<PAGE> 1
Filed pursuant to rule 424(b)(3)
Registration Nos. 33-59369 and
33-60108
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED AUGUST 9, 1995)
$150,000,000
PIEDMONT NATURAL GAS COMPANY, INC.
MEDIUM-TERM NOTES, SERIES B
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
Piedmont Natural Gas Company, Inc. (the "Company") may offer from time to
time its Medium-Term Notes, Series B (the "Notes"), at an aggregate initial
public offering price of up to $150,000,000, subject to reduction as a result of
the sale of other Debt Securities (as defined in the accompanying Prospectus).
Each Note will mature nine months or more from its date of original issuance
(the "Issue Date"), as selected by the initial purchaser and agreed to by the
Company. The Notes may be subject to optional redemption, or obligate the
Company to redeem or purchase the Notes pursuant to sinking fund or analogous
provisions or at the option of the registered owner (the "Holder") thereof, in
each case as indicated in the applicable Pricing Supplement. The Notes will be
denominated in U.S. dollars and, unless otherwise indicated in the applicable
Pricing Supplement, will be issued in fully registered form in denominations of
$100,000 and integral multiples of $1,000 in excess thereof.
The interest rate or interest rate formula, if any, issue price, stated
maturity and redemption provisions, if any, for each Note will be established by
the Company on its Issue Date and will be set forth in a Pricing Supplement.
Each interest-bearing Note will bear interest at either (a) a fixed rate (a
"Fixed Rate Note") or (b) a variable rate determined by reference to an interest
rate formula (a "Floating Rate Note"), which may be adjusted by adding or
subtracting a spread or multiplying by a spread multiplier, if any, unless
otherwise indicated in the applicable Pricing Supplement. Unless otherwise
specified in the applicable Pricing Supplement, the interest payment dates for
Fixed Rate Notes will by January 1 and July 1 of each year and at maturity (or
upon redemption or acceleration thereof). The interest payment dates for
Floating Rate Notes will be as indicated herein or in the applicable Pricing
Supplement and, unless otherwise indicated in the applicable Pricing Supplement,
the interest rate formula for Floating Rate Notes will be the Commercial Paper
Rate, the CD Rate, the Prime Rate, the Federal Funds Effective Rate, LIBOR or
the Treasury Rate (in each case, as defined herein). Interest rates, or interest
rate formulas, are subject to change by the Company from time to time, but no
such change will affect any Note already issued or as to which an offer to
purchase has been accepted by the Company.
Unless otherwise specified in the applicable Pricing Supplement, each Note
will be issued in fully registered form and will be represented by the master
security (a "Book-Entry Note") registered in the name of a nominee of The
Depository Trust Company ("DTC") or another depositary (DTC or such other
depositary as is specified in the applicable Pricing Supplement is herein
referred to as the "Depositary"). Interests in Book-Entry Notes will be shown
on, and transfers thereof will be effected only through, records maintained by
the Depositary and its participants. Except as described under "Description of
Notes -- Book-Entry System", owners of beneficial interests in Book-Entry Notes
("Beneficial Owners") will not be entitled to receive physical delivery of Note
certificates and will not be considered the Holders thereof.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT,
ANY PRICING SUPPLEMENT HERETO OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
================================================================================================================================
PRICE TO AGENTS' PROCEEDS TO
PUBLIC (1) COMMISSIONS(2) COMPANY(2)(3)
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note................................................ 100% .125%-.750% 99.875%-99.250%
--------------------------------------------------------------------------------------------------------------------------------
Total................................................... $150,000,000 $187,500-$1,125,000 $149,812,500-$148,875,000
================================================================================================================================
</TABLE>
(1) The Notes will be issued at 100% of their principal amount unless otherwise
set forth in the applicable Pricing Supplement.
(2) The Company will pay a commission to Bear, Stearns & Co. Inc., Citicorp
Securities, Inc. and Smith Barney Inc., as agents (collectively, the
"Agents"), in the form of a discount off the principal amount of any Note
sold through such Agent, ranging from .125% to .750%, depending on the
stated maturity of the Note (except that the Company and the Agents may
agree to a higher commission for maturities in excess of 30 years). The
Company may also sell Notes to any Agent at a discount for resale to
investors and other purchasers at varying prices related to prevailing
market prices at the time of resale, as determined by such Agent. The
Company has agreed to indemnify each Agent against certain liabilities,
including liabilities under the Securities Act of 1933, as amended.
(3) Before deducting other expenses payable by the Company estimated at
$269,828.
------------------------------
The Notes are being offered on a continuing basis by the Company through the
Agents, each of whom has agreed to use reasonable best efforts to solicit offers
to purchase the Notes. In addition, the Notes may be sold to the Agents, as
principal, for resale to investors and other purchasers. The Company also may
sell the Notes directly to investors on its own behalf, in which case no
commission will be paid. The Notes will not be listed on any securities
exchange, and there can be no assurance that the Notes offered by this
Prospectus Supplement will be sold or that there will be a secondary market for
the Notes. The Company reserves the right to withdraw, cancel or modify the
offer made hereby without notice. The Company or the Agent who solicits any
offer may reject such offer in whole or in part. See "Plan of Distribution of
Notes".
------------------------------
BEAR, STEARNS & CO. INC.
CITICORP SECURITIES, INC.
SMITH BARNEY INC.
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS SEPTEMBER 20, 1995
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE AGENTS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby supplements and, to the extent inconsistent therewith, replaces the
description of the general terms and provisions of Debt Securities set forth
under the heading "Description of Debt Securities" in the accompanying
Prospectus (the "Prospectus"), to which description reference is hereby made.
The Notes are referred to in the Prospectus as the "Offered Securities". The
following description will apply to the Notes unless otherwise specified in the
applicable Pricing Supplement.
GENERAL
The Notes are part of a single series of Debt Securities of the Company
issuable under the Indenture referred to in the Prospectus between the Company
and Citibank, N.A., as trustee (the "Trustee"). The Notes are initially limited
to an aggregate principal amount not to exceed $150,000,000 (or, if any Notes
are to be Original Issue Discount Notes (as defined herein) or Indexed Notes (as
defined herein), such principal amount as shall result in an aggregate initial
offering price equivalent to no more than $150,000,000), reduced by an amount
equal to the aggregate initial offering price of any other Debt Securities,
including any other series of medium-term notes, issued from time to time by the
Company. The foregoing limit, however, may be increased by the Company if in the
future it determines that it may wish to sell additional Notes. For a
description of the rights attaching to the Debt Securities under the Indenture,
see "Description of Debt Securities" in the Prospectus.
The Notes will be offered on a continuing basis and (unless specified in
the applicable Pricing Supplement) will mature at par at least nine months from
the Issue Date, as selected by the purchaser and agreed to by the Company, and
may be subject to redemption at the option of the Company, or obligate the
Company to redeem or purchase the Notes pursuant to sinking fund or analogous
provisions or at the option of the Holders thereof prior to maturity at the
price or prices and on or after the date or dates specified in the applicable
Pricing Supplement. The Notes will be denominated in U.S. dollars and, unless
otherwise specified in the applicable Pricing Supplement, will be issuable only
in fully registered form in denominations of $100,000 and integral multiples of
$1,000 in excess thereof.
Unless otherwise specified in an applicable Pricing Supplement, each Note
will be issued as a Book-Entry Note registered in the name of the Depositary or
its nominee. So long as the Depositary is the registered owner of the master
security, the Depositary or its nominee, as the case may be, will be considered
the Holder of the Book-Entry Note or Notes represented by such master security
for all purposes under the Indenture. See "Book-Entry System" below.
The Notes may be issued as Original Issue Discount Notes. An "Original
Issue Discount Note" is a Note which is issued at a price lower than the
principal amount thereof and which provides that upon redemption or acceleration
of the maturity thereof an amount less than the principal thereof shall become
due and payable. In the event of redemption or acceleration of the maturity of
an Original Issue Discount Note, the amount payable to the Holder of such Note
upon such redemption or acceleration will be determined in accordance with the
terms of the Note, but will be an amount less than the amount payable at the
stated maturity of such Note. In addition, a Note issued at a discount may, for
United States Federal income tax purposes, be considered an original issue
discount note, regardless of the amount payable upon redemption or acceleration
of maturity of such Note. See "Certain Federal Tax Considerations -- Original
Issue Discount" in the Prospectus.
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<PAGE> 3
The Notes may also be issued as "Indexed Notes", the principal amount of
which is payable at or prior to maturity and the interest on which and/or any
premium payable with respect to which will be determined by reference to an
index or indices (e.g., the difference in price of specified security or
commodity on certain dates, a securities or commodity index or any other index
or indices). The applicable Pricing Supplement relating to such Indexed Notes
will set forth the terms of such Note, which may include the method by and the
terms on which the amount of principal (payable on or prior to the maturity
date), interest and/or any premium will be determined, any additional tax
consequences to the Holders of such Notes, a description of certain risks
associated with investment in such Notes and other information relating to such
Notes.
Notes other than Book-Entry Notes may be presented for registration of
transfer or exchange at the Corporate Trust Office of Citibank, N.A., in the
Borough of Manhattan, the City of New York, under the circumstances described
under "Description of Debt Securities -- Exchange, Registration and Transfer" in
the Prospectus.
Unless otherwise specified in the Pricing Supplement, the Company will be
entitled to defease the Notes subject to compliance with the terms of the
Indenture. See "Description of Debt Securities -- Satisfaction and Discharge" in
the Prospectus. The Company may at any time purchase Notes at any price in the
open market or otherwise. Notes so purchased by the Company may be held or
resold or, at the discretion of the Company, may be surrendered to the Trustee
for cancellation. Unless otherwise specified in the applicable Pricing
Supplement, the Notes will not be entitled to the benefits of a sinking fund.
PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST
Principal of, premium, if any, and interest payments on Book-Entry Notes
registered in the name of the Depositary or its nominee will be made to the
Depositary or its nominee, as the case may be, as the registered owner of the
Book-Entry Note as described under "Book-Entry Notes". Neither the Company, the
Trustee, any paying agent nor the registrar for such Book-Entry Notes will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Book-Entry Note
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Company expects that the Depositary or its nominee, upon receipt of any
payment of principal, premium, if any, or interest in respect of a Book-Entry
Note, will credit immediately participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of such Book-Entry Note as shown on the records of such Depositary or its
nominee. The Company also expects that payments by participants to owners of
beneficial interests in such Book-Entry Note held through such participants 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.
Unless otherwise specified in the applicable Pricing Supplement, payments
of interest (other than interest payable at maturity or upon earlier redemption
or repayment) on Notes issued in certificated form will be made by mailing a
check to the Holder at the address of such Holder appearing on the Debt
Securities Register (as defined in the Prospectus) on the applicable Record Date
(as defined herein). Notwithstanding the foregoing, a Holder of $1,000,000 or
more in aggregate principal amount of Notes, other than Book-Entry Notes, of
like tenor and terms shall be entitled to receive such payments by wire transfer
of immediately available funds, but only if appropriate payment instructions
have been received in writing by the Trustee not less than fifteen days prior to
the applicable Interest Payment Date. Unless otherwise specified in the
applicable Pricing Supplement, principal, premium, if any, and interest payable
at maturity or upon earlier redemption or repayment in respect of Notes, other
than Book-Entry Notes, will be paid in immediately available funds upon
surrender of such Notes at the Corporate Trust Office of Citibank, N.A. in the
Borough of Manhattan, the City of New York or such other office or agency of the
Company maintained for such purpose in the Borough of Manhattan, the City of New
York.
The applicable Pricing Supplement relating to a Note will designate, in the
case of a Fixed Rate Note, a fixed rate of interest per annum payable on such
Fixed Rate Note and, in the case of a Floating Rate Note,
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<PAGE> 4
one of the following interest rate formulas as applicable to such Floating Rate
Note: (i) the Commercial Paper Rate (as defined below), in which case such Note
will be a "Commercial Paper Rate Note"; (ii) the CD Rate (as defined below), in
which case such Note will be a "CD Rate Note"; (iii) the Prime Rate, in which
case such Note will be a "Prime Rate Note"; (iv) the Federal Funds Effective
Rate (as defined below), in which case such Note will be a "Federal Funds
Effective Rate Note"; (v) the Treasury Rate (as defined below), in which case
such Note will be a "Treasury Rate Note"; (vi) LIBOR, in which case such Note
will be a "LIBOR Note"; or (vii) such other interest rate formulas as is set
forth in such Pricing Supplement. The rate of interest on each Floating Rate
Note will be reset daily, weekly, monthly, quarterly, semiannually or annually
(each an "Interest Reset Period") as set forth in each such Floating Rate Note,
or as may otherwise be specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, each Note
will bear interest from its Issue Date at the rate per annum (in the case of a
Fixed Rate Note), or pursuant to the interest rate formula (in the case of a
Floating Rate Note), stated in the applicable Pricing Statement until the
principal thereof is paid or made available for payment. Interest will be
payable on each interest payment date ("Interest Payment Date") and at maturity
or, if applicable, upon redemption or acceleration. Interest will be payable to
the Holder thereof (which in the case of Book-Entry Notes will be the Depositary
or its nominee) at the close of business on the Record Date (as defined herein)
next preceding each Interest Payment Date; provided, however, that interest
payable at maturity or, if applicable, upon redemption or acceleration, will be
payable to the person to whom principal shall be payable (which in the case of
Book-Entry Notes will be the Depositary or its nominee). The "Record Date" with
respect to any Interest Payment Date shall be the date fifteen calendar days
(unless otherwise specified in the applicable Pricing Supplement) immediately
preceding such Interest Payment Date whether or not such date is a Business Day.
"Business Day", as used herein, shall mean any day which is not a Saturday, a
Sunday or a day on which banks and trust companies in New York, New York are
authorized or obligated by law, regulation or executive order to remain closed.
The first payment of interest on any Note issued between a Record Date and an
Interest Payment Date will be made on the Interest Payment Date following the
next succeeding Record Date to the Holder on such next succeeding Record Date.
The person in whose name any Note is registered at the close of business on the
Record Date with respect to an Interest Payment Date shall be entitled to
receive interest on such date notwithstanding the cancellation of such Note upon
any registration of transfer or exchange subsequent to such Record Date and
prior to such Interest Payment Date.
