-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, lBFNTFdwIwqFZl5YjBnHXKZR0pow0UjwKuuROMFbjhx8Z1UazBL8ykYzPFtpJgW9 JJMhv3RbvsIbSAWranBLXg== 0000912057-95-005859.txt : 19950804 0000912057-95-005859.hdr.sgml : 19950804 ACCESSION NUMBER: 0000912057-95-005859 CONFORMED SUBMISSION TYPE: 424A PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19950803 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHWESTERN PUBLIC SERVICE CO CENTRAL INDEX KEY: 0000073088 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 460172280 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424A SEC ACT: 1933 Act SEC FILE NUMBER: 033-60423 FILM NUMBER: 95558551 BUSINESS ADDRESS: STREET 1: 33 THIRD ST SE STREET 2: PO BOX 1318 CITY: HURON STATE: SD ZIP: 57350-1318 BUSINESS PHONE: 6053528411 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NWPS CAPITAL FINANCING I CENTRAL INDEX KEY: 0000946925 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424A SEC ACT: 1933 Act SEC FILE NUMBER: 033-60423-01 FILM NUMBER: 95558552 BUSINESS ADDRESS: STREET 1: 33 THIRD ST SE STREET 2: PO BOX 1318 CITY: HURON STATE: SD ZIP: 57350-1318 BUSINESS PHONE: 6053528411 MAIL ADDRESS: STREET 1: C/O NORTHWESTERN PUBLIC SERVICE CO STREET 2: 33 THIRD STREET SE CITY: MURON STATE: SD ZIP: 57350-1318 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NWPS CAPITAL FINANCING II CENTRAL INDEX KEY: 0000946938 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424A SEC ACT: 1933 Act SEC FILE NUMBER: 033-60423-02 FILM NUMBER: 95558553 BUSINESS ADDRESS: STREET 1: 33 THIRD ST SE STREET 2: PO BOX 1318 CITY: HURON STATE: SD ZIP: 57350-1318 BUSINESS PHONE: 6053528411 MAIL ADDRESS: STREET 1: 33 THIRD STREET SE CITY: MURON STATE: SD ZIP: 57350-1318 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NWPS CAPITAL FINANCING III CENTRAL INDEX KEY: 0000946940 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424A SEC ACT: 1933 Act SEC FILE NUMBER: 033-60423-03 FILM NUMBER: 95558554 BUSINESS ADDRESS: STREET 1: 33 THIRD ST SE STREET 2: PO BOX 1318 CITY: HURON STATE: SD ZIP: 57350-1318 BUSINESS PHONE: 6053528411 MAIL ADDRESS: STREET 1: 33 THIRD STREET SE CITY: MURON STATE: SD ZIP: 57350-1318 424A 1 424A INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PRELIMINARY PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PRELIMINARY PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH JURISDICTION. PROSPECTUS SUPPLEMENT (SUBJECT TO COMPLETION, ISSUED JULY 28, 1995) (TO PROSPECTUS DATED , 1995) $60,000,000 NORTHWESTERN PUBLIC SERVICE COMPANY % MORTGAGE BONDS DUE , 2005 ----------------- INTEREST PAYABLE AND ------------------- THE MORTGAGE BONDS OFFERED HEREBY (THE "OFFERED BONDS") WILL MATURE ON , 2005. THE OFFERED BONDS WILL NOT BE REDEEMABLE PRIOR TO MATURITY. THE OFFERED BONDS WILL BE ISSUED IN THE FORM OF FULLY-REGISTERED BOOK-ENTRY OFFERED BONDS WHICH WILL BE DEPOSITED WITH, AND REGISTERED IN THE NAME OF A NOMINEE OF, THE DEPOSITORY TRUST COMPANY. SEE "CERTAIN TERMS OF THE OFFERED BONDS" HEREIN. ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------- PRICE % AND ACCRUED INTEREST, IF ANY -------------------
UNDERWRITING PRICE TO DISCOUNTS AND PROCEEDS PUBLIC (1) COMMISSIONS (2) TO COMPANY (1)(3) --------------------- --------------------- --------------------- PER OFFERED BOND.......................... % % % TOTAL..................................... $ $ $ - --------- (1) PLUS ACCRUED INTEREST, IF ANY, FROM , 1995. (2) THE COMPANY HAS AGREED TO INDEMNIFY THE UNDERWRITERS AGAINST CERTAIN LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED. (3) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY, ESTIMATED AT $700,000.
------------------- THE OFFERED BONDS ARE OFFERED, SUBJECT TO PRIOR SALE, WHEN, AS AND IF ACCEPTED BY THE UNDERWRITERS AND SUBJECT TO APPROVAL OF CERTAIN LEGAL MATTERS BY WINTHROP, STIMSON, PUTNAM & ROBERTS, COUNSEL FOR THE UNDERWRITERS. IT IS EXPECTED THAT DELIVERY OF THE OFFERED BONDS WILL BE MADE ON OR ABOUT AUGUST , 1995 THROUGH THE BOOK-ENTRY FACILITIES OF THE DEPOSITORY TRUST COMPANY AGAINST PAYMENT THEREFOR IN IMMEDIATELY AVAILABLE FUNDS. ------------------- MORGAN STANLEY & CO. NATWEST CAPITAL MARKETS LIMITED INCORPORATED AUGUST , 1995 NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER OR A SOLICITATION BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH AN OFFER OR SOLICITATION. THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THE PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. ------------------- TABLE OF CONTENTS
PAGE PROSPECTUS SUPPLEMENT Prospectus Supplement Summary.............................................................................. S-3 The Company................................................................................................ S-3 Summary Financial Information.............................................................................. S-5 Use of Proceeds............................................................................................ S-6 Certain Terms of the Offered Bonds......................................................................... S-6 Underwriting............................................................................................... S-9 PROSPECTUS Available Information...................................................................................... 1 Documents Incorporated by Reference........................................................................ 1 The Company................................................................................................ 2 Pending Acquisition of Synergy Group Incorporated.......................................................... 5 Northwestern Public Service Company and Synergy Group Incorporated Pro Forma Financial Information......... 10 The NWPS Trusts............................................................................................ 19 Use of Proceeds............................................................................................ 20 Ratio of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and Preferred Dividends.......... 20 Description of the Mortgage Bonds.......................................................................... 20 Description of the Subordinated Debt Securities............................................................ 32 Description of the Preferred Securities.................................................................... 40 Description of the Guarantees.............................................................................. 41 Description of the Common Stock............................................................................ 43 Legal Opinions............................................................................................. 45 Experts.................................................................................................... 46 Plan of Distribution....................................................................................... 46
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE OFFERED BONDS AT LEVELS ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. S-2 PROSPECTUS SUPPLEMENT SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE CONSIDERED IN CONJUNCTION WITH, THE INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND THE DOCUMENTS INCORPORATED THEREIN BY REFERENCE. THE COMPANY The principal business of Northwestern Public Service Company (the "Company") is energy distribution. The Company is engaged in providing regulated electric and natural gas service in South Dakota and natural gas service in Nebraska. The Company serves approximately 54,900 electric customers and 75,000 gas customers representing a diverse mix of residential, commercial and industrial customers. In addition, the Company has investments in nonutility businesses and has recently contracted to acquire Synergy Group Incorporated ("Synergy"), a major propane distribution company. See "The Company" and "Pending Acquisition of Synergy Group Incorporated" in the accompanying Prospectus. The Company's electric business generates, transmits and distributes electricity to over 100 communities in eastern South Dakota. In 1994, 46% of the Company's total operating revenues were from the sale of electric energy. At December 31, 1994, the aggregate capacity of all Company-owned electric generating units was 309,000 kilowatts ("kw"), consisting of 202,000 kw from jointly-owned baseload plants and 107,000 kw from internal combustion turbine and diesel units used primarily for peaking purposes. All of the Company's baseload plants are fueled by coal. The Company has maintained competitive electric rates when compared to neighboring utilities and has a competitive electric baseload generating production cost, which includes fuel and plant operating expenses, of less than 1.5 CENTS per kilowatt hour. The Company's natural gas business purchases, transports and distributes natural gas to over 50 communities in eastern South Dakota and 4 communities in central Nebraska. In 1994, 40% of the Company's total operating revenues were from the sale of natural gas. The Company purchases gas supply from more than 20 domestic and Canadian suppliers and transports natural gas supply through five pipelines. Gas agreements provide for firm deliverable pipeline capacity of approximately 98,900 million british thermal units ("MMBTU"), per day. To supplement firm gas supplies, the Company owns six propane-air plants and has contracts for underground natural gas storage services. Over the last five years the Company has expanded its gas distribution operations to serve 29 new communities in South Dakota. The Company's business strategy is summarized by three primary objectives: - To enhance the Company's competitive position in its energy distribution businesses; - To expand energy sales and markets with value-added services for customers; and - To provide earnings and dividend growth and increased shareholder value through its energy distribution businesses and investment and acquisition activities. By enhancing the competitive position of its core electric and gas distribution businesses and expanding its energy sales and markets, the Company believes it will position itself to be successful in the increasingly competitive electric and gas distribution businesses anticipated over the next several years. To supplement growth strategies in its electric and natural gas businesses, the Company also plans to seek new investment and acquisition opportunities that have demonstrable growth potential. The primary focus of these investment and acquisition activities is targeted in energy distribution businesses. The Company also plans to pursue opportunities in non-energy businesses that complement its existing operations and provide the capability to enhance shareholder value. In May 1995, the Company contracted to acquire Synergy, a retail propane distributor serving over 200,000 customers from 152 locations in 23 states in the eastern and south central regions of the U.S. See "Pending Acquisition of Synergy Group Incorporated" in the accompanying Prospectus. In S-3 accordance with its strategic plan, the Company believes that the Synergy propane distribution operations are complementary to the Company's electric and natural gas businesses. Propane is the nation's fourth largest energy source after electricity, natural gas and fuel oil. The acquisition price to be paid for Synergy is $137.5 million cash (subject to certain adjustments) and certain securities of the Company's acquisition subsidiary. The Company has entered into an agreement with a third party for the sale of certain Synergy properties which will reduce the cash portion of the acquisition price to approximately $100 million. The Company has executed a management agreement with Empire Gas Corporation ("Empire Gas") for the joint management of the properties after the acquisition. Empire Gas is the nation's eleventh largest retail propane distributor. Subsequent to the acquisition and expected third party sale, the Company's total assets will consist of approximately 65% electric and gas distribution, 25% propane distribution and 10% marketable securities and other diversified investments. The Company's principal executive offices are located at 33 Third Street S.E., Huron, South Dakota 57350. The Company's telephone number is (605) 352-8411. S-4 SUMMARY FINANCIAL INFORMATION (in thousands, except percentages and per share amounts) The financial information presented below should be read in conjunction with the Company's historical financial statements and the notes thereto which are incorporated by reference herein and the pro forma financial statements and the notes thereto included in the accompanying Prospectus. The pro forma financial information contained in the right column, reflecting the pending acquisition of Synergy and related matters, was prepared solely to comply with Regulation S-X of the Securities and Exchange Commission. The pro forma financial information is based on the assumptions and adjustments set forth under "Northwestern Public Service Company and Synergy Group Incorporated Pro Forma Financial Information" in the accompanying Prospectus.
PRO FORMA(1) ------------------------ THREE THREE MONTHS YEAR MONTHS YEAR ENDED DECEMBER 31, ENDED ENDED ENDED ---------------------------- MARCH 31, DECEMBER 31, MARCH 31, 1992 1993 1994 1995 1994 1995(2) -------- -------- -------- --------- ------------ --------- INCOME STATEMENT DATA: Revenues............................................. $119,197 $153,257 $157,266 $50,754 $256,634 $82,612 Operating income..................................... 24,809 27,246 30,368 12,882 37,985 20,088 Net income........................................... 13,721 15,191 15,440 7,103 17,463 13,840 Net income available for common stock................ 13,578 15,070 15,320 7,073 15,300 13,299 Earnings per share................................... 1.77 1.96 2.00 0.92 1.74 1.51 Dividends paid per common share...................... 1.59 1.63 1.67 0.425 1.67 0.425 Weighted average shares outstanding.................. 7,677 7,677 7,677 7,677 8,805 8,805
AS OF MARCH 31, 1995 ------------------------------------- ACTUAL PRO FORMA -------- --------- BALANCE SHEET DATA: Assets................................................................... $363,432 $ 487,435 -------- --------- -------- --------- Capitalization Summary Long-term debt (including current maturities)........................................ $129,888 51.6% $ 181,592 50.7% Company-Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trust (3).................................................. -- -- 24,212 6.8 Cumulative preferred stock (including portion to be redeemed within one year)................................................................. 2,640 1.1 2,640 0.7 Common Stock Equity Common stock........................................................... 26,870 -- 31,179 -- Additional paid-in capital............................................. 29,923 -- 56,398 -- Retained earnings...................................................... 59,183 -- 59,183 -- Unrealized gain on investments, net.................................... 3,181 -- 3,181 -- -------- --------- $119,157 47.3 $ 149,941 41.8 -------- ------ --------- ------ Total................................................................ $251,685 100.0% $ 358,385 100.0% -------- ------ --------- ------ -------- ------ --------- ------ - ---------- (1) The pro forma financial information does not purport to present the financial position or results of operations of the Company had the acquisition of Synergy actually been completed as of the dates indicated. In addition, the pro forma financial information is not necessarily indicative of future results of operations. (2) The results of operations of Synergy for the three months ended March 31, 1995 are not indicative of a full year's results of operations. (3) As described in the accompanying Prospectus, all of the assets of NWPS Capital, the subsidiary trust, will be approximately $31 million of Subordinated Debt Securities of the Company which will bear interest at a rate of % per annum, assuming the issuance of 1.2 million Preferred Securities. Pro Forma amounts shown in the table reflect the portion of the estimated net proceeds of the offering of Preferred Securities to be used to fund the acquisition of Synergy.
