1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 1997
REGISTRATION NO. 333-
POST-EFFECTIVE AMENDMENT NO. 1 TO REGISTRATION NO. 33-59369
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-3
REGISTRATION STATEMENT
AND
POST-EFFECTIVE AMENDMENT NO. 1
UNDER
THE SECURITIES ACT OF 1933
---------------------
PIEDMONT NATURAL GAS COMPANY, INC.
(Exact name of Registrant as specified in its charter)
---------------------
NORTH CAROLINA 56-0556998
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.)
organization)
1915 REXFORD ROAD
POST OFFICE BOX 33068
CHARLOTTE, NC 28233
(704) 364-3120
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
JOHN H. MAXHEIM
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PIEDMONT NATURAL GAS COMPANY, INC.
1915 REXFORD ROAD, CHARLOTTE, NC 28211
(704) 364-3120
(Name, address, including zip code, and telephone numbers, including area code,
of agent for service)
---------------------
WITH COPIES TO:
JERRY W. AMOS, ESQ. ARNOLD H. TRACY, ESQ.
AMOS & JEFFRIES, L.L.P. COUDERT BROTHERS
SUITE 1230 1114 AVENUE OF THE AMERICAS
230 NORTH ELM STREET NEW YORK, NEW YORK 10036-7703
GREENSBORO, NORTH CAROLINA 27401 (212) 626-4400
(910) 273-5569
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement as determined by
market conditions and other factors.
If the only securities being registered on this Form S-3 are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form S-3 are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
------------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
------------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
---------------------
CALCULATION OF REGISTRATION FEE
=============================================================================================================================
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT(2)(3) OFFERING PRICE(2)(3) FEE
- -----------------------------------------------------------------------------------------------------------------------------
Debt Securities............................. $95,000,000 100% $95,000,000 $28,787.88
=============================================================================================================================
(1) Plus such additional principal amount as may be necessary such that, if Debt
Securities are issued with an original issue discount, the aggregate initial
offering price of all Debt Securities will equal $95,000,000.
(2) Estimated solely for the purpose of calculating the registration fee.
(3) Excluding accrued interest and accrued amortization of discount, if any, to
the date of delivery.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT AND POST-EFFECTIVE
AMENDMENT NO. 1 ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY THEIR
EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT AND POST-EFFECTIVE
AMENDMENT NO. 1 SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION
8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION
STATEMENT AND POST-EFFECTIVE AMENDMENT NO. 1 SHALL BECOME EFFECTIVE ON SUCH DATE
AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
* Pursuant to Rule 429 under the Securities Act of 1933, the Prospectus included
in this registration statement is a combined prospectus and also relates to
Registration Statement No. 33-59369 previously filed by the registrant. This
registration statement, which is a new registration statement, also
constitutes Post-Effective Amendment No. 1 to Registration Statement No.
33-59369, and such Post-Effective Amendment No. 1 shall hereafter become
effective concurrently with the effectiveness of this registration statement.
This registration statement and the registration statement amended hereby are
collectively referred to herein as the "Registration Statement."
2
Information contained herein is subject to completion or amendment.
Registration Statements relating to these securities have been filed with
the Securities and Exchange Commission. These securities
may not be sold nor may offers to buy be accepted prior to the time such
registration statements become effective. This prospectus shall not
constitute an offer to sell or the solicitation of an offer to buy nor
shall there be any sale of these securities in any State in which such
offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any State.
SUBJECT TO COMPLETION DATED APRIL 30, 1997
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 April , 1997.
3
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: Citicorp 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. Such material may also be accessed electronically by
means of the Commission's home page on the Internet at http://www.sec.gov. 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, 1996;
and
(b) Quarterly Report on Form 10-Q for the quarter ended January 31,
1997.
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.
2
4
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 615,000
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 567,000 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 and in the sale of propane and propane appliances to
over 48,500 customers in the Company's three-state service area. The Company is
also engaged in Tennessee in the retailing of residential and commercial gas
appliances.
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 Regulatory Authority
("TRA") 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.
