred stock of the Company, the effect of which would require, or
permit the holders thereof to require, the Company to redeem such preferred
stock prior to any mandatory redemption date; (vii) a final judgment
against the Company in a specified material amount which remains unstayed
for more than 60 days; and (viii) certain events of bankruptcy, insolvency
and reorganization of the Company.
If a default exists, the Trustee may and, at the request of the
holders of at least 25% of the principal amount of the outstanding Bonds,
shall declare all of the Bonds to be immediately due and payable, subject
to the right of the holders of a majority of the principal amount of the
outstanding Bonds to rescind such declaration if the default has been
cured. The holders of at least 66 2/3% of the principal amount of the
outstanding Bonds (including at least 60% in principal amount of Bonds of
any Prior Series Bonds specially affected) may waive any default except a
payment default or a lien default. Upon a default, all outstanding Bonds
generally share ratably in accordance with the principal, premium, if any,
and interest then owing on such outstanding Bonds. In addition to
principal and interest, the holders of the Series CH Bonds are entitled to
receive upon default a make-whole premium.
Subject to provision for indemnification of the Trustee, the
holders of a majority in principal amount of outstanding Bonds 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 under the Indenture. No holder of any Bond will
have any right to institute any proceeding with respect to the Indenture or
for any remedy thereunder, unless such holder shall have previously given
to the Trustee written notice of an existing default and unless also the
holders of at least 25% in principal amount of the outstanding Bonds shall
have made written request, and offered reasonable security or indemnity, to
the Trustee to institute such proceeding as trustee, and the Trustee shall
have failed to institute such proceeding within 30 days. However, the
holder of any Bond will have an absolute right to receive payment of the
principal of and premium, if any, and interest on such Bond on or after the
due dates and to institute suit for the enforcement of any such payment.
The Indenture requires the Company to certify to the Trustee at
the time of the issuance of any Bonds whether there is a default in the
performance or observance of any provision of the Indenture. The Indenture
also requires an annual opinion of counsel as to the maintenance of the
lien of the Indenture.
Modification of the Indenture
Modification and amendments of the Indenture may be made by the
Company and the Trustee with the consent of the holders of at least 66 2/3%
in principal amount of the outstanding Bonds of all series affected thereby
and of each series affected thereby in a manner different than other
affected series; provided, however, that no such modification or amendment
may (i) without the consent of the holder of a Bond, affect or impair the
obligation of the Company in respect of the principal of or premium, if
any, and interest on such Bond or change the amount or rate or extend the
time of such payment, or (ii) without the consent of the holders of all
Bonds outstanding, reduce the percentage required for a modification or
amendment or the creation, except as authorized, of a lien prior to or on a
parity with the lien of the Indenture.
The Company and the Trustee may agree to certain routine
modifications and amendments of the Indenture without the consent of the
holders of the Bonds, including modifications in regard to matters arising
under the Indenture as may be necessary or desirable and not inconsistent
with the security and protection intended to be conferred upon the Trustee
and the Bondholders.
Satisfaction and Discharge of the Indenture
The Indenture provides that when, among other things, all Bonds
not previously delivered to the Trustee for cancellation (i) have become
due and payable, or (ii) will become due and payable at their stated
maturity within seven months, or (iii) are to be called for redemption
within seven months, and the Company deposits or causes to be deposited
with the Trustee a sum sufficient to pay the whole amount of the principal
of and premium, if any, and interest due or to become due on the Bonds,
then the Indenture will cease to be of further effect (except as to the
Company's obligations to compensate, reimburse and indemnify the Trustee
pursuant to the Indenture and certain other obligations), and the Company
will be deemed to have satisfied and discharged the Indenture.
Consolidation, Merger and Sale of Assets
The Indenture does not prevent the consolidation or merger of the
Company with or into any other corporation, or the merger into the Company
of any other corporation, or the sale or lease by the Company of its assets
substantially as an entirety, provided that (i) any consolidation, merger,
sale or transfer shall be on terms that do not impair the lien of the
Indenture or any of the rights or powers of the Trustee or the holders of
the Bonds; (ii) the successor corporation shall expressly assume the due
and punctual payment of the Bonds and the observance and performance of all
covenants, conditions and provisions of the Indenture; (iii) immediately
after a merger or consolidation, the surviving corporation shall be in
compliance with the provisions of the Indenture in all material respects;
and (iv) so long as the Series CH Bonds are outstanding, the successor
corporation shall be able to incur $1.00 of additional indebtedness for
borrowed money. See "--Restrictive Covenants."
