<PAGE> 1
REGISTRATION NO: 333-72289
FILED PURSUANT TO RULE 424(b)(1)
PROSPECTUS
$45,000,000
ORANGE AND ROCKLAND UTILITIES, INC.
7% DEBENTURES DUE 2029 (SERIES G)
-----------------------
Orange and Rockland Utilities, Inc. hereby issues $45,000,000 of unsecured
debentures in a single series. Interest on the debentures will be paid each year
on March 1 and September 1, beginning September 1, 1999. We may redeem the
debentures on or after March 1, 2009 at prices set forth in this prospectus.
The debentures are unsecured and rank equally with all of our other
unsecured senior indebtedness. The debentures will be issued only in registered
form in denominations of $1,000 or in any amount in excess thereof which is an
integral multiple of $1,000.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
<TABLE>
<CAPTION>
Underwriting
Price Discounts and Proceeds to
to Public(1) Commissions Company (2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Debenture........... 98.458% 0.445% 98.013%
- --------------------------------------------------------------------------------
Total................... $44,306,100 $200,250 $44,105,850
- --------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from the date of issuance.
(2) Before deducting expenses payable by Orange and Rockland Utilities, Inc.,
estimated at $225,000.
------------------------
The debentures are offered by the purchasers, subject to prior sale, when,
as and if delivered to and accepted by them, and subject to certain conditions.
The purchasers reserve the right to withdraw, cancel or modify the offer and
reject any order in whole or in part. It is expected that delivery of the
debentures will be made in New York, New York on or about March 9, 1999 in
book-entry form through the facilities of The Depository Trust Company against
payment therefore in immediately available funds.
------------------------
BEAR, STEARNS & CO. INC. EVEREN SECURITIES, INC.
------------------------
The date of this prospectus is March 4, 1999
<PAGE> 2
TABLE OF CONTENTS
Page
WHERE YOU CAN FIND MORE INFORMATION...........................................3
INCORPORATION OF INFORMATION WE FILE WITH THE SEC.............................3
ORANGE AND ROCKLAND UTILITIES, INC............................................4
MERGER WITH CONSOLIDATED EDISON, INC..........................................5
REGULATORY PROCEEDINGS........................................................6
SELECTED FINANCIAL INFORMATION................................................9
USE OF PROCEEDS..............................................................10
DESCRIPTION OF DEBENTURES....................................................11
UNDERWRITING.................................................................17
LEGAL MATTERS................................................................18
EXPERTS......................................................................18
----------------------
FORWARD-LOOKING STATEMENTS
Certain statements contained in this prospectus and in the documents
incorporated by reference into this prospectus are forward-looking statements.
We have based these forward-looking statements on our current expectations and
projections about future events. These forward-looking statements are not
statements of historical fact. Forward-looking statements involve risks,
uncertainties and assumptions that may cause our actual financial condition,
results of operations, business or performance to be materially different from
the expectations of future financial condition, results of operations, business
or performance we express or imply in any forward-looking statements. Some of
the important factors that could cause our actual financial condition, results
of operations, business or performance to differ materially from our
expectations include:
- competition and industry restructuring,
- changes in economic conditions,
- changes in laws, regulations or regulatory policies,
- uncertainties relating to the ultimate outcome of the Company's
proposed merger and the sale of its electric generation assets,
which transactions are discussed in this prospectus under "Merger with
Consolidated Edison, Inc." and "Regulatory Proceedings -- Divestiture,"
- the outcome of certain assumptions made in regard to Year 2000
issues, and
- other uncertainties.
We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this prospectus might not occur. When used
in our documents or oral presentations, the words "anticipate," "intend,"
"estimate," "expect," "objective," "projection," "forecast," "goal" or similar
words are intended to identify forward-looking statements. We qualify any such
forward-looking statements entirely by these cautionary factors.
----------------------
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
different information. If anyone provides you with different or inconsistent
information, you should not rely on it. We are offering to sell the debentures
and seeking offers to buy the debentures only in jurisdictions where offers and
sales are permitted. The information contained in this prospectus is accurate
only as of the dates of this prospectus, regardless of the time of delivery of
this prospectus or any sale of the debentures. Our business, financial
condition, results of operations and prospects may have changed since that date.
As used in this prospectus, the terms "O&R," "we," "our" and "the company,"
refer to Orange and Rockland Utilities, Inc., an investor-owned utility
incorporated in New York, and, unless the context requires otherwise, its
subsidiaries.
2
<PAGE> 3
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC
(Securities and Exchange Commission). You can inspect and copy any documents
that we file at the SEC's public reference facilities in Washington, D.C., New
York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for
more information on their public reference rooms and their copy charges. Our SEC
filings can also be reviewed on the internet at the SEC's website at
http://www.sec.gov. In addition, our SEC filings and other information can be
inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street,
New York, New York 10005, where the company's common stock is listed and traded
under the ticker symbol "ORU."
INCORPORATION OF INFORMATION WE FILE WITH THE SEC
The SEC allows us to "incorporate by reference" the information we file
with them, which means:
- incorporated documents are considered part of the prospectus;
- we can disclose important information to you by referring you to those
documents; and
- information that we file with the SEC will automatically update and
supersede this prospectus.