3
5
RATIO OF EARNINGS TO FIXED CHARGES
The following are the consolidated ratios of earnings to fixed charges for
the twelve-month period ended January 31, 1997, and each of the fiscal years of
the Company in the five-year period ended October 31, 1996:
TWELVE MONTHS
ENDED YEARS ENDED OCTOBER 31,
JANUARY 31, ------------------------------------
1997 1996 1995 1994 1993 1992
------------- ---- ---- ---- ---- ----
Ratio of Earnings to Fixed
Charges (unaudited)(1)......... 3.27 3.15 2.84 2.91 3.28 3.16
- ---------------
(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 March 31, 1997, the Company had issued and outstanding senior notes with
an aggregate principal amount of $176,000,000 and medium-term notes with an
aggregate principal amount of $225,000,000.
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 periods within which
the price or prices at which
4
6
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.
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
5
7
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 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
6
8
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.
7
9
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; provided that,
except in the case of default in the payment of principal, premium (if any) or
interest on any of the
8
10
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 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.
9
11
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.
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
10
12
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 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,
11
13
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.
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% 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,
12
14
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 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
13
15
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 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.
14
16
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% 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 three months prior to the first day on which the value is in
effect and no later than one 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 0.65 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 0.65 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 is based upon objective financial or
economic information. 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 variations in the qualified floating rate
(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.
15
17
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
Final regulations concerning the proper tax treatment of certain contingent
payment debt instruments (other than Variable Debt Securities and Debt
Securities subject to alternate payment schedule contingencies discussed above)
were issued in June 1996 and are applicable to contingent payment debt
instruments issued after August 12, 1996. Under the final regulations, original
issue discount on a contingent payment debt instrument is determined by
reference to a "comparable yield" which, in general, is the yield for fixed rate
debt instruments of the same issuer having similar terms and conditions,
including "the level of subordination, term, timing of payments, and general
market conditions." Once the "comparable yield" has been determined, a projected
payment schedule must be prepared which will generate the comparable yield and
original issue discount calculations are based on the projected payment
schedule. If actual payments are more or less than the projected payments,
corresponding upward or downward adjustments to income are made in the year of
actual payment. In the event the Company issues Debt Securities that are subject
to these regulations, it will prepare the necessary projected payment schedule
and furnish it to holders of such Debt Securities who will normally be bound
thereby. Holders of Debt Securities that are subject to the contingent payment
debt regulations should consult their own tax advisors concerning the
application of the regulations and the appropriate tax treatment of Debt
Securities classified as contingent payment debt instruments.
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 one 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
16
18
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% 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 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
17
19
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) 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 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
18
20
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 56,510 shares of the Company's Common Stock as of
March 31, 1997.
Certain legal matters in connection with the issuance of the Debt
Securities will be passed upon for any underwriters or agents by Coudert
Brothers, 1114 Avenue of the Americas, New York, New York 10036-7703.
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, 1996, have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm, given upon their authority as experts in auditing and
accounting.
19
21
PART II. INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses to be paid by the
Registrant in connection with the sale and distribution of the Debt Securities
being registered hereby, other than underwriting or broker dealer fees,
discounts and commissions. All amounts are estimated except for the Securities
Act registration fee.
Securities Act registration fee............................. $ 28,787.88
Printing and engraving...................................... $ 35,000
Legal fees and expenses..................................... $ 65,000
Accounting fees and expenses................................ $ 25,000
Rating agency fees.......................................... $ 60,000
Blue Sky fees and expenses.................................. $ 2,500
Trustee's Fees and Expenses................................. $ 5,000
Miscellaneous expenses...................................... $ 5,000
-----------
Total.................................................. $226,287.88
===========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The following provisions of the North Carolina Business Corporation Act
govern indemnification of officers and directors of the Company:
SECTION 55-8-50. POLICY STATEMENT AND DEFINITIONS. (a) It is the
public policy of this State to enable corporations organized under this
Chapter to attract and maintain responsible, qualified directors, officers,
employees and agents, and, to that end, to permit corporations organized
under this Chapter to allocate the risk of personal liability of directors,
officers, employees and agents through indemnification and insurance as
authorized in this Part.