Book-Entry Notes
Unless otherwise specified in the applicable Pricing Supplement,
the Notes will be issued as Book-Entry Notes. Upon issuance, all
Book-Entry Notes having identical terms and provisions will be represented
by a single Global Note. Unless otherwise specified in a Pricing
Supplement, each Global Note representing Book-Entry Notes will be
deposited with, or on behalf of, the Depositary, and registered in the name
of a nominee of the Depositary. Except as set forth below, a Global Note
may not be transferred except as a whole by the Depositary to a nominee of
the Depositary or by a nominee of the Depositary to the Depositary or
another nominee of the Depositary or any nominee to a successor of the
Depositary or a nominee of such successor.
The Depositary has advised the Company and the Agents that it is
a limited-purpose trust company organized under the laws of the State of
New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act.
The Depositary was created to hold securities of its participants and to
facilitate the clearance and settlement of securities transactions among
its participants in such securities through electronic book-entry changes
in accounts of the participants, thereby eliminating the need for physical
movement of securities certificates. The Depositary's participants include
securities brokers and dealers (including the Agents), banks, trust
companies, clearing corporations and certain other organizations, some of
whom (and/or their representatives) own the Depositary. Access to the
Depositary's book-entry system is also 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.
Persons who are not participants may beneficially own securities held by
the Depositary only through participants.
Upon the issuance of Book-Entry Notes by the Company represented
by a Global Note, the Depositary will credit, on its book-entry
registration and transfer system, the respective principal amounts of the
Book-Entry Notes represented by such Global Note to the accounts of
participants. The accounts to be credited shall be designated by the Agent
through or by which such Book-Entry Notes are sold. Ownership of beneficial
interests in a Global Note will be limited to participants or persons that
may hold interests through participants. In addition, ownership of
beneficial interests by participants in a Global Note will be evidenced
only by, and the transfer of any such ownership interest will be effected
only through, records maintained by the Depositary or its nominee for such
Global Note. Ownership of beneficial interests in such a Global Note by
persons that hold through participants will be evidenced only by, and the
transfer of any such ownership interest within such participant will be
effected only through, records maintained by such participant. The laws of
some states require that certain purchasers of securities take physical
delivery of such securities in certificated form. Such limits and such
laws may impair the ability to transfer beneficial interests in a Global
Note.
So long as the Depositary, or its nominee, is the registered
owner of a Global Note, the Depositary or its nominee, as the case may be,
will be considered the sole owner or holder of the Book-Entry Notes
represented by such Global Note for all purposes under the Indenture.
Except as provided below, owners of beneficial interests in a Global Note
representing Book-Entry Notes will not be entitled to have such Book-Entry
Notes registered in their names, will not receive or be entitled to receive
physical delivery of Certificated Notes and will not be considered the
owners or holders thereof under the Indenture. Accordingly, each person
owning a beneficial interest in a Global Note must rely on the procedures
of the Depositary and, if such person is not a participant, on the
procedures of the participant through which such person owns its interest,
to exercise any rights of a holder under the Indenture or such Global Note.
The Company understands that, under existing industry practice, in the
event that the Company requests any action of holders of Book-Entry Notes
or an owner of a beneficial interest in a Global Note desires to take any
action that the Depositary, as the holder of such Global Note, is entitled
to take, the Depositary would authorize the participants to take such
action and that the participants would authorize beneficial owners owning
through such participants to take such action or would otherwise act upon
the instructions of beneficial owners owning through them.
Payments of principal of and premium, if any, and interest on the
Book-Entry Notes represented by one or more Global Notes will be made by
the Company in immediately available funds through the Trustee to the
Depositary, or its nominee, as the case may be, as the registered owner of
such Global Note or Notes. Neither the Company nor the Trustee will have
any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership interests. The Company
expects that the Depositary, upon receipt of any payment of principal,
premium, if any, and interest in respect of a Global Note, will credit
immediately the accounts of the related participants with payment in
amounts proportionate to their respective holdings in principal amount of
beneficial interests in such Global Note 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 will be governed by
standing customer instructions and customary practices, as is now the case
with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such
participants.