Interest rates, interest rate formulas and the various other variable terms
of the Notes described herein are subject to change by the Company from time to
time, but no such change will affect any Note already issued or as to which an
offer to purchase has been accepted by the Company.
FIXED RATE NOTES
Each Fixed Rate Note will bear interest from its Issue Date at the rate per
annum stated on the face thereof, until the principal thereof is paid or made
available for payment. Unless otherwise specified in the applicable Pricing
Supplement, the Interest Payment Dates for Fixed Rate Notes will be January 1
and July 1 of each year and at maturity (or upon redemption or acceleration
thereof). Interest payments for Fixed Rate Notes shall be the amount of interest
accrued to, but excluding, the relevant Interest Payment Date, and will be
computed on the basis of a 360-day year of twelve 30-day months. In the event
that any Interest Payment Date is not a Business Day, interest on Fixed Rate
Notes will be paid on the next succeeding Business Day and, unless otherwise
specified by the applicable Pricing Supplement, no interest shall accrue for the
period from and after such Interest Payment Date to such next succeeding
Business Day.
FLOATING RATE NOTES
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate on each Floating Rate Note will be calculated by reference to the
specified interest rate formula, which will be adjusted by adding or subtracting
the Spread or multiplying by the Spread Multiplier, if any. The "Spread" is the
number of basis points specified in the applicable Pricing Supplement as being
applicable to the interest rate for such Floating Rate Note and the "Spread
Multiplier" is the percentage specified in the applicable Pricing Supplement as
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<PAGE> 5
being applicable to the interest rate for such Floating Rate Note. A Floating
Rate Note may also have either or both of the following: (i) a maximum
limitation, or ceiling, on the rate of interest which may accrue during any
interest period; and (ii) a minimum limitation, or floor, on the rate of
interest which may accrue during any interest period. In addition to any maximum
interest rate which may be applicable to any Floating Rate Note pursuant to the
above provisions, the interest rate on the Floating Rate Notes will in no event
be higher than the maximum rate permitted by New York law, as the same may be
modified by United States law of general application.
The applicable Pricing Supplement will specify the interest rate formula,
the amount or amounts of the Spread or Spread Multiplier, if any, and the
maximum or minimum interest rate limitation, if any, applicable to each Floating
Rate Note. In addition, such Pricing Supplement will define or specify for each
Floating Rate Note the following terms, if applicable: Calculation Agent,
Calculation Dates, Initial Interest Rate, Interest Payment Period, Interest
Payment Dates, Record Dates, Index Maturity, Interest Reset Period, Interest
Reset Date and such other terms that are applicable to such Note, if any. "Index
Maturity" means, with respect to a Floating Rate Note, the period to maturity of
the instrument or obligation on which the interest rate formula is based, as
specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the rate
of interest on a Floating Rate Note in effect on any day will be (a) if such day
is an Interest Reset Date with respect to such Floating Rate Note, the interest
rate on such Floating Rate Note on such Interest Reset Date, or (b) if such day
is not an Interest Reset Date with respect to such Floating Rate Note, the
interest rate on such Floating Rate Note on the immediately preceding Interest
Reset Date with respect to such Floating Rate Note; provided, however, that (i)
the interest rate in effect from the Issue Date of a Floating Rate Note to but
excluding the first Interest Reset Date with respect to such Floating Rate Note
will be the Initial Interest Rate (as set forth in the applicable Pricing
Supplement), and (ii) the interest rate in effect for the ten days immediately
prior to maturity of a Floating Rate Note will be that in effect on the tenth
day preceding such maturity. Subject to applicable provisions of law and except
as described herein, the rate of interest on a Floating Rate Note on any
Interest Reset Date with respect thereto will be the rate of interest determined
with respect to the Interest Determination Date pertaining to such Interest
Reset Date as determined in accordance with the applicable provisions described
below.
Unless otherwise specified in the applicable Pricing Supplement, the rate
of interest on each Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semi-annually or annually (each an "Interest Reset Date"). Unless
otherwise specified in the applicable Pricing Supplement, the Interest Reset
Date will be, in the case of Floating Rate Notes which reset daily, each
Business Day; in the case of Floating Rate Notes (other than Treasury Rate
Notes) which reset weekly, the Wednesday of each week; in the case of Treasury
Rate Notes which reset weekly, except as provided in the following paragraph,
the Tuesday of each week; in the case of Floating Rate Notes which reset
monthly, the third Wednesday of each month; in the case of Floating Rate Notes
which reset quarterly, the third Wednesday of March, June, September and
December; in the case of Floating Rate Notes which reset semi-annually, the
third Wednesday of two months of each year, as indicated in the applicable
Pricing Supplement; and in the case of Floating Rate Notes which reset annually,
the third Wednesday of one month of each year, as indicated in the applicable
Pricing Supplement. If any Interest Reset Date for any Floating Rate Note would
otherwise be a day that is not a Business Day with respect to such Note, such
Interest Reset Date shall be the next succeeding Business Day with respect to
such Note, except that if such Note is a LIBOR Note and the next succeeding
Business Day falls in the next succeeding calendar month, such Interest Reset
Date shall be the immediately preceding Business Day.
Unless otherwise specified in the applicable Pricing Supplement, the
Interest Determination Date pertaining to an Interest Reset Date for a
Commercial Paper Rate Note (the "Commercial Paper Interest Determination Date"),
a CD Rate Note (the "CD Rate Interest Determination Date"), a Prime Rate Note
(the "Prime Rate Interest Determination Date") or a Federal Funds Effective Rate
Note (the "Federal Funds Effective Interest Determination Date") will be the
second Business Day preceding the Interest Reset Date with respect to such Note.
Unless otherwise specified in the applicable Pricing Supplement, the Interest
Determination Date pertaining to an Interest Reset Date for a LIBOR Note (the
"LIBOR Interest Determination Date") will be the second Business Day preceding
such Interest Reset Date. Unless otherwise
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<PAGE> 6
specified in the applicable Pricing Supplement, the Interest Determination Date
pertaining to an Interest Reset Date for a Treasury Rate Note (the "Treasury
Interest Determination Date") will be the day of the week in which such Interest
Reset Date falls on which Treasury bills would normally be auctioned. Treasury
bills are usually sold at auction on Monday of each week, unless that day is a
legal holiday, in which case the auction is usually held on the following
Tuesday, except that such auction may be held on the preceding Friday. If, as
the result of a legal holiday, an auction is so held on the preceding Friday,
such Friday will be the Interest Determination Date pertaining to the Interest
Reset Date for a Treasury Rate Note occurring in the next succeeding week. If an
auction falls on a day that is an Interest Reset Date, such Interest Reset Date
will be the next following Business Day.
Unless otherwise indicated in the applicable Pricing Supplement and except
as provided below, interest will be payable, in the case of Floating Rate Notes
which reset daily, weekly, or monthly, on the third Wednesday of each month or
on the third Wednesday of March, June, September and December of each year (as
indicated in the applicable Pricing Supplement); in the case of Floating Rate
Notes which reset quarterly, on the third Wednesday of March, June, September
and December of each year; in the case of Floating Rate Notes which reset
semi-annually, on the third Wednesday of the two months of each year specified
in the applicable Pricing Supplement; and in the case of Floating Rate Notes
which reset annually, on the third Wednesday of the month specified in the
applicable Pricing Supplement (each an "Interest Payment Date"), and in each
case, at maturity or, if applicable upon redemption or acceleration thereof. If,
pursuant to the preceding sentence, an Interest Payment Date with respect to any
Floating Rate Note would otherwise be a day that is not a Business Day with
respect to such Note, such Interest Payment Date shall be the next succeed
Business Day with respect to such Note, except that if such Note is a LIBOR Note
and the next succeeding Business Day falls in the next succeeding calendar
month, such Interest Payment Date shall be the immediately preceding Business
Day. Unless otherwise indicated in the applicable Pricing Supplement, the Record
Date with respect to Floating Rate Notes shall be the date 15 calendar days
prior to each Interest Payment Date, whether or not such date shall be a
Business Day.
Unless otherwise indicated in the applicable Pricing Supplement, interest
payments for a Floating Rate Note shall be the amount of interest accrued to but
excluding the Interest Payment Date; provided, however, that if the Interest
Reset Dates with respect to any Floating Rate Note are daily or weekly, interest
payable on any Interest Payment Date, other than interest payable on any date on
which principal on any such Note is payable, will include interest accrued to
and including the Record Date next preceding such Interest Payment Date.
The interest accrued for any period is calculated by multiplying the face
amount of such Floating Rate Note by an accrued interest factor. Such accrued
interest factor is computed by adding the interest factor calculated for each
day in such period. Unless otherwise specified in the Note and the applicable
Pricing Supplement, the interest factor (expressed as a decimal rounded upwards,
if necessary, as described below) for each such day is computed by dividing the
interest rate (expressed as a decimal rounded upwards, if necessary, as
described below) applicable to such date by 360, in the case of Commercial Paper
Rate Notes, CD Rate Notes, Prime Rates Notes, Federal Funds Effective Rate Notes
or LIBOR Notes, or by the actual number of days in the year, in the case of
Treasury Rate Notes.
Unless otherwise specified in a Pricing Supplement, all percentages
resulting from any calculation on Floating Rate Notes will be rounded, if
necessary, to the nearest one-hundred thousandth of a percentage point, with
five one-millionths of a percentage point rounded upwards (e.g., 9.876545% (or
.09876545) being rounded to 9.987655% (or .0987655) and 9.876544% (or .
09876544) being rounded to 9.87654% (or .0987654)), and all dollar amounts used
in or resulting from such calculation on Floating Rate Notes will be rounded to
the nearest cent (with one-half cent being rounded upwards).
The "Calculation Date" pertaining to an Interest Determination Date will be
the tenth calendar day after such Interest Determination Date or, if any such
day is not a Business Day, the next succeeding Business Day.
Unless otherwise specified in the applicable Pricing Supplement, Citibank,
N.A., the Trustee under the Indenture, will be the calculation agent (the
"Calculation Agent") with respect to the Floating Rate Notes. Upon the request
of the Holder of any Floating Rate Note, the Calculation Agent will provide the
interest rate
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then in effect, and, if different, the interest rate which will become effective
as a result of a determination made on the most recent Interest Reset Date with
respect to such Floating Rate Note.
All determinations made by the Calculation Agent (except to the extent
expressly provided herein or in the applicable Pricing Supplement) shall be, in
the absence of manifest error, conclusive for all purposes and binding on
Holders of the Notes and the Company, and the Calculation Agent shall have no
liability therefor.
Commercial Paper Rate Notes
Each Commercial Paper Rate Note will bear interest at the interest rate
(calculated with reference to the Commercial Paper Rate and the Spread or Spread
Multiplier, if any) specified on the face of such Commercial Paper Rate Note and
in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Commercial Paper Interest
Determination Date, the Money Market Yield (calculated as described below) of
the rate on such date for commercial paper having the Index Maturity specified
in the applicable Pricing Supplement as published by the Board of Governors of
the Federal Reserve System in "Statistical Release H.15(519), Selected Interest
Rates" ("H.15(519)"), or any successor publication, under the heading
"Commercial Paper". In the event that such rate is not published prior to 9:00
A.M., New York City time, on the Calculation Date pertaining to such Commercial
Paper Interest Determination Date, then the Commercial Paper Rate shall be the
Money Market Yield of the rate on such Commercial Paper Interest Determination
Date for commercial paper having the Index Maturity specified in the applicable
Pricing Supplement as published by the Federal Reserve Bank of New York in its
daily statistical release "Composite 3:30 P.M. Quotations for U.S. Government
Securities" ("Composite Quotations") under the heading "Commercial Paper". If
such rate is neither published in either H.15(519) by 9:00 A.M., New York City
time, on such Calculation Date nor in Composite Quotations by 3:00 P.M., New
York City time, on such date, the Commercial Paper Rate for that Commercial
Paper Interest Determination Date shall be the Money Market Yield of the
arithmetic mean, as calculated by the Calculation Agent on such Calculation
Date, of the offered rates, as of 11:00 A.M., New York City time, on that
Commercial Paper Interest Determination Date, of three leading dealers of
commercial paper in The City of New York selected by the Calculation Agent for
commercial paper having the Index Maturity specified in the applicable Pricing
Supplement placed for an industrial issuer whose bond rating is "AA", or the
equivalent, from a nationally recognized rating agency; provided, however, that
if the dealers selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, the Commercial Paper Rate will be the Commercial
Paper Rate in effect on such Commercial Paper Interest Determination Date.
"Money Market Yield" shall be a yield (expressed as a percentage rounded
upwards, if necessary, to the next higher one-hundred thousandth of a percentage
point) calculated in accordance with the following formula:
<TABLE>
<S> <C> <C> <C>
Money Market Yield = D X 360 X 100
-------------
360 - (D X M)
</TABLE>
where "D" refers to the per annum rate for commercial paper quoted on a bank
discount basis and expressed as a decimal; and "M" refers to the actual number
of days in the interest period for which interest is being calculated.
CD Rate Notes
Each CD Rate Note will bear interest at the interest rate (calculated with
reference to the CD Rate and the Spread or Spread Multiplier, if any) specified
on the face of such CD Rate Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "CD Rate"
means, with respect to any CD Rate Interest Determination Date, the rate on such
date for negotiable certificates of deposit having the Index Maturity specified
in the applicable Pricing Supplement as published in H.15(519) under the heading
"CDs (Secondary Market)". In the event that such rate is not published prior to
9:00 A.M., New York City
S-7
<PAGE> 8
time, on the Calculation Date pertaining to such CD Rate Interest Determination
Date, then the CD Rate shall be the rate on such CD Rate Interest Determination
Date for negotiable certificates of deposit having the Index Maturity specified
in the applicable Pricing Supplement as published in Composite Quotations under
the heading "Certificates of Deposit". If such rate is neither published in
either H.15(519) by 9:00 A.M., New York City time, on such Calculation Date nor
in Composite Quotations by 3:00 P.M., New York City time, on such date, the CD
Rate for that CD Interest Determination Date shall be calculated by the
Calculation Agent and shall be the arithmetic mean (rounded upwards, if
necessary, to the next higher one-hundred thousandth of a percentage point) of
the secondary market offered rates, as of 10:00 A.M., New York City time, on
that CD Rate Interest Determination Date, of three leading nonbank dealers of
negotiable U.S. dollar certificates of deposit in The City of New York selected
by the Calculation Agent for negotiable certificates of deposit of major United
States money market banks with a remaining maturity closest to the Index
Maturity specified in the applicable Pricing Supplement in a denomination of
$5,000,000; provided, however, that if the dealers selected as aforesaid by the
Calculation Agent are not quoting as mentioned in this sentence, the CD Rate
will be the CD Rate in effect on such CD Rate Interest Determination Date.