We incorporate by reference the documents listed below which the
company filed with the SEC under the Exchange Act ("Securities Exchange Act
of 1934"):
- annual report on Form 10-K for the year ended December 31, 1997;
- quarterly reports on Form 10-Q for the quarters ended March 31, 1998,
June 30, 1998, and September 30, 1998; and
- current reports on Form 8-K dated February 5, 1998, March 9, 1998,
April 8, 1998, May 10, 1998, June 18, 1998, August 20,1998,
November 24, 1998 and February 26, 1999.
We also incorporate by reference each of the following documents that
we will file with the SEC after the date of this prospectus but before the end
of the offering:
- all documents filed under Sections 13(a) and (c) of the Exchange Act;
- definitive proxy or information statements filed under Section 14 of
the Exchange Act in connection with any subsequent stockholders'
meeting; and
- any reports filed under Section 15(d) of the Exchange Act.
You may review our SEC filings through our website at
http://www.oru.com and may request a copy of any filings referred to above
(excluding certain exhibits) at no cost, by contacting us, either orally or in
writing, at the following address or phone number:
Orange and Rockland Utilities, Inc.
Office of the Treasurer
One Blue Hill Plaza
Pearl River, New York 10965
(telephone: 914-577-2512)
3
<PAGE> 4
ORANGE AND ROCKLAND UTILITIES, INC.
Our company was formed on May 21, 1926 as Rockland Light and Power
Company (originally organized in 1899) when it was consolidated with Catskill
Power Corporation and Orange County Public Service Company Inc. We adopted our
present name on February 28, 1958 when we consolidated with The Orange and
Rockland Electric Company.
Our company, with its two wholly-owned utility subsidiaries RECO
(Rockland Electric Company), a New Jersey corporation, and Pike (Pike County
Light & Power Company), a Pennsylvania corporation, supplies electricity and gas
to a territory covering approximately 1,350 square miles. Our service area
includes southeastern New York State and adjacent sections of northern New
Jersey and northeastern Pennsylvania. As of December 31, 1998, we furnished
electric service to approximately 274,000 customers in 96 communities with an
estimated population of 681,000 and gas service to approximately 117,000
customers in 57 communities with an estimated population of 482,000.
We also have two wholly owned non-utility subsidiaries, Clove (Clove
Development Corporation), a real estate operation, and ORD (O&R Development,
Inc.), a land development company. In addition, RECO has two wholly-owned
non-utility subsidiaries, EHI (Enserve Holdings, Inc.) and SRH (Saddle River
Holdings Corp.). EHI also has two wholly-owned non-utility subsidiaries. The
following chart shows our principal subsidiaries.
[O & R Flow Chart]
In addition, SRH has a wholly-owned non-utility subsidiary, NHI
(NORSTAR Holdings, Inc.) (formerly O&R Energy, Inc.), which was engaged in
natural gas marketing through its wholly-owned non-utility subsidiary, NMI
(NORSTAR Management, Inc.). NMI was the sole general partner of the NORSTAR
Partnership (NORSTAR Energy Limited Partnership), the majority owner of NORSTAR
LLC (NORSTAR Energy Pipeline Company, L.L.C.). The NORSTAR Partnership sold its
accounts receivable, with certain exceptions, and its contracts with customers
and related agreements to mc2 Inc. in 1997, and the winding down of the NORSTAR
Partnership has been substantially completed.
4
<PAGE> 5
MERGER WITH CONSOLIDATED EDISON, INC.
On May 10, 1998, the company, CEI (Consolidated Edison, Inc.) and C
Acquisition Corp., a wholly-owned merger subsidiary of CEI, entered into a
merger agreement providing for a merger transaction among the company, CEI and
the merger subsidiary. Pursuant to the merger agreement, the merger subsidiary
will merge with and into the company, with the company being the surviving
corporation and becoming a wholly-owned subsidiary of CEI.
On June 22, 1998, the company, CEI and CEI's utility subsidiary, Con
Edison (Consolidated Edison Company of New York, Inc.) filed a joint petition
with the NYPSC (New York Public Service Commission) requesting approval of the
merger. The parties have requested regulatory reviews and approvals prior to
March 31, 1999.
In this joint petition, the company reaffirmed its commitment to honor
the provisions of its NYPSC-approved Electric Rate and Restructuring Plan, dated
November 26, 1997. In the divestiture plan the company agreed to divest all of
its electric generating assets and to implement full retail access for all
electric customers by May 1, 1999. Since both the company and Con Edison have
agreed to implement full retail access and have committed to comprehensive
generation divestiture programs, the company and Con Edison in their filing with
the FERC (Federal Energy Regulatory Commission) took the position that the
merger will not have an adverse impact on competition in the electric industry.
On July 2, 1998, RECO and Pike filed similar petitions with the NJBPU
(New Jersey Board of Public Utilities) and the PPUC (Pennsylvania Public Utility
Commission), respectively, for approval of the merger. The proceedings before
the NYPSC, the NJBPU and the PPUC have established schedules that provide for
final decisions by March 31, 1999. The company can give no assurance that any of
the commissions will issue orders by that date or what, if any, conditions such
commissions may impose on such orders.
On January 14, 1999, Pike, the Office of the Consumer Advocate and the
Office of the Small Business Advocate executed a settlement agreement which
allows Pike to retain all merger savings, net of costs to achieve, until its
next electric and gas base rate case. An administrative law judge issued a
recommended decision to the PPUC on February 3, 1999 recommending approval of
the settlement in its entirety. A final PPUC order is expected prior to March
31, 1999.