S-5 USE OF PROCEEDS The net proceeds from the sale of approximately $50 million of the Offered Bonds will be applied to fund the acquisition of Synergy, including certain transaction expenses. The additional net proceeds from the sale of the Offered Bonds will be applied to repay short term debt of the Company. See "Use of Proceeds" in the accompanying Prospectus. CERTAIN TERMS OF THE OFFERED BONDS GENERAL. The Offered Bonds are being issued under the Company's General Mortgage Indenture and Deed of Trust dated as of August 1, 1993 (the "New Mortgage") between the Company and The Chase Manhattan Bank (National Association), as trustee (the "New Mortgage Trustee"), as supplemented by various supplemental indentures, including the Supplemental Indenture dated as of , 1995 relating to the Offered Bonds (the "Supplemental Indenture"). The Offered Bonds will be issued on the basis of a First Mortgage Bond in the principal amount of $60,000,000 (the "Pledged Bond") issued to the New Mortgage Trustee under the Company's Indenture dated August 1, 1940 (the "First Mortgage") between the Company and The Chase Manhattan Bank (National Association) and C. J. Heinzelmann, as successor Trustees, as supplemented by various supplemental indentures, including the supplemental indenture dated , 1995 relating to the Pledged Bond. The Offered Bonds will be secured primarily by the First Mortgage Bonds (including the Pledged Bond) held by the New Mortgage Trustee. The First Mortgage constitutes, subject to certain exceptions, a first lien on substantially all properties of the Company. The Offered Bonds will also be secured by the lien of the New Mortgage on the Company's properties used in the generation, production, transmission or distribution of electricity or the distribution of gas in any form and for any purpose in the States of South Dakota or Nebraska, which lien is junior to the lien of the First Mortgage. See "Description of the Mortgage Bonds" in the accompanying Prospectus. The Company has reached an agreement with the holders of all of its outstanding First Mortgage Bonds (other than the First Mortgage Bonds held by the New Mortgage Trustee) to exchange the First Mortgage Bonds of such holders for Mortgage Bonds issued under the New Mortgage in the same principal amount, bearing the same interest rate, maturing on the same maturity date and otherwise containing financial terms that are comparable to the terms contained in the existing First Mortgage Bonds. The Company has agreed that, upon completion of such exchange (at which point the only First Mortgage Bonds will be the First Mortgage Bonds (including the Pledged Bond) held by the New Mortgage Trustee), the Company will cause the New Mortgage Trustee to surrender for cancellation to the Trustees under the First Mortgage all of the First Mortgage Bonds (including the Pledged Bond) then held by the New Mortgage Trustee. The Company has further agreed, promptly following the surrender by the New Mortgage Trustee of the First Mortgage Bonds (including the Pledged Bond) then held by it, to cause the Trustees to cancel and discharge the lien of the First Mortgage. As described under the caption "Description of the Mortgage Bonds" in the accompanying Prospectus, if and when no Class "A" Mortgages are in effect, the New Mortgage will constitute a first mortgage lien on all property of the Company subject thereto. As also described under such caption, as of the date of this Prospectus Supplement, the First Mortgage is the only Class "A" Mortgage. Accordingly, upon the discharge of the lien of the First Mortgage as described above, the Offered Bonds will be secured directly by a first mortgage lien on all property of the Company subject to the New Mortgage. The following summaries of certain provisions of the New Mortgage, the Supplemental Indenture and the Offered Bonds (referred to in the Prospectus as "Mortgage Bonds") hereby supplement, and to the extent inconsistent therewith replace, the description of the general terms and provisions of the Mortgage Bonds set forth under "Description of the Mortgage Bonds" in the Prospectus, to which description reference is hereby made. The following summaries do not purport to be complete and are S-6 subject to, and are qualified in their entirety by reference to, the provisions of the New Mortgage and the Supplemental Indenture. The following makes use of defined terms in the New Mortgage and the Supplemental Indenture. INTEREST RATE AND MATURITY. The Offered Bonds will bear interest from , 1995 at the rate of % per annum, payable semi-annually on and , beginning . The interest so payable on any or will be paid to the person in whose name an Offered Bond is registered at the close of business on the immediately preceding or , as the case may be. The Offered Bonds will mature on , 2005. REDEMPTION. The Offered Bonds will not be redeemable prior to maturity. BOOK-ENTRY SYSTEM. The Offered Bonds will be issued in the form of fully-registered book-entry Offered Bonds which will be deposited with, or on behalf of, The Depository Trust Company (the "Depositary") and registered in the name of the Depositary's nominee (each, a "Book-Entry Security"). Except as set forth below, a Book-Entry Security may not be transferred except as a whole by the Depositary or by a nominee of the Depositary to the Depositary, by a nominee of the Depositary to another nominee of the Depositary or by the Depositary or any such nominee to a successor of the Depositary or a nominee of such successor. The Depositary has advised the Company and the Underwriters that it is a limited-purpose trust company organized under the laws of the State of New York, a "banking organization" within the meaning of the New York banking law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. The Depositary was created to hold securities of its participants and to facilitate the clearance and settlement of securities transactions among the participants in such securities through electronic book-entry changes in accounts of the participants, thereby eliminating the need for physical movement of securities certificates. The Depositary's participants include securities brokers and dealers (including the Underwriters), banks, trust companies, clearing corporations and certain other organizations, some of whom (and/or their representatives) own the Depositary. Access to the Depositary's book-entry system is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly. Persons who are not participants may beneficially own securities held by the Depositary only through participants. The rules applicable to the Depositary are on file with the Securities and Exchange Commission. Upon the issuance by the Company of the Book-Entry Securities, the Depositary will credit, on its book-entry registration and transfer system, the principal amount of the Offered Bonds represented by such Book-Entry Securities to the accounts of participants. The accounts to be credited shall be designated by the applicable Underwriter. Ownership of beneficial interests in a Book-Entry Security will be limited to participants or persons that may hold interests through participants. Beneficial interests in a Book-Entry Security will be shown on, and the transfer thereof will be effected only through, records maintained by the Depositary (with respect to beneficial interests of participants) or by participants, or persons that may hold interests through participants (with respect to beneficial interests to beneficial owners). The laws of some states require that certain purchasers of securities take physical delivery of such securities in certificated form. Such limits and such laws may impair the ability to transfer beneficial interests in a Book-Entry Security. For a Book-Entry Security, so long as the Depositary or its nominee is the registered owner of a Book-Entry Security, the Depositary or its nominee, as the case may be, will be considered the sole owner or holder of the Offered Bonds represented by such Book-Entry Security for all purposes under the New Mortgage. Except as provided below, owners of beneficial interests in a Book-Entry Security S-7 will not be entitled to have Offered Bonds represented by such Book-Entry Security registered in their names, will not receive or be entitled to receive physical delivery of such Offered Bonds in certificated form and will not be considered the owners or holders thereof under the New Mortgage. Principal and interest payments on Offered Bonds issued in book-entry form and represented by the Book-Entry Securities will be made by the Company to the Depositary or its nominee, as the case may be, as the registered owner of the related Book-Entry Securities. The Company will not have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the Book-Entry Securities, or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. The Company expects that the Depositary, upon receipt of any payment of principal or interest in respect of any Book-Entry Securities, will credit immediately the accounts of the related participants with payment in amounts proportionate to their respective beneficial interest in the principal amount of such Book-Entry Securities as shown on the records of the Depositary. The Company also expects the payments by participants to owners of beneficial interests in the Book-Entry Securities will be governed by standing customer instructions and customary practices, as is now the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such participants. If the Depositary is at any time unwilling or unable to continue as depositary and a successor depositary is not appointed by the Company within 90 days, the Company will issue Offered Bonds in certificated form in exchange for each Book-Entry Security. In addition, the Company may at any time determine not to have Offered Bonds represented by the Book-Entry Securities. In any such instance, owners of beneficial interests in such Book-Entry Securities will be entitled to physical delivery of Offered Bonds in certificated form equal in principal amount to such beneficial interests and to have such Offered Bonds registered in its name. Offered Bonds so issued in certificated form will be issued in denominations of $1,000 or any larger amount that is an integral multiple thereof and will be issued in registered form only, without coupons. SAME-DAY PAYMENT AND SETTLEMENT. All payments of principal of and interest on the Offered Bonds will be made by the Company in same-day funds. BASIS OF ISSUANCE. The Offered Bonds will be issued on the basis of the Pledged Bond. The Pledged Bond will be issued and delivered to, and registered in the name of, the New Mortgage Trustee or its nominee and will be owned and held by the New Mortgage Trustee, subject to the provisions of the New Mortgage, for the benefit of the Holders (as defined in the accompanying Prospectus) of the Offered Bonds and all other outstanding Mortgage Bonds issued under the New Mortgage, and the Company will have no interest in the Pledged Bond. The Pledged Bond will be issued in the principal amount of $60,000,000 and, as is the case with the Offered Bonds, will mature on , 2005 will bear interest at the rate of % per annum, and will be payable semi-annually on and , beginning . Any payment by the Company of principal of, or interest on, the Pledged Bond shall be applied by the New Mortgage Trustee to the payment of any principal, or interest, as the case may be, in respect of the Offered Bonds which is then due and, to the extent of such application, the obligation of the Company under the New Mortgage to make such payment in respect of the Offered Bonds will be deemed satisfied and discharged. Any payment by the Company under the New Mortgage of principal of, or interest on, the Offered Bonds will, to the extent thereof, be deemed to satisfy and discharge the obligation of the Company to make a payment of principal, or interest, as the case may be, in respect of the Pledged Bond which is then due. S-8 UNDERWRITING Under the terms and subject to the conditions contained in the Underwriting Agreement dated the date hereof, the Underwriters named below have severally agreed to purchase, and the Company has agreed to sell to the Underwriters, severally, the following respective principal amounts of the Offered Bonds:
PRINCIPAL AMOUNT OF THE UNDERWRITERS OFFERED BONDS - -------------------------------------------------------------------------------- -------------- Morgan Stanley & Co. Incorporated............................................... $ NatWest Capital Markets Limited................................................. Total....................................................................... -------------- --------------
The Underwriting Agreement provides that the obligations of the several Underwriters to pay for and accept delivery of the Offered Bonds are subject to approval of certain legal matters by counsel and to certain other conditions. The Underwriters are committed to pay for and accept delivery of all of the Offered Bonds if any are taken; provided that under certain circumstances involving a default of Underwriters, less than all of the Offered Bonds may be purchased. The Underwriters initially propose to offer part of the Offered Bonds directly to the public at the public offering price set forth on the cover page of this Prospectus Supplement and part to certain dealers at a price which represents a concession not in excess of % of the principal amount of the Offered Bonds. The Underwriters may allow and such dealers may reallow a concession of % of the principal amount of the Offered Bonds to certain other dealers. After the initial public offering, the public offering price and the other selling items may be changed. Each series of Offered Bonds will be a new issue of securities and will have no established trading market. Any Underwriter to whom Offered Bonds of any series are sold for public offering and sale may make a market in such series of Offered Bonds, 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, or trading market for, any Offered Bonds. The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended. The Underwriters engage in (or in the future may engage in) transactions with, and perform services for, the Company or its affiliates in the ordinary course of business. Morgan Stanley & Co. Incorporated represents Synergy in connection with the pending acquisition of Synergy by the Company described under "Pending Acquisition of Synergy Group Incorporated" in the accompanying Prospectus. National Westminster Bank P l c. is the parent of NatWest Capital Markets Limited and is serving as the managing agent for the short-term loan for the Synergy acquisition. NatWest Capital Markets Limited ("NatWest"), a United Kingdom broker-dealer and a member of the Securities Futures Authority Limited, has agreed that, as part of the distribution of the Offered Bonds and subject to certain exceptions, it will not offer or sell any Offered Bonds within the United States, its territories or possessions or to persons who are citizens thereof or residents therein. The Underwriting Agreement does not limit sale of the Offered Bonds offered hereby outside the United States. NatWest has further represented and agreed that (i) it has not offered or sold and will not offer or sell prior to the date six months after their date of issue any Offered Bonds to persons in the United Kingdom, except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995, (ii) it has complied with and will comply with all applicable provisions of the Financial Services Act 1986 with respect to S-9 anything done by it in relation to the Offered Bonds in, from or otherwise involving the United Kingdom, and (iii) it has only issued or passed on and will only issued or pass on in the United Kingdom any document received by it in connection with the issue of the Offered Bonds to a person who is of the kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995 or is a person to whom such document may otherwise lawfully be issued or passed on. S-10 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BY ANY SALE OF THESE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH JURISDICTION. PROSPECTUS (SUBJECT TO COMPLETION, ISSUED JULY 28, 1995) $200,000,000 NORTHWESTERN PUBLIC SERVICE COMPANY MORTGAGE BONDS SUBORDINATED DEBT SECURITIES COMMON STOCK NWPS CAPITAL FINANCING I NWPS CAPITAL FINANCING II NWPS CAPITAL FINANCING III PREFERRED SECURITIES GUARANTEED TO THE EXTENT SET FORTH HEREIN BY NORTHWESTERN PUBLIC SERVICE COMPANY ----------------- NORTHWESTERN PUBLIC SERVICE COMPANY, A DELAWARE CORPORATION (THE "COMPANY"), MAY OFFER FROM TIME TO TIME, TOGETHER OR SEPARATELY, (I) MORTGAGE BONDS ("MORTGAGE BONDS"); (II) SUBORDINATED DEBT SECURITIES ("SUBORDINATED DEBT SECURITIES"); AND (III) COMMON STOCK, PAR VALUE $3.50 PER SHARE ("COMMON STOCK"). NWPS CAPITAL FINANCING I, NWPS CAPITAL FINANCING II AND NWPS CAPITAL FINANCING III (EACH, A "NWPS TRUST"), EACH A STATUTORY BUSINESS TRUST FORMED UNDER THE LAWS OF THE STATE OF DELAWARE, MAY OFFER, FROM TIME TO TIME, PREFERRED SECURITIES REPRESENTING UNDIVIDED BENEFICIAL INTERESTS IN THE ASSETS OF THE RESPECTIVE NWPS TRUSTS ("PREFERRED SECURITIES"). THE PAYMENT OF PERIODIC CASH DISTRIBUTIONS ("DISTRIBUTIONS") WITH RESPECT TO PREFERRED SECURITIES OF A PARTICULAR NWPS TRUST OUT OF MONEYS HELD BY THAT NWPS TRUST, AND PAYMENTS ON LIQUIDATION, REDEMPTION OR OTHERWISE WITH RESPECT TO SUCH PREFERRED SECURITIES, WILL BE GUARANTEED BY THE COMPANY TO THE EXTENT DESCRIBED HEREIN ("GUARANTEE"). SEE "DESCRIPTION OF THE GUARANTEES" BELOW. THE COMPANY'S OBLIGATIONS UNDER EACH GUARANTEE ARE SUBORDINATE AND JUNIOR IN RIGHT OF PAYMENT TO ALL OTHER LIABILITIES OF THE COMPANY AND RANK PARI PASSU WITH THE MOST SENIOR PREFERRED STOCK ISSUED FROM TIME TO TIME BY THE COMPANY. THE SUBORDINATED DEBT SECURITIES MAY BE ISSUED AND SOLD FROM TIME TO TIME IN ONE OR MORE SERIES BY THE COMPANY TO A NWPS TRUST, OR A TRUSTEE OF SUCH TRUST, IN CONNECTION WITH THE INVESTMENT OF THE PROCEEDS FROM THE OFFERING OF PREFERRED SECURITIES AND COMMON SECURITIES (AS DEFINED HEREIN) OF SUCH NWPS TRUST. THE SUBORDINATED DEBT SECURITIES PURCHASED BY A NWPS TRUST MAY BE SUBSEQUENTLY DISTRIBUTED PRO RATA TO HOLDERS OF PREFERRED SECURITIES AND COMMON SECURITIES IN CONNECTION WITH THE DISSOLUTION OF SUCH NWPS TRUST UPON THE OCCURRENCE OF CERTAIN EVENTS AS MAY BE DESCRIBED IN AN ACCOMPANYING PROSPECTUS SUPPLEMENT. THE SUBORDINATED DEBT SECURITIES WILL BE UNSECURED AND SUBORDINATE AND JUNIOR IN RIGHT OF PAYMENT TO CERTAIN OTHER INDEBTEDNESS OF THE COMPANY AS MAY BE DESCRIBED IN THE ACCOMPANYING PROSPECTUS SUPPLEMENT. THE MORTGAGE BONDS, SUBORDINATED DEBT SECURITIES AND COMMON STOCK OF THE COMPANY, AND THE PREFERRED SECURITIES OF ANY NWPS TRUST, ARE COLLECTIVELY REFERRED TO HEREIN AS THE "OFFERED SECURITIES." THE OFFERED SECURITIES MAY BE ISSUED IN ONE OR MORE SERIES OR ISSUANCES IN AN AMOUNT NOT TO EXCEED IN THE AGGREGATE $200,000,000, BASED ON THE INITIAL OFFERING PRICE, WITH THE AMOUNTS, PRICES AND TERMS TO BE DETERMINED AT OR PRIOR TO THE TIME OF SALE AND SET FORTH IN ONE OR MORE SUPPLEMENTS TO THIS PROSPECTUS (EACH, A "PROSPECTUS SUPPLEMENT"). (CONTINUED ON FOLLOWING PAGE) ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------- THE OFFERED SECURITIES WILL BE SOLD DIRECTLY, THROUGH AGENTS, UNDERWRITERS AND DEALERS, INCLUDING MORGAN STANLEY & CO. INCORPORATED, AS DESIGNATED FROM TIME TO TIME, OR THROUGH A COMBINATION OF SUCH METHODS. SEE "PLAN OF DISTRIBUTION." THE NAMES OF SUCH AGENTS, UNDERWRITERS OR DEALERS AND ANY APPLICABLE COMMISSIONS OR DISCOUNTS WILL BE SET FORTH IN, OR MAY BE CALCULATED FROM, THE PROSPECTUS SUPPLEMENT. SEE "PLAN OF DISTRIBUTION" FOR A DESCRIPTION OF ANY INDEMNIFICATION ARRANGEMENTS BETWEEN THE COMPANY, EACH OF THE NWPS TRUSTS AND ANY UNDERWRITERS, DEALERS OR