The Company will issue Certificated Notes in exchange for Global
Notes representing Book-Entry Notes only if (i) the Depositary is at any
time unwilling or unable to continue as depositary and a successor
depositary is not appointed by the Company within 90 days, (ii) the Company
at any time determines not to have Book-Entry Notes represented by one or
more Global Notes, or (iii) a default under the Indenture has occurred and
is continuing. In any such instance, an owner of a beneficial interest in
any Global Note will be entitled to physical delivery of Certificated Notes
which are equal in principal amount to such beneficial interest and to have
such Certificated Notes registered in its name. Such Notes so issued will
be issued in registered form only without coupons and in denominations of
$1,000 and multiples thereof. If Certificated Notes are issued, the record
dates for the payment of interest thereon will be set forth in such
Certificated Notes and the applicable Pricing Supplement.
The information above concerning the Depositary and the
Depositary's book-entry system has been obtained from the Depositary. None
of the Company, the Trustee or the Agents takes responsibility for the
accuracy or completeness thereof.
Concerning the Trustee
State Street Bank and Trust Company, as Trustee under the
Indenture, is the trustee for the Bonds currently outstanding under the
Indenture.
CERTAIN TAX CONSIDERATIONS
The following summarizes certain United States federal income tax
considerations that may be relevant to a holder of Notes and is based on
laws, existing Treasury regulations, rulings, judicial decisions and other
authorities as of the date hereof, all of which are subject to change.
Prospective investors should consult their own tax advisors in determining
their tax consequences from purchasing, holding or disposing of Notes,
including the application to their particular situations of the tax
considerations discussed below, and in determining the application of
state, local or other tax laws as well as prospects for changes in federal
income tax laws or interpretations.
Payments of interest on a Note (other than an OID Note, as
discussed below) will generally be taxable to a holder as gross income at
the time it is paid or accrued in accordance with the holder's method of
tax accounting. A Note may be issued for an amount less than its stated
redemption price at stated maturity, and that difference may give rise to
original issue discount ("OID"). Notes issued with OID are referred to as
"OID Notes." Holders of OID Notes should be aware that they must, in
general, include OID income on an accrual method, i.e., in advance of the
related cash payments. Notice will be given in the applicable Pricing
Supplement when the Company determines that a particular Note will be an
OID Note.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuing basis for sale by the
Company to or through Salomon Brothers Inc, A.G. Edwards & Sons, Inc.,
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated or
other Agents selected from time to time by the Company who become parties
to the Distribution Agreement. The Agents individually or in a syndicate,
may purchase Notes, as principal, from the Company from time to time for
resale to investors and other purchasers at varying prices relating to
prevailing market prices at the time of resale as determined by the
applicable Agent or, if so specified in the applicable Pricing Supplement,
for resale at a fixed offering price. If agreed to by the Company and an
Agent, such Agent may also utilize its reasonable efforts on an agency
basis to solicit offers to purchase the Notes at 100% of the principal
amount thereof, unless otherwise specified in the applicable Pricing
Supplement. The Company will pay a commission to an Agent, ranging from
.125% to .750% of the principal amount of each Note, depending upon its
stated maturity, sold through such Agent as an agent of the Company.
Commissions with respect to Notes with stated maturities in excess of 30
years that are sold through an Agent as an agent of the Company will be
negotiated between the Company and such Agent at the time of such sale.
The Company may also sell the Notes directly to purchasers in those
jurisdictions in which it is permitted to do so. No commission or discount
will be payable by the Company on Notes sold directly by the Company.
Unless otherwise specified in the applicable Pricing Supplement,
any Note sold to an Agent as principal will be purchased by such Agent at a
price equal to 100% of the principal amount thereof less a percentage of
the principal amount equal to the commission applicable to an agency sale
of a Note of identical maturity. An Agent may sell Notes it has purchased
from the Company as principal to certain dealers less a concession equal to
all or any portion of the discount received in connection with such
purchase. Such Agent may allow, and such dealers may reallow, a discount
to certain other dealers. After the initial offering of Notes, the
offering price (in the case of Notes to be resold on a fixed offering price
basis), the concession and the reallowance may be changed.