On September 9, 1998, the company and Con Edison filed an Application
for Approval of Merger and Related Authorizations with the FERC. On January 27,
1999, the FERC issued an order approving the merger consistent with the terms of
the application.
On January 26, 1999, the company and CEI each filed a Notification and
Report Form under the HSR Act (Hart-Scott-Rodino Act of 1976) with the
Department of Justice and the Federal Trade Commission. Under the provisions of
the HSR Act, consummation of the merger is subject to the expiration or earlier
termination of the applicable waiting period.
On February 3, 1999, the company and CEI filed an application with the
SEC seeking approval of the merger under the Public Utility Holding Company Act
of 1935.
The merger is expected to occur shortly after all of the conditions to
the consummation of the merger, including the receipt of all regulatory
approvals, are met or waived. At a special meeting of the common shareholders of
the company held on August 20, 1998, the merger agreement was approved by a vote
of approximately 74% of the common shares entitled to vote.
5
<PAGE> 6
REGULATORY PROCEEDINGS
DIVESTITURE
In accordance with the schedule in the restructuring plan referred to
above, the company filed its final plan for divestiture of all of its electric
generating assets with the NYPSC on February 4, 1998. The plan, which provides
for a two phase auction process, was approved by the NYPSC in orders issued
April 16, 1998 and May 26, 1998. The company retained Donaldson, Lufkin &
Jenrette Securities Corporation to act as its financial advisor in connection
with the divestiture of the generating assets.
Following the review of final bids and negotiations with the winning
bidder, on November 24, 1998, the company entered into four separate ASAs (Asset
Sales Agreements) with subsidiaries of Southern Energy (Southern Energy, Inc.),
a subsidiary of The Southern Company. The sales price for all generating
facilities, including the two-thirds interest in the Bowline Point Generating
Plant owned by Con Edison is approximately $480 million, plus certain fuel
inventory and other adjustments. The company's share of the sales price is
approximately $345 million. The sales are subject to federal and state
regulatory review and approval. The ASAs provide for the closing of the sale to
occur on April 30, 1999, which date may be adjusted depending on the receipt of
regulatory approvals. Under the terms of the ASAs, if approval by the FERC of
the establishment of the ISO (Independent System Operator), as described below,
has not been obtained by the time all other regulatory approvals have been
obtained, the parties have agreed to defer the closing of the sale, but in no
event to a date later than August 31, 1999.
The restructuring plan provides that the New York share of any net book
gains from the divestiture of the generating assets will be shared between the
company's New York customers and shareholders, with shareholders receiving 25
percent of the gain, up to $20 million. The NJBPU has not yet decided how RECO's
share of any gain will be allocated between ratepayers and shareholders.
Pike's settlement will allow shareholders to retain $55,000 of any gain.
The terms of the restructuring plan also permit the company to defer
and recover up to $7.5 million (New York electric share) of prudent and
verifiable non-officer employee costs associated with the divestiture, such as
retraining, outplacement, severance, early retirement and employee retention
programs. Under the terms of the restructuring plan, the company will be
authorized to petition the NYPSC for recovery of employee costs in excess of
$7.5 million. In addition, the restructuring plan provides for the recovery of
all prudent and verifiable costs of the sale.
COMPETITION
Regulatory agencies at the federal level as well as in the three states
in which the company and its utility subsidiaries have retail electric
franchises are currently implementing changes in regulatory and rate-making
practices designed to promote increased competition consistent with safety,
reliability and affordability standards. Depending on ongoing developments in
this area, the company's market share and profit margins will become subject to
competitive pressures in addition to regulatory constraints.
FEDERAL INITIATIVE
On April 24, 1996, the FERC issued its final order (FERC Order 888)
requiring electric utilities to file nondiscriminatory open access transmission
tariffs that would be available to wholesale sellers and buyers of electric
energy. The order also provided for the recovery of related legitimate and
verifiable strandable costs subject to the FERC's jurisdiction. The company's
open access transmission tariff, as originally filed with the FERC on July 9,
1996 and amended through August 1997, offers transmission service and certain
ancillary services to wholesale customers on a basis that is comparable to that
which it provides itself. The company is operating under the filed tariff,
subject to refund, pending final FERC approval of the company's filing. The
company participates in the wholesale electric market primarily as a buyer of
energy and, as a result, Order 888 is not expected to materially impact the
company's financial condition or results of operations.
On January 31, 1997, the company, in conjunction with the other members
of the NYPP (New York Power Pool), filed tariffs with the FERC seeking
permission to restructure the NYPP into an ISO. On December 19, 1997,
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<PAGE> 7
the company and the other members of the NYPP made a supplemental filing with
the FERC which provides for a revised ISO governance structure. In an order
dated January 27, 1999, the FERC conditionally accepted the proposed ISO tariff
and the proposed market rules of the ISO. The order requires substantial
modifications to the proposed ISO tariff, including separation of the
transmission tariff from the rate schedules that govern non-transmission
functions. The NYPP members must submit a revised monitoring program to identify
both the exercise of market power and market design flaws. The FERC also set a
hearing to consider certain rate issues and noted that an application pursuant
to Section 203 of the Federal Power Act requesting transfer of control of all
necessary facilities from the NYPP members to the ISO must be submitted to and
approved by the FERC. The NYPP members filed such Section 203 application with
the FERC on February 5, 1999. The company is unable to predict when the ISO will
become operational.