AGENTS. THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF OFFERED SECURITIES UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT. MORGAN STANLEY & CO. INCORPORATED , 1995 (CONTINUED FROM PREVIOUS PAGE) CERTAIN SPECIFIC TERMS OF THE PARTICULAR OFFERED SECURITIES IN RESPECT OF WHICH THIS PROSPECTUS IS BEING DELIVERED WILL BE SET FORTH IN AN ACCOMPANYING PROSPECTUS SUPPLEMENT, INCLUDING, WHERE APPLICABLE, THE INITIAL PUBLIC OFFERING PRICE OF THE OFFERED SECURITIES, THE NET PROCEEDS THEREOF TO THE COMPANY OR A NWPS TRUST, AS APPLICABLE, ANY LISTING OF SUCH OFFERED SECURITIES ON A SECURITIES EXCHANGE AND ANY OTHER SPECIAL TERMS. THE PROSPECTUS SUPPLEMENT WILL ALSO SET FORTH CERTAIN OTHER INFORMATION WITH REGARD TO OFFERED SECURITIES BEING OFFERED, INCLUDING WITHOUT LIMITATION, THE FOLLOWING: (I) IN THE CASE OF MORTGAGE BONDS, THE SERIES DESIGNATION, AGGREGATE PRINCIPAL AMOUNT, AUTHORIZED DENOMINATIONS, MATURITY, INTEREST RATE (WHICH MAY BE FIXED OR VARIABLE) OR METHOD OF CALCULATION OF INTEREST AND DATE OF PAYMENT OF ANY INTEREST, AND ANY EXCHANGE, CONVERSION, REDEMPTION, SINKING FUND, OR CREDIT ENHANCEMENT PROVISIONS AND OTHER SPECIAL TERMS OF EACH SERIES; (II) IN THE CASE OF SUBORDINATED DEBT SECURITIES, THE SPECIFIC DESIGNATION, AGGREGATE PRINCIPAL AMOUNT, AUTHORIZED DENOMINATION, MATURITY, INTEREST RATE (WHICH MAY BE FIXED OR VARIABLE) OR METHOD OF CALCULATION OF INTEREST, DATE OF PAYMENT OF ANY INTEREST, ANY PREMIUM, THE PLACE OR PLACES WHERE PRINCIPAL OF, PREMIUM, IF ANY, AND ANY INTEREST ON SUCH SUBORDINATED DEBT SECURITIES WILL BE PAYABLE, THE RIGHT OF THE COMPANY, IF ANY, TO DEFER PAYMENT OF INTEREST ON THE SUBORDINATED DEBT SECURITIES AND THE MAXIMUM LENGTH OF SUCH DEFERRAL PERIOD, ANY EXCHANGE, CONVERSION, REDEMPTION OR SINKING FUND PROVISIONS, AND ANY SECURITY, SUBORDINATION OR OTHER TERMS IN CONNECTION WITH THE OFFERING AND SALE OF THE SUBORDINATED DEBT SECURITIES IN RESPECT OF WHICH THIS PROSPECTUS IS DELIVERED; (III) IN THE CASE OF COMMON STOCK, THE NUMBER OF SHARES AND THE TERMS OF OFFERING THEREOF; AND (IV) IN THE CASE OF PREFERRED SECURITIES, THE DESIGNATION, NUMBER OF SECURITIES, LIQUIDATION PREFERENCE PER SECURITY, DISTRIBUTION RATE (OR METHOD OF CALCULATION THEREOF), DATES ON WHICH DISTRIBUTIONS SHALL BE PAYABLE AND DATES FROM WHICH DISTRIBUTIONS SHALL ACCRUE, ANY VOTING RIGHTS, ANY EXCHANGE, CONVERSION, REDEMPTION OR SINKING FUND PROVISIONS, ANY OTHER RIGHTS, PREFERENCES, PRIVILEGES, LIMITATIONS OR RESTRICTIONS RELATING TO THE PREFERRED SECURITIES AND THE TERMS UPON WHICH THE PROCEEDS OF THE SALE OF THE PREFERRED SECURITIES SHALL BE USED TO PURCHASE A SPECIFIC SERIES OF SUBORDINATED DEBT SECURITIES OF THE COMPANY. IF SO SPECIFIED IN THE APPLICABLE PROSPECTUS SUPPLEMENT, OFFERED SECURITIES MAY BE ISSUED IN WHOLE OR IN PART IN THE FORM OF ONE OR MORE TEMPORARY OR GLOBAL SECURITIES. THE PROSPECTUS SUPPLEMENT WILL ALSO CONTAIN INFORMATION, WHERE APPLICABLE, ABOUT CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS RELATING TO THE OFFERED SECURITIES COVERED BY THE PROSPECTUS SUPPLEMENT. For United Kingdom Purchasers: The Offered Securities may not be sold in the United Kingdom other than to persons whose ordinary business is to buy or sell securities, whether as principal or agent (except in circumstances that do not constitute an offer to the public within the meaning of the Companies Act of 1985), and this Prospectus may only be issued or passed on to any person in the United Kingdom if that person is of a kind described in Article 9(3) of the Financial Services Act of 1986 (Investment Advertisements) (Exemption) Order 1988, as amended. AVAILABLE INFORMATION The Company and the NWPS Trusts have filed with the Securities and Exchange Commission (the "Commission") a Registration Statement on Form S-3 (including any amendments thereto, the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the Offered Securities. This Prospectus does not contain all of the information set forth in the Registration Statement and the exhibits and schedules thereto, certain portions of which have been omitted pursuant to the rules of the Commission. Statements made in this Prospectus as to the contents of any contract, agreement or other document are not necessarily complete. With respect to each such contract, agreement or other document filed or incorporated by reference as an exhibit to the Registration Statement, reference is made to such exhibit for a more complete description of the matter involved, and each such statement is qualified in its entirety by such reference. The Company and Synergy Group Incorporated ("Synergy"), a corporation which the Company proposes to acquire (see "Pending Acquisition of Synergy Group Incorporated"), are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith file reports and other information with the Commission, including proxy statements in the case of the Company, but not Synergy. Reports, proxy statements and other information filed by the Company and Synergy with the Commission may be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices located at Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60661 and at Seven World Trade Center, 13th Floor, New York, New York 10048. Copies of such materials may be obtained from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Such reports, proxy statements and other information concerning the Company may also be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005, on which exchange certain of the Company's securities are listed. Information in this Prospectus concerning Synergy has been obtained from reports and other information filed by Synergy with the Commission. No separate financial statements of any of the NWPS Trusts have been included herein. The Company and the NWPS Trusts do not consider that such financial statements would be material to holders of the Preferred Securities because (i) all of the common securities of the NWPS Trusts will be owned, directly or indirectly, by the Company, a reporting company under the Exchange Act, (ii) each of the NWPS Trusts is a newly organized special purpose entity, has no operating history and has no independent operations but exists for the sole purpose of issuing securities representing undivided beneficial interests in the assets of such NWPS Trust, investing the proceeds thereof in Subordinated Debt Securities issued by the Company and engaging in activities necessary or incidental thereto, and (iii) the obligations of each of the NWPS Trusts under the Trust Securities (as defined herein) are fully and unconditionally guaranteed by the Company to the extent that such NWPS Trust has funds legally available to meet such obligations. See "Description of the Subordinated Debt Securities" and "Description of the Guarantees." DOCUMENTS INCORPORATED BY REFERENCE The following documents filed by the Company with the Commission are incorporated herein by reference: (a) The Company's Annual Report on Form 10-K for the year ended December 31, 1994; (b) The Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995; 1 (c) The Company's Current Report on Form 8-K filed May 26, 1995; (d) The Company's Current Report on Form 8-K filed June 21, 1995; and (e) The Company's Current Report on Form 8-K filed July 27, 1995. All documents subsequently filed by the Company pursuant to Section 13(a), 13(c), or 14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to the termination of the offering of the Offered Securities shall be deemed to be incorporated by reference in this Prospectus and to be a part hereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein, or in the Prospectus Supplement for the offering of the particular Offered Securities, 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 COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM A COPY OF THIS PROSPECTUS HAS BEEN DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY OF ANY OR ALL OF THE DOCUMENTS REFERRED TO ABOVE WHICH HAVE BEEN OR MAY BE INCORPORATED IN THIS PROSPECTUS BY REFERENCE, OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE INTO THE INFORMATION THAT THE PROSPECTUS INCORPORATES. REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO MS. ROGENE THADEN, TREASURER, NORTHWESTERN PUBLIC SERVICE COMPANY, 33 THIRD STREET S.E., HURON, SOUTH DAKOTA 57350-1318, TELEPHONE NUMBER 605-353-8320. THE COMPANY The Company's principal business is energy distribution. The Company is engaged as an electric and gas utility in generating, transmitting, distributing, and selling electric energy in eastern South Dakota, where it furnishes electric service to approximately 54,900 customers in more than 100 communities and adjacent rural areas and in purchasing, distributing, selling, and transporting natural gas to approximately 75,000 customers in four communities in Nebraska and 56 communities in eastern South Dakota. The Company, through its subsidiaries, is also engaged in certain nonutility operations as more fully discussed under the caption "Nonutility Operations" and has recently contracted to acquire Synergy Group Incorporated, a major propane distribution company. See "Pending Acquisition of Synergy Group Incorporated." The Company was incorporated under the laws of the State of Delaware in 1923 and has its principal office at 33 Third Street SE, Huron, South Dakota 57350-1318. Its telephone number is 605-352-8411. ELECTRIC BUSINESS On a fully consolidated basis, 46% of the Company's 1994 operating revenues were from the sale of electric energy. All of the Company's electric revenues are derived from customers in South Dakota. By customer category, 33% of 1994 total electric sales were from residential sales, 50% were from commercial and industrial sales, 2% was from street lighting and sales to public authorities, and 15% were from sales for resale. The Company has relatively few large customers in its service territory. Sales for resale primarily include power pool sales to other utilities. Power pool sales fluctuate from year to year depending on a number of factors including the Company's availability of excess short-term generation and the ability to sell the excess power to other utilities in the power pool. The Company also sells power and energy at wholesale to certain municipalities for resale and to various governmental agencies. The Company shares in the ownership of the Big Stone Generating Plant ("Big Stone"), located near Big Stone City in northeastern South Dakota, the Coyote I Electric Generating Plant ("Coyote"), located near Beulah, North Dakota, and the Neal Electric Generating Unit #4 ("Neal"), located near Sioux City. At December 31, 1994, the aggregate net summer peaking capacity of all Company owned electric generating units was 309,480 kw, consisting of 105,711 kw from Big Stone (the Company's 23.4% share), 2 42,600 kw from Coyote (the Company's 10.0% share), 54,169 kw from Neal (the Company's 8.7% share), and 107,000 kw from internal combustion turbine units and small diesel units, used primarily for peaking purposes. The Company is a summer peaking utility. The 1994 peak demand of 229,922 kw occurred on July 18, 1994. Total system capability at the time of peak was 309,480 kw. The reserve margin for 1994 was 35%. The minimum reserve margin requirement as determined by the members of the Mid-Continent Area Power Pool, of which the Company is a member, is 15%. The Company has an integrated resource plan to identify how to meet the energy needs of its customers. The plan includes estimates of customer usage and programs to provide for economic, reliable, and timely supplies of energy. The plan does not anticipate the need for additional baseload generating capacity for the Company for at least the next 10 years. All of the Company's baseload plants are fueled by coal. The Company has maintained competitive electric rates when compared to neighboring utilities and has a competitive electric baseload generating production cost, which includes fuel and plant operating expenses, of less than 1.5 CENTS per kilowatt hour. Lignite and sub-bituminous coal were utilized by the Company as fuel for virtually all of the electric energy generated during 1994. The continued delivery of lignite and sub-bituminous coal to the three large steam generating units in which the Company is part owner is reasonably assured by contracts covering various periods of the operating lives of these units. GAS BUSINESS On a fully consolidated basis, 40% of the Company's 1994 operating revenues were from the sale of gas energy. During 1994, the Company derived 56% of its gas revenues from South Dakota and 44% from Nebraska. The Company's peak daily sendout was 128,700 MMBTU. For the year ended December 1994, 44% of the Company's gas sales were from residential customers and 56% of sales were from commercial and industrial sales. During the last five years the Company has expanded its gas distribution operations to serve 29 new communities in South Dakota. The Company owns and operates natural gas distribution systems serving approximately 36,000 customers in eastern South Dakota, for which it purchases gas from various gas marketing firms under gas transportation service agreements with various gas marketing firms. These agreements provide for firm deliverable pipeline capacity of approximately 49,300 MMBTU per day in South Dakota. The Company has service agreements with Northern Natural Gas Company ("NNG") providing for firm transportation of natural gas. While NNG has eliminated nearly all of its gas supply activities, the Company has supply contracts in place and peak shaving capacity to meet its peak day system needs. In Nebraska, the Company owns and operates natural gas distribution systems serving approximately 39,000 retail customers in the village of Alda and the cities of Grand Island, Kearney, and North Platte, Nebraska. The Company purchases much of its natural gas for these systems from KN Gas Supply Co. under a seven-year service agreement entered into in 1993. The Company also purchases certain quantities of gas for its Nebraska customers from various gas marketing firms. These agreements provide for firm deliverable pipeline capacity of approximately 49,600 MMBTU per day in Nebraska. To supplement firm gas supplies, the Company has contracts for underground natural gas storage services to meet the heating season and peak day requirements of its gas customers. In addition, the Company owns and operates six propane-air plants with a total rated capacity of 18,000 MMBTU per day, or approximately 14% of peak day requirements. The propane-air plants provide an economic alternative to pipeline transportation charges to meet the extreme peaks caused by customer demand on extremely cold days. A few of the Company's industrial customers purchase their natural gas requirements directly from gas marketing firms for transportation and delivery through the Company's distribution system. The transportation rates have been designed to make the Company economically indifferent as to whether the Company sells and transports gas or only transports gas. 3 COMPETITION Although the Company's electric service territory is assigned according to the South Dakota Public Utilities Act, and the Company has the right to provide electric service to present and future electric customers in its assigned service area for so long as the service provided is deemed adequate, the energy industry in general has become increasingly competitive. Electric service also competes with other forms of energy and the degree of competition may vary from time to time depending on relative costs and supplies of other forms of energy. The National Energy Policy Act of 1992 was designed to promote energy efficiency and increased competition in the electric wholesale markets. Such Act also allows the Federal Energy Regulatory Commission ("FERC") to order wholesale wheeling by public utilities to provide utility and nonutility generators access to public utility transmission facilitates. The FERC is currently investigating a restructuring of the electric utility industry. Many states are currently considering retail wheeling, which aims to provide all customers with the right to choose their electricity supplier. No regulatory proposals have yet been formally introduced in South Dakota. FERC Order 636 requires, among other provisions, that all companies with natural gas pipelines separate natural gas supply or production services from transportation service and storage businesses. This allows gas distribution companies, such as the Company, and individual customers to purchase gas directly from producers, third parties, and various gas marketing entities and transport it through the suppliers' pipelines. While Order 636 had positive aspects by providing for more diversified supply and storage options, it also required the Company to assume responsibility for the procurement, transportation, and storage of natural gas. The alternatives now available under Order 636 create additional pressure on all distribution companies to keep gas supply and transportation pricing competitive, particularly for large customers. WEATHER Weather fluctuations in the Company's service area have the greatest influence on the Company's revenues from year to year. Typically gas sales peak when colder winter weather patterns create increased winter heating needs while sales decline during warmer winter periods. Electric sales peak during warmer summer periods due to increased air conditioning sales while cooler summer weather patterns produce less sales of electric energy. REGULATION The Company is a "public utility" within the meaning of the Federal Power Act and the South Dakota Public Utilities Act and, as such, is subject to the jurisdiction of, and regulation by, FERC with respect to issuance of securities, the South Dakota Public Utilities Commission ("PUC") with respect to electric service territories, and both FERC and the PUC with respect to rates, service, accounting records, and in other respects. The State of Nebraska has no centralized regulatory agency which has jurisdiction over the Company's operations in that state; however, the Company's natural gas rates are subject to regulation by the municipalities in which it operates. Under the South Dakota Public Utilities Act, enacted in 1975, a requested rate increase may be implemented by the Company 30 days after the date of its filing unless its effectiveness is suspended by the PUC and, in such event, can be implemented subject to refund with interest six months after the date of filing, unless sooner authorized by the PUC. The Company's electric rate schedules provide that it may pass along to all classes of customers qualified increases or decreases in the cost of fuel used in its generating stations and in the cost of fuel included in purchased power. A purchased gas adjustment provision in its gas rate schedules permits the company to pass along to gas customers increases or decreases in the cost of purchased gas. The Company's last electric rate increase amounted to less than 1% in May, 1985. On May 26, 1994, the Company filed for a $2.4 million increase in South Dakota natural gas revenues. As a result of a negotiated settlement with the PUC on November 15, 1994, the Company implemented rates which will produce additional annual natural gas revenues of $2.1 million, assuming normal weather, representing an overall 4 increase of 6.2%. On December 30, 1994, the Company filed for a $2.7 million increase in rates applicable to its Nebraska natural gas service area. Following a negotiated settlement, an annual increase of $2.275 million has been implemented, effective July 1, 1995, an overall increase of 8.7%. CAPITAL SPENDING AND FINANCING The Company's primary capital requirements include the funding of its utility construction and expansion programs, the funding of debt and preferred stock retirements