Prime Rate Notes
Each Prime Rate Note will bear interest at the interest rate (calculated
with reference to the Prime Rate and the Spread or Spread Multiplier, if any)
specified on the face of such Prime Rate Note and in the applicable Pricing
Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Prime Rate Interest Determination Date, the
rate set forth on such date in H.15(519) under the heading "Bank Prime Loan". In
the event that such rate is not published prior to 9:00 A.M., New York City
time, on the Calculation Date pertaining to such Prime Rate Interest
Determination Date, then the Prime Rate will be the arithmetic mean (rounded
upwards, if necessary, to the next higher one-hundred thousandth of a percentage
point) of the rates of interest publicly announced by each bank that appears on
the Reuters Screen NYMF Page (as defined below) as such bank's prime rate or
base lending rate as in effect for that Prime Rate Interest Determination Date.
If fewer than four such rates but more than one such rate appear on the Reuters
Screen NYMF Page for that Prime Rate Interest Determination Date, the Prime Rate
will be the arithmetic mean (rounded upwards, if necessary, to the next higher
one-hundred thousandth of a percentage point), as calculated by the Calculation
Agent on such Calculation Date, of the prime rates quoted on the basis of the
actual number of days in the year divided by a 360-day year as of the close of
business on such Prime Rate Interest Determination Date by four major money
center banks in The City of New York selected by the Calculation Agent. If fewer
than two quotations are provided, the Prime Rate shall be determined on the
basis of the rates furnished in The City of New York by the appropriate number
of substitute banks or trust companies organized and doing business under the
laws of the United States, or any State thereof, having total equity capital of
at least $500 million and being subject to supervision or examination by Federal
or State authority, selected by the Calculation Agent to provide such rate or
rates; provided, however, that if the banks selected as aforesaid are not
quoting as mentioned in this sentence, the Prime Rate will be the Prime Rate in
effect on such Prime Rate Interest Determination Date.
"Reuters Screen NYMF Page" means the display designated as page "NYMF" on
the Reuters Monitor Money Rates Service (or such other page as may replace the
NYMF page on that service for the purpose of displaying prime rates or base
lending rates of major United State banks).
Federal Funds Effective Rate Notes
Each Federal Funds Effective Rate Note will bear interest at the interest
rate (calculated with reference to the Federal Funds Effective Rate and the
Spread or Spread Multiplier, if any) specified on the face of such Federal Funds
Effective Rate Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Federal
Funds Effective Rate" means, with respect to any Federal Funds Effective
Interest Determination Date, the rate on such date for Federal Funds having the
Index Maturity specified in the applicable Pricing Supplement as published in
H.15(519)
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<PAGE> 9
under the heading "Federal Funds (Effective)". In the event that such rate is
not published prior to 9:00 A.M., New York City time, on the Calculation Date
pertaining to such Federal Funds Effective Interest Determination Date, then the
Federal Funds Effective Rate will be the rate on such Federal Funds Effective
Interest Determination Date as published in Composite Quotations under the
heading "Federal Funds/Effective Rate". If such rate was neither published in
either H.15(519) by 9:00 A.M., New York City time on such Calculation Date nor
in Composite Quotations by 3:00 P.M., New York City time, on such date, the
Federal Funds Effective Rate for that Federal Funds Effective Interest
Determination Date shall be the arithmetic mean, as calculated by the
Calculation Agent on such Calculation Date, of the rates, as of 11:00 A.M., New
York City time, on that Federal Funds Effective Interest Determination Date, for
the last transaction in over-night Federal Funds arranged by three leading
brokers of Federal Funds transactions in The City of New York selected by the
Calculation Agent; provided, however, that if the brokers selected as aforesaid
by the Calculation Agent are not quoting as mentioned in this sentence, the
Federal Funds Effective Rate will be the Federal Funds Effective Rate in effect
on such Federal Funds Effective Interest Determination Date.
LIBOR Notes
Each LIBOR Note will bear interest at the interest rate (calculated with
reference to LIBOR and the Spread or Spread Multiplier, if any) specified on the
face on such LIBOR Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, LIBOR will
be determined by the Calculation Agent in accordance with the following
provisions:
(a) With respect to any LIBOR Interest Determination Date, LIBOR will
be determined on the basis of the offered rates for deposits of not less
than $1,000,000 having the Index Maturity specified in the applicable
Pricing Supplement, commencing on the second Business Day immediately
following such LIBOR Interest Determination Date, which appear on the
Reuters Screen LIBO Page (as defined below) as of 11:00 A.M., London time,
on that LIBOR Interest Determination Date. If at least two such offered
rates appear on the Reuters Screen LIBO Page, the rate for such LIBOR
Interest Determination date will be the arithmetic mean of such offered
rates as determined by the Calculation Agent. If fewer than two offered
rates appear, LIBOR for such LIBOR Interest Determination Date will be
determined as described in (b) below.
(b) With respect to a LIBOR Interest Determination Date on which fewer
than two offered rates for the applicable Index Maturity appear on the
Reuters Screen LIBO Page as described in (a) above, LIBOR will be
determined on the basis of the rates at approximately 11:00 A.M., London
time, on such LIBOR Interest Determination Date at which deposits in U.S.
dollars having the Index Maturity specified in the applicable Pricing
Supplement are offered to prime banks in the London interbank market by
four major banks in the London interbank market selected by the Calculation
Agent commencing on the second Business Day immediately following such
LIBOR Interest Determination Date and in a principal amount equal to an
amount of not less than $1,000,000 that in the Calculation Agent's judgment
is representative for a single transaction in such market at such time. The
Calculation Agent will request the principal London office of each of such
banks to provide a quotation of its rate. If at least two such quotations
are provided, LIBOR for such LIBOR Interest Determination Date will be the
arithmetic mean, as calculated by the Calculation Agent on such Calculation
Date, of such quotations. If fewer than two quotations arc provided, LIBOR
for such LIBOR Interest Determination Date will be the arithmetic mean, as
calculated by the Calculation Agent on such Calculation Date, of the rates
quoted at approximately 11:00 A.M., New York City time, on such LIBOR
Interest Determination Date by three major banks in The City of New York,
selected by the Calculation Agent, for loans in U.S. dollars to leading
European banks having the specified Index Maturity commencing on the second
Business Day immediately following such LIBOR Interest Determination Date
and in a principal amount equal to an amount of not less than $1,000,000
that in the Calculation Agent's judgment is representative for a single
transaction in such market at such time; provided, however, that if
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<PAGE> 10
the banks selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, LIBOR will be the LIBOR in effect on such LIBOR
Interest Determination Date.
"Reuters Screen LIBO Page" means the display designated as page "LIBO" on
the Reuters Monitor Money Rates Service (or such other page as may replace the
LIBO page on that service for the purpose of displaying London interbank offered
rates of major banks).
Treasury Rate Notes
Each Treasury Rate Note will bear interest at the interest rate (calculated
with reference to the Treasury Rate and the Spread or Spread Multiplier, if any)
specified on the face of such Treasury Rate Note and in the applicable Pricing
Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Treasury Interest Determination Date, the rate
for the most recent auction of direct obligations of the United States
("Treasury bills") having the Index Maturity specified in the applicable Pricing
Supplement as published in H.15(519) under the heading "U.S. Government
Securities auction average (investment)" or, if not so published by 3:00 P.M.,
New York City time, on the Calculation Date pertaining to such Treasury Interest
Determination Date, the auction average rate (expressed as a bond equivalent on
the basis of a year of 365 or 366 days, as applicable, and applied on a daily
basis) for such auction as otherwise announced by the United States Department
of the Treasury. In the event that the results of the auction of Treasury bills
having the Index Maturity specified in the applicable Pricing Supplement are not
published or reported as provided above by 3:00 P.M., New York City time, on
such date, or if no such auction is held in a particular week, then the Treasury
Rate shall be a yield to maturity (expressed as a bond equivalent on the basis
of a year of 365 or 366 days, as applicable, and applied on a daily basis) of
the arithmetic mean, as calculated by the Calculation Agent on such Calculation
Date, of the secondary market bid rates as of approximately 3:30 P.M., New York
City time, on such Treasury Interest Determination Date, of three leading
primary United States government securities dealers selected by the Calculation
Agent, for the issue of Treasury bills with a remaining maturity closest to the
specified Index Maturity; provided, however, that if the dealers selected as
aforesaid by the Calculation Agent are not quoting as mentioned in this
sentence, the Treasury Rate will be the Treasury Rate in effect on such Treasury
Interest Determination Date.
BOOK-ENTRY SYSTEM
The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources (including DTC)
that the Company believes to be reliable. The Company takes no responsibility
for the accuracy thereof.
Upon issuance, all Book-Entry Notes will be represented by a single master
security (the "Master Security"). The Master Security representing Book-Entry
Notes will be deposited with, or on behalf of, the Depositary and registered in
the name of the Depositary or its nominee. Book-Entry Notes will not be
exchangeable for Certificated Notes at the option of the holder and, except as
set forth below, will not otherwise be issuable in definitive form. Unless
otherwise specified in the applicable Pricing Supplement, DTC will be the
Depositary.
DTC has advised the Company and the Agents as follows: 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 Securities Exchange Act of 1934. DTC
holds securities that its participants ("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 securities certificates. "Direct Participants"
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. Access to the DTC 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
S-10
<PAGE> 11
Participant, either directly or indirectly ("Indirect Participants"). The Rules
applicable to DTC and its Participants are on file with the Securities and
Exchange Commission.
Purchases of Book-Entry Notes under the DTC System must be made by or
through Direct Participants. Upon the issuance by the Company of Book-Entry
Notes represented by the Master Security, the Depositary will credit, on its
book-entry system, the respective principal amounts of the Book-Entry Notes
represented by the Master Security to the accounts of Participants. The accounts
to be credited shall be designated by the Agents or underwriters of such
Book-Entry Notes, by certain other agents of the Company or by the Company if
such Book-Entry Notes are offered and sold directly by the Company. The
ownership interest of each Beneficial Owner will 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 Notes are expected to be effected 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
Notes, except as set forth below. To facilitate subsequent transfers, all Notes
deposited by Participants with DTC will be registered in the name of DTC's
partnership nominee, Cede & Co. The deposit of Notes with DTC and their
registration in the name of Cede & Co. will not effect any change in beneficial
ownership. The laws of some states require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
impair the ability to transfer beneficial interests in Book-Entry Notes
represented by the Master Security.
So long as the Depositary for the Master Security, or its nominee, is the
registered owner of the Master Security, 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 Master Security for all purposes under the Indenture. Except
as provided below, owners of beneficial interests in Book-Entry Notes
represented by the Master Security will not be entitled to have Book-Entry Notes
represented by such Master Security registered in their names, will not receive
or be entitled to receive physical delivery of Book-Entry Notes in definitive
form and will not be considered the owners or holders thereof under the
Indenture. Unless and until it is exchanged in whole or in part for individual
certificates evidencing the Book-Entry Notes represented thereby, the Master
Security may not be transferred except as a whole by the Depositary for the
Master Security to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary or by the
Depositary or any nominee to a successor Depositary or any nominee of such
successor.
The Company expects that 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. In addition, neither DTC nor
Cede & Co. will consent or vote with respect to Notes. The Company has been
advised that DTC's usual procedure is to mail an omnibus proxy to the Company as
soon as possible after the record date with respect to such consent or vote. The
omnibus proxy would assign Cede & Co.'s consenting or voting rights to those
Direct Participants to whose accounts the Notes are credited on such record date
(identified in a listing attached to the omnibus proxy).
Payments of principal of and interest, if any, on the Book-Entry Notes
represented by the Master Security registered in the name of the Depositary or
its nominee will be made by the Company through the Paying Agent to the
Depositary or its nominee, as the case may be, as the registered owner of the
Master Security. Neither the Company, the Trustee, any Paying Agent nor the
registrar for the Notes will have any responsibility or liability for any aspect
of the records relating to or payments made on account of beneficial ownership
interests in the Master Security or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
The Company has been advised that DTC will credit the accounts of Direct
Participants with payment in amounts proportionate to their respective holdings
in principal amount of interest in the Master Security as shown on the records
of DTC. The Company has been advised that DTC's practice is to credit Direct
S-11
<PAGE> 12
Participants' accounts on the applicable payment date unless DTC has reason to
believe that it will not receive payment on such date. The Company expects that
payments by Participants to Beneficial Owners will be governed by standing
customer instructions and customary practices, as is now the case with
securities held for the accounts of customers. Such payments will be the
responsibility of such Participants.
The Company may at any time and in its sole discretion determine not to use
the Depositary's book-entry system with respect to the Master Security and elect
to use Global Securities, as described in the following sentence. In such event,
upon issuance, all Book-Entry Notes having the same Issue Date, stated maturity
date, reset, extension, redemption and repayment provisions, Interest Payment
Period, Interest Payment Dates, Record Dates, and, in the case of Fixed Rate
Notes, interest rate, or, in the case of Floating Rate Notes, Base Rate, Initial
Interest Rate, Interest Reset Period, Interest Reset Dates, Spread and/or Spread
Multiplier, if any, Maximum Interest Rate, if any, and Minimum Interest Rate, if
any, would be represented by a single global security (a "Global Security").
Each Global Security representing Book-Entry Notes would be deposited with, or
on behalf of, the Depositary, and registered in the name of the Depositary or
its nominee.
If the Depositary with respect to the Master Security is at any time
unwilling or unable to continue as Depositary and a successor Depositary is not
appointed by the Company within 90 days, the Company will issue Certificated
Notes in exchange for the Book-Entry Notes represented by the Master Security.