NEW YORK COMPETITIVE OPPORTUNITIES PROCEEDING--ELECTRIC
The restructuring plan, in addition to providing for divestiture of the
company's electric generating facilities, as discussed above, provides that full
retail access to a competitive energy and capacity market will be available for
all customers by May 1, 1999. The company will act as a provider of last resort
for those customers who do not contract with third party energy suppliers to
meet their energy needs. As a result, the future energy requirements of the
company as a provider of last resort are expected to be substantially lower
than in the past. Such requirements will initially be satisfied through a
Transitional Power Supply Agreement between the company and subsidiaries of
Southern Energy whereby, from the later of May 1, 1999 or the closing of the
sale of the company's generating assets through October 31, 2000, the company
will purchase specified amounts of capacity and energy. In addition, the company
currently has two firm capacity contracts in place; an agreement with the New
York Power Authority for the purchase of 25 Mw of firm capacity, and a firm
capacity agreement with PSE&G (Public Service Electric and Gas Company) which
will provide between 100 Mw and 200 Mw of capacity during the contract term
which extends through October 2000. At the option of the company, additional
capacity purchases are available throughout the term of the PSE&G contract,
which, together with the firm contract capacity, would bring the total capacity
available under the PSE&G contract to between 300 Mw and 400 Mw. The company
currently has no firm, long-term energy contracts in place, other than the
Transitional Power Sales Agreement cited above. Capacity and energy requirements
after this transition period are expected to be satisfied by the company within
the operating policies of the ISO or through bilateral purchase agreements.
The restructuring plan also provides for electric price reductions of
approximately $32.4 million over its four-year term and for recovery, through a
CTC (Competitive Transition Charge), of above-market generation costs should the
transfer of title to the company's generating assets not occur before May 1,
1999. Should a CTC be required, the company would be authorized to recover the
difference between its non-variable costs of generation, including 75% of fixed
production labor expenses and property taxes, and the revenues, net of fuel and
variable operating and maintenance expenses, derived from the operation of the
company's generating assets in a deregulated competitive market. If title to the
generating assets has not transferred as of May 1, 2000, the CTC would be
modified so as to allow a maximum recovery of 65% of fixed production labor
expenses and property taxes. The modified CTC would remain effective until the
earlier of the date title to the generating assets is transferred or October 31,
2000. In the event title to the generating assets is not to be transferred by
October 31, 2000, the company would be authorized to petition the NYPSC for
permission to continue a CTC until the title to the generating assets is
transferred. The CTC does not allow for the recovery of inflationary increases
in non-fuel operating and maintenance production costs, property tax increases,
wage rate increases, or increased costs associated with capital additions or
changes in the costs of capital applicable to production costs.
In addition, the restructuring plan permits the company to retain all
earnings up to an 11.4% return on equity and provides that earnings in excess of
11.4% are to be shared, with 75% to be used to offset NYPSC approved deferrals
or otherwise inure to the company's customers, and 25% to be retained by the
company's shareholders.
The restructuring plan also provides a schedule for the submission of
comments by the company, the staff of the New York State Department of Public
Service and other interested parties to the NYPSC on the degree and timing of
introducing competition in metering and billing services. The NYPSC initiated
proceedings in these areas during 1998. The company cannot predict at this time
the ultimate outcome of the proceedings or their effect, if any, on the
company's consolidated financial position or results of operations.
Settlement agreements providing for the implementation of unbundled
rates which separate the components of existing tariffs into production,
transmission, distribution and customer cost categories effective May 1, 1999,
were reached on August 13 and September 18, 1998 between the company, the NYPSC
staff and other interested parties. By orders dated February 4, 1999, the NYPSC
approved the settlement agreements with minor modifications.
NEW YORK COMPETITIVE OPPORTUNITIES PROCEEDING--GAS
In 1996, the NYPSC approved utility restructuring plans designed to
open up the local natural gas market to competition and allow residential and
small commercial users the ability to purchase gas supplies from a variety of
sources, other than the franchised local distribution utility. On November 3,
1998, the NYPSC issued a Policy Statement Concerning the Future of the Natural
Gas Industry in New York State and Order Terminating Capacity Assignment (Case
97-G-1380). In accordance with the policy statement, the company ceased
requiring transportation customers to utilize its upstream capacity as of
October 1, 1998. As of December 31, 1998, the company has not incurred any
stranded costs related to its upstream pipeline capacity. As the company moves
to a competitive market, traditional cost recovery mechanisms may be replaced by
market-based methods. It is not
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<PAGE> 8
possible to predict the outcome of this proceeding or its effect on the
company's consolidated financial position or results of operations.
Additional information concerning regulatory proceedings relating to
the company and its utility subsidiaries is contained in the documents
incorporated by reference into this prospectus.
8
<PAGE> 9
SELECTED FINANCIAL INFORMATION
The selected financial information set forth below has been derived
from the company's previously published financial statements included in the
incorporated documents. The company's financial statements for the years ended
December 31, 1998 and 1997 have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports included in the incorporated
documents.
The selected financial data set forth below do not purport to be
complete and should be read in conjunction with the company's annual report on
Form 10-K for the year ended December 31, 1997 and current report on Form 8-K
dated February 26, 1999 included in the incorporated documents.