and sinking fund requirements, and the funding of its corporate development and investment activities. Expenditures for regulated utility construction activities for 1994, 1993, and 1992 were $22.7 million, $20.0 million, and $18.5 million. Construction expenditures during the last three years included expenditures related to the installation of an additional 43 mw of internal electric peaking capacity, the expansion of the Company's natural gas system into 29 additional communities in eastern South Dakota, and to construction of an operations center which will provide future cost savings and operating efficiencies through consolidation of activities. Construction expenditures for the Company's regulated utility businesses are estimated to be $19.3 million in 1995. The majority of these projected expenditures will be spent on enhancements of the electric and gas distribution systems and completion of the operations center. Estimated construction expenditures for the Company's regulated utility businesses for the years 1995 through 1999 are expected to be approximately $69 million. Capital requirements for the mandatory retirement of long-term debt and the mandatory preferred stock sinking fund redemption totaled $600,000, $180,000, and $513,000, for the years ended 1994, 1993, and 1992. It is expected that such mandatory retirements will be $600,000 in 1995, $1,080,000 in 1996, $570,000 in 1997, $20.6 million in 1998, and $13.5 million in 1999. NONUTILITY OPERATIONS NORTHWESTERN GROWTH CORPORATION ("NGC"). NGC was incorporated under the laws of South Dakota in 1994 to pursue and manage nonutility investments and development activities. Although the primary focus of NGC's investment program will be to seek growth opportunities in the energy, energy equipment, and energy services industries, NGC is also pursuing opportunities in existing and emerging growth entities in nonenergy industries that meet return and capital gain requirements. Along with a portfolio of marketable securities, NGC's assets include the investments of three subsidiaries: Northwestern Networks, Inc., Northwestern Systems, Inc., and SYN Inc. NORTHWESTERN NETWORKS, INC. ("NNI"). NNI was incorporated in South Dakota in 1986. NNI holds a common stock investment in LodgeNet Entertainment Corporation, a provider of television entertainment and information systems to hotels and motels. NORTHWESTERN SYSTEMS, INC. ("NSI"). NSI was incorporated in South Dakota in 1986. NSI owns all of the common stock ownership in Lucht, Inc., a firm that develops, manufactures, and markets multi-image photographic printers and other related equipment. SYN INC. ("SYN"). SYN, a Delaware corporation, was formed for the purpose of acquiring Synergy Group Incorporated, a major propane distributor. See "Pending Acquisition of Synergy Group Incorporated." GRANT, INC. Grant, Inc., which holds title to property not used in the Company's utility business, was incorporated in South Dakota in 1972. PENDING ACQUISITION OF SYNERGY GROUP INCORPORATED GENERAL On May 17, 1995, SYN entered into a Purchase and Sale Agreement (the "Acquisition Agreement") with Synergy Group Incorporated, a Delaware corporation ("Synergy"), S & J Investments and the stockholders of Synergy (the "Synergy Stockholders"), providing for the acquisition by SYN of Synergy and its 5 subsidiaries and of certain operating equipment which Synergy has been leasing from S & J Investments (the "Acquisition"). NGC, the immediate parent corporation of SYN, joined in the Acquisition Agreement to guarantee SYN's performance thereof. Under the terms of the Acquisition Agreement, the Acquisition is subject to various conditions and approvals, including the accuracy of various representations and warranties made by the sellers as to the business, assets, financial condition and results of operations of Synergy and its subsidiaries, the obtaining of financing needed by SYN for the Acquisition, the issuance of orders by the FERC authorizing the Company's issuance of the securities offered under this Prospectus, the net proceeds from which are to be used to provide such financing for SYN (see "Use of Proceeds"), and the expiration or termination of the waiting period for the Acquisition under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. On June 19, 1995 the FERC issued the required orders and on July 6, 1995 early termination of the Hart-Scott-Rodino waiting period was granted. The Acquisition will be an expansion of the Company's energy distribution business, which currently is primarily regulated electric and gas utility distribution. See "The Company". Two of the Company's corporate objectives are intended to be accomplished through the Acquisition. The immediate objective is to expand the Company's energy distribution business. The second objective is to use the business acquired from Synergy as a base for additional acquisitions in the propane distribution industry which, unlike the Company's electric and gas public utility business, is not regulated as to rates or territory served. The Company is currently considering the acquisition of a small propane distributor. The propane distribution industry currently consists of approximately 8,000 retail propane marketing companies in the continental United States, with propane being the fourth largest source of energy marketed at retail in the United States, following electricity, natural gas and fuel oil. As a result of the factors affecting Synergy's business, see "Business of Synergy", the Company expects that its consolidated revenues and earnings may be subject to increased variability following consummation of the Acquisition. BUSINESS OF SYNERGY Synergy, headquartered in Farmingdale, New York, is a multi-state marketer principally engaged in the retail distribution of propane and other fuels for residential, commercial, industrial, agricultural and other uses. Synergy's propane sales during the past three fiscal years represented approximately 83% of its annual revenues, of which the major portion (approximately 50% of propane sales in the fiscal year ending March 31, 1995) resulted from sales to customers who utilize propane for residential purposes, primarily for home heating, water heating and cooking. The balance of propane sales are primarily for commercial, industrial and agricultural use. Synergy also sells propane for use as engine fuel for forklifts and over-the-road vehicles. Synergy currently maintains 152 retail branches which service approximately 200,000 customers in 23 states, primarily in rural and suburban areas of the Northeast, Mid-Atlantic, Southeast and Southcentral regions of the United States. According to available industry data, Synergy is, based upon volume sold, one of the nation's 10 largest retailers of propane. Synergy also sells gasoline, diesel and aviation fuel, and appliances and equipment which use propane, and is engaged in the sale, repair and leasing of forklift trucks. Synergy purchases propane from major domestic oil companies as well as independent oil and liquid gas producers. These producers ship the propane via pipeline to immediate supply terminals at which Synergy's large transport trucks take delivery and transport the propane to bulk storage tanks. Synergy's fleet of approximately 500 tank trucks delivers the propane from these bulk storage facilities to approximately 193,000 propane storage tanks or cylinders which it leases to its customers and which are located at customer premises. These tanks are used exclusively to hold propane purchased from Synergy, thereby promoting the stability of Synergy's customer base. While the cost and inconvenience of switching tanks tends to minimize switching by customers among suppliers on the basis of minimal price variations, it also makes it more difficult to obtain new customers, other than through acquisitions, in areas where there are existing relationships between potential customers and other distributors. 6 The retail propane industry is mature, with only limited growth in total demand for the product foreseen. The Company expects the overall demand for propane to remain relatively constant over the next several years, with year-to-year industry volumes being impacted primarily by weather patterns. Therefore, Synergy's ability to grow within the industry will be dependent on its ability to acquire other retail distributors, on the success of opening new district locations and on the success of its marketing efforts to acquire new customers. Synergy competes with other distributors of propane, including several major companies and several thousand small independent operators. Synergy's ability to compete effectively depends on the reliability of its service, its responsiveness to customers and its ability to maintain competitive retail prices. Synergy competes for customers against suppliers of electricity, fuel oil and natural gas. In the last two decades, many new homes were built, and older homes converted to use electrical heating systems and appliances. Electricity is a major competitor of propane, but propane generally enjoys a substantial competitive price advantage over electricity. The Company believes that fuel oil does not present a significant competitive threat in Synergy's primary service areas because: (i) propane is a residue-free, cleaner energy source, (ii) environmental concerns make fuel oil relatively unattractive, and (iii) fuel oil appliances generally are not as efficient as propane appliances. Furnaces and appliances that burn propane will not operate on fuel oil, and therefore a conversion from one fuel to the other requires the installation of new equipment. Synergy's customers will have an incentive to switch to fuel oil only if fuel oil becomes significantly less expensive than propane. Synergy generally does not attempt to sell propane in areas served by natural gas distribution systems, except sales for specialized industrial applications because the price per equivalent energy unit of propane is, and has historically been, higher than that of natural gas. To use natural gas, however, a retail customer must be connected to a distribution system provided by a local utility. Natural gas is not expected by management of the Company to create significant competition for Synergy in areas that are not currently served by natural gas distribution systems because of the costs involved in building or connecting to a natural gas distribution system. The propane gas distribution business is affected by economic and other factors, some of which are beyond the control of the Synergy, such as weather conditions. Synergy's business is highly seasonal, with a substantial portion of its revenues customarily being generated during the six month winter period ending in March. Synergy's business was adversely affected by unusually warm winter conditions in fiscal 1995. Warm winter conditions in the future periods may adversely affect Synergy's revenues, operating income and cash flow in such years. The retail propane business is a "margin-based" business in which gross profits are dependent upon the excess of the sales price over the propane supply costs. Propane is a commodity, and, as such, its unit price is subject to changes in response to changes in supply or other market conditions. Consequently, the unit price of propane purchased by Synergy, as well as other marketers, can change rapidly over a short period. In general, product supply contracts permit suppliers to charge posted prices at the time of delivery or the current prices established at major storage points. If rapid increases in the wholesale cost of propane cannot be immediately passed on to retail customers, such increases may reduce margins on retail sales. Consequently, Synergy's profitability will be sensitive to changes in wholesale propane prices. According to public reports filed by Synergy with the Commission, Synergy incurred substantial net losses in each of its last five fiscal years. As a result of such net losses, Synergy has been in default under certain of its debt covenants and the audit report prepared by Synergy's independent accountants relating to Synergy's financial statements for the last two fiscal years noted that Synergy's recurring losses from operations, net capital deficiency and default on certain of its debt "raise substantial doubt about the entity's ability to continue as a going concern." Although Synergy has recorded net losses during each of the last five years, its operating income for the years ended March 31, 1995 and 1994 was approximately $6,492,000 and $4,090,000, respectively. See "Management of Synergy" for a description of the Company's financing plans and anticipated operating efficiencies which the Company believes will substantially improve Synergy's results of operations following the Acquisition. 7 ACQUISITION CONSIDERATION The consideration to be paid by SYN for the Acquisition, in addition to assuming various liabilities of Synergy and its subsidiaries, consists of (i) cash in the amount of $137,500,000, which amount will be subject to adjustment upward or downward according to whether the working capital of Synergy (as specifically defined in the Acquisition Agreement) exceeds or is less than $21,042,000 at the time of closing of the Acquisition, (ii) a promissory note payable by SYN in the principal amount of $1,250,000, and (iii) the issuance to the Synergy Stockholders of 17,500 shares of the Common Stock of SYN (17.5% of the total that will be outstanding) and 2,500 shares of the 15% Series A Cumulative Preferred Stock of SYN (valued at $2,500,000), such shares of preferred stock being part of a series of preferred stock of SYN for which the remaining 50,000 shares are expected to be issued to the Company in exchange for a $50,000,000 portion of the long-term financing which the Company expects to provide to SYN. Substantially all of Synergy's loan indebtedness ($88.2 million) will be paid from the cash portion of the consideration for the Acquisition. MANAGEMENT OF SYNERGY The Acquisition will be made in association with Empire Gas Corporation ("Empire Gas"), a large propane distribution company headquartered in Lebanon, Missouri, which has a management experienced in the retail propane distribution business. NGC and SYN have entered into a management agreement (the "Management Agreement") with Empire Gas, pursuant to which Empire Gas has been engaged to perform the planning and management of the assets and business operations of SYN and its subsidiaries, subject to the direction of the Board of Directors of SYN, following the Acquisition (the "Management Services"). It is planned that, immediately upon the consummation of the Acquisition, substantial changes will be made in the management and operation of the acquired business in order to achieve improvement in the results of operations of the business. NGC and Empire Gas will implement significant cost efficiency measures to reduce Synergy's operating, selling and general and administrative expenses. These measures include the elimination of employee positions, corporate overhead and field location operating expenses. The Synergy headquarters office operations will be consolidated with the Empire Gas corporate offices in Lebanon, Missouri, resulting in substantial expense savings. Another significant portion of the expense reductions is represented by the elimination of compensation and vehicle lease expenses previously paid to the Synergy Stockholders. In addition to operating cost reductions, the Company's post acquisition financing and capitalization plan for Synergy will reduce overall financing expenses and provide capital for growth that was not available prior to the acquisition. See "Northwestern Public Service Company and Synergy Group Incorporated Pro Forma Financial Information." As compensation for the Management Services, SYN will pay Empire Gas a Fixed Fee and a Management Fee. The Fixed Fee is intended to cover Empire Gas' operating overhead in performing the Management Services and initially will be $3,250,000 per annum, subject to adjustment annually based upon increases in the Consumer Price Index. The Management Fee will be at the rate of $500,000 per annum plus 10% of the amount by which the earnings before interest, taxes, depreciation and amortization of SYN and its subsidiaries, on a consolidated basis, exceed certain threshold amounts. At the time of the Acquisition, Empire Gas will purchase 10% of the common stock of SYN for $10,000 and will have an ongoing option to purchase from NGC an additional 20% of the common stock of SYN for $20,000. However, according to the formula stated in another agreement among SYN, Empire Gas and NGC, NGC will be allowed to reacquire from Empire Gas up to 7,500 shares of such common stock of SYN, without payment, if Empire Gas fails to achieve certain cumulative results from the management of SYN and its subsidiaries while the Management Agreement remains in effect. The term of the Management Agreement extends to June 30, 2000 and continues year to year thereafter unless terminated earlier by SYN or Empire Gas. The Management Agreement may be terminated by either party prior to the expiration of the term on any one of several grounds specified in the Agreement. The Management Agreement includes a right of termination by SYN if its operating results do not exceed prescribed thresholds which increase annually as specified therein. In the event the Company receives notice 8 that the Management Agreement will be terminated by Empire Gas, SYN has the right to the use of the personnel and facilities of Empire Gas for a period of up to 18 months following such notice by Empire Gas, while developing an alternative for Empire Gas' services. THIRD PARTY SALE NGC and SYN have entered into a purchase agreement with an unrelated party, granting that party the right to purchase certain of the retail branches to be acquired by SYN from Synergy (the "Third Party Sale"). The third party purchase must occur immediately after the closing of the Acquisition and the purchase price is payable in cash and will be based on the price paid by SYN to Synergy for such outlets. Such cash price is estimated to be approximately $40 million, which would decrease SYN's cash payment for the Acquisition to approximately $100 million, which reduction would be applied to reduce the long-term investment in securities to be issued by SYN to NGC or the Company and the loan to be made by NGC to SYN. CAPITALIZATION OF SYN The capitalization of SYN, taking into account the financing intended to be provided to SYN by the Company and NGC from the net proceeds of certain of the securities being offered pursuant to this Prospectus (see "Use of Proceeds"), is planned to be as follows at the time of the Acquisition closing, assuming consummation of the third party sale: Common Stock (100,000 shares outstanding): NGC (72,500 shares) (1)............................................. $ 72,500 Empire Gas (10,000 shares) (1)...................................... 10,000 Former Synergy Stockholders (17,500 shares) (2)..................... 17,500 $ 100,000 15% Series A Cumulative Preferred Stock (52,500 shares outstanding): NGC (50,000 shares)................................................. $ 50,000,000 Former Synergy Stockholders (2,500 shares) (2)...................... 2,500,000 $ 52,500,000 Long Term Debt: Secured Term Loan from NGC (3)...................................... $ 52,500,000 Total Capitalization.............................................. $105,100,000 - ------------------------ (1) Empire Gas has an option to purchase 20,000 of the shares owned by NGC for a price of $1 per share. (2) Issued to Former Synergy Stockholders as part of Acquisition consideration. (3) The Company anticipates that SYN will obtain a bank borrowing facility to fund SYN's working capital needs.