(b) Definitions in this Part:
(1) "Corporation" includes any domestic or foreign corporation
absorbed in a merger which, if its separate existence had continued,
would have had the obligation or power to indemnify its directors,
officers, employees, or agents, so that a person who would have been
entitled to receive or request indemnification from such corporation if
its separate existence had continued shall stand in the same position
under this Part with respect to the surviving corporation.
(2) "Director" means an individual who is or was a director of a
corporation or an individual who, while a director of a corporation, is
or was serving at the corporation's request as a director, officer,
partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan,
or other enterprise. A director is considered to be serving an employee
benefit plan at the corporation's request if his duties to the
corporation also impose duties on, or otherwise involve services by, him
to the plan or to participants in or beneficiaries of the plan.
"Director" includes, unless the context requires otherwise, the estate
or personal representative of a director.
(3) "Expenses" means expenses of every kind incurred in defending a
proceeding, including counsel fees.
(4) "Liability" means the obligation to pay a judgment, settlement,
penalty, fine (including an excise tax assessed with respect to an
employee benefit plan), or reasonable expenses incurred with respect to
a proceeding.
(4a) "Officer," "employee," or "agent" includes, unless the context
requires otherwise, the estate or personal representative of a person
who acted in that capacity.
II-1
22
(5) "Official capacity" means (i) when used with respect to a
director, the office of director in a corporation; and (ii) when used
with respect to an individual other than a director, as contemplated in
G.S. 55-8-56, the office in a corporation held by the officer or the
employment or agency relationship undertaken by the employee or agent on
behalf of the corporation. "Official capacity" does not include service
for any other foreign or domestic corporation or any partnership, joint
venture, trust, employee benefit plan, or other enterprise.
(6) "Party" includes an individual who was, is, or is threatened to
be made a named defendant or respondent in a proceeding.
(7) "Proceeding" means any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative and whether formal or informal.
SECTION 55-8-51. AUTHORITY TO INDEMNIFY. (a) Except as provided in
subsection (d), a corporation may indemnify an individual made a party to a
proceeding because he is or was a director against liability incurred in
the proceeding if:
(1) He conducted himself in good faith; and
(2) He reasonably believed (i) in the case of conduct in his
official capacity with the corporation, that his conduct was in its best
interests; and (ii) in all other cases, that his conduct was at least
not opposed to its best interests; and
(3) In the case of any criminal proceeding, he had no reasonable
cause to believe his conduct was unlawful.
(b) A director's conduct with respect to an employee benefit plan for
a purpose he reasonably believed to be in the interests of the participants
in and beneficiaries of the plan is conduct that satisfies the requirement
of subsection (a)(2)(ii).
(c) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of no contest or its equivalent is not, of
itself, determinative that the director did not meet the standard of
conduct described in this section.
(d) A corporation may not indemnify a director under this section:
(1) In connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the
corporation; or
(2) In connection with any other proceeding charging improper
personal benefit to him, whether or not involving action in his official
capacity, in which he was adjudged liable on the basis that personal
benefit was improperly received by him.
(e) Indemnification permitted under this section in connection with a
proceeding by or in the right of the corporation that is concluded without
a final adjudication on the issue of liability is limited to reasonable
expenses incurred in connection with the proceeding.
(f) The authorization, approval or favorable recommendation by the
board of directors of a corporation of indemnification, as permitted by
this section, shall not be deemed an act or corporate transaction in which
a director has a conflict of interest, and no such indemnification shall be
void or voidable on such ground.
SECTION 55-8-52. MANDATORY INDEMNIFICATION. Unless limited by its
articles of incorporation, a corporation shall indemnify a director who was
wholly successful, on the merits or otherwise, in the defense of any
proceeding to which he was a party because he is or was a director of the
corporation against reasonable expenses incurred by him in connection with
the proceeding.