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------
1998(1) 1997(1)
----------- -----------
(Dollars in thousands)
<S> <C> <C>
Selected Income Statement Data:
- -------------------------------
Operating Revenues $ 626,104 $ 648,774
Operating Income $ 75,990 $ 76,997
Net Income:
Continuing Operations $ 44,967 $ 44,938
Discontinued Operations $ -- $ (15,432)
Total $ 44,967 $ 29,506
Earnings Applicable to Common Stock $ 42,170 $ 26,706
Selected Balance Sheet Data:
- ----------------------------
Total Assets $ 1,308,140 $ 1,288,009
Total Long-Term Debt $ 357,156 $ 356,637
Common Stock Equity $ 380,305 $ 376,319
Other Data:
- -----------
Electric Customers 273,663 269,096
Gas Customers 116,698 114,400
Ratio of Earnings to Fixed Charges (2) 2.85 2.93
</TABLE>
(1) Effective August 1, 1997, the accounts receivable, with certain
exceptions, and contracts with customers and related agreements of the
NORSTAR Partnership were sold. In accordance with Accounting Principles
Board Opinion No. 30, the consolidated financial statements of the
company have reported the results of the NORSTAR Partnership as
"Discontinued Operations." Additional information regarding the NORSTAR
Partnership is included in the company's Annual Report to the Commission
on Form 10-K for the year ended December 31, 1997, which information is
incorporated by reference in this document.
(2) The ratio of earnings to fixed charges for the years ended December 31,
1996, 1995 and 1994 were 3.20, 2.75 and 2.62, respectively. The ratio
for 1994 has been calculated on a historical basis and has not been
restated to reflect discontinued operations of the NORSTAR Partnership.
For purposes of computing the ratio of earnings to fixed charges,
earnings are defined as the sum of pre-tax income from continuing
operations plus fixed charges. Fixed charges consist of all interest
expense (before allowance for borrowed funds used during construction),
one-third of rent expense (which approximates the interest component of
such expense) and amortization of debt expense.
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<PAGE> 10
USE OF PROCEEDS
We will use the net proceeds from the sale of the debentures to redeem
all of our outstanding preferred stock and preference stock, of which 428,443
shares and 10,684 shares, respectively, are outstanding at December 31, 1998,
with an aggregate liquidation preference of approximately $43,192,000. The
dividend rates on our preferred and preference stock range from 4% to 8%. We
will use remaining proceeds to refinance permanently outstanding short-term
debt.
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<PAGE> 11
DESCRIPTION OF DEBENTURES
The debentures are to be issued under an Indenture dated as of March 1,
1990 between the company and The Bank of New York, as Trustee (the "Trustee"),
as supplemented by four supplemental indentures, and by a fifth supplemental
indenture, to be dated as of March 1, 1999, relating to the debentures
(collectively, the "Indenture," which term includes all amendments and
supplements from time to time). The statements herein concerning the debentures
and the Indenture do not purport to be complete. They are qualified in their
entirety by reference to the Indenture and to the definitions therein of terms
used herein. All article and section references appearing in this section are to
articles and sections of the Indenture, and all capitalized terms not defined
herein have the meanings specified in the Indenture.
GENERAL
The title of the debentures shall be "7% Debentures Due 2029 (Series
G)." The debentures will be issued in a single series and will be limited to
$45,000,000 in aggregate principal amount.
The debentures will mature on March 1, 2029 and will bear interest from
the date of original issuance at the rate of 7% per annum payable on March 1
and September 1 of each year, commencing September 1, 1999, until maturity.
The debentures will be unsecured and will rank equally with other
unsecured obligations of the company. The Indenture does not limit the amount of
debentures which may be issued thereunder, and additional debentures may be
issued thereunder up to the aggregate principal amount which may be authorized
from time to time by the company.
REDEMPTION
The company may not redeem the debentures for the first ten years, but
may do so on March 1, 2009 or at any time thereafter. The debentures will be
redeemable prior to maturity, at the option of the company, as a whole at any
time or in part from time to time, on notice given as provided in the Indenture,
at the principal amount thereof and accrued interest to the date fixed for
redemption, together with a premium equal to a percentage of the principal
amount thereof, determined as set forth below.
<TABLE>
If redeemed If redeemed If redeemed
during the during the during the
12 months 12 months 12 months
ending the ending the ending the
last day of last day of last day of
February, Premium February, Premium February, Premium
------------- ------- ------------ ------- ------------ -------
<S> <C> <C> <C> <C> <C>
2010 .......... 4.586% 2017 .......... 2.897% 2024 .......... 1.207%
2011 .......... 4.345% 2018 .......... 2.655% 2025 .......... 0.966%
2012 .......... 4.103% 2019 .......... 2.414% 2026 .......... 0.724%
2013 .......... 3.862% 2020 .......... 2.172% 2027 .......... 0.483%
2014 .......... 3.621% 2021 .......... 1.931% 2028 .......... 0.241%
2015 .......... 3.379% 2022 .......... 1.690% 2029 .......... 0.000%
2016 .......... 3.138% 2023 .......... 1.448%
</TABLE>
There is no sinking fund for the debentures.