9 NORTHWESTERN PUBLIC SERVICE COMPANY AND SYNERGY GROUP INCORPORATED PRO FORMA FINANCIAL INFORMATION Set forth below are summary financial data extracted from the audited consolidated statement of operations of the Company for the year ended December 31, 1994, the unaudited consolidated financial statements of the Company as of March 31, 1995, and for the three months then ended; the summary financial data extracted from the unaudited statement of operations of Synergy for the 12 months ended December 31, 1994 and for the three months ended March 31, 1995, and balance sheet information as of March 31, 1995; and the pro forma financial information for the Company ("the Pro Forma Financial Information") for the year ended December 31, 1994, for the three months ended March 31, 1995, and as of March 31, 1995, based on such historical financial statements, to illustrate the effects of the Acquisition. The Pro Forma Financial Information illustrates the effects of the Acquisition as adjusted to give effect to the Third Party Sale. (See "Pending Acquisition of Synergy Group Incorporated.") The Acquisition will be accounted for using the purchase method of accounting. After the Acquisition, the total purchase price of the Acquisition will be allocated to Synergy's tangible and intangible assets and liabilities based upon their respective fair values. The allocation of the aggregate purchase price included in the Pro Forma Financial Information is preliminary, but the final allocation of the purchase price is not expected to differ materially from the preliminary allocation. The financing plan to be executed for the funding of the Acquisition is expected to be as presented in the Pro Forma Financial Information. Although market conditions may impact certain financing options and assumptions as to interest and dividend rates, the overall financing plan is not expected to vary materially from that presented. The pro forma statements of operations for the year ended December 31, 1994 and for the three months ended March 31, 1995, give effect to the Acquisition, and the related transactions as if they had occurred on January 1, 1994. The pro forma balance sheet as of March 31, 1995 has been prepared as if the transaction had occurred on that date. The pro forma financial information does not purport to present the financial position or results of operations of the Company had the Acquisition actually been completed as of the dates indicated. In addition, the pro forma financial information is not necessarily indicative of future results of operations and should be read in conjunction with the historical consolidated financial statements of the Company incorporated by reference herein. 10 UNAUDITED PRO FORMA STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1994 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ESTIMATED EFFECTS OF PARTIAL SALE OF ASSETS TO NPS SYNERGY UNRELATED PRO FORMA HISTORICAL HISTORICAL THIRD PARTY(A) SUBTOTAL ADJUSTMENT PRO FORMA ---------- ---------- -------------- -------- ----------- --------- Operating Revenue............................ $ 157,266 $ 128,182 $(28,814) $256,634 -- $256,634 Cost of Product Sold......................... 80,457 62,242 (14,748) 127,951 -- 127,951 ---------- ---------- -------------- -------- ----------- --------- Gross Profit................................. 76,809 65,940 (14,066) 128,683 -- 128,683 ---------- ---------- -------------- -------- ----------- --------- Operating Costs and Expenses Operating and maintenance expenses......... 18,191 44,663 (10,046) 52,808 $(4,181)(B) 48,627 General and administrative................. 9,707 14,239 -- 23,946 (4,944)(B) 19,002 Depreciation and amortization.............. 12,439 4,983 (905) 16,517 448(C) 16,965 Property and other taxes................... 6,104 -- -- 6,104 -- 6,104 ---------- ---------- -------------- -------- ----------- --------- 46,441 63,885 (10,951) 99,375 (8,677) 90,698 ---------- ---------- -------------- -------- ----------- --------- Operating Income............................. 30,368 2,055 (3,115) 29,308 8,677 37,985 ---------- ---------- -------------- -------- ----------- --------- Other Income (Expense) Investment income and other................ 2,611 1,185 -- 3,796 -- 3,796 Interest expense........................... (9,670) (11,994) -- (21,664) 7,504(D) (14,160) Debt restructuring costs................... -- (2,976)(G) -- (2,976) -- (2,976) ---------- ---------- -------------- -------- ----------- --------- (7,059) (13,785) -- (20,844) 7,504 (13,340) ---------- ---------- -------------- -------- ----------- --------- Income (Loss) Before Income Taxes............ 23,309 (11,730) (3,115) 8,464 16,181 24,645 Provision (Credit) for Income Taxes.......... 7,869 (324) (94) 7,451 (269)(E) 7,182 ---------- ---------- -------------- -------- ----------- --------- Net Income................................. 15,440 (11,406) (3,021) 1,013 16,450 17,463 Dividends on Preferred Stock................. (120) -- -- (120) (2,043)(F) (2,163) ---------- ---------- -------------- -------- ----------- --------- Net Income Available for Common............ $ 15,320 $ (11,406) $ (3,021) $ 893 $14,407 $ 15,300(G) ---------- ---------- -------------- -------- ----------- --------- ---------- ---------- -------------- -------- ----------- --------- Net Income per Share......................... $ 2.00 $ 1.74(G) ---------- --------- ---------- --------- Weighted Average Shares Outstanding.......... 7,677 8,805 ---------- --------- ---------- --------- Selected Financial Ratios Interest coverage.......................... 5.14(H) 4.65 ---------- --------- ---------- --------- Ratio of earnings to fixed charges......... 3.39(H) 2.73(G) ---------- --------- ---------- --------- Ratio of earnings to fixed charges, including preferred dividends............. 3.33(H) 2.25(G) ---------- --------- ---------- ---------
11 UNAUDITED PRO FORMA STATEMENT OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1995 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ESTIMATED EFFECTS OF PARTIAL SALE OF ASSETS TO NPS SYNERGY UNRELATED PRO FORMA HISTORICAL HISTORICAL THIRD PARTY(A) SUBTOTAL ADJUSTMENT PRO FORMA ---------- ---------- -------------- -------- ----------- --------- Operating Revenue............................ $ 50,754 $ 42,816 ($10,958) $ 82,612 $-- $ 82,612 Cost of Product Sold......................... 26,185 20,907 (6,001) 41,091 -- 41,091 ---------- ---------- -------------- -------- ----------- --------- 24,569 21,909 (4,957) 41,521 -- 41,521 ---------- ---------- -------------- -------- ----------- --------- Operating Costs and Expenses Operating and maintenance expenses......... 4,210 11,889 (2,819) 13,280 197(B) 13,477 General and administrative................. 2,594 (159)(G) -- 2,435 (690)(B) 1,745 Depreciation and amortization.............. 3,210 1,476 (220) 4,466 72(C) 4,538 Property and other taxes................... 1,673 -- -- 1,673 -- 1,673 ---------- ---------- -------------- -------- ----------- --------- 11,687 13,206 (3,039) 21,854 (421) 21,433 ---------- ---------- -------------- -------- ----------- --------- Operating Income............................. 12,882 8,703 (1,918) 19,667 421 20,088 ---------- ---------- -------------- -------- ----------- --------- Other Income (Expense) Investment income and other................ 565 172 -- 737 -- 737 Interest expense........................... (2,590) (2,390) -- (4,980) 1,267(D) (3,713) Debt restructuring costs................... -- (24) -- (24) -- (24) ---------- ---------- -------------- -------- ----------- --------- (2,025) (2,242) -- (4,267) 1,267 (3,000) ---------- ---------- -------------- -------- ----------- --------- Income (Loss) Before Income Taxes............ 10,857 6,461 (1,918) 15,400 1,688 17,088 Provision (Credit) for Income Taxes.......... 3,754 (224) -- 3,530 (282)(E) 3,248 ---------- ---------- -------------- -------- ----------- --------- Net Income................................... 7,103 6,685 (1,918) 11,870 1,970 13,840 Dividends on Preferred Stock................. (30) -- -- (30) (511)(F) (541) ---------- ---------- -------------- -------- ----------- --------- Net Income Available for Common.............. $ 7,073 $ 6,685 ($ 1,918) $ 11,840 $ 1,459 $ 13,299(G) ---------- ---------- -------------- -------- ----------- --------- ---------- ---------- -------------- -------- ----------- --------- Net Income per Share......................... $ 0.92 $ 1.51(G) ---------- --------- ---------- --------- Weighted Average Shares Outstanding.......... 7,677 8,805 ---------- --------- ---------- --------- Selected Financial Ratios Interest coverage.......................... 7.53(H) 6.68 ---------- --------- ---------- --------- Ratio of earnings to fixed charges........... 5.09(H) 5.52(G) ---------- --------- ---------- --------- Ratio of earnings to fixed charges, including preferred dividends......................... 5.00(H) 4.69(G) ---------- --------- ---------- --------- - ------------------------ Note: The results of operations for Synergy for the three months ended March 31, 1995 are not indicative of a full year's results of operations.