SECTION 55-8-53. ADVANCE FOR EXPENSES. Expenses incurred by a
director in defending a proceeding may be paid by the corporation in
advance of the final disposition of such proceeding as authorized by the
board of directors in the specific case or as authorized or required under
any provision in the articles of incorporation or bylaws or by any
applicable resolution or contract upon receipt of an undertaking by or on
II-2
23
behalf of the director to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the corporation against
such expenses.
SECTION 55-8-54. COURT-ORDERED INDEMNIFICATION. Unless a
corporation's articles of incorporation provide otherwise, a director of
the corporation who is a party to a proceeding may apply for
indemnification to the court conducting the proceeding or to another court
of competent jurisdiction. On receipt of an application, the court after
giving any notice the court considers necessary may order indemnification
if it determines:
(1) The director is entitled to mandatory indemnification under
G.S. 55-8-52, in which case the court shall also order the corporation
to pay the director's reasonable expenses incurred to obtain court-
ordered indemnification; or
(2) The director is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances, whether or
not he met the standard of conduct set forth in G.S. 55-8-51 or was
adjudged liable as described in G.S. 55-8-51(d), but if he was adjudged
so liable his indemnification is limited to reasonable expenses
incurred.
SECTION 55-8-55. DETERMINATION AND AUTHORIZATION OF
INDEMNIFICATION. (a) A corporation may not indemnify a director under G.S.
55-8-51 unless authorized in the specific case after a determination has
been made that indemnification of the director is permissible in the
circumstances because he has met the standard of conduct set forth in G.S.
55-8-51.
(b) The determination shall be made:
(1) By the board of directors by majority vote of a quorum
consisting of directors not at the time parties to the proceeding;
(2) If a quorum cannot be obtained under subdivision (1), by
majority vote of a committee duly designated by the board of directors
(in which designation directors who are parties may participate),
consisting solely of two or more directors not at the time parties to
the proceeding;
(3) By special legal counsel (i) selected by the board of directors
or its committee in the manner prescribed in subdivision (1) or (2); or
(ii) if a quorum of the board of directors cannot be obtained under
subdivision (1) and a committee cannot be designated under subdivision
(2), selected by majority vote of the full board of directors (in which
selection directors who are parties may participate); or
(4) By the shareholders, but shares owned by or voted under the
control of directors who are at the time parties to the proceeding may
not be voted on the determination.
(c) Authorization of indemnification and evaluation as to
reasonableness of expenses shall be made in the same manner as the
determination that indemnification is permissible, except that if the
determination is made by special legal counsel, authorization of
indemnification and evaluation as to reasonableness of expenses shall be
made by those entitled under subsection (b)(3) to select counsel.
SECTION 55-8-56. INDEMNIFICATION OF OFFICERS, EMPLOYEES, AND
AGENTS. Unless a corporation's articles of incorporation provide
otherwise:
(1) An officer of the corporation is entitled to mandatory
indemnification under G.S. 55-8-52, and is entitled to apply for the
court-ordered indemnification under G.S. 55-8-54, in each case to the
same extent as a director;
(2) The corporation may indemnify and advance expenses under this
Part to an officer, employee, or agent of the corporation to the same
extent as to a director; and
(3) A corporation may also indemnify and advance expenses to an
officer, employee, or agent who is not a director to the extent,
consistent with public policy, that may be provided by its articles of
incorporation, bylaws, general or specific action of its board of
directors, or contract.