RESTRICTION ON SECURED INDEBTEDNESS FOR BORROWED MONEY
The Indenture contains a covenant restricting the issuance by the
company of secured indebtedness for borrowed money while any debentures are
outstanding under the Indenture. The company is precluded from creating,
issuing, incurring or assuming any other indebtedness for borrowed money secured
by a mortgage or other lien on, or security interest in, any properties of the
company (other than (i) certain types of properties such as materials, fuels,
supplies, cash, gas, minerals, notes, accounts receivables and securities and
(ii) any property that is acquired by the company after the date of the second
supplemental indenture subject to a mortgage, lien or security interest and
certain additions, improvements and betterments thereto). The term "indebtedness
for borrowed money" means indebtedness evidenced by a bond, note or other
comparable written obligation representing borrowed money, and does not, in any
event, include any lease or installment sale agreement (or any obligation in
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<PAGE> 12
the nature of or having the characteristics of a lease or installment sale
agreement), whether or not capitalized for financial reporting or any other
purpose. (Section 4.7, as amended by Section 2.01 of the second supplemental
indenture)
MERGER, SALE OF ASSETS, ETC.
Under the Indenture, the company covenants that it will not consolidate
with or merge into any other corporation, or sell, transfer or lease its
properties as an entirety or substantially as an entirety, unless the due and
punctual payment of the principal of and interest on the debentures, and the due
and punctual performance and observance of all the terms, covenants and
conditions of the Indenture to be performed or observed by the company, shall be
expressly assumed by the successor corporation, if other than the company,
formed by or surviving any such consolidation or merger or to which such sale,
transfer or lease shall have been made, and immediately after giving effect to
such transaction, no Event of Default, and no event which, after notice or lapse
of time, or both, would become an Event of Default, shall have occurred and be
continuing. In the case of any such sale or transfer, the company will thereupon
be released from its liability as obligor on the debentures. (Section 11.2)
DELIVERY AND FORM
The debentures will be issued in fully-registered form without coupons.
See "--Book-Entry, Delivery and Form." The debentures will be issued only in
denominations of $1,000 or in any amount in excess thereof which is an integral
multiple of $1,000.
MODIFICATIONS OF INDENTURE
The Indenture, the rights and obligations of the company thereunder and
the rights of the Holders may be modified with respect to one or more series of
debentures issued under the Indenture with the consent of the Holders of a
majority of the aggregate principal amount of Outstanding debentures of all
series affected by the modification (voting as one class). Without the consent
of the Holder of each debenture affected, however, no modification shall change
the Stated Maturity of any debentures, reduce the principal amount or the amount
of any premium payable thereon, reduce the rate, extend the time of payment or
change the method of calculation of interest thereon, reduce any amount payable
on redemption thereof or reduce the percentage required for modification. No
modification of the Indenture subordinating the indebtedness evidenced by any
series of debentures issued thereunder to any indebtedness of the company is
effective against any Holder of debentures without the consent of such Holder.
Under certain limited circumstances, including, without limitation, modification
of the Indenture to conform to any amendments of the Trust Indenture Act of
1939, the Indenture may be modified without the consent of the Holders.
(Sections 10.1 and 10.2)
EVENTS OF DEFAULT
The Indenture provides that the following are Events of Default
thereunder with respect to any series of debentures issued thereunder:
- default in the payment of the principal of (or premium, if any,
on) any debentures of such series when and as the same shall be due
and payable;
- default in making a sinking fund payment, if any, when and as the same
shall be due and payable by the terms of the debentures of such series;
- default for 30 days in the payment of any installment of interest on
any debentures of such series;
- default for 60 days after written notice (given to the company by the
Trustee or by the Holders of at least 25% in aggregate principal amount
of the Outstanding debentures of all series affected) in the
performance of any other covenant or agreement in respect of the
debentures of such series contained in the Indenture;
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- certain events of bankruptcy, insolvency or reorganization, or any
related court appointment of a receiver, liquidator or trustee of the
company or any substantial part of its property; or
- any other Event of Default provided in the applicable Board Resolution
or supplemental indenture under which such series of debentures is
issued. (Section 6.1)
An Event of Default with respect to a particular series of debentures
issued under the Indenture does not necessarily constitute an Event of Default
with respect to any other series of debentures issued under the Indenture. The
Trustee may withhold notice to the Holders of any series of debentures of any
default with respect to such series (except a default in the payment of
principal, premium or interest) if it considers such withholding in the interest
of such Holders. (Section 6.11)
If any Event of Default with respect to any series of debentures shall
have occurred and be continuing, the Trustee or the Holders of not less than 25%
in aggregate principal amount of the Outstanding debentures of such series may
declare the principal of all the debentures of such series to be due and payable
immediately; however, subject to certain conditions, any such declaration and
its consequences may be rescinded or annulled by the Holders of a majority in
aggregate principal amount of the Outstanding debentures of such series.