12 UNAUDITED PRO FORMA BALANCE SHEET MARCH 31, 1995 (DOLLARS IN THOUSANDS)
ESTIMATED SALE OF CERTAIN ASSETS TO NPS SYNERGY UNRELATED PRO FORMA HISTORICAL HISTORICAL THIRD PARTY(I) SUBTOTAL ADJUSTMENT PRO FORMA ---------- ---------- -------------- -------- ----------- --------- Current Assets Cash....................................... $ 3,338 $ 4,117 $ 40,000 $ 47,455 ($40,000)(J) $ 7,455 Trade receivables.......................... 13,890 16,677 (4,598) 25,969 (990)(K) 24,979 Inventories................................ 13,332 10,607 (2,393) 21,546 (1,500)(K) 20,046 Prepaid expenses........................... -- 1,137 -- 1,137 -- 1,137 Other...................................... 5,765 -- -- 5,765 -- 5,765 ---------- ---------- -------------- -------- ----------- --------- 36,325 32,538 33,009 101,872 (42,490) 59,382 ---------- ---------- -------------- -------- ----------- --------- Property and Equipment At cost, net of accumulated depreciation... 252,806 70,045 (13,685) 309,166 7,140(K) 316,306 ---------- ---------- -------------- -------- ----------- --------- Other Assets (net) Goodwill and other intangibles............. -- 2,348 (19,324) (16,976) 54,422(K) 37,446 Other...................................... 74,301 1,014 -- 75,315 (1,014)(K) 74,301 ---------- ---------- -------------- -------- ----------- --------- 74,301 3,362 (19,324) 58,339 53,408 111,747 ---------- ---------- -------------- -------- ----------- --------- Total Assets............................... $ 363,432 $ 105,945 $-- $469,377 $ 18,058 $487,435 ---------- ---------- -------------- -------- ----------- --------- ---------- ---------- -------------- -------- ----------- --------- Current Liabilities Commercial paper........................... $ 6,000 $ -- $-- $ 6,000 $ -- $ 6,000 Current maturities of long-term debt....... 570 88,387 -- 88,957 (88,387)(L) 570 Accounts payable and accrued expenses...... 29,699 10,540 -- 40,239 5,455(K) 45,694 ---------- ---------- -------------- -------- ----------- --------- 36,269 98,927 -- 135,196 (82,932) 52,264 ---------- ---------- -------------- -------- ----------- --------- Other Liabilities Deferred income taxes...................... 37,742 2,093 -- 39,835 (1,720)(L) 38,115 Unamortized investment tax credits......... 10,444 -- -- 10,444 -- 10,444 Deferred interest payable.................. -- 1,030 -- 1,030 (1,030)(L) -- Other...................................... 27,862 935 -- 28,797 -- 28,797 ---------- ---------- -------------- -------- ----------- --------- 76,048 4,058 -- 80,106 (2,750) 77,356 ---------- ---------- -------------- -------- ----------- --------- Long Term Debt............................... 129,318 4,330 -- 133,648 47,374(M) 181,022 ---------- ---------- -------------- -------- ----------- --------- Company-Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trust.... -- -- -- -- 24,212(N) 24,212 ---------- ---------- -------------- -------- ----------- --------- Cumulative Preferred Stock................... 2,640 41,700 -- 44,340 (41,700)(Q) 2,640 ---------- ---------- -------------- -------- ----------- --------- Common Stock Equity (Deficit) Common stock............................... 26,870 41 -- 26,911 4,268(O) 31,179 Additional paid-in capital................... 29,923 5,284 -- 35,207 21,191(P) 56,398 Retained earnings.......................... 59,183 (48,395) -- 10,788 48,395(Q) 59,183 Unrealized gain on investments, net........ 3,181 -- -- 3,181 -- 3,181 ---------- ---------- -------------- -------- ----------- --------- 119,157 (43,070) -- 76,087 73,854 149,941 ---------- ---------- -------------- -------- ----------- --------- Total Liabilities & Stockholders Equity.... $ 363,432 $ 105,945 -- $469,377 $ 18,058 $487,435 ---------- ---------- -------------- -------- ----------- --------- ---------- ---------- -------------- -------- ----------- ---------
13 NOTES TO PRO FORMA FINANCIAL INFORMATION A) Represents all relevant statement of operations effects, net of income taxes, generated by the expected sale of certain Synergy properties to an unrelated third party. Although a purchase agreement to sell certain properties has been executed and it is anticipated that such transaction will be consummated, in the event the Third Party Sale is not closed, pro forma net income available for common would have been $15,343,000 and $14,040,000; and pro forma net income per common share would have been $1.73 and $1.58 for the year ended December 31, 1994 and for the three months ended March 31, 1995, respectively. The following represents the estimated impact on pro forma net income available for common as presented if the sale does not occur (in thousands):
YEAR THREE ENDED MONTHS 12/31/94 ENDED --------- 3/31/95 INCREASE ----------- (DECREASE) Pro forma net income available for common as presented........................... $ 15,300 $ 13,299 --------- ----------- 1) Operating income retained............................................ 3,115 1,918 2) Additional reductions in operating costs and expenses................ 610 153 3) Increased general and administrative charge.......................... (750) (188) 4) Increased interest expense........................................... (1,934) (483) 5) Increased income tax expense......................................... (180) (455) 6) Increased dividends on preferred stock............................... (818) (204) --------- ----------- Subtotal........................................................... 43 741 --------- ----------- Pro forma net income available for common without sale to third party............ $ 15,343 $ 14,040 --------- ----------- --------- -----------
The following represents the estimated impact on the pro forma balance sheet at March 31, 1995 as presented if the sale does not occur (in thousands):
3/31/95 ----------- INCREASE (DECREASE) 1) Trade receivables................................................... $ 4,598 2) Inventories......................................................... 2,393 3) Property and equipment, net......................................... 13,685 4) Goodwill............................................................ 19,324 ----------- Total Assets...................................................... $ 40,000 ----------- ----------- 1) Long-term debt...................................................... 28,000 2) Common stock........................................................ 2,000 3) Preferred stock..................................................... 10,000 ----------- Total Liabilities & Equity........................................ $ 40,000 ----------- -----------
14 NOTES TO PRO FORMA FINANCIAL INFORMATION B) Represents the following breakdown of reductions in operating costs and expenses principally related to employee positions, corporate administrative expenses and certain other specifically identified cost savings (in thousands):
YEAR ENDED THREE 12/31/94 MONTHS ----------- ENDED 3/31/95 INCREASE ----------- (DECREASE) Operating expenses -- 1) Employee related expenses................................................... $ (1,834) $ (458) 2) Vehicle lease expenses...................................................... (2,047) 730 3) Store consolidations........................................................ (300) (75) ----------- ----------- Total..................................................................... $ (4,181) $ 197 ----------- ----------- ----------- ----------- General and administrative expenses -- 1) Employee related expenses................................................... $ (7,863) $ (1,431) 2) Occupancy costs............................................................. (643) (151) 3) Bank account charges........................................................ (188) (45) 4) Empire Gas general and administrative charge................................ 3,250 812 5) Empire Gas management fee................................................... 500 125 ----------- ----------- Total..................................................................... $ (4,944) $ (690) ----------- ----------- ----------- -----------
All general and administrative functions previously performed at Synergy headquarters would be undertaken by Empire Gas, Inc. under a management agreement governing the operation of the Synergy properties. (See "Pending Acquisition of Synergy Group Incorporated.") Under the terms of the management agreement, Empire Gas will be compensated through a general and administrative charge and a management fee arrangement. The vehicle lease expenses are primarily attributable to property owned by affiliates of existing Synergy shareholders. Such property will be purchased as a part of the acquisition transaction. The increase in lease expense for the three months ended March 31, 1995 reflects the net effect of the elimination of such lease expense and a reversal of the credit to expense created by a $1,328,000 forgiveness by these same affiliates of accrued rental obligations. In addition, general and administrative expense savings include shareholder compensation. C) Represents additional depreciation and amortization of fixed assets and intangibles related to the adjustment of assets to fair market value in accordance with the purchase method of accounting. D) Represents interest expense savings associated with the retirement of Synergy's debt as a result of the Acquisition net of additional interest expense related to NPS issuing new debt securities. 15 NOTES TO PRO FORMA FINANCIAL INFORMATION The following table presents a reconciliation of the pro forma interest expense to the historical interest expense for the year ended December 31, 1994, and the three months ended March 31, 1995 (in thousands):
THREE MONTHS YEAR ENDED ENDED 12/31/94 3/31/95 ---------- --------- Historical interest expense -- NPS....................................................................................... $ 9,670 $ 2,590 Synergy................................................................................... 11,994 2,390 ---------- --------- 21,664 4,980 ---------- --------- Add: Interest on short-term bridge financing at an assumed rate of 7.5%.................... 649 162 Interest on new debt securities issued for permanent financing at an assumed rate of 7.5%.................................................................................. 3,639 910 Less: Interest on retired long-term debt of Synergy.................................. (11,792) (2,339) ---------- --------- Pro forma adjustment........................................................................ (7,504) (1,267) ---------- --------- Pro forma interest expense.................................................................. $ 14,160 $ 3,713 ---------- --------- ---------- ---------
E) Represents income tax effect of all pro forma adjustments. Such adjustments assume Synergy will be a separate income tax filing and reporting entity. F) Represents preferred stock dividend requirements related to the issuance of new securities as part of the permanent financing. This dividend requirement is based on an 8.5% pretax rate. G) The net income of Synergy for the year ended December 31, 1994 includes a nonrecurring charge of $2,976,000 for debt restructing costs. Had the debt restructuring not occurred, pro forma net income available for common would have been $18,276,000; pro forma net income per common share would have been $2.08; ratio of earnings to fixed charges would have been 2.94x; and ratio of fixed charges, including preferred dividends would have been 2.42x for the year ended December 31, 1994. The net income of Synergy for the three months ended March 31, 1995 includes a nonrecurring credit to general and administrative expense of $4,326,000 for the reversal of previously accrued shareholders' compensation. Had this compensation adjustment not been made, pro forma net income available for common would have been $8,973,000; pro forma net income per common share would been $1.02; ratio of earnings to fixed charges would have been 4.38x and ratio of earnings to fixed charges, including preferred dividends would have been 3.68x for the three months ended March 31, 1995. In accordance with the current guidelines of the SEC, no minority interest has been recognized even though NPS will initially own 72.5% of the common stock of SYN. H) The Company has calculated the interest coverage ratio pursuant to the Company's general mortgage indenture and has calculated the ratio of earnings to fixed charges pursuant to Item 503 of the Commission's Regulation S-K. I) Represents the sale of certain assets to an unrelated third party in a separate transaction. J) Represents cash purchase price from the unrelated third party sale proceeds. K) Represents various purchase accounting adjustments to be accounted for in accordance with the purchase method of accounting. 16 NOTES TO PRO FORMA FINANCIAL INFORMATION The following is a detailed allocation of the purchase price and source of funds, net of underwriting fees, related to the acquisition transaction (in thousands): Purchase price.......................................................... $ 140,000 Add: Debt, acquisition, and transition costs........................... 5,000 --------- Total............................................................... 145,000 Less: Sale to an unrelated third party................................. 40,000 --------- Adjusted purchase price................................................. $ 105,000 --------- --------- Allocation of purchase price -- Cash.................................................................. $ 4,117 Trade receivables..................................................... 11,089 Inventories........................................................... 6,714 Prepaid expenses and other............................................ 1,137 Property, plant, and equipment........................................ 63,500 Goodwill and other intangibles........................................ 37,446 Accounts payable and accrued expenses................................. (15,995) Customer deposits..................................................... (935) Deferred income tax................................................... (373) Long-term debt........................................................ (1,700) --------- Net assets acquired................................................. $ 105,000 --------- --------- Source of funds, net -- Long-term debt........................................................ $ 50,004 Company-Obligated Mandatorily Redeemable Preferred Securities of Trust Subsidiary........................................................... 24,212 Common stock.......................................................... 30,784 --------- Total............................................................... $ 105,000 --------- ---------
L) Represents liabilities and other deferred credits that would be paid with proceeds of the transaction. M) Represents the following debt restructuring of the combined companies (in thousands): Historical long-term debt -- NPS................................................................... $ 129,318 Synergy............................................................... 4,330 --------- Total............................................................... 133,648 --------- Add: New debt offering................................................. 50,004 Less: Retirement of Synergy long-term debt............................. (2,630) --------- Pro forma adjustment.................................................. 47,374 --------- Pro forma long-term debt.............................................. $ 181,022 --------- ---------
N) Represents the net proceeds expected to be generated by a Company-Obligated Mandatorily Redeemable Preferred Securities of Trust Subsidiary offering that is part of the permanent financing. All of the assets of NWPS Capital, the subsidiary trust, will be approximately $31 million of Subordinated Debt Securities of the Company which will bear interest at a rate of % per annum, assuming the issuance of 1.2 million Preferred Securities. Pro Forma amounts shown in the table reflect the portion of the estimated net proceeds of the offering of Preferred Securities to be used to fund the Acquisition. O) Represents the combination of purchase accounting adjustments eliminating Synergy's common stock investment of $41,000 against the par value of shares expected to be sold in a common stock offering that is part of the permanent financing. 17 NOTES TO PRO FORMA FINANCIAL INFORMATION The following provides a summary of the net adjustment (in thousands): Par value of shares generated from NPS common stock offering.............. $ 4,309 Less: elimination of Synergy common stock................................ (41) --------- Net..................................................................... $ 4,268 --------- ---------
P) Represents the combination of purchase accounting adjustments eliminating Synergy's additional paid-in capital of $5,284,000 against the net proceeds expected to be allocated to NPS additional paid-in capital as a result of the common stock offering that is part of the permanent financing. The following provides a summary of the net adjustment (in thousands): Net allocation to additional paid-in capital from NPS common stock offering................................................................ $ 26,475 Less: elimination of Synergy additional paid-in capital................. (5,284) --------- Net.................................................................... $ 21,191 --------- ---------
Q) Represents the elimination of Synergy's remaining equity accounts. 18 THE NWPS TRUSTS Each of NWPS Capital Financing I, NWPS Capital Financing II and NWPS Capital Financing III is a statutory business trust formed under Delaware law pursuant to (i) a separate declaration of trust ( each, a "Declaration") executed by the Company, as sponsor for such trust (the "Sponsor"), and the NWPS Trustees (as defined below) of such trust and (ii) the filing of a separate certificate of trust with the Secretary of State of the State of Delaware on June 19, 1995. Each NWPS Trust exists for the exclusive purposes of (i) issuing the Preferred Securities and common securities representing undivided beneficial interests in the assets of such NWPS Trust (the "Common Securities" and, together with the Preferred Securities, the "Trust Securities"), (ii) investing the gross proceeds from the sale of the Trust Securities in the Subordinated Debt Securities of the Company and (iii) engaging in only those other activities necessary or incidental thereto. All of the Common Securities will be directly or indirectly owned by the Company. The Common Securities will rank pari passu, and payments will be made thereon pro rata, with the Preferred Securities, except that, upon an event of default under the Declaration, the rights of the holders of the Common Securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise will be subordinated to the rights of the holders of the Preferred Securities. The Company will directly or indirectly acquire Common Securities in an aggregate liquidation amount equal to 3% of the total capital of each NWPS Trust. Each NWPS Trust has a term of approximately 55 years but may terminate earlier, as provided in each Declaration. The business and affairs of each NWPS Trust will be conducted by the trustees (the "NWPS Trustees") appointed by the Company as the direct or indirect holder of all the Common Securities. The holder of the Common Securities will be entitled to appoint, remove or replace any of, or increase or reduce the number of, the NWPS Trustees of a NWPS Trust. The duties and obligations of the NWPS Trustees for each NWPS Trust shall be governed by the Declaration for such trust. A majority of the NWPS Trustees will be persons who are employees or officers of or who are affiliated with the Company (the "Regular Trustees"). In certain limited circumstances set forth in the Prospectus Supplement for the Preferred Securities, the holders of a majority in liquidation amount of the Preferred Securities will be entitled to appoint one additional Regular Trustee who need not be an employee or officer of or otherwise affiliated with the Company. One NWPS Trustee of each NWPS Trust will be a financial institution that is not affiliated with the Company and has a specified minimum amount of aggregate capital, surplus, and undivided profits of not less than $50,000,000, which shall act as property trustee and as indenture trustee for the purposes of the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), pursuant to the terms set forth in the Prospectus Supplement for the Preferred Securities (the "Property Trustee"). In addition, unless the Property Trustee maintains a principal place of business in the State of Delaware and otherwise meets the requirements of applicable law, one NWPS Trustee of each NWPS Trust will have a principal place of business or reside in the State of Delaware (the "Delaware Trustee"). The Company will pay all fees and expenses related to the NWPS Trusts and the offering of the Trust Securities, the payment of which will be guaranteed by the Company as described under "Description of the Guarantees" herein. The Delaware Trustee for each NWPS Trust is Wilmington Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890. The principal place of business of each NWPS Trust is c/o the Company, 33 Third Street S.E., Huron, South Dakota, 57350-1318, telephone (605) 352-8411. 19 USE OF PROCEEDS If the Third Party Sale is consummated, the net proceeds from the sale of $102.5 million of the Offered Securities will be applied to fund the Acquisition, including certain transaction expenses. The Company will use $50 million of the net proceeds to purchase 50,000 shares of the 15% Series A Cumulative Preferred Stock of SYN, the subsidiary of the Company formed to effect the Acquisition, and $52.5 million of the net proceeds will be loaned by the Company to SYN. If the Third Party Sale is not consummated, the net proceeds from the sale of $142,500,000 of the Offered Securities will be applied to fund the Acquisition, including certain transaction expenses. In that case the Company will use $68 million of the net proceeds to purchase 68,000 shares of the 15% Series A Cumulative Preferred Stock of SYN and $74.5 million of the net proceeds will be loaned by NGC to SYN. Each NWPS Trust will use all of the proceeds received from the sale of its Preferred Securities to purchase Subordinated Debt Securities from the Company. The Company intends to add the net proceeds from the sale of the Subordinated Debt Securities to its general funds, to be used to fund the Acquisition, as described above, and for other general corporate purposes, as described below. The net proceeds from the sale of any other Offered Securities will be used for general corporate purposes, which may include the repayment of indebtedness, working capital expenditures and other investments in, or acquisitions of, businesses and assets. Pending application of such net proceeds for specific purposes, such proceeds may be invested in short-term or marketable securities. Specific allocations of proceeds to a particular purpose that have been made at the date of any Prospectus Supplement will be described therein. In the event the Acquisition is not consummated, the net proceeds from the sale of the Offered Securities will be used to redeem or acquire and retire outstanding First Mortgage Bonds (as defined under "Description of the Mortgage Bonds"), repay short term debt, and for other general corporate purposes, as described above. RATIO OF EARNINGS TO FIXED CHARGES AND EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS The following table sets forth the ratios of earnings to fixed charges and earnings to combined fixed charges and preferred dividends for the Company on an historical basis for the fiscal years ended December 31, 1994, 1993, 1992, 1991 and 1990, and for the three-month period ended March 31, 1995. Such ratios are also presented on a pro forma basis for the year ended December 31, 1994 and the three-month period ended March 31, 1995. For the purpose of calculating such ratios, "earnings" consist of income from continuing operations before income taxes, "fixed charges" consist of interest on all indebtedness, amortization of debt expense and the percentage of rental expense on operating leases deemed representative of the interest factor and "preferred dividends" represent dividends paid on all preferred shares outstanding during the periods. See "Northwestern Public Service Company and Synergy Group Incorporated Pro Forma Financial Information" for the assumptions upon which the pro forma ratios are based.