In addition, the Company may at any time and in its sole discretion determine
not to use the Depositary's book-entry system, and, in such event, will issue
Certificated Notes in exchange for the Book-Entry Notes represented by the
Master Security.
OPTIONAL REDEMPTION
If one or more redemption dates (the "Redemption Dates") or range of
Redemption Dates are specified in the applicable Pricing Supplement, the Notes
described therein will be subject to redemption, in whole or in part, as
specified in such Pricing Supplement, on any such date (or during any such range
of dates) at the option of the Company upon not less than 30 days' or more than
60 days' notice, at the redemption price or prices specified in the applicable
Pricing Supplement, together with interest accrued to the Redemption Date;
provided, however, that interest installments due prior to the date fixed for
redemption will be payable to the Holder of record at the close of business on
the Record Date. If less than the entire principal amount of a Note is redeemed,
the principal amount of such Note that remains outstanding after such redemption
shall not be less than the minimum denomination of such Note. Redemption Dates,
if any, will be fixed at the time of sale and set forth in the applicable
Pricing Supplement and on the applicable Note. If no Redemption Date is
indicated with respect to a Note, such Note will not be redeemable prior to
maturity.
REDEMPTION AT THE OPTION OF THE HOLDER
Notes may be subject to redemption at the option of the Holders thereof on
the dates specified in the applicable Pricing Supplement ("Optional Repayment
Dates"), if any. Optional Repayment Dates, if any, will be fixed at the time of
sale and set forth in the applicable Pricing Supplement and on the applicable
Note. If no Optional Repayment Date is indicated with respect to a Note, such
Note will not be redeemable at the option of the Holder prior to maturity. On
the Optional Repayment Date, the related Fixed Rate Note or Floating Rate Note
will be redeemable, in whole or in part (provided that any remaining principal
amount of such Note shall be at least $100,000), at the option of the Holder
thereof at price equal to 100% of the principal amount to be repaid, together
with interest thereon payable to the Optional Repayment Date (the "Optional
Repayment Price"). Unless otherwise specified in the applicable Pricing
Supplement, for any Note to be repaid in whole or in part at the option of the
Holder thereof, the Trustee must receive not less than 30 nor more than 60 days
prior to the Optional Repayment Date (i) the Note to be repaid with the form
entitled "Option to Elect Redemption" set forth on the reverse of such Note duly
completed or (ii) a telegram, telex, facsimile transaction or a letter from a
member of a national securities exchange or the NASD or a commercial bank or a
trust company in the U.S. setting forth the name of the Holder of the Note, the
principal amount of the Note, the certificate number of the Note or a
description of the Note's tenor or terms, 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 form entitled
"Option to Elect
S-12
<PAGE> 13
Redemption" set forth on the reverse of the Note duly completed will be received
by such Trustee no later than five Business Days after the date of such
telegram, telex, facsimile transmission or letter and such Note and form duly
completed are received by the Trustee by such fifth Business Day. Exercise of
the redemption options shall be irrevocable.
In the case of Book-Entry Notes, the Depositary or its nominee will be the
Holder of such Note and therefore will be the only entity that can exercise a
right to redemption. In order to ensure that the Depositary's nominee will
timely exercise a right to redemption with respect to a particular Note, the
Beneficial Owner of such Note must instruct the broker or other Direct or
Indirect Participant through which it holds an interest in such Note to notify
the Depositary of its desire to exercise a right to redemption. Different firms
have different deadlines for accepting instructions from their customers and
accordingly, each Beneficial Owner should consult the broker or other Direct or
Indirect Participant through which it holds an interest in a Book-Entry Note in
order to ascertain the time by which such an instruction must be given in order
for timely notice to be delivered to the Depositary.
PLAN OF DISTRIBUTION OF NOTES
The Notes are being offered on a continuous basis by the Company through
Bear, Stearns & Co. Inc., Citicorp Securities, Inc. and Smith Barney Inc., the
Agents, each of whom has agreed to use its reasonable best efforts to solicit
purchases of the Notes. Unless otherwise determined, the Company will pay each
Agent a commission of .125% to .750% of the principal amount of each Note sold
through such Agent, depending upon maturity of the Note (except that the Company
and the Agents may agree to a higher commission for maturities in excess of 30
years). The Company may sell Notes to any of the Agents at a discount for resale
to investors at varying prices related to prevailing market prices at the time
of resale, to be determined by such Agent. The Company may also sell the Notes
directly to investors on its behalf. In the case of sales made directly by the
Company no commission will be payable. The Company has agreed to reimburse the
Agents for certain expenses.
The Company may also sell Notes to an Agent as principal for its own
account at a discount to be agreed upon at the time of sale. Such Notes may be
resold to investors and other purchasers at prevailing market prices, or prices
related thereto at the time of such resale or otherwise, as determined by the
Agent. In addition, the Agents may offer the Notes they have purchased as
principal to other dealers. The Agents may sell the Notes to any dealer at a
discount and, unless otherwise specified in the applicable Pricing Supplement,
such discount allowed to any dealer will not be in excess of 66 2/3% of the
discount to be received by such Agent from the Company. After the initial public
offering of Notes to be resold to investors and other purchasers on a fixed
public offering price basis, the public offering price, concession and discount
may be changed.
The Company will have the sole right to accept offers to purchase Notes and
may reject any proposed purchase of Notes in whole or in part. Each Agent will
have the right, in its discretion reasonably exercised, to reject any offer to
purchase Notes received by it in whole or in part.
No Note will have an established trading market when issued. The Notes will
not be listed on any securities exchange. Each Agent may make a market in the
Notes, but such Agent is not obligated to do so and may discontinue any
market-making at any time without notice. There can be no assurance of a
secondary market for any Notes, or that the Notes will be sold.
The Company has agreed to indemnify each Agent against certain liabilities,
including liabilities under the Securities Act of 1933 (the "Act") or to
contribute to payments such Agent may be required to make in respect thereof.
Each Agent may be deemed to be an "Underwriter" within the meaning of the Act.
Citibank, N.A., the Trustee under the Indenture, is an affiliate of
Citicorp Securities, Inc.
S-13
<PAGE> 14
VALIDITY OF NOTES
The validity of the Notes will be passed upon for the Company by Amos &
Jeffries, L.L.P., 230 North Elm Street, Greensboro, North Carolina 27401, and
for the Agents by Mudge Rose Guthrie Alexander & Ferdon LLP, 180 Maiden Lane,
New York, New York 10038. Mudge Rose Guthrie Alexander & Ferdon LLP will rely on
the opinion of Amos & Jeffries, L.L.P., as to all matters involving state
regulatory consents and approvals. The opinions of Amos & Jeffries, L.L.P., and
Mudge Rose Guthrie Alexander & Ferdon LLP will be conditioned upon, and subject
to certain assumptions regarding, future action required to be taken by the
Company and the Trustee in connection with the issuance and sale of any
particular Note, the specific terms of Notes and other matters which may affect
the validity of Notes but which cannot be ascertained on the date of such
opinions.
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<PAGE> 15
PROSPECTUS
----------
PIEDMONT NATURAL GAS COMPANY, INC.
$150,000,000
DEBT SECURITIES
---------------------
Piedmont Natural Gas Company, Inc. (the "Company") intends to offer and
issue from time to time in one or more series up to $150,000,000 aggregate
principal amount of unsecured notes, debentures and other evidences of
indebtedness (the "Debt Securities"). The Debt Securities may be offered as
separate series in amounts, at prices and on terms to be determined when an
agreement to sell is made or at the time or times of sale, as the case may be,
and set forth in one or more supplements to this Prospectus (each, a "Prospectus
Supplement"), which will be delivered to the offerees.
The terms of each series of the Debt Securities, including, where
applicable, the specific designation, aggregate principal amount, authorized
denominations, interest rate or rates (which may be fixed or variable),
maturity, any premium, any interest payment dates, any optional or mandatory
redemption terms, the initial public offering price, the proceeds to the Company
and any other terms of the offering of such series will be set forth in one or
more Prospectus Supplements. Debt Securities may be issued with amounts payable
in respect of principal of or premium or interest on the Debt Securities
determined by reference to the value, rate or price of one or more specified
indices.
The Debt Securities may be sold (i) to or through underwriting syndicates
represented by managing underwriters, or by underwriters without a syndicate,
such underwriters to be designated at the time of sale; (ii) through agents
designated from time to time; or (iii) directly by the Company. See "Plan of
Distribution." The names of any underwriters or agents involved in the offering
and sale of the Debt Securities and any applicable commissions or discounts will
be set forth in the corresponding Prospectus Supplement. The net proceeds to the
Company from such sale also will be set forth in such Prospectus Supplement.
This Prospectus may not be used to consummate sales of Debt Securities
unless accompanied by a Prospectus Supplement.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is August 9, 1995.
<PAGE> 16
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "1934 Act") and in accordance therewith files reports,
proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information filed by the Company can be inspected and copied at the following
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the following Regional Offices of the
Commission: Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511; and 7 World Trade Center, Suite 1300, New York,
New York 10048. Copies of this material may also be obtained by mail from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Company's Common Stock is
listed on the New York Stock Exchange ("NYSE"), and reports, proxy statements
and other information concerning the Company may be inspected and copied at the
offices of the NYSE at 20 Broad Street, New York, New York 10005.
This Prospectus does not contain all of the information set forth in the
Registration Statements on Form S-3, of which this Prospectus is a part, and
exhibits relating thereto which the Company has filed with the Commission under
the Securities Act of 1933, as amended (the "1933 Act"). Reference is made to
such Registration Statements and to the exhibits relating thereto for further
information with respect to the Company and the Debt Securities offered hereby.
Statements contained herein concerning the provisions of documents are
necessarily summaries of such documents, and each statement is qualified in its
entirety by reference to the copy of the applicable document filed with the
Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, previously filed by the Company with the
Commission pursuant to Section 13 of the 1934 Act, are incorporated herein by
reference:
(a) Annual Report on Form 10-K for the year ended October 31, 1994;
(b) Quarterly Reports on Form 10-Q for the quarters ended January 31,
1995 and April 30, 1995; and
(c) Current Report on Form 8-K filed on February 27, 1995.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the 1934 Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Debt Securities hereby offered shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of the filing of such documents. The documents incorporated
or deemed to be incorporated herein by reference are sometimes hereinafter
called the "Incorporated Documents." Any statement contained herein or in the
Incorporated Documents shall be deemed to be modified or superseded for purposes
of this Prospectus to the extent that a statement contained herein, in the
accompanying Prospectus Supplement or in any subsequently filed Incorporated
Document modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The information relating to the Company contained in this Prospectus does
not purport to be comprehensive and is based upon information contained in the
Incorporated Documents. Accordingly, the information contained herein should be
read together with the information contained in the Incorporated Documents.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM A COPY OF THIS PROSPECTUS IS DELIVERED, UPON THE
WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A COPY OF ANY OR ALL OF THE
INCORPORATED DOCUMENTS (OTHER THAN CERTAIN EXHIBITS TO SUCH DOCUMENTS WHICH ARE
NOT SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS). REQUESTS FOR SUCH
COPIES SHOULD BE DIRECTED TO THE OFFICE OF THE SECRETARY, PIEDMONT NATURAL GAS
COMPANY, INC., 1915 REXFORD ROAD, POST OFFICE BOX 33068, CHARLOTTE, NORTH
CAROLINA 28233; TELEPHONE NUMBER (704) 364-3120.
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<PAGE> 17
THE COMPANY
The Company is an energy and services company primarily engaged in the
transportation and sale of natural gas and the sale of propane to over 560,000
residential, commercial and industrial natural gas and propane customers in
North Carolina, South Carolina and Tennessee. The Company was incorporated in
1993 under the laws of the State of North Carolina under the name "PNG
Acquisition Company" for the purpose of changing the state of incorporation of
Piedmont Natural Gas Company, Inc., a New York corporation ("Old Piedmont"),
from New York to North Carolina, and has succeeded to all assets, rights,
liabilities and obligations of Old Piedmont as a result of the merger of Old
Piedmont with and into the Company effective as of March 1, 1994. The Company,
as the surviving corporation in the merger, changed its name immediately
following the effective time of the merger to "Piedmont Natural Gas Company,
Inc."
The principal executive offices of the Company are maintained at 1915
Rexford Road, Post Office Box 33068, Charlotte, North Carolina 28233; telephone
number (704) 364-3120.
The Company's utility operations serve over 512,000 natural gas customers.
The Company and its non-utility subsidiaries and divisions are also engaged in
acquiring, marketing and arranging for the transportation of natural gas to
large volume purchasers, in retailing residential and commercial gas appliances
and in the sale of propane and propane appliances to over 47,000 customers in
the Company's three-state service area.
In the Carolinas, the Company's service area is comprised of numerous
cities, towns and communities including Anderson, Greenville and Spartanburg in
South Carolina and Charlotte, Salisbury, Greensboro, Winston-Salem, High Point,
Burlington and the Hickory area in North Carolina. In Tennessee, the service
area is the Nashville metropolitan area, including portions of eight adjoining
counties. The Company's propane market is in and adjacent to its natural gas
markets in all three states. The Company is principally engaged in the gas
distribution industry and has no other reportable industry segments.
The Company's utility operations are subject to regulation by the North
Carolina Utilities Commission ("NCUC") and the Tennessee Public Service
Commission ("TPSC") as to the issuance of securities, and by those commissions
and by the Public Service Commission of South Carolina as to rates, service
area, adequacy of service, safety standards, extensions and abandonment of
facilities, accounting and depreciation. The Company is also subject to or
affected by various federal regulations.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement, the net
proceeds from the sale of the Debt Securities will be used for general corporate
purposes, including construction of additional facilities, the repayment of
short-term debt and working capital needs. Pending such use, the Company may
temporarily invest the net proceeds in investment grade securities. The Company
may, from time to time, engage in additional capital financing of a character
and in amounts to be determined by the Company in light of its needs at such
time or times and in light of prevailing market conditions. If the Company
elects at the time of an issuance of the Debt Securities to make different or
more specific use of proceeds other than that set forth herein, such use will be
described in the Prospectus Supplement.