(Section 6.1)
On or before May 1 of each year, the company must file with the Trustee
a certificate, signed by specified officers, stating whether or not such
officers have knowledge of any default relating to certain covenants, and, if
so, specifying each such default and the nature thereof. (Section 4.6)
Subject to provisions relating to its duties during the continuance of
any Event of Default, the Trustee shall be under no obligation to exercise any
of its rights or powers under the Indenture at the request, order or direction
of any Holders, unless such Holders shall have offered the Trustee reasonable
indemnity. (Section 7.2) Subject to such provisions for indemnification and
subject to the right of the Trustee to decline to follow any Holders' directions
under specified circumstances, the Holders of a majority in principal amount of
the Outstanding debentures of any series may direct the time, method and place
of conducting any proceeding or any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, with respect to the
debentures of such series. (Section 6.9)
PAYMENT AND TRANSFER
In the event that debenture certificates are required to be printed and
delivered as described under "--Book-Entry, Delivery and Form," principal,
premium, if any, and interest on debentures will be payable at such place or
places as may be designated by the company for such purpose, except that payment
of interest may be made at the option of the company by check mailed to the
persons in whose names such debentures are registered at the close of business
on the February 15 or the August 15 next preceding the relevant interest payment
date. (Sections 3.8 and 4.1)
Debentures may be registered for transfer or exchanged at the Corporate
Trust Office of the Trustee or at any other office or agency maintained by the
company for such purposes, subject to the limitations in the Indenture, without
the payment of any service charge except for any tax or governmental charge
incidental thereto. (Section 3.6)
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The company may, at its option, at any time, elect to have all
obligations discharged with respect to the Outstanding debentures ("Legal
Defeasance"). Such Legal Defeasance means that the company will be deemed to
have paid and discharged the entire indebtedness represented by the Outstanding
debentures, except for:
- the rights of holders of Outstanding debentures to receive payments in
respect of the principal of and interest on the debentures when such
payments are due;
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- the company's obligations with respect to the debentures concerning
issuing temporary debentures, registration of debentures, mutilated,
destroyed, lost or stolen debentures and the maintenance of an office
or agency for payment and money for security payments held in trust;
- the rights, powers, trust, duties and immunities of the Trustee, and
the company's obligations in connection therewith; and
- the Legal Defeasance provisions of the fifth supplemental indenture.
In addition, the company may, at its option at any time, elect to have all
obligations released with respect to a certain covenant contained in the
Indenture restricting the issuance by the company of secured indebtedness for
borrowed money ("Covenant Defeasance") and thereafter any omission to comply
with such obligations shall not constitute a Default or Event of Default with
respect to the debentures. In the event Covenant Defeasance occurs, certain
events (not including non-payment, bankruptcy, receivership, rehabilitation and
insolvency events) described under "--Events of Default" will no longer
constitute an Event of Default with respect to the debentures.
In order to exercise either Legal Defeasance or Covenant Defeasance:
- the company must irrevocably deposit with the Trustee, in trust, for
the benefit of the holders of the debentures, cash in United States
dollars, non-callable Government Obligations, or a combination thereof,
in such amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants selected by the
Trustee, to pay the principal of and interest on the outstanding
debentures on the earlier of stated maturity or the date that the
debentures have been irrevocably called for redemption on or after
March 1, 2009;
- in the case of Legal Defeasance, the company shall have delivered to
the Trustee an Opinion of Counsel confirming that (A) the company has
received from, or there has been published by, the Internal Revenue
Service, a ruling or (B) since the date of the fifth supplemental
indenture, there has been a change in the applicable Federal income tax
law, in each case to the effect that, and based thereon such opinion of
counsel shall confirm that, the holders of such debentures will not
recognize income, gain or loss for Federal income tax purposes as a
result of such Legal Defeasance, and will be subject to Federal income
tax in the same amount, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred;
- in the case of Covenant Defeasance, the company shall have delivered to
the Trustee an Opinion of Counsel confirming that the holders of such
debentures will not recognize income, gain or loss for Federal income
tax purposes as a result of such Covenant Defeasance and will be
subject to Federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Covenant
Defeasance had not occurred;
- no Event of Default shall have occurred and be continuing on the date
of such deposit or insofar as Events of Default from bankruptcy or
insolvency events are concerned, at any time in the period ending on
the 91st day after the date of deposit;
- such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under the Indenture or
any other material agreement or instrument to which the company is a
party;
- the company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the company with
the intent of preferring the holders of such debentures over any other
creditors of the company or with the intent of defeating, hindering,
delaying or defrauding any other creditors of the company or others;
and
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- the company shall have delivered to the Trustee an Officers'
Certificate stating that all conditions precedent provided for or
relating to the Legal Defeasance or the Covenant Defeasance have been
complied with.
CONCERNING THE TRUSTEE
The Bank of New York is the Trustee under the Indenture. The Bank of
New York is also the Trustee under two indentures relating to Pollution Control
Refunding Revenue Bonds issued by the New York State Energy Research and
Development Authority and supported by the obligation of the company. The Bank
of New York also serves as the company's Stock Transfer Agent. In addition, The
Bank of New York has a course of regular dealings with the company in the
ordinary course of business and from time to time may also make short-term
unsecured loans and secured or unsecured revolving credit and term loans to the
company and associated companies.
BOOK-ENTRY, DELIVERY AND FORM
The Depository Trust Company ("DTC") will act as securities depository
for the debentures. The debentures will be issued as fully- registered
securities registered in the name of Cede & Co. (DTC's partnership nominee). One
fully- registered Global Debenture will be issued for the debentures in the
aggregate principal amount of such issue and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants (the "Participants") deposit with DTC.
DTC also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of debentures. The "Direct
Participants" include securities brokers and dealers, banks, trust companies,
clearing corporations, and certain other organizations. DTC is owned by a number
of its Direct Participants and by The New York Stock Exchange, Inc., the
American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to DTC's system is also available to others such as
securities brokers and dealers, banks, and trust companies that clear through or
maintain a custodial relationship with a Direct Participant, either directly or
indirectly (the "Indirect Participants"). The Rules applicable to DTC and its
Participants are on file with the Commission.