YEAR ENDED DECEMBER 31, QUARTER ENDED --------------------------------------------------------------- MARCH 31, 1990 1991 1992 1993 1994 1995 ----- ----- ----- ----- ----- ------------- Ratio of Earnings to Fixed Charges....... 4.61 4.09 3.42 3.52 3.39 5.09 Ratio of Earnings to Combined Fixed Charges and Preferred Dividends......... 4.28 3.79 3.33 3.45 3.33 5.00 PRO FORMA -------------------------------- YEAR ENDED QUARTER ENDED DECEMBER 31, MARCH 31, 1994 1995 ----------------- ------------- Ratio of Earnings to Fixed Charges....... 2.73 5.52 Ratio of Earnings to Combined Fixed Charges and Preferred Dividends......... 2.25 4.69
DESCRIPTION OF THE MORTGAGE BONDS GENERAL The Mortgage Bonds will be bonds, notes or other evidences of indebtedness authenticated and delivered under a General Mortgage Indenture and Deed of Trust, between the Company and The Chase 20 Manhattan Bank (N.A.) (the "New Mortgage Trustee"), dated as of August 1, 1993. The New Mortgage Trustee shall act as indenture trustee for the purposes of the Trust Indenture Act of 1939, as amended. Such General Mortgage and Deed of Trust, as supplemented by various supplemental indentures, including one or more supplemental indentures relating to the Mortgage Bonds, is hereinafter referred to as the "New Mortgage." The summaries under this heading do not purport to be complete and are subject to the detailed provisions of the New Mortgage. Capitalized terms used under this heading which are not otherwise defined in this Prospectus shall have the meanings ascribed thereto in the New Mortgage. Wherever particular provisions of the New Mortgage or terms defined therein are referred to, such provisions or definitions are incorporated by reference as a part of the statements made herein and such statements are qualified in their entirety by such reference. References to article and section numbers in this description of the Mortgage Bonds, unless otherwise indicated, are references to article and section numbers of the New Mortgage. The New Mortgage provides that additional bonds may be issued thereunder on the basis of Pledged Bonds (as hereinafter defined), property additions, retired bonds and cash. (See "Issuance of Additional Mortgage Bonds" below.) The Mortgage Bonds and all other bonds heretofore or hereafter issued under the New Mortgage are collectively referred to herein as the "Mortgage Bonds." Reference is made to the Prospectus Supplement for the Mortgage Bonds for a description of the following terms of the series of Mortgage Bonds in respect of which this Prospectus is being delivered: (i) the title (series designation) of such Mortgage Bonds; (ii) the limit, if any, upon the aggregate principal amount of such Mortgage Bonds, (iii) the date or dates on which the principal of such Mortgage Bonds is payable; (iv) the rate or rates at which such Mortgage Bonds will bear interest, if any; the date or dates from which such interest will accrue; the dates on which such interest will be payable ("Interest Payment Dates") and the regular record dates for the interest payable on such Interest Payment Dates; (v) the bases on which the Mortgage Bonds will be issued; (vi) the option, if any, of the Company to redeem such Mortgage Bonds and the periods within which or the dates on which, the prices at which and the terms and conditions upon which, such Mortgage Bonds may be redeemed, in whole or in part, upon the exercise of such option; (vii) the obligation, if any, of the Company to redeem or purchase such Mortgage Bonds pursuant to any sinking fund or analogous provisions or at the option of the Holder and the periods within which or the dates on which, the prices at which and the terms and conditions upon which such Mortgage Bonds will be redeemed, in whole or in part, pursuant to such obligation; (viii) the denominations in which such Mortgage Bonds will be issuable; and (ix) any other terms of such Mortgage Bonds not inconsistent with the provisions of the New Mortgage. While the New Mortgage contains provisions for the maintenance of the Mortgaged Property, it does not contain any provisions for a maintenance or sinking fund and, except as may be provided in a Supplemental Indenture (and described in the applicable Prospectus Supplement), there will be no provisions for any such funds for the Mortgage Bonds. REDEMPTION OF THE MORTGAGE BONDS Any terms for the optional or mandatory redemption of Mortgage Bonds will be set forth in the Prospectus Supplement. Except as shall otherwise be provided in the applicable Prospectus Supplement with respect to Mortgage Bonds redeemable at the option of the Holder, Mortgage Bonds will be redeemable only upon notice by mail not less than 30 days prior to the date fixed for redemption, and, if less than all the Mortgage Bonds of a series, or any tranche thereof, are to be redeemed, the particular Mortgage Bonds to be redeemed will be selected by such method as shall be provided for the particular series or tranche, or in the absence of any such provision, by such method as the Bond Registrar deems fair and appropriate. (See Sections 5.03 and 5.04.) Any notice of redemption at the option of the Company may state that such redemption shall be conditioned upon receipt by the New Mortgage Trustee, on or prior to the dated fixed for such redemption, of money sufficient to pay the principal of and premium, if any, and interest, if any, on such Mortgage Bonds and that if such money has not been so received, such notice will be of no force and effect and the Company will not be required to redeem such Mortgage Bonds. (See Section 5.04.) 21 SECURITY GENERAL. Except as discussed below, Mortgage Bonds now or hereafter issued under the New Mortgage will be secured primarily by: (a) bonds ("First Mortgage Bonds") issued under the Company's Indenture dated August 1, 1940 (the "First Mortgage"), to The Chase Manhattan Bank (National Association), successor by merger to The Chase National Bank of the City of New York, as trustee (the "First Mortgage Trustee"), and C. J. Heinzelmann, successor to Carl E. Buckley, as individual trustee, and delivered to the New Mortgage Trustee under the New Mortgage, which First Mortgage Bonds will be secured, equally and ratably with all other bonds issued under the First Mortgage, by a valid first lien on substantially all of the fixed property, franchises and rights of the Company of a character not expressly excepted from the lien (which excepted property consists principally of cash, securities, receivables, personal property held for sale or lease or consumable in operations, and certain real estate held for resale and not used or useful in the public utility business of the Company), subject to permitted encumbrances and liens as defined in the First Mortgage; and (b) the lien of the New Mortgage on the Company's properties used in the generation, production, transmission or distribution of electricity or the distribution of gas in any form and for any purpose in the States of South Dakota or Nebraska, together with the properties owned by the Company as of August 1, 1993 located in the States of North Dakota and Iowa which consist principally of shared ownership interests in electric generating facilities (the Company does not serve customers in the States of North Dakota and Iowa), but not, unless the Company otherwise elects, any future acquired properties in the States of North Dakota and Iowa, which lien is junior to the lien of the First Mortgage. As discussed below under "Pledged Bonds," following a merger or consolidation of another corporation into the Company, the Company could deliver to the New Mortgage Trustee bonds issued under an existing mortgage on the properties of such other corporation in lieu of or in addition to bonds issued under the First Mortgage. In such event, the Mortgage Bonds would be secured, additionally, by such bonds and by the lien of the New Mortgage on the properties of such other corporation, which would be junior to the liens of such existing mortgage and the First Mortgage. The First Mortgage and all such other mortgages are hereinafter, collectively, called the "Class "A" Mortgages," and all bonds issued under the Class "A" Mortgages and delivered to the New Mortgage Trustee are hereinafter collectively called the "Pledged Bonds." If and when no Class "A" Mortgages are in effect, the New Mortgage will constitute a first mortgage lien on all property of the Company subject thereto. PLEDGED BONDS. The Pledged Bonds will be issued and delivered to, and registered in the name of, the New Mortgage Trustee or its nominee and will be owned and held by the New Mortgage Trustee, subject to the provisions of the New Mortgage, for the benefit of the Holders of all Mortgage Bonds Outstanding from time to time, and the Company will have no interest in such Pledged Bonds. Except as may be otherwise set forth in the supplemental indenture pursuant to which any Mortgage Bonds are to be issued, Pledged Bonds issued as the basis for the authentication and delivery of such Mortgage Bonds (a) will mature on the same dates, and in the same principal amounts, as such Mortgage Bonds, and (b) will contain, in addition to any mandatory redemption provisions applicable to all Pledged Bonds Outstanding under the related Class "A" Mortgage, mandatory redemption provisions correlative to provisions for mandatory redemption, or for redemption at the option of the Holder, of such Mortgage Bonds. Pledged Bonds issued as the basis for authentication and delivery of a series or tranche of Mortgage Bonds (x) may, but need not, bear interest, any such interest to be payable at the same times as interest on the Mortgage Bonds of such series or tranche, and (y) may, but need not, contain provisions for the redemption thereof at the option of the Company, any such redemption to be made at a redemption price or prices not less than the principal amount of such Pledged Bonds. (See Sections 4.02 and 7.01.) Any payment by the Company of principal of or premium or interest on the Pledged Bonds held by the New Mortgage Trustee will be applied by the New Mortgage Trustee to the payment of any principal, premium or interest, as the case may be, in respect of the Mortgage Bonds which is then due, and, to the extent of such application, the obligation of the Company under the New Mortgage to make such payment in 22 respect of the Mortgage Bonds will be deemed satisfied and discharged. If, at the time of any such payment of principal of Pledged Bonds, there shall be no principal then due in respect to the Mortgage Bonds, the proceeds of such payment will be deemed to constitute Funded Cash and will be held by the New Mortgage Trustee as part of the New Mortgaged Property, to be withdrawn, used or applied as provided in the New Mortgage. If, at the time of any such payment of premium or interest on Pledged Bonds, there shall be no premium or interest, as the case may be, then due in respect of the Mortgage Bonds, the proceeds of such payment will be remitted to the Company at its request. (See Section 7.02 and "Withdrawal of Cash" below.) Any payment by the Company of principal of or premium or interest on Mortgage Bonds authenticated and delivered on the basis of the deposit with the New Mortgage Trustee of Pledged Bonds (other than by application of the proceeds in respect of such Pledged Bonds) will, to the extent thereof, be deemed to satisfy and discharge the obligation of the Company, if any, to make a payment of principal, premium or interest, as the case may be, in respect of such Pledged Bonds which is then due. The New Mortgage Trustee may not sell, assign or otherwise transfer any Pledged Bonds except to a successor trustee under the New Mortgage. (See Section 7.04.) At the time any Mortgage Bonds of any series or tranche which have been authenticated and delivered upon the basis of Pledged Bonds cease to be Outstanding (other than as a result of the application of the proceeds of the payment or redemption of such Pledged Bonds), the New Mortgage Trustee shall surrender to or upon the order of the Company an equal principal amount of such Pledged Bonds having the same Stated Maturity and mandatory redemption provisions as such Mortgage Bonds. (See Section 7.03.) At the date of this Prospectus, the only Class "A" Mortgage is the First Mortgage and the only Pledged Bonds issuable at this time are First Mortgage Bonds issuable thereunder. The New Mortgage provides that in the event of the merger or consolidation of another company with or into the Company, an existing mortgage constituting a lien on properties of such other company prior to the lien of the New Mortgage may be designated by the Company as an additional Class "A" Mortgage. Bonds thereafter issued under such additional mortgage would be Pledged Bonds and could provide the basis for the authentication and delivery of Mortgage Bonds under the New Mortgage. (See Section 7.06.) When no Pledged Bonds are Outstanding under a Class "A" Mortgage except for Pledged Bonds held by the New Mortgage Trustee, then, at the request of the Company and subject to satisfaction of certain conditions, the New Mortgage Trustee will surrender such Pledged Bonds for cancellation, and the related Class "A" Mortgage will be satisfied and discharged, the lien of such Class "A" Mortgage on the Company's property will cease to exist and the priority of the lien of the New Mortgage will be increased. (See Section 7.07.) The New Mortgage contains no restrictions on the issuance of bonds under Class "A" Mortgages in addition to Pledged Bonds issued to the New Mortgage Trustee as the basis for the authentication and delivery of Mortgage Bonds. First Mortgage Bonds may currently be issued under the First Mortgage on the basis of property additions, retirements of bonds previously issued under the First Mortgage and cash deposited with the First Mortgage Trustee. As of July 27, 1995, $47,500,000 of First Mortgage Bonds (other than Pledged Bonds) were outstanding. LIEN OF THE NEW MORTGAGE. The properties of the Company used in the generation, production, transmission and distribution of electricity and the distribution of gas in any form and for any purpose in the States of South Dakota or Nebraska together with properties owned by the Company as of August 1, 1993 located in the States of North Dakota and Iowa (but not, unless the Company otherwise elects, any future acquired properties in the States of North Dakota and Iowa) are subject to the lien of the New Mortgage. Substantially all of such property, while subject to the lien of the New Mortgage, will be also subject to the prior lien of the First Mortgage. The Mortgage Bonds will have the benefit of the prior lien of the First Mortgage on such property, and the benefit of the prior lien of any additional Class "A" Mortgage on any property subject thereto, to the extent of the aggregate principal amount of Pledged Bonds, issued under the respective Class "A" Mortgages, held by the New Mortgage Trustee. The lien of the New Mortgage is subject to Permitted Liens which include tax liens and other governmental charges which are not delinquent and which are being contested, construction and materialmen's liens, certain judgment liens, easements, reservations and rights of others (including governmental entities) 23 in, and defects of title in, certain property of the Company, certain leasehold interests, liens on the Company's pollution control and sewage and solid waste facilities and certain other liens and encumbrances. (See Section 1.01.) There are excepted from the lien of the New Mortgage, among other things, cash and securities not paid to, deposited with or held by the New Mortgage Trustee under the New Mortgage; contracts, leases and other agreements of all kinds, contract rights, bills, notes and other instruments, accounts receivable, claims, certain intellectual property rights and other general intangibles; permits, licenses and franchises; automobiles, other vehicles, movable equipment, aircraft and vessels; all goods, wares and merchandise held for sale in the ordinary course of business or for use by or for the benefit of the Company; fuel, materials, supplies and other personal property consumable in the operations of the Company's business; computers, machinery and equipment; coal, ore, gas, oil, minerals and timber mined or extracted from the land; gas transmission lines connecting wells with main or branch trunk lines or field gathering lines connecting wells with main or branch trunk lines; electric energy, gas, steam, water and other products generated, produced or purchased; leasehold interests; and all books and records. (See Granting Clauses.) The First Mortgage contains similar, but not identical, exceptions. Without the consent of the Holders, the Company and the New Mortgage Trustee may enter into supplemental indentures to subject to the lien of the New Mortgage additional property, whether or not used in the electric or gas utility businesses (including property which would otherwise be excepted