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<PAGE> 18
RATIO OF EARNINGS TO FIXED CHARGES
The following are the consolidated ratios of earnings to fixed charges for
the twelve-month period ended April 30, 1995, and each of the fiscal years of
the Company in the five-year period ended October 31, 1994:
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED YEARS ENDED OCTOBER 31,
APRIL 30, ----------------------------------------
1995 1994 1993 1992 1991 1990
------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed
Charges (unaudited)(1)......... 2.94 2.91 3.28 3.16 2.19 2.58
</TABLE>
---------------
(1) For purposes of computing the consolidated ratios, "earnings" represent the
Company's net income from continuing operations plus applicable income
taxes and fixed charges, and "fixed charges" represent interest expense,
amortization of debt discount, premium and expense, and a portion of lease
payments considered to represent an interest factor.
DESCRIPTION OF DEBT SECURITIES
The following description of the Debt Securities sets forth certain general
terms and provisions of the Debt Securities to which any Prospectus Supplement
may relate. The particular terms of the Debt Securities offered by any
Prospectus Supplement (the "Offered Securities") and the extent, if any, to
which such general provisions may apply to the Offered Securities will be
described in the Prospectus Supplement relating to such Offered Securities.
The Debt Securities will be issued under an Indenture dated as of April 1,
1993 between Old Piedmont and Citibank, N.A., as trustee (the "Trustee"), as
amended by the First Supplemental Indenture dated as of February 25, 1994, among
the Company, Old Piedmont and the Trustee (as so amended, the "Indenture"). The
Indenture has been filed as Exhibits 4.1 and 4.2 to the Registration Statements
of which this Prospectus is a part. The following summary of certain provisions
of the Indenture does not purport to be complete and is subject to and qualified
in its entirety by reference to the provisions of the Indenture. Whenever
particular sections or defined terms of the Indenture are referred to, it is
intended that such sections or defined items shall be incorporated herein by
reference. Unless otherwise indicated, capitalized terms shall have the meaning
ascribed to them in the Indenture.
GENERAL
The Debt Securities may be issued from time to time in one or more series.
Although the amount of Debt Securities offered hereby will be limited to the
aggregate initial offering price described on the cover page of this Prospectus,
the Indenture does not contain any limitations on the amount of Debt Securities
that may be issued thereunder at any time or from time to time in one or more
series.
The Debt Securities will be unsecured obligations of the Company and will
rank equally and ratably with all other unsecured indebtedness of the Company.
As of April 30, 1995, the Company had issued and outstanding senior notes with
an aggregate principal amount of $188,000,000 and medium-term notes with an
aggregate principal amount of $130,000,000.
Reference is made to the applicable Prospectus Supplement for the specific
terms of the Offered Securities, including: (1) the specific title of the
Offered Securities; (2) any limit on the aggregate principal amount of the
Offered Securities; (3) the person to whom any interest on the Offered
Securities will be payable, if other than the person in whose name that Offered
Security is registered at the close of business on the record date for such
interest; (4) the date or dates on which the principal of the Offered Securities
is payable; (5) the rate or rates at which the Offered Securities will bear
interest, if any, or the formula pursuant to which such rate or rates will be
determined, and the date or dates from which any such interest will accrue, and
the date or dates for any interest payable; (6) the place or places where the
principal, premium (if any) and interest on the Offered Securities will be
payable, and the method of such payment; (7) the period or
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<PAGE> 19
periods within which the price or prices at which and the terms and conditions
upon which the Offered Securities may be redeemed, in whole or in part, at the
option of the Company; (8) the obligation, if any, of the Company to purchase or
redeem the Offered Securities pursuant to any sinking fund or analogous
provision or at the option of holders thereof and the period or periods within
which, the price or prices at which and the terms and conditions upon which the
Offered Securities will be redeemed or purchased, in whole or in part, pursuant
to such obligation; (9) the denominations in which the Offered Securities will
be issuable, if other than denominations of $1,000 and any integral multiple
thereof; (10) if the amount of payments of principal, premium (if any) or
interest on the Offered Securities may be determined with reference to an index,
the manner in which such amounts shall be determined; (11) whether the Offered
Securities shall be issuable in whole or in part in the form of one or more
Global Securities (as defined under "Exchange Registration and Transfer") and,
if so, the securities depository or depositories for such Global Security or
Securities (the "Depository") and the circumstances under which any such Global
Security or Securities may be registered for transfer or exchange, or
authenticated and delivered, in the name of a person other than such Depository
or its nominee, other than as set forth in the Indenture; (12) if other than the
principal amount thereof, the portion of the principal amount of the Offered
Securities which shall be payable upon declaration of acceleration of the
maturity thereof; (13) any modification, amendment or addition to the covenants
of the Company; (14) whether the Offered Securities shall be subject to
defeasance or covenant defeasance, or such other means of satisfaction and
discharge as may be specified therein; (15) any additional Events of Default;
and (16) any other terms or provisions of the Offered Securities not
inconsistent with the provisions of the Indenture.
Debt Securities may be sold at a substantial discount below their stated
principal amount, bearing no interest or interest at a rate which at the time of
issuance is below market rates. Special United States federal income tax
considerations applicable to Debt Securities issued at an original issue
discount are described under "Certain Federal Tax Considerations".
GLOBAL SECURITIES
The specific terms of the depository arrangements with respect to any Debt
Securities represented by a Global Security will be described in the applicable
Prospectus Supplement.
Debt Securities will be issuable only in fully registered form. Debt
Securities of a series may be represented, in whole or in part, by one or more
permanent global book-entry securities (each a "Global Security") in a
denomination or aggregate denomination equal to the portion of the aggregate
principal amount of Debt Securities of such series to be represented by such
Global Security. Any such Global Security shall bear the legend required by the
Indenture and may not be registered in the name of or transferred to a person
other than the Depository or its nominee unless (i) the Depository notifies the
Company that it is unwilling or unable to continue as Depository, or if the
Depository ceases to be a clearing agency registered under the 1934 Act, (ii)
the Company instructs the Trustee in accordance with the Indenture that the Debt
Securities represented by such Global Security shall be so exchangeable and the
transfer thereof so registerable, or (iii) there shall have occurred and be
continuing an Event of Default with respect to the Debt Securities of such
series.
EXCHANGE REGISTRATION AND TRANSFER
Debt Securities not represented by a Global Security may be presented for
exchange or registration of transfer (with the form of transfer endorsed thereon
duly executed) at the office or agency designated and maintained by the Company
for such purpose. Such Debt Securities may be exchanged for a like aggregate
principal amount of Debt Securities of other authorized denominations of such
series. The transfer of such Debt Securities may also be registered in registry
books kept at such office or agency (the "Debt Security Register"). No service
charge shall be made for any exchange or registration of transfer of such Debt
Securities, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
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<PAGE> 20
The Company shall not be required to exchange or register a transfer of (i)
any Debt Securities of any series for a period of fifteen (15) days next
preceding the mailing of the notice of any redemption of such Debt Securities of
such series to be redeemed, or (ii) any such series selected, called or being
called for redemption except, in the case of any such series to be redeemed in
part, the portion thereof not to be so redeemed.
REDEMPTION
Any terms for the optional or mandatory redemption of the Debt Securities
will be set forth in the applicable Prospectus Supplement. Except as shall
otherwise be provided with respect to the Debt Securities redeemable at the
option of the holder, such Debt Securities will be redeemable only upon notice,
by mail, not less than thirty (30) nor more than sixty (60) days prior to the
date fixed for redemption and, if less than all of the Debt Securities of any
series are to be redeemed, the Trustee shall select the particular Debt
Securities to be redeemed in such manner as it deems fair and appropriate. If
less than all of the Debt Securities represented by a Global Security are to be
redeemed, the beneficial interest to be redeemed will be selected by the
Depository as described in the applicable Prospectus Supplement.
COVENANTS
The Indenture contains the covenants summarized below, which are applicable
so long as any of the Debt Securities are outstanding.
The Company will cause (or, with respect to property owned in common with
others, make reasonable effort to cause) all its properties used or useful in
the conduct of its business to be maintained and kept in good condition, repair
and working order and will cause (or, with respect to property owned in common
with others, make reasonable effort to cause) to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as, in the
judgment of the Company, may be necessary so that the business carried on in
conjunction therewith may be properly conducted; provided, however, that the
foregoing shall not prevent the Company from discontinuing, or causing the
discontinuance of, the operation and maintenance of any of its properties if
such discontinuance is, in the judgment of the Company, desirable in the conduct
of its business.
The Company will not create, assume or suffer to exist, and will not permit
any subsidiary to create, assume or suffer to exist, except in favor of the
Company, any mortgage, pledge or other lien or encumbrance of or upon any of its
properties or assets (including stock and other securities of subsidiaries)
without making effective provisions to secure equally and ratably the Debt
Securities then outstanding and other indebtedness entitled to be so secured,
except that the Company or a subsidiary, without so securing the Debt
Securities, may create, assume or suffer to exist (a) certain purchase money and
existing liens in connection with property acquisitions and the extension,
renewal or refunding of the same, (b) pledges of current assets, in the ordinary
course of business to secure current liabilities, (c) liens on property to
secure obligations to pay all or a part of the purchase price of such property
only out of or measured by oil or gas production or the proceeds thereof, or
liens upon production from oil and gas property or the proceeds of such
production, to secure obligations to pay all or part of the expenses of
exploration, drilling or development of such property only out of such
production or proceeds, (d) mechanics' or materialman's liens, certain good
faith deposits, deposits to secure public or statutory obligations, deposits to
secure, or in lieu of, surety, stay or appeal bonds, and deposits as security
for payment of taxes, assessments or similar charges and liens or security
interests created in connection with bid or completion bonds, (e) liens arising
by reason of deposits with, or the giving of security to, a governmental agency
as a condition to the transaction of business or the exercise of a privilege or
license, or to enable the Company or a subsidiary to maintain self-insurance or
participate in any funds established to cover any insurance risks in connection
with workmen's compensation, unemployment insurance, old age pension or other
social security, (f) pledges or assignments of accounts receivable, including
customers' installment paper, to banks or others (including to or by any
subsidiary which is principally engaged in the business of financing the
business of the Company and its subsidiaries) made in the ordinary course of
business, (g) liens of taxes or assessments for the current year or not due or
being contested in good faith and against which an adequate reserve has been
established, (h) judgments or liens the finality of which is being contested and
execution on which is stayed, (i) assessments or similar encumbrances the
existence of
6
<PAGE> 21
which does not impair the use of the property subject thereto for the purposes
for which it was acquired, (j) certain landlords' liens so long as the rent
secured thereby is not in default, and (k) liens on the assets of any limited
liability company organized under a limited liability company act of any state
which limited liability company is treated as a partnership for federal income
tax purposes.
Subject to the provisions described under "Consolidation, Merger or Sale",
the Company will do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence, rights (charter and
statutory) and franchises of the Company and its subsidiaries; provided,
however, that the Company shall not be required to preserve, or cause any
subsidiary to preserve, any such right or franchise or to keep in full force and
effect the corporate existence of any subsidiary if, in the judgment of the
Company, preservation thereof is no longer desirable in the conduct of the
business of the Company and the loss thereof is not disadvantageous in any
material respect to the holders of any series of Debt Securities.
Unless otherwise indicated in the Prospectus Supplement, the covenants
contained in the Indenture and the Securities would not necessarily afford
holders protection in the event of a highly leveraged or other transaction
involving the Company that may adversely affect holders.
CONSOLIDATION, MERGER OR SALE
The Company will not consolidate with or merge into any other corporation
or sell or convey all or substantially all of its assets to any person, firm or
corporation unless (i) either the Company shall be the continuing corporation,
or the successor corporation (if other than the Company) shall be a corporation
organized and existing under the laws of the United States of America or a state
thereof or the District of Columbia and such corporation shall expressly assume,
by supplemental indenture, the due and punctual payment of the principal,
premium (if any) and interest on all the Debt Securities and the performance of
all of the covenants of the Company under the Indenture, (ii) the Company or
such successor corporation, as the case may be, shall not, immediately after
such merger or consolidation, or such sale or conveyance, be in default in the
performance of any such covenant or condition, and (iii) the Company will have
delivered to the Trustee an Opinion of Counsel as provided in the Indenture.
PAYMENT AND PAYING AGENT
The principal, premium (if any) and interest (if any) on Debt Securities
not represented by a Global Security shall be payable in New York Clearing House
Funds at the office or agency of the Paying Agent or Paying Agents as the
Company may designate from time to time, provided that, at the option of the
Company, interest may be paid by check mailed to the holders entitled thereto at
their last addresses as they appear in the Debt Security Register.
The Trustee is initially designated as the Company's sole Paying Agent and
the principal corporate trust office of Citibank, N.A., in the Borough of
Manhattan, the City of New York, is initially designated as the office where the
Debt Securities may be presented for payment, for the registration of transfer
and for exchange and where notices and demands to or upon the Company in respect
of the Debt Securities or of the Indenture may be served.
Unless otherwise indicated in the applicable Prospectus Supplement,
interest payments shall be made to the person in whose name any Debt Security is
registered at the close of business on the record date with respect to an
interest payment date.
All moneys paid by the Company to a Paying Agent for the payment of
principal, premium (if any) or interest on any Debt Security of any series which
remain unclaimed at the end of two years after such principal, premium or
interest shall have become due and payable will be repaid to the Company, and
the holder of such Debt Security will thereafter look only to the Company for
payment thereof.
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<PAGE> 22
DEFAULTS AND RIGHTS OF ACCELERATION
The following are Events of Default under the Indenture with respect to a
particular series of Debt Securities:
(a) default in the payment of the principal or premium (if any) on any
of the Debt Securities of such series when due and payable;
(b) default in the payment of any installment of interest upon any of
the Debt Securities of such series when due and payable, and continuance of
such default for a period of thirty (30) days;
(c) default in the payment of any sinking or purchase fund payment or
analogous obligation when due and payable;
(d) failure to observe or perform any other covenants or agreements of
the Company for a period of ninety (90) days after written notice of such
failure has been given as provided in the Indenture;
(e) a default under any bond, debenture, note or other evidence of
indebtedness for money borrowed by the Company (including a default with
respect to Debt Securities of any series other than that series) or under
any mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any indebtedness for money borrowed
by the Company (including the Indenture) whether such indebtedness now
exists or shall hereafter be created, which default shall constitute a
failure to pay in excess of $50,000,000 principal amount of such
indebtedness when due and payable after the expiration of any applicable
grace period with respect thereto or shall have resulted in an excess of
$50,000,000 of principal amount of such indebtedness becoming or being
declared due and payable prior to the date on which it would otherwise have
become due and payable, without such indebtedness having been discharged,
or such acceleration having been rescinded or annulled, within a period of
ten (10) days after there shall have been given, by registered or certified
mail, to the Company by the Trustee or to the Company and the Trustee by
the holders of at least 25% in principal amount of the outstanding Debt
Securities of that series a written notice specifying such default and
requiring the Company to cause such indebtedness to be discharged or cause
such acceleration to be rescinded or annulled and stating that such notice
is a "Notice of Default" thereunder; or
(f) certain events in bankruptcy, insolvency or other similar
occurrences.