Purchases of debentures under DTC's system must be made by or through
Direct Participants, who will receive a credit for the debentures on DTC's
records. The ownership interest of each actual purchaser of each Debenture (the
"Beneficial Owners") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchase, but Beneficial Owners are expected to receive
written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through
which the Beneficial Owner entered into the transaction. Transfers of ownership
interests in the debentures are to be accomplished by entries made on the books
of Participants acting on behalf of Beneficial Owners. Beneficial Owners will
not receive certificates representing their ownership interests in debentures,
except in the event that use of the book-entry system for the debentures is
discontinued.
To facilitate subsequent transfers, all debentures deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of debentures with DTC and their registration in the name
of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of
the actual Beneficial Owners of the debentures; DTC's records reflect only the
identity of the Direct Participants to whose accounts such debentures are
credited, which may or may not be the Beneficial Owners. The Participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
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Redemption notices shall be sent to DTC. If less than all of the
debentures within an issue are being redeemed, DTC's practice is to determine by
lot the amount of the interest of each Direct Participant in such issue to be
redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to
debentures. Under its usual procedures, DTC mails an Omnibus Proxy to the
company as soon as possible after the record date. The Omnibus Proxy assigns
Cede & Co.'s consenting or voting rights to those Direct Participants to whose
accounts the debentures are credited on the record date (identified in a listing
attached to the Omnibus Proxy).
Principal, premium, if any, and interest payments on the debentures
will be made to Cede & Co., as nominee of DTC. DTC's practice is to credit
Direct Participants' accounts upon DTC's receipt of funds and corresponding
detail information from the company or the Trustee on the payable date in
accordance with their respective holdings shown on DTC's records. Payments by
Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in a "street name," and will be the
responsibility of such Participant and not of DTC, the Trustee, or the company,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of principal, premium, if any, and interest to Cede & Co.
is the responsibility of the company or the Trustee, disbursement of such
payments to Direct Participants shall be the responsibility of DTC, and
disbursement of such payments to the Beneficial Owners shall be the
responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository
with respect to the debentures at any time by giving reasonable notice to the
company or the Trustee. Under such circumstances, in the event that a successor
securities depository is not obtained, Debenture certificates are required to be
printed and delivered.
The company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
Debenture certificates will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that the company believes to be reliable,
but the company takes no responsibility for the accuracy thereof.
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UNDERWRITING
Under the terms and subject to the conditions contained in the purchase
agreement between the company and the purchasers, the purchasers have agreed
severally to purchase, and the company has agreed to sell to the purchasers, the
respective principal amount of the debentures set forth opposite its name below.
<TABLE>
<CAPTION>
Purchasers Principal Amount
---------- ----------------
<S> <C>
Bear, Stearns & Co. Inc........... $10,000,000
EVEREN Securities, Inc............ $35,000,000
-----------
Total............................. $45,000,000
-----------
</TABLE>
The purchase agreement provides that the several obligations of the
purchasers to pay for and accept delivery of the debentures are subject to
certain conditions. The purchasers' obligations are such that they are
committed to take and pay for all of the debentures offered hereby if any are
taken, provided, that under certain circumstances involving a default of a
purchaser, less than all of the debentures may be purchased.
The purchasers have advised the company that they propose to offer all or
part of the debentures directly to the public at the initial public offering
price set forth on the cover page of this prospectus, and to certain securities
dealers at such price less a concession not in excess of 0.30% of the principal
amount of the debentures. The purchasers may allow, and such dealers may
reallow to certain brokers and dealers, a concession not in excess of 0.25% of
the principal amount of the debentures. After the debentures are released for
sale to the public, the offering price and other selling terms may from time to
time be varied.
The company has agreed to indemnify the purchasers against certain
liabilities, including liabilities under the Securities Act of 1933.
There is currently no trading market for the debentures and there is no
assurance that a market will develop. Although they are under no obligation to
do so, the purchasers currently intend to act as market makers for the
debentures in the secondary trading market, but may discontinue such
market-making at any time without notice.
In order to facilitate the offering of the debentures hereunder, certain
persons participating in the offering of the debentures may engage in
transactions that stabilize, maintain or otherwise affect the price of the
debentures during and after the offering of the debentures. Specifically, the
purchasers of the debentures may over-allot or otherwise create a short position
in the debentures for their own account by selling more of the debentures than
have been sold to them by the company and may elect to cover any such short
position by purchasing the debentures in the open market. In addition, the
purchasers may stabilize or maintain the price of the debentures by bidding for
or purchasing the debentures in the open market and may impose penalty bids,
under which selling concessions allowed to syndicate members or other
broker-dealers participating in the offering are reclaimed if debentures
previously distributed in the offering are repurchased in connection with
stabilization transactions or otherwise. The effect of these transactions may
be to stabilize or maintain the market price of the debentures at a level above
that which might otherwise prevail in the open market. The imposition of a
penalty bid may also affect the price of the debentures to the extent that it
discourages resales thereof. No representation is made as to the magnitude or
effect of any such stabilization or other transaction. Such transactions, if
commenced, may be discontinued at any time.
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LEGAL MATTERS
Winthrop, Stimson, Putnam & Roberts will issue an opinion about the
validity of the debentures for us. Thelen Reid & Priest LLP will issue an
opinion about the validity of the debentures for the purchasers. Thelen Reid &
Priest LLP has represented the company for many years with respect to certain
tax matters.
EXPERTS
The consolidated financial statements and related financial statement
schedule of the company incorporated by reference in this prospectus have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports and are incorporated herein by reference in reliance upon the
authority of said firm as experts in giving said reports.
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