from such lien). (See Section 14.01.) Such property, so long as the same would otherwise constitute Property Additions (as described below), would thereupon constitute Property Additions and be available as a basis for the issuance of Mortgage Bonds. (See "Issuance of Additional Mortgage Bonds" below.) The New Mortgage contains provisions subjecting after-acquired property to the lien thereof, subject to the prior lien of the First Mortgage. These provisions are limited in the case of consolidation or merger (whether or not the Company is the surviving corporation) or sale of substantially all of the Company's assets. In the event of consolidation or merger or the transfer of all the mortgaged property as or substantially as an entirety, the New Mortgage will not be required to be a lien upon any of the properties then owned or thereafter acquired by the successor corporation, except properties acquired from the Company in or as a result of such transaction and improvements, extensions and additions to such properties and renewals, replacements and substitutions of or for any part or parts of such properties. (See Article Thirteen and "Consolidation, Merger, Conveyance, Transfer or Lease" below.) In addition, after-acquired property may be subject to vendors' liens, purchase money mortgages and other liens thereon at the time of acquisition thereof, including the lien of any Class "A" Mortgage. The New Mortgage provides that the New Mortgage Trustee will have a lien, prior to the lien on behalf of the holders of Mortgage Bonds, upon Mortgaged Property and any money collected by the New Mortgage Trustee as proceeds of the Mortgaged Property, for the payment of its reasonable compensation and expenses and for indemnity against certain liabilities. (See Section 11.07.) ISSUANCE OF ADDITIONAL MORTGAGE BONDS The maximum principal amount of Mortgage Bonds which may be issued under the New Mortgage is limited to $500,000,000, provided that, without the consent of the Holders, the Company and the New Mortgage Trustee may enter into supplemental indentures to increase such amount. (See Sections 3.01 and 14.01.) Mortgage Bonds of any series may be issued from time to time under Article Four of the New Mortgage on the basis of, and in an aggregate principal amount not exceeding: (1) the aggregate principal amount of Pledged Bonds issued and delivered to the Trustee; (2) 75% of the Cost or Fair Value (whichever is less) of Property Additions (as described below) which do not constitute Bonded Property Additions (being, generally, Property Additions which have been made the basis of the authentication and delivery of Mortgage Bonds, the release of mortgaged property or cash withdrawals) after certain deductions and additions, primarily including adjustments to offset property retirements; 24 (3) the aggregate principal amount of Retired Bonds (which consist of Mortgage Bonds no longer Outstanding under the New Mortgage (including Mortgage Bonds deposited under any sinking or analogous funds) which have not been used for certain other purposes under the New Mortgage and which are not to be paid, redeemed or otherwise retired by the application of Funded Cash), but if Pledged Bonds have been made the basis for the authentication and delivery of such Retired Bonds, only if the related Class "A" Mortgage has been discharged; and (4) an amount of cash deposited with the Trustee. In general, the issuance of Mortgage Bonds is subject to Adjusted New Earnings of the Company for 12 consecutive months within the preceding 18 months being at least one and three-fourths the Annual Interest Requirements on all Mortgage Bonds at the time Outstanding, Mortgage Bonds then applied for, all outstanding Pledged Bonds other than Pledged Bonds held by the New Mortgage Trustee under the New Mortgage, and all other indebtedness (with certain exceptions) secured by a lien prior to the lien of the New Mortgage, except that no such net earnings requirement need be met if the additional Mortgage Bonds to be issued are to have no Stated Interest Rate prior to Maturity. The Company is not required to satisfy the net earnings requirement prior to issuance of Mortgage Bonds as provided in (1) above if the Pledged Bonds issued and delivered to the New Mortgage Trustee as the basis for such issuance have been authenticated and delivered under the related Class "A" Mortgage on the basis of retired Pledged Bonds unless (a) the Stated Maturity of such retired Pledged Bonds is a date more than five years after the date of the Company Order requesting the authentication and delivery of such Mortgage Bonds and (b) the Stated Interest Rate, if any, on such retired Pledged Bonds immediately prior to Maturity is less than the Stated Interest Rate, if any, on such Mortgage Bonds to be in effect upon the initial authentication and delivery thereof. In addition, the Company is not required to satisfy the net earnings requirement prior to issuance of Mortgage Bonds as provided in (3) above unless (a) the Stated Maturity of the Retired Bonds is a date more than five years after the date of the Company Order requesting the authentication and delivery of such Mortgage Bonds and (b) the Stated Interest Rate, if any, on such Retired Bonds immediately prior to Maturity is less than the Stated Interest Rate, if any, on such Mortgage Bonds to be in effect upon the initial authentication and delivery of such Mortgage Bonds. In general, the interest requirement with respect to variable interest rate indebtedness, if any, is determined with reference to the rate or rates in effect on the date immediately preceding such determination or the rate to be in effect upon initial authentication. (See Section 1.03 and Article Four). Adjusted Net Earnings are calculated before, among other things, provisions for income taxes; depreciation or amortization of property; interest on any indebtedness and amortization of debt discount and expense; any non-recurring charge to income of whatever kind or nature (including without limitation the recognition of expense or impairment due to the non-recoverability of assets or expense), whether or not recorded as a non-recurring item in the Company's books of account; and any refund of revenues previously collected or accrued by the Company subject to possible refund. With respect to Mortgage Bonds of a series subject to a Periodic Offering (such as a medium-term note program), the New Mortgage Trustee will be entitled to receive a certificate evidencing compliance with the net earnings requirements only once, at or prior to the time of the first authentication and delivery of the Mortgage Bonds of such series (unless the Company Order requesting the authentication and delivery of such Mortgage Bonds is delivered on or after the date which is two years after the most recent Net Earnings Certificate was delivered, in which case an updated certificate would be required to be delivered). (See Sections 1.03 and 4.01.) Property Additions generally include any property which is owned by the Company and is subject to the lien of the New Mortgage, except any property the cost of acquisition or construction of which is properly chargeable to an operating expense account of the Company. (See Section 1.04.) Unless otherwise provided in the applicable Prospectus Supplement, the Company will issue the Mortgage Bonds on the basis of Pledged Bonds (I.E., First Mortgage Bonds) issued under its First Mortgage. 25 RELEASE OF PROPERTY The Company may obtain the release from the lien of the New Mortgage of any Mortgaged Property if the Fair Value of all of the Mortgaged Property (excluding the Mortgaged Property to be released but including any Mortgaged Property to be acquired by the Company with the proceeds of, or otherwise in connection with, such release) equals or exceeds an amount equal to twenty-fifteenths (20/15ths) of the aggregate principal amount of Mortgage Bonds Outstanding and bonds issued under Class "A" Mortgages outstanding (other than Pledged Bonds). The New Mortgage provides simplified procedures for the release of property which has been released from the lien of a Class "A" Mortgage, minor properties and property taken by eminent domain, and provides for dispositions of certain obsolete property and grants or surrender of certain rights without any release or consent by the New Mortgage Trustee. If any property released from the lien of the New Mortgage continues to be owned by the Company after such release, the New Mortgage will not become a lien on any improvement, extension or addition to such property or renewals, replacements or substitutions of or for any part or parts of such property. (See Article Eight.) WITHDRAWAL OF CASH Subject to certain limitations, cash held by the New Trustee may (1) be withdrawn by the Company (a) to the extent of the Cost or Fair Value (whichever is less) of Unbonded Property Additions, after certain deductions and additions primarily including adjustments to offset retirements, or (b) in an amount equal to twenty-fifteenths (20/15ths) of the aggregate principal amount of Mortgage Bonds that the Company would be entitled to issue on the basis of Retired Bonds (with the entitlement to such issuance being waived by operation of such withdrawal), or (c) in an amount equal to twenty-fifteenths (20/15ths) of the aggregate principal amount of any Outstanding Mortgage Bonds delivered to the New Trustee, or (2) upon the request of the Company, be applied to (a) the purchase of Mortgage Bonds (at prices not exceeding twenty-fifteenths (20/15ths) of the principal amount thereof) or (b) the redemption or payment at Stated Maturity of Mortgage Bonds (with any Mortgage Bonds received by the New Trustee pursuant to these provisions being canceled by the New Trustee) (see Section 8.06); provided, however, that cash deposited with the New Mortgage Trustee as the basis for the authentication and delivery of Mortgage Bonds, as well as cash representing a payment of principal of Pledged Bonds, may only be withdrawn in an amount equal to the aggregate principal amount of Mortgage Bonds the Company would be entitled to issue on any basis (with the entitlement to such issuance being waived by operation of such withdrawal), or may, upon the request of the Company, be applied to the purchase, redemption or payment of Mortgage Bonds at prices not exceeding, in the aggregate, the principal amount thereof (See Sections 4.05 and 7.02). CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE The Company may not consolidate with or merge into any other corporation or convey, transfer or lease the Mortgaged Property as or substantially as an entirety to any person unless (a) such transaction is on such terms as will fully preserve the lien and security of the New Mortgage and the rights and powers of the New Mortgage Trustee and Holders, (b) the corporation formed by such consolidation or into which the Company is merged or the person which acquires by conveyance or transfer, or which leases, the Mortgaged Property as or substantially as an entirety is a corporation organized and existing under the laws of the United States of America or any state or territory thereof or the District of Columbia, and such corporation executes and delivers to the New Mortgage Trustee a supplemental indenture, which contains an assumption by such corporation of the due and punctual payment of the principal of and premium, if any, and interest, if any, on the Mortgage Bonds and the performance of all of the covenants of the Company under the New Mortgage and which contains a grant, conveyance, transfer and mortgage by the corporation confirming the lien of the New Mortgage on the Mortgaged Property and subjecting to such lien all property thereafter acquired by the corporation which shall constitute an improvement, extension or addition to the Mortgaged Property or a renewal, replacement or substitution of or for any part thereof, and, at the election of the corporation, subjecting to the lien of the New Mortgage such other property then owned or thereafter acquired by the 26 corporation as the corporation shall specify, and (c) in the case of a lease, such lease will be made expressly subject to termination by the Company or the New Mortgage Trustee at any time during the continuance of an Event of Default. (See Section 13.01.) Other than the security afforded by the lien of the First Mortgage and the New Mortgage and the restrictions on the issuance of additional First Mortgage Bonds and New Mortgage Bonds, there are no provisions of the First Mortgage or the New Mortgage which afford the holders of the Offered Bonds protection in the event of a highly leveraged transaction, reorganization, restructuring, merger or similar transaction involving the Company. Neither the First Mortgage nor the New Mortgage contain provisions requiring the repurchase of the Offered Bonds upon a change in control of the Company. MODIFICATION OF NEW MORTGAGE Without the consent of any Holders, the Company and the New Mortgage Trustee may enter into one or more supplemental indentures for any of the following purposes: (a) to evidence the succession of another person to the Company and the assumption by any such successor of the covenants of the Company in the New Mortgage and in the Mortgage Bonds; or (b) to add one or more covenants of the Company or other provisions for the benefit of all Holders or for the benefit of the Holders of, or to remain in effect only so long as there shall be Outstanding, Mortgage Bonds of one or more specified series, or one or more tranches thereof, or to surrender any right or power conferred upon the Company by the New Mortgage; or (c) to correct or amplify the description of any property at any time subject to the lien of the New Mortgage, or better to assure, convey and confirm to the New Mortgage Trustee any property subject or required to be subjected to the lien of the New Mortgage, or to subject to the lien of the New Mortgage additional property; or (d) to convey, transfer and assign to the New Mortgage Trustee and to subject to the lien of the New Mortgage with the same force and effect as if included in the New Mortgage, property of subsidiaries of the Company used or to be used for one or more purposes which if owned by the Company would constitute property used or to be used for one or more of the Primary Purposes of the Company's Business, which property shall for all purposes of the New Mortgage be deemed to be property of the Company, together with such other provisions as may be appropriate to express the respective rights of the New Mortgage Trustee and the Company in regard thereto; or (e) to change or eliminate any provision of the New Mortgage or to add any new provision to the New Mortgage, provided that if such change, elimination or addition adversely affects the interests of the Holders of the Mortgage Bonds of any series or tranche in any material respect, such change, elimination or addition will become effective with respect to such series or tranche only when no Mortgage Bond of such series or tranche remains outstanding under the New Mortgage; or (f) to establish the form or terms of the Mortgage Bonds of any series or tranche as permitted by the New Mortgage; or (g) to provide for the authentication and delivery of bearer securities and coupons appertaining thereto representing interest, if any, thereon and for the procedures for the registration, exchange and replacement thereof and for the giving of notice to, and the solicitation of the vote or consent of, the holders thereof, and for any and all other matters incidental thereto; or (h) to evidence and provide for the acceptance of appointment by a successor trustee or by a co-trustee or separate trustee; or (i) to provide for the procedures required to permit the Company to utilize, at its option, a noncertificated system of registration for all, or any series or tranche of, the Mortgage Bonds; or (j) to change any place where (1) the principal of and premium, if any, and interest, if any, on the Mortgage Bonds of any series, or any tranche thereof, will be payable, (2) any Mortgage Bonds of any series, or any tranche thereof, may be surrendered for registration of transfer, (3) any Mortgage Bonds 27 of any series, or any tranche thereof, may be surrendered for exchange, and (4) notices and demands to or upon the Company in respect of the Mortgage Bonds of any series, or any tranche thereof, and the New Mortgage may be served; or (k) to cure any ambiguity, to correct or supplement any provision therein which may be defective or inconsistent with any other provision therein, or to make any changes to the provisions thereof or to add other provisions with respect to matters and questions arising under the New Mortgage, so long as such other changes or additions do not adversely affect the interests of the Holders of Mortgage Bonds of any series or tranche in any material respect; or (l) to reflect changes in Generally Accepted Accounting Principles; or (m) to provide the terms