The Indenture provides that if an Event of Default described in clause (a),
(b), (c), (d) or (e) shall have occurred and is continuing, and in each and
every such case, unless the principal amount of all the Debt Securities of such
series shall have already become due and payable, either the Trustee or the
holders of not less than 25% in aggregate principal amount of the Debt
Securities of all series affected thereby then outstanding, by notice in writing
to the Company (and to the Trustee if given by securityholders) may declare the
principal amount of all the Debt Securities (or, with respect to Discount Debt
Securities, as defined below under "Certain Federal Tax Considerations", such
lesser amount as may be specified in the terms of such Debt Securities) affected
thereby to be due and payable immediately, or, if an Event of Default described
in clause (f) shall have occurred and is continuing, and unless the principal of
all the Debt Securities of such series shall have already become due and
payable, either the Trustee or the holders of not less than 25% in aggregate
principal amount of all the Debt Securities then outstanding, by notice in
writing to the Company (and to the Trustee if given by securityholders), may
declare the principal of all the Debt Securities (or, with respect to Discount
Debt Securities, such lesser amount as may be specified in the terms of such
Debt Securities) to be due and payable immediately. Upon certain conditions,
such declarations may be annulled and certain past defaults may be waived by the
holders of a majority of the principal amount of outstanding Debt Securities of
such series. For information as to waiver of defaults, see "Meetings;
Modification of the Indenture; Waiver."
The Company will be required to furnish to the Trustee annually a statement
as to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance.
Under the Indenture, the Trustee must give to the holders of each series of
Debt Securities notice of all uncured defaults with respect to such series
within ninety (90) days after the occurrence of such a default;
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<PAGE> 23
provided that, except in the case of default in the payment of principal,
premium (if any) or interest on any of the Debt Securities, the Trustee shall be
protected in withholding such notice if it in good faith determines that the
withholding of such notice is in the interests of the holders of the Debt
Securities of such series.
MEETINGS; MODIFICATION OF THE INDENTURE; WAIVER
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the holders of not less than 66 2/3% in aggregate principal
amount of all series of the Debt Securities to be affected at the time
outstanding under the Indenture (voting as one class), to enter indentures
supplemental to or modifying the Indenture or the rights of the holders of such
Debt Securities, except that no such modification shall (a) extend the fixed
maturity, reduce the principal amount or redemption premium (if any) or reduce
the rate or extend the time of payment of interest on any Debt Security without
the consent of the holder of each Debt Security so affected; or (b) reduce the
percentage in principal amount of the outstanding Debt Securities, the consent
of whose holders is required for any such modification, without the consent of
the holders of all Debt Securities then outstanding.
Without the consent of any holders of Debt Securities, the Company and the
Trustee may enter into one or more supplemental indentures (which shall conform
to the provisions of the Trust Indenture Act as in force at the date of the
execution thereof) for any of the following purposes:
(a) to evidence the succession of another corporation to the Company,
or successive successions and the assumption by the successor corporation
of the covenants, agreements and obligations of the Company pursuant to
Article Eleven of the Indenture;
(b) to add to the covenants of the Company for the protection of the
holders of the Debt Securities, and to make the occurrence, or the
occurrence or continuance, of a default in any of such additions, an Event
of Default permitting the enforcement of all remedies provided in the
Indenture, with such period of grace, if any, and subject to such
conditions as such supplemental indenture may provide;
(c) to provide for the issuance under this Indenture of Debt
Securities, whether or not then outstanding, in coupon form (including Debt
Securities registrable as to principal only) and to provide for
exchangeability of such Debt Securities with Debt Securities issued
hereunder in fully registered form and to make all appropriate changes for
such purpose;
(d) to modify, eliminate or add to the provisions of this Indenture to
such extent as shall be necessary to effect the qualification of the
Indenture under the Trust Indenture Act, or under any similar federal
statute hereafter enacted, and to add to the Indenture such other
provisions as may be expressly permitted by the Trust Indenture Act,
excluding, however, the provisions referred to in Section 316(a)(2) of the
Trust Indenture Act or any corresponding provision in any similar federal
statute hereafter enacted;
(e) to convey, transfer, assign, mortgage or pledge any property to or
with the Trustee;
(f) to evidence and provide for the acceptance and appointment
hereunder of a successor trustee with respect to the Debt Securities of one
or more series and to add or change any provisions of the Indenture as
shall be necessary to provide for or facilitate the administration of the
trusts by more than one trustee;
(g) to change or eliminate any provision of the Indenture or to add
any new provision to the Indenture; provided that if such change,
elimination or addition will adversely affect the interests of the holders
of the Debt Securities of any series in any material respect, such change,
elimination or addition will become effective with respect to such series
only when there is no Debt Security of such series remaining outstanding
under the Indenture;
(h) to provide collateral security for the Debt Securities;
(i) to change any place where (1) the principal, premium (if any) and
interest on Debt Securities of any series shall be payable; (2) any Debt
Securities of any series may be surrendered for registration of
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<PAGE> 24
transfer; (3) Debt Securities of any series may be surrendered for
exchange; and (4) notices and demands to or upon the Company in respect of
the Debt Securities of any series and the Indenture may be served; and
(j) to establish the form or terms of Debt Securities of any series as
permitted by the Indenture.
The Trustee is authorized by the Indenture to join with the Company in the
execution of any such supplemental indenture, to make any further appropriate
agreements and stipulations which may be therein contained and to accept the
conveyance, transfer, assignment, mortgage or pledge of any property thereunder,
but the Trustee shall not be obligated to enter into any such supplemental
indenture which adversely affects the Trustee's own rights, duties or immunities
under the Indenture or otherwise. No supplemental indenture shall be effective
as against the Trustee unless and until the Trustee has duly executed and
delivered the same.
The Indenture contains provisions for convening meetings of the holders of
Debt Securities of a series. A meeting may be called at any time by the Trustee,
and also by the Company or the holders of at least 25% in aggregate principal
amount of the outstanding Debt Securities of any series if the Trustee fails to
call the meeting upon request of the Company or such holders. Notice of every
meeting of securityholders, setting forth the time and place in the Borough of
Manhattan, the City of New York, of such meeting and in general terms the action
proposed, shall be mailed to all holders of Debt Securities of the applicable
series as the names and addresses of such holders appear on the Debt Security
Register.
Each holder of Debt Securities of a series with respect to which a meeting
is being held (or such holder's proxy) shall be entitled to one vote for each
$1,000 outstanding principal amount of Debt Securities held (or represented) by
him. The vote upon any resolution submitted to any meeting of securityholders
shall be by written ballot.
The holders of a majority in principal amount of the outstanding Debt
Securities of all series affected thereby (voting as one class) may waive
compliance by the Company of covenants or conditions provided for in the
Indenture. The holders of a majority in principal amount of the outstanding Debt
Securities of each series may, on behalf of the holders of all the Debt
Securities of such series, waive any past default under the Indenture, except a
default (1) in the payment of principal, premium (if any) or interest on any
Debt Security of such series, or (2) in respect of a covenant or provision of
the Indenture which cannot be modified or amended without the consent of the
holder of each outstanding Debt Security affected.
COLLECTION OF INDEBTEDNESS, ETC.
The Indenture also provides that in the event of a failure by the Company
to make payment of principal, premium, interest, or any mandatory sinking fund
requirements on the Debt Securities (and in the case of payment of interest or
any mandatory sinking fund payment, such failure to pay shall have continued for
thirty (30) days) the Company will, upon demand of the Trustee, pay to it, for
the benefit of the holders of the Debt Securities, the whole amount then due and
payable on the Debt Securities for principal or premium (if any) and interest,
with interest on the overdue principal and, to the extent payment of interest
shall be legally enforceable, upon overdue installments of interest at the rate
borne by the Debt Securities. The Indenture further provides that if the Company
fails to pay such amount forthwith upon such demand, the Trustee may, among
other things, institute a judicial proceeding for the collection thereof.
However, the Indenture provides that notwithstanding any other provision of the
Indenture, the holder of any Debt Security shall have the right to institute
suit for the enforcement of any payment of principal and interest on such Debt
Security on the respective stated maturities expressed in such Debt Security and
that such right shall not be impaired without the consent of such holder.
The holders of a majority in principal amount of the Debt Securities of
each series then outstanding under the Indenture shall have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustee; provided, that the holders shall have offered to the Trustee
reasonable indemnity against expenses and liabilities.
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SATISFACTION AND DISCHARGE
Under the terms of the Indenture, the Company may satisfy and discharge its
obligations under the Indenture if, at any time, (1) the Company shall have
delivered to the Trustee for cancellation all Debt Securities of any series
theretofore authenticated or (2) all such Debt Securities of such series not
theretofore delivered to the Trustee for cancellation shall have become due and
payable, or are by their terms to become due and payable within one year or are
to be called for redemption within one year under arrangements satisfactory to
the Trustee for the giving of notice of redemption, and the Company shall
deposit or cause to be deposited with the Trustee as trust funds (a) an amount
of money which will be sufficient, or (b) Government Obligations, the principal
and interest on which when due, without any regard to reinvestment thereof, will
provide monies which will be sufficient, or (c) a combination of (a) and (b)
which will be sufficient, to pay at maturity or upon redemption all Debt
Securities of such series not theretofore delivered to the Trustee for
cancellation, including principal, premium (if any) and interest due or to
become due to such date of maturity or date fixed for redemption, as the case
may be.
If the conditions of either (1) or (2) above are satisfied, the Company
shall also pay or cause to be paid all other sums payable by the Company under
the Indenture with respect to such series, and then the Indenture shall cease to
be of further effect with respect to the Debt Securities of such series, and the
Trustee, on demand of and at the cost and expense of the Company, shall execute
proper instruments acknowledging satisfaction of and discharging the Indenture
with respect to the Debt Securities of such series. The Company agrees to
reimburse the Trustee for any costs or expenses thereafter reasonably and
properly incurred by the Trustee in connection with the Indenture or the Debt
Securities of such series.
In addition, under the Indenture the Company will be discharged from any
and all obligations in respect of the Debt Securities of any series (except in
each case for certain obligations to register the transfer or exchange of Debt
Securities, replace stolen, lost or mutilated Debt Securities, maintain paying
agencies and hold moneys for payment in trust) if the Company deposits with the
Trustee, in trust, money, Government Obligations, or a combination thereof, in
an amount sufficient to pay all the principal (including any mandatory sinking
fund payments) of, and interest on, Debt Securities of such series on the dates
such payments are due in accordance with the terms of such Debt Securities. Such
defeasance and discharge will become effective after the Company has, among
other things, delivered to the Trustee an opinion of counsel to the effect that
the deposit and related defeasance would not cause the holders of the Debt
Securities of such series to recognize income, gain or loss for federal income
tax purposes, or a copy of a ruling or other formal statement or action to such
effect received from or published by the United States Internal Revenue Service
(the "IRS").
NOTICES
Any notice or demand required or permitted to be given or served by the
Trustee or by the holders of Debt Securities to or on the Company may be given
or served by postage prepaid first class mail addressed (until another address
is filed by the Company with the Trustee) as follows: Piedmont Natural Gas
Company, Inc., 1915 Rexford Road, Post Office Box 33068, Charlotte, North
Carolina 28233, Attention: Ted C. Coble, Vice President and Treasurer and
Assistant Secretary.
Any notice, direction, request or demand by any securityholder to or upon
the Trustee shall be deemed to have been sufficiently given or made, if given or
made in writing at the principal corporate trust office of the Trustee in the
Borough of Manhattan, the City of New York.
Any notice to be given to the securityholders of the Debt Securities will
be given by mail to the addresses of such holders as they appear in the Debt
Security Register.
TITLE
The Company, the Trustee and any agent of the Company or the Trustee may
deem the person in whose name such Debt Security shall be registered upon the
books of the Company (which, in the case of Debt Securities represented by a
Global Security, shall be the Depository or its nominee) to be the absolute
owner
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of such Debt Security (whether or not such Debt Security shall be overdue and
notwithstanding any notation of ownership or other writing thereon), for the
purpose of receiving payment and for all other purposes.
REPLACEMENT OF DEBT SECURITIES
In case any Debt Security shall become mutilated or be destroyed, lost or
stolen, the Company, in the case of a mutilated Debt Security shall, and in the
case of a lost, stolen or destroyed Debt Security may in its discretion, provide
a new Debt Security of the same series. The applicant for a substituted Debt
Security shall furnish to the Company and the Trustee such security or indemnity
as may be required by them to save each of them harmless, and, in every case of
destruction, loss or theft, the applicant shall also furnish evidence of the
destruction, loss or theft of such Debt Security and of the ownership thereof.
The Company may require the payment of a sum sufficient to cover any tax,
governmental charge or other charges that may be imposed in relation to the
issuance of a substituted Debt Security and in addition a further sum not
exceeding two dollars for each Debt Security so issued in substitution.
GOVERNING LAW
The Indenture is and the Debt Securities will be governed by, and construed
in accordance with, the laws of the State of New York.
CONCERNING THE TRUSTEE
Subject to the provisions of the Indenture relating to its duties, the
Trustee will be under no obligation to expend or risk its own funds or to incur
any personal financial liability in the performance of its duties under the
Indenture, or to exercise any of its rights or powers under the Indenture, if
there are reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it. Subject to such provisions, the holders of a majority in principal amount of
the Debt Securities then outstanding will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee under the Indenture, or exercising any trust or power conferred on the
Trustee.