II-3
24
SECTION 55-8-57. ADDITIONAL INDEMNIFICATION AND INSURANCE. (a) In
addition to and separate and apart from the indemnification provided for in
G.S. 55-8-51, 55-8-52, 55-8-54, 55-8-55 and 55-8-56, a corporation may in
its articles of incorporation or bylaws or by contract or resolution
indemnify or agree to indemnify any one or more of its directors, officers,
employees, or agents against liability and expenses in any proceeding
(including without limitation a proceeding brought by or on behalf of the
corporation itself) arising out of their status as such or their activities
in any of the foregoing capacities; provided, however, that a corporation
may not indemnify or agree to indemnify a person against liability or
expenses he may incur on account of his activities which were at the time
taken known or believed by him to be clearly in conflict with the best
interests of the corporation. A corporation may likewise and to the same
extent indemnify or agree to indemnify any person who, at the request of
the corporation, is or was serving as a director, officer, partner,
trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise or as a trustee or
administrator under an employee benefit plan. Any provision in any articles
of incorporation, bylaw, contract, or resolution permitted under this
section may include provisions for recovery from the corporation of
reasonable costs, expenses, and attorneys' fees in connection with the
enforcement of rights to indemnification granted therein and may further
include provisions establishing reasonable procedures for determining and
enforcing the rights granted therein.
(b) The authorization, adoption, approval, or favorable recommendation
by the board of directors of a public corporation of any provision in any
articles of incorporation, bylaw, contract or resolution, as permitted in
this section, shall not be deemed an act of corporate transaction in which
a director has a conflict of interest, and no such articles of
incorporation or bylaw provision or contract or resolution shall be void or
voidable on such grounds. The authorization, adoption, approval, or
favorable recommendation by the board of directors of a nonpublic
corporation of any provision in any articles of incorporation, bylaw,
contract or resolution, as permitted in this section, which occurred prior
to July 1, 1990, shall not be deemed an act or corporate transaction in
which a director has a conflict of interest, and no such articles of
incorporation, bylaws provision, contract or resolution shall be void or
voidable on such grounds. Except as permitted in G.S. 55-8-31, no such
bylaw, contract, or resolution not adopted, authorized, approved or
ratified by shareholders shall be effective as to claims made or
liabilities asserted against any director prior to its adoption,
authorization, or approval by the board of directors.
(c) A corporation may purchase and maintain insurance on behalf of an
individual who is or was a director, officer, employee, or agent of the
corporation, or who, while a director, officer, employee, or agent of the
corporation, is or was serving at the request of the corporation as a
director, officer, partner, trustee, employee, or agent of another foreign
or domestic corporation, partnership, joint venture, trust, employee
benefit plan, or other enterprise, against liability asserted against or
incurred by him in that capacity or arising from his status as a director,
officer, employee, or agent, whether or not the corporation would have
power to indemnify him against the same liability under any provision of
this Chapter.
SECTION 55-8-58. APPLICATION OF PART. (a) If articles of
incorporation limit indemnification or advance for expenses,
indemnification and advance for expenses are valid only to the extent
consistent with the articles.
(b) This Part does not limit a corporation's power to pay or reimburse
expenses incurred by a director in connection with his appearance as a
witness in a proceeding at a time when he has not been made a named
defendant or respondent to the proceeding.
(c) This Part shall not affect rights or liabilities arising out of
acts or omissions occurring before July 1, 1990.
The Company's By-Laws provide that the Company shall indemnify and hold
harmless its directors, and officers of the Company who are also directors or
who are designated by the Board of Directors from time to time as indemnified
officers ("indemnified officers") against any obligation to pay any judgment,
settlement, penalty, fine (including any excise tax assessed with respect to an
employee benefit plan) and reasonable expenses, including but not limited to
attorneys' fees of opposing parties ("Liabilities") and for any expenses
incurred with respect to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, whether
formal or informal, and any appeal therein (and any inquiry or investigation
that could
II-4
25
lead to such a proceeding) (a "Proceeding"), including any Proceeding brought by
or on behalf of the Company itself, arising out of their status as directors or
officers of the Company. The Company shall also indemnify its directors and
indemnified officers for their service at the Company's request as a director,
officer, partner, trustee, employee or agent or another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise.
The Company shall not, however, indemnify a director or indemnified officer
against Liabilities or expenses incurred on account of activities of such person
that at the time taken were known or believed by him or her, or a reasonable
person would have or should have known, to be clearly in conflict with the best
interests of the Company, The By-Laws further provide that the Company shall
indemnify each director and indemnified officer for his or her reasonable costs,
expenses and attorneys' fees incurred in connection with the enforcement of the
rights to indemnification granted therein, if it is determined that such
director or indemnified officer is entitled to indemnification thereunder.