The Company reserves the right to withdraw, cancel or modify the
offer made hereby without notice and may reject offers in whole or in part
(whether placed directly with the Company or through an Agent). Each Agent
will have the right, in its discretion reasonably exercised, to reject in
whole or in part any offer to purchase Notes received by it on an agency
basis.
Upon issuance, the Notes will not have an established trading
market. The Notes will not be listed on any securities exchange. The
Agents may from time to time purchase and sell Notes in the secondary
market, but the Agents are not obligated to do so, and there can be no
assurance that there will be a secondary market for the Notes or that there
will be liquidity in the secondary market if one develops. From time to
time, the Agents may make a market in the Notes, but the Agents are not
obligated to do so and may discontinue any market-making activity at any
time.
In connection with an offering of Notes purchased by one or more
Agents as principal, each such Agent will be permitted to engage in
certain transactions that stabilize the price of such Notes. Such
transactions may consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of such Notes. If an
Agent creates a short position in such Notes (i.e., if it sells Notes in an
aggregate principal amount exceeding that set forth in the applicable
Pricing Supplement), such Agent may reduce that short position by
purchasing Notes in the open market. In general, purchases of Notes for
the purpose of stabilization or to reduce a short position could cause the
price of Notes to be higher than it might be in the absence of such
purchases.
Neither the Company nor any of the Agents makes any
representation or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the price of the Notes.
In addition, neither the Company nor any of the Agents makes any
representation that the Agents will engage in any such transactions or that
such transactions once commenced will not be discontinued without notice.
The Agents may be deemed to be "underwriters" within the meaning
of the Securities Act. The Company has agreed to indemnify the Agents
against, and to provide contribution with respect to, certain liabilities,
including liabilities under the Securities Act. The Company also has
agreed to reimburse the Agents for certain other expenses.
The Agents have in the past performed, and in the future may
perform, various services for the Company in the ordinary course of its
business.
LEGAL OPINIONS
The validity of the Notes will be passed upon for the Company by
Palmer & Dodge LLP, counsel to the Company, One Beacon Street, Boston,
Massachusetts, and certain legal matters will be passed upon for the
Agents by Winthrop, Stimson, Putnam & Roberts, One Battery Park
Plaza, New York, New York.
EXPERTS
The financial statements and schedule included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997,
incorporated by reference in this Prospectus and in the Registration
Statement, have been audited by Grant Thornton LLP, independent auditors,
as stated in their reports, which are incorporated by reference herein, and
have been so incorporated in reliance upon the reports of such firm given
upon their authority as experts in accounting and auditing.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representation not contained in this Prospectus
(including any accompanying Pricing Supplement) and, if given or made, such
information or representation must not be relied upon as having been
authorized by the Company or by any of the Agents. This Prospectus
(including any accompanying Pricing Supplement) does not constitute an
offer to sell or a solicitation of any offer to buy any of the securities
offered hereby or thereby in any jurisdiction to any person to whom it is
unlawful to make such offer in such jurisdiction. Neither the delivery of
this Prospectus (or any accompanying Pricing Supplement) by the Company or
any of the Agents 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 date hereof or that the information
contained or incorporated by reference herein is correct as of any time
subsequent to its date.
No dealer, salesperson or any
other person has been
authorized to give any
information or to make any $75,000,000
representation not contained
in this Prospectus (including
any accompanying Pricing Colonial Gas
Supplement) and, if given or Company
made, such information or
representation must not be
relied upon as having been Secured Medium Term
authorized by the Company or Notes, Series B
by any of the Agents. This
Prospectus (including any
accompanying Pricing PROSPECTUS
Supplement) does not
constitute an offer to sell or March 30, 1998
a solicitation of any offer to
buy any of the securities
offered hereby or thereby in Salomon Smith Barney
any jurisdiction to any person
to whom it is unlawful to make A.G. Edwards & Sons, Inc.
such offer in such
jurisdiction. Neither the Merrill Lynch & Co.
delivery of this Prospectus
(or any accompanying Pricing
Supplement) by the Company or
any of the Agents 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 date
hereof or that the information
contained or incorporated by
reference herein is correct as
of any time subsequent to its
date.
_______________
TABLE OF CONTENTS
Available Information
Incorporation of Certain
Information by
Reference
The Company
Selected Financial Information
Use of Proceeds
Description of Notes
Certain Tax Considerations
Plan of Distribution
Legal Opinions
Experts