Citibank, N.A., Trustee under the Indenture, has commercial banking
relationships with the Company. Citibank, N.A., is an affiliate of Citicorp
Securities, Inc., which is one of the agents for the Company's medium-term note
program.
CERTAIN FEDERAL TAX CONSIDERATIONS
The following summary of the principal Federal income tax consequences of
the purchase, ownership and disposition of the Debt Securities is based upon the
Internal Revenue Code of 1986, as amended (the "Code"), its legislative history,
existing and proposed regulations thereunder, published rulings and court
decisions, all as currently in effect and all subject to change at any time,
perhaps with retroactive effect. It deals only with Debt Securities held as
capital assets by initial purchasers (unless otherwise specified) and does not
purport to deal with purchasers in special tax situations, such as foreign
corporations, nonresident aliens, financial institutions, tax-exempt
organizations, insurance companies, regulated investment companies, dealers in
securities or currencies, persons holding Debt Securities as a hedge against
currency risks or as a position in a "straddle" for tax purposes, or persons
whose functional currency (as defined in section 985 of the Code) is not the
United States dollar. Prospective purchasers of the Debt Securities should
consult their own tax advisors concerning the application of Federal income tax
laws to their particular situations as well as any consequences of the purchase,
ownership and disposition of the Debt Securities arising under the laws of any
other taxing jurisdiction.
PAYMENTS OF INTEREST. Generally, payments of interest on a Debt Security
will be taxable to a holder as ordinary interest income at the time such
payments are accrued or are received, in accordance with the holder's regular
method of accounting for Federal income tax purposes.
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ORIGINAL ISSUE DISCOUNT
GENERAL. The following summary is a general discussion of the Federal
income tax consequences to holders of the purchase, ownership and disposition of
Debt Securities issued with original issue discount ("Discount Debt
Securities").
For Federal income tax purposes, original issue discount is the excess of
the stated redemption price at maturity of a Debt Security over its issue price,
if such excess equals or exceeds a de minimis amount (generally defined as 1/4
of 1-percent of the Debt Security's stated redemption price at maturity
multiplied by the number of complete years to its maturity from the issue date).
The issue price of each Debt Security in an issue of Debt Securities is the
first price at which a substantial amount of such issue of Debt Securities has
been sold (ignoring sales to bond houses, brokers, or similar persons or
organizations acting in the capacity of underwriters, placement agents, or
wholesalers). The stated redemption price at maturity of a Debt Security
generally is the sum of all payments provided by the Debt Security other than
"qualified stated interest" payments. The term "qualified stated interest"
generally means stated interest that is unconditionally payable in cash or
property (other than debt instruments of the issuer) at least annually at a
single fixed rate.
Generally, if a Debt Security bears interest for one or more accrual
periods at a rate below the rate applicable for the remaining term of such Debt
Security (e.g., Debt Securities with teaser rates or interest holidays), then
for purposes of determining whether the Debt Security has original issue
discount exceeding a de minimis amount, the Debt Security's stated redemption
price at maturity is treated as equal to the Debt Security's issue price plus
the greater of "foregone interest" or the excess of the Debt Security's stated
principal amount over its issue price. The amount of "foregone interest" is the
amount of additional stated interest that would be required to be payable on the
Debt Security during the period of the teaser rate, holiday or shortfall so that
all stated interest would be qualified stated interest.
Payments of qualified stated interest on a Debt Security are taxable to a
holder as ordinary interest income at the time such payments are accrued or are
received, in accordance with the holder's regular method of tax accounting. A
holder of a Discount Debt Security having a maturity of more than one year from
the date of issue must include original issue discount in income as ordinary
interest for Federal income tax purposes as it accrues under a constant yield
method in advance of receipt of the cash payments attributable to such income,
regardless of such holder's regular method of tax accounting. In general, the
amount of original issue discount included in income by the initial holder of a
Discount Debt Security is the sum of the daily portions of original issue
discount with respect to such Discount Debt Security for each day during the
taxable year on which such holder held such Discount Debt Security. The "daily
portions" of original issue discount on any Discount Debt Security are
determined by allocating to each day in an accrual period a ratable portion of
the original issue discount allocable to that accrual period. An "accrual
period" may be of any length and the accrual periods may vary in length over the
term of the Discount Debt Security as long as (i) each accrual period is no
longer than one year, and (ii) each scheduled payment of principal or interest
occurs either on the final day of an accrual period or on the first day of an
accrual period. The amount of original issue discount allocable to each accrual
period is generally equal to the difference between (i) the product of the
Discount Debt Security's adjusted issue price at the beginning of such accrual
period and its yield to maturity (determined on the basis of compounding at the
close of each accrual period and appropriately adjusted to take into account the
length of the particular accrual period) and (ii) the amount of any qualified
stated interest payments allocable to such accrual period. The "adjusted issue
price" of a Discount Debt Security at the beginning of the first accrual period
is simply the issue price. Thereafter, the "adjusted issue price" of a Discount
Debt Security is the sum of the issue price plus the amount of original issue
discount previously includible in the gross income of the holder reduced by the
amount of any payment previously made on the Discount Debt Security other than a
payment of qualified stated interest. Under these rules, holders generally will
have to include in income increasingly greater amounts of original issue
discount in successive accrual periods.
ACQUISITION PREMIUM. A holder who purchases a Discount Debt Security for
an amount that is greater than its adjusted issue price as of the purchase date
and less than or equal to the sum of all amounts payable on the Discount Debt
Security after the purchase date, other than payments of qualified stated
interest, will be
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considered to have purchased the Discount Debt Security at an "acquisition
premium." Under the acquisition premium rules, the amount of original issue
discount which a holder must include in its gross income with respect to such
Discount Debt Security for any taxable year (or portion thereof in which the
holder holds the Discount Debt Security) will be reduced by an amount which
would be the daily portion for such day multiplied by the acquisition premium
fraction. The numerator of the "acquisition premium fraction" is the excess of
the holder's adjusted basis in the Debt Security immediately after its purchase
over the adjusted issue price of the Debt Security, and the denominator is the
sum of the daily portions for such Debt Security for all days after the date of
purchase and ending on the stated maturity date (i.e., the total original issue
discount remaining on the Debt Security).
Alternatively, rather than applying the acquisition premium fraction to
reduce the daily portion of accrued original issue discount, a holder of a Debt
Security may elect to compute original issue discount by treating the purchase
as a purchase at original issuance and applying the mechanics of the constant
yield method. Prior to making this election, holders of Debt Securities should
consult their own tax advisors concerning the potential Federal income tax
consequences to their particular situations.
DEBT SECURITIES SUBJECT TO CONTINGENCIES. In general, if a Debt Security
provides for an alternative payment schedule or schedules applicable upon the
occurrence of a contingency or contingencies and the timing and amounts of the
payments that comprise each payment schedule are known as of the issue date,
then the yield to maturity of the Debt Security is determined by assuming that
the payments will be made according to the Debt Security's stated payment
schedule. If based on all of the facts and circumstances as of the issue date,
it is more likely than not that the Debt Security's stated payment schedule will
not occur, then the yield to maturity of the Debt Security is computed on the
payment schedule most likely to occur.
Generally, special rules apply for determining the yield to maturity on
Debt Securities which are subject to certain options. If the Company has an
unconditional option or options to redeem a Debt Security or the holder has an
unconditional option or options to cause the Debt Security to be repurchased,
then (i) in the case of an option or options of the Company, the Company will be
deemed to exercise or not exercise an option or combination of options in a
manner that minimizes the yield on the Debt Security, and (ii) in the case of an
option or options of the holder, the holder will be deemed to exercise or not
exercise an option or combination of options in a manner that maximizes the
yield on the Debt Security.
If a contingency (including the exercise of an option) actually occurs, or
does not occur, contrary to the assumptions made pursuant to the rules described
above ("a change in circumstances"), then, solely for purposes of the accrual of
original issue discount, the yield to maturity of the Debt Security is
redetermined by treating the Debt Security as reissued on the date of the change
of circumstances for an amount equal to its adjusted issue price on that date.
ELECTION TO TREAT ALL INTEREST AS ORIGINAL ISSUE DISCOUNT. A holder of a
Debt Security may elect to include in gross income all interest that accrues on
the Debt Security by using the constant yield method described in "Original
Issue Discount -- General" with certain modifications. For the purposes of this
election, interest includes stated interest, acquisition discount, original
issue discount, de minimis original issue discount, market discount, de minimis
market discount, and unstated interest, as adjusted by any amortizable bond
premium or acquisition premium.
In applying the constant yield method to a Debt Security with respect to
which this election has been made, (a) the issue price of the Debt Security will
equal the electing holder's adjusted basis on the Debt Security immediately
after acquisition, (b) the issue date of the Debt Security will be the date of
acquisition by the electing holder, and (c) no payments on the Debt Security
will be treated as payments of qualified stated interest. The election must be
made for the taxable year in which the holder acquires the Debt Security and
will generally apply only to the Debt Security (or Debt Securities) identified
by the holder in a statement attached to the holder's timely filed Federal
income tax return. The election may not be revoked without the consent of the
IRS. If a holder makes the election with respect to a Debt Security with
"amortizable bond premium" (as described in "Amortizable Premium"), then the
electing holder is deemed to have elected to apply amortizable bond premium
against interest with respect to all debt instruments with amortizable bond
premium (other than debt instruments the interest on which is excludible from
gross income) held by the
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electing holder as of the beginning of the taxable year in which the Debt
Security (with respect to which the election is made) is acquired or thereafter
acquired. The deemed election with respect to amortizable bond premium may not
be revoked without the consent of the IRS.
If the election to apply the constant yield method to all interest on a
Debt Security is made with respect to a "Market Discount Debt Security" (as
described in "Market Discount"), the electing holder will be deemed to have made
an election to include market discount in income currently over the life of all
debt instruments acquired during the first taxable year the election applies and
all subsequent tax years. The election to currently include market discount in
income may not be revoked without the consent of the IRS. Prior to making an
election to treat all income of a Debt Security (or other debt instrument) as
original issue discount, holders should consult with their own tax advisors as
to the consequences resulting from such an election with respect to their own
particular situations.
VARIABLE RATE DEBT INSTRUMENTS
Generally, floating rate Debt Securities and indexed Debt Securities
("Variable Debt Securities") are subject to special rules whereby a Variable
Debt Security will qualify as a "variable rate debt instrument" if (a) its issue
price does not exceed the total noncontingent principal payments due under the
Variable Debt Security by more than an amount equal to the lesser of (i) 0.015
multiplied by the product of the total noncontingent principal payments and the
number of complete years to maturity from the issue date or (ii) 15-percent of
the total noncontingent principal payments, (b) it provides for stated interest,
paid or compounded at least annually, at (i) one or more qualified floating
rates, (ii) a single fixed rate and one or more qualified floating rates, (iii)
a single objective rate, or (iv) a single fixed rate and a single objective rate
that is a qualified inverse floating rate, and (c) a qualified floating rate or
objective rate in effect at any time during the term of the Debt Security is set
at a current value of that rate (i.e., the value of the rate on any day that is
no earlier than 3 months prior to the first day on which the value is in effect
and no later than 1 year following that first day).
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Variable Debt Security is denominated. Although a multiple of a qualified
floating rate will generally not itself constitute a qualified floating rate, a
variable rate equal to the product of a qualified floating rate and a fixed
multiple that is greater than zero but not more than 1.35 will constitute a
qualified floating rate. A variable rate equal to the product of a qualified
floating rate and a fixed multiple that is greater than zero but not more than
1.35, increased or decreased by a fixed rate, will also constitute a qualified
floating rate. In addition, two or more qualified floating rates that can
reasonably be expected to have approximately the same values throughout the term
of the Variable Debt Security together will constitute a single qualified
floating rate. Two or more qualified floating rates will be conclusively
presumed to meet the requirements of the previous sentence if the values of all
rates on the issue date are within 25 basis points of each other. A variable
rate is not a qualified floating rate if it is subject to certain restrictions
(including caps, floors, governors, or other similar restrictions) unless,
generally, such restrictions are fixed throughout the term of the Debt Security
or are not reasonably expected to significantly affect the yield on the Debt
Security.
An "objective rate" is a rate other than a qualified floating rate that is
determined using a single fixed formula and which is based upon (i) one or more
qualified floating rates, (ii) one or more rates where each rate would be a
qualified floating rate for a debt instrument denominated in a currency other
than the currency in which the Variable Debt Security is denominated, (iii)
either the yield or changes in the price of one or more items of actively traded
personal property (other than stock or debt of the issuer or a related party),
or (iv) a combination of objective rates. Despite the foregoing, a variable rate
of interest on a Variable Debt Security will not constitute an objective rate if
it is reasonably expected that the average value of such rate during the first
half of the Variable Debt Security's term will be either significantly less than
or significantly greater than the average value of the rate during the final
half of the Variable Debt Security's term. A "qualified inverse floating rate"
is any objective rate where such rate is equal to a fixed rate minus a qualified
floating rate, as long as variations in the rate can reasonably be expected to
inversely reflect contemporaneous
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variations in the cost of newly borrowed funds (disregarding yield restrictions
such as caps, floors or governors).
Generally, if a Variable Debt Security provides for stated interest at a
fixed rate for an initial period of less than one year followed by a variable
rate that is either a qualified floating rate or an objective rate for a
subsequent period, and the value of the variable rate on the Variable Debt
Security's issue date is intended to approximate the fixed rate, then the fixed
rate and the variable rate together will constitute either a single qualified
floating rate or objective rate, as the case may be. A fixed rate and a variable
rate will be conclusively presumed to meet the previous requirements if the
value of the variable rate on the issue date of the Variable Debt Security does
not differ from the value of the fixed rate by more than 25 basis points.
If a Variable Debt Security provides for stated interest at a single
qualified floating rate or objective rate that is unconditionally payable in
cash or in property (other than debt instruments of the issuer) at least
annually, then (a) all stated interest with respect to the Debt Security is
qualified stated interest, and (b) the amount of original issue discount, if
any, is determined under the general original issue discount rules (as described
in "Original Issue Discount -- General") by assuming that the variable rate is a
fixed rate equal to (i) in the case of a qualified floating rate or qualified
inverse floating rate, the value, as of the issue date, of the qualified
floating rate or qualified inverse floating rate, or (ii) in the case of an
objective rate (other than a qualified inverse floating rate), a fixed rate that
reflects the yield that is reasonably expected for the Debt Security.