The Company's Articles of Incorporation, as amended, contain the following
provisions:
ARTICLE 8: A director of the Corporation shall not be personally
liable to the Corporation or any of its shareholders for monetary damages
for any breach of duty as a director, except for liability with respect to
(i) acts or omissions not made in good faith that the director at the time
of such breach knew or believed were in conflict with the best interests of
the Corporation, (ii) any liability under N.C.G.S. sec. 55-8-33 (liability
for unlawful distributions), (iii) any transaction from which such director
derived an improper personal benefit, or (iv) acts or omissions occurring
prior to the date on which this Article 8 became effective. As used herein,
the term, "improper personal benefit" does not include a director's
compensation or other incidental benefit for or on account of service as a
director, officer, employee, independent contractor, attorney or consultant
of the Corporation. If the North Carolina General Statutes are amended
after approval by the Corporation's shareholders of this Article 8 to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the North
Carolina General Statutes, as so amended. No amendment or repeal of the
provisions of this Article 8 shall apply to or have an effect on the
liability or alleged liability of any director of the Corporation for or
with respect to any act or failure to act on the part of such director
occurring prior to such amendment or repeal. The provisions of this Article
8 shall not be deemed to limit or preclude indemnification of a director by
the Corporation for any liability which has not been eliminated by the
provisions of this Article 8.
The Company has obtained and maintains a policy for directors' and
officers' liability insurance. The policy is designed to protect the Company in
the event it is required to pay any amounts to its directors and officers as
indemnification against loss arising from certain civil claims, including
certain claims under the 1933 Act, which might be made against its directors and
officers by reason of any alleged "breach of duty," neglect, error,
misstatement, misleading statement, omission or other act done or wrongfully
attempted, while acting in their respective capacities as directors or officers
of the Company.
Reference is made to the form of Underwriting Agreement and Agency
Agreement filed as Exhibits 1.1 and 1.2 hereto, respectively, which contain
provisions for indemnification of the Company, its directors, officers, and any
controlling persons by underwriters against certain liabilities for information
furnished by such underwriters expressly for use in this Registration Statement.
II-5
26
ITEM 16. LIST OF EXHIBITS.
1.1 Form of Underwriting Agreement
1.2 Form of Agency Agreement
4.1 Indenture dated as of April 1, 1993, between Piedmont
Natural Gas Company, Inc., and Citibank, N.A., as Trustee
(incorporated by reference to Exhibit 4.1 of Form S-3
Registration Statement No. 33-59369 filed by the Registrant
on August 9, 1995)
4.2 First Supplemental Indenture dated as of February 25, 1994,
between PNG Acquisition Company, Piedmont Natural Gas
Company, Inc., and Citibank, N.A., as Trustee (incorporated
by reference to Exhibit 4.2 of Form S-3 Registration
Statement No. 33-59369 filed by the Registrant on August 9,
1995)
4.3 Form of Debt Security*
4.4 Form of Master Global Note*
5.1 Opinion of Amos & Jeffries, L.L.P., regarding legality of
securities being registered
12.1 Computation of Ratio of Earnings to Fixed Charges
(incorporated by reference to Exhibit 12 of Form 10-Q for
the quarterly period ended January 31, 1997)
23.1 Consent of Amos & Jeffries, L.L.P. (included in Exhibit 5.1)
23.2 Independent Auditors' Consent
24.1 Powers of Attorney
25.1 Statement of Eligibility of Trustee on Form T-1
- ---------------
* The Company will file any forms of Debt Securities not previously so filed in
a current report on Form 8-K.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
A. Post-Effective Amendments
(1) To file, during any period in which offers or sales are being made of
the securities registered hereby, a post-effective amendment to this
Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the Registration Statement;
provided, however, that the undertakings set forth in paragraphs (1)(i) and
(1)(ii) above do not apply if the registration statement is on Form S-3 or
Form S-8, and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with
or furnished to the Commission by the Registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in this Registration Statement.
(2) That for the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment of
any of the securities being registered which remain unsold at the termination of
the offering.
II-6
27
B. Filings Incorporating Subsequent Documents by Reference
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. Indemnification
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15 above or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-7
28
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement and Post-Effective Amendment No. 1 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Charlotte, State of North
Carolina, on the 30th day of April, 1997.
PIEDMONT NATURAL GAS COMPANY, INC.
By: /s/ JOHN H. MAXHEIM
------------------------------------
John H. Maxheim
Chairman of the Board,
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement and Post-Effective Amendment No. 1 have been signed by
the following persons in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
---------- ----- ----
/s/ JOHN H. MAXHEIM Director, Chairman of April 30, 1997
- ----------------------------------------------------- the Board, President
John H. Maxheim and Chief Executive
Officer
/s/ DAVID J. DZURICKY Senior Vice President -- April 30, 1997
- ----------------------------------------------------- Finance (Principal
David J. Dzuricky Financial Officer)
/s/ BARRY L. GUY Vice President and April 30, 1997
- ----------------------------------------------------- Controller (Principal
Barry L. Guy Accounting Officer)
JERRY W. AMOS* Director April 30, 1997
- -----------------------------------------------------
Jerry W. Amos
Director
- -----------------------------------------------------
C.M. Butler III
SAM J. DIGIOVANNI* Director April 30, 1997
- -----------------------------------------------------
Sam J. DiGiovanni
JOHN W. HARRIS* Director April 30, 1997
- -----------------------------------------------------
John W. Harris
MURIEL W. HELMS* Director April 30, 1997
- -----------------------------------------------------
Muriel W. Helms
JOHN F. MCNAIR III* Director April 30, 1997
- -----------------------------------------------------
John F. McNair III
II-8
29
SIGNATURES TITLE DATE
---------- ----- ----
NED R. McWHERTER* Director April 30, 1997
- -----------------------------------------------------
Ned R. McWherter
WALTER S. MONTGOMERY, JR.* Director April 30, 1997
- -----------------------------------------------------
Walter S. Montgomery, Jr.
DONALD S. RUSSELL, JR.* Director April 30, 1997
- -----------------------------------------------------
Donald S. Russell, Jr.
JOHN E. SIMKINS, JR.* Director April 30, 1997
- -----------------------------------------------------
John E. Simkins, Jr.
*By: /s/ DAVID J. DZURICKY
-----------------------------------------------
David J. Dzuricky
(Attorney-in-Fact)
II-9
30
INDEX TO EXHIBITS
1.1 Form of Underwriting Agreement
1.2 Form of Agency Agreement
4.1 Indenture dated as of April 1, 1993, between Piedmont
Natural Gas Company, Inc., and Citibank, N.A., as Trustee
(incorporated by reference to Exhibit 4.1 of Form S-3
Registration Statement No. 33-59369 filed by the Registrant
on August 9, 1995)
4.2 First Supplemental Indenture dated as of February 25, 1994,
between PNG Acquisition Company, Piedmont Natural Gas
Company, Inc., and Citibank, N.A., as Trustee (incorporated
by reference to Exhibit 4.2 of Form S-3 Registration
Statement No. 33-59369 filed by the Registrant on August 9,
1995)
4.3 Form of Debt Security*
4.4 Form of Master Global Note*
5.1 Opinion of Amos & Jeffries, L.L.P., regarding legality of
securities being registered
12.1 Computation of Ratio of Earnings to Fixed Charges
(incorporated by reference to Exhibit 12 of Form 10-Q for
the quarterly period ended January 31, 1997)
23.1 Consent of Amos & Jeffries, L.L.P. (included in Exhibit 5.1)
23.2 Independent Auditors' Consent
24.1 Powers of Attorney
25.1 Statement of Eligibility of Trustee on Form T-1
- ---------------
* The Company will file any forms of Debt Securities not previously so filed in
a current report on Form 8-K.