If a Variable Debt Security does not provide for stated interest at a
single qualified floating rate or objective rate, or at a single fixed rate
(other than at a single fixed rate for an initial period), the amount of
qualified stated interest and original issue discount on the Debt Security are
generally determined by (i) determining a fixed rate substitute for each
variable rate provided under the Variable Debt Security (generally, the value of
each variable rate as of the issue date or, in the case of an objective rate
that is not a qualified inverse floating rate, a rate that reflects the yield
that is reasonably expected for the Debt Security), (ii) constructing the
equivalent fixed rate debt instrument (using the fixed rate substitute described
above), (iii) determining the amount of qualified stated interest and original
issue discount with respect to the equivalent fixed rate debt instrument (by
applying the general original issue discount rules as described in "Original
Issue Discount -- General"), and (iv) making the appropriate adjustments for
actual variable rates during the applicable accrual period.
If a Variable Debt Security provides for stated interest either at one or
more qualified floating rates or at a qualified inverse floating rate and in
addition provides for stated interest at a single fixed rate (other than a
single fixed rate for an initial period), the amount of interest and original
issue discount are determined as in the immediately preceding paragraph with the
modification that the Variable Debt Security is treated, for purposes of the
first three steps of the determination, as if it provided for a qualified
floating rate (or qualified inverse floating rate, if the Debt Security provides
for a qualified inverse floating rate) rather than the fixed rate. The qualified
floating rate (or qualified inverse floating rate) replacing the fixed rate must
be such that the fair market value of the Debt Security as of the issue date
would be approximately the same as the fair market value of an otherwise
identical debt instrument that provides for a qualified floating rate (or
qualified inverse floating rate) rather than a fixed rate.
CONTINGENT DEBT INSTRUMENTS
On December 16, 1994 the Treasury Department proposed new Regulations
concerning the proper tax treatment of contingent payment debt instruments. The
newly proposed Regulations supersede the prior Proposed Original Issue Discount
Regulations of 1986 and the Treasury Regulations of 1991 relating to the
treatment of contingent payment debt instruments. The proposed effective date of
the newly proposed Regulations is 60 days after the date that the Regulations
are finalized. Until such time as the proposed Regulations become effective, the
treatment of contingent payment debt obligations appears to be governed by
general Federal income tax principles. Holders of Debt Securities should consult
their own tax advisors concerning the appropriate treatment of Debt Securities
classified as contingent payment debt instruments.
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SHORT TERM DEBT SECURITIES
Generally, a cash basis holder of "Short-Term Debt Securities" (i.e., Debt
Securities having a fixed maturity date not more than 1 year from the date of
issue) is not required to accrue original issue discount for Federal income tax
purposes unless it elects to do so. An election by a cash basis holder applies
to all short-term obligations acquired on or after the beginning of the first
taxable year to which the election applies, and for all subsequent taxable years
unless the consent is secured from the IRS to revoke the election. Accrual basis
holders and certain other holders, including banks, regulated investment
companies, dealers in securities, common trust funds, holders who hold
Short-Term Debt Securities as part of certain identified hedging transactions,
certain pass-through entities and cash basis holders who so elect, are required
to accrue original issue discount on Short-Term Debt Securities on either a
straight-line basis or, at the election of the holder, under the constant yield
method (based on daily compounding). In the case of a holder not required and
not electing to include original issue discount in income currently, any gain
realized on the sale or retirement of the Short-Term Debt Security will be
ordinary income to the extent of the original issue discount accrued on a
straight-line basis (unless an election is made to accrue the original issue
discount under the constant yield method) through the date of sale or
retirement. Holders who are not required and do not elect to accrue original
issue discount on Short-Term Debt Securities will be required to defer
deductions for interest on borrowings allocable to Short-Term Debt Securities in
an amount not exceeding the deferred income until the deferred income is
realized.
MARKET DISCOUNT
A Debt Security, other than a Short-Term Debt Security, will be treated as
purchased at a market discount (a "Market Discount Debt Security") if the amount
for which a holder purchased the Debt Security is less than (i) the Debt
Security's issue price (as determined above under "Original Issue Discount --
General"), (ii) the Debt Security's stated redemption price at maturity (in the
case of a subsequent purchaser), or (iii) the Debt Security's "revised issue
price" (in the case of a Discount Debt Security), and such excess is greater
than or equal to 1/4 of 1-percent of such Debt Security's stated redemption
price at maturity multiplied by the number of complete years to the Debt
Security's maturity. If such excess is not sufficient to cause the Debt Security
to be a Market Discount Debt Security, then such excess constitutes de minimis
market discount. The Code provides that, for these purposes, the "revised issue
price" of a Debt Security generally equals its issue price, increased by the
amount of original issue discount that has accrued over the term of the Debt
Security.
Any gain recognized on the retirement or disposition of a Market Discount
Debt Security will be treated as ordinary income to the extent that such gain
does not exceed the accrued market discount on such Debt Security.
Alternatively, a holder of a Market Discount Debt Security may elect to include
market discount in income over the life of the Debt Security. Such election
shall apply to all debt instruments with market discount acquired by the
electing holder during the first taxable year to which the election applies and
all subsequent tax years. This election may not be revoked without the consent
of the IRS.
Market discount on a Market Discount Debt Security will accrue on a
straight-line basis unless the holder elects to accrue such market discount
using a constant yield method. Such an election shall apply only to the Debt
Security with respect to which it is made and may not be revoked. A holder of a
Market Discount Debt Security that does not elect to include market discount in
income currently generally will be required to defer deductions for interest in
borrowings allocable to such Debt Security in an amount not exceeding the
accrued market discount on such Debt Security until the maturity or disposition
of such Debt Security.
AMORTIZABLE PREMIUM
Generally, if a holder purchases a Debt Security for an amount that is
greater than the sum of all amounts payable on the Debt Security after the
purchase date other than payments of qualified stated interest, such holder will
be considered to have purchased the Debt Security with "amortizable bond
premium" equal in amount to such excess. A holder of such a Debt Security may
elect to amortize such premium using a constant yield method over the remaining
term of the Debt Security and may offset interest otherwise required
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to be included in respect of the Debt Security during any taxable year by the
amortized amount of such excess for the taxable year. However, if the Debt
Security may be optionally redeemed after the holder acquires it at a price in
excess of its stated redemption price at maturity, special rules would apply
which could result in a deferral of the amortization of some bond premium until
later in the term of the Debt Security. Any election to amortize bond premium
with respect to any Debt Security (or general debt obligation) applies to all
taxable debt obligations held by the holder at the beginning of the first
taxable year to which the election applies and to all debt obligations
thereafter acquired in all subsequent tax years. The election may not be revoked
without the consent of the IRS.
DISPOSITION OF A DEBT SECURITY
Except as discussed above, upon the sale, exchange or retirement of a Debt
Security, a holder generally will recognize taxable gain or loss equal to the
difference between the amount realized on the sale, exchange or retirement
(other than amounts representing accrued and unpaid interest) and such holder's
adjusted tax basis in the Debt Security. A holder's adjusted tax basis in a Debt
Security generally will equal such holder's initial investment in the Debt
Security increased by any original issue discount included in income and any
accrued market discount included in income, decreased by the amount of any
payments that are not deemed qualified stated interest payments and amortizable
bond premium applied to reduce interest with respect to such Debt Security. Such
gain or loss generally will be long-term capital gain or loss if the Debt
Security were held for more than one year.
BACKUP WITHHOLDING
Backup withholding of Federal income tax at a rate of 31% may apply to
payments made in respect of the Debt Securities to registered owners who are not
"exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's tax identification number ("TIN")) in the
required manner. Generally, individuals are not exempt recipients, whereas
corporations and certain other entities generally are exempt recipients.
Payments made in respect of the Debt Securities to a holder must be reported to
the IRS, unless the holder is an exempt recipient or establishes an exemption.
In addition, upon the sale of a Debt Security to (or through) a broker, the
broker must withhold 31% of the entire purchase price, unless either (i) the
broker determines that the seller is a corporation or other exempt recipient or
(ii) the seller provides, in the required manner, certain identifying
information. Such a sale must also be reported by the broker to the IRS, unless
the broker determines that the seller is an exempt recipient.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's Federal income tax provided the required information is
furnished to the IRS.
PLAN OF DISTRIBUTION
The Debt Securities may be sold (i) to or through underwriting syndicates
represented by managing underwriters, or by underwriters without a syndicate,
such underwriters to be designated at the time of sale; (ii) through agents
designated from time to time; or (iii) directly by the Company. The applicable
Prospectus Supplement will set forth the terms of the offering of the Debt
Securities, including the name or names of any underwriters or agents, the
purchase price of such Debt Securities and the proceeds to the Company from such
sales, any underwriting discounts, agency commissions and other items
constituting underwriters' or agents' compensation, any initial public offering
price, any discounts or concessions to be allowed or reallowed or paid to
dealers and the securities exchanges, if any, on which such Debt Securities may
be listed.
If underwriters are used in the sale, the Debt Securities will be acquired
by the underwriters for their own accounts and may be resold from time to time
in one or more transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the time of sale. Such
Debt Securities may be offered to the public either through underwriting
syndicates represented by managing underwriters or by
18
<PAGE> 33
underwriters without a syndicate, all of which underwriters in either case will
be designated in the Prospectus Supplement corresponding to such offering.
Unless otherwise set forth in the applicable Prospectus Supplement, under the
terms of the underwriting agreement, the obligations of the underwriters to
purchase such Debt Securities will be subject to certain conditions precedent,
and the underwriters will be obligated to purchase all of such Debt Securities
if any are purchased. Any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may be changed from time to
time.
The Debt Securities may be sold directly by the Company or through agents
designated by the Company from time to time. Any agent involved in the offer or
sale of the Debt Securities with respect to which this Prospectus is delivered
will be named, and any commission payable by the Company to such agent will be
set forth, in the corresponding Prospectus Supplement. Unless otherwise
indicated in the corresponding Prospectus Supplement, any such agent will be
acting on a reasonable best-efforts basis for the period of its appointment.
If so indicated in the applicable Prospectus Supplement, the Company may
authorize underwriters or agents to solicit offers by certain institutions to
purchase Debt Securities from the Company at the public offering price set forth
in such Prospectus Supplement pursuant to delayed delivery contracts ("Delayed
Delivery Contracts") providing for payment and delivery on the future date or
dates stated in the Prospectus Supplement. The amount of Debt Securities to be
sold under each Delayed Delivery Contract and the aggregate amount of Debt
Securities to be sold under all Delayed Delivery Contracts will be set forth in
the Prospectus Supplement. Institutions with which Delayed Delivery Contracts,
when authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies and educational and charitable
institutions, but shall in all cases be subject to the approval of the Company
in its sole discretion. The obligations of the purchaser under any Delayed
Delivery Contract to pay for and take delivery of Debt Securities will not be
subject to any conditions except that (i) the purchase of Debt Securities by
such institution shall not at the time of delivery be prohibited under the laws
of any jurisdiction to which such institution is subject; and (ii) any related
sale of Debt Securities to underwriters shall have occurred. A commission set
forth in the applicable Prospectus Supplement will be paid to underwriters or
agents soliciting purchases of Debt Securities pursuant to Delayed Delivery
Contracts accepted by the Company. The underwriters or agents will not have any
responsibility in respect of the validity or performance of Delayed Delivery
Contracts.
All Debt Securities will be new issues of securities with no established
trading market. Any underwriters to whom Debt Securities are sold by the Company
for public offering and sale may make a market in such Debt Securities, but such
underwriters will not be obligated to do so and may discontinue any market
making at any time without notice. No assurance can be given as to the liquidity
of the trading market for any Debt Securities.
Underwriters and agents may be entitled under agreements entered into with
the Company to indemnification by the Company against certain civil liabilities,
including liabilities under the 1933 Act, or to contribution with respect to
payments which the underwriters or agents may be required to make in respect
thereof and to reimbursement by the Company for certain expenses. Underwriters
and agents also may be customers of, engage in transactions with, or perform
other services for the Company in the ordinary course of business.
LEGAL OPINIONS
The validity of the Debt Securities will be passed upon for the Company by
Amos & Jeffries, L.L.P., P.O. Box 787, Greensboro, North Carolina 27402. Jerry
W. Amos, a partner in that law firm and General Counsel to and a Director of the
Company, beneficially owned 43,707 shares of the Company's Common Stock as of
May 1, 1995.
Certain legal matters in connection with the issuance of the Debt
Securities will be passed upon for any underwriters or agents by Mudge Rose
Guthrie Alexander & Ferdon, LLP, 180 Maiden Lane, New York, New York 10038.
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<PAGE> 34
EXPERTS
The consolidated financial statements and the related financial statement
schedule incorporated in this Prospectus by reference from the Company's Annual
Report on Form 10-K for the year ended October 31, 1994, have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports which
are incorporated herein by reference, and have been so incorporated in reliance
upon the reports of such firm, given upon their authority as experts in auditing
and accounting.
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<PAGE> 35
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NO DEALER, AGENT, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT, ANY PRICING
SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE AGENTS. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT, ANY PRICING
SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF. THIS PROSPECTUS
SUPPLEMENT, ANY PRICING SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER
OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Description of Notes................ S-2
Plan of Distribution of Notes....... S-13
Validity of Notes................... S-14
PROSPECTUS
Available Information............... 2
Incorporation of Certain Documents
by Reference...................... 2
The Company......................... 3
Use of Proceeds..................... 3
Ratios of Earnings to Fixed
Charges........................... 4
Description of Debt Securities...... 4
Certain Federal Tax
Considerations.................... 12
Plan of Distribution................ 18
Legal Opinions...................... 19
Experts............................. 20
</TABLE>
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$150,000,000
PIEDMONT NATURAL GAS
COMPANY, INC.
MEDIUM-TERM NOTES,
SERIES B
------------------------------------------------
PROSPECTUS SUPPLEMENT
------------------------------------------------
BEAR, STEARNS & CO. INC.
CITICORP SECURITIES, INC.
SMITH BARNEY INC.
DATED SEPTEMBER 20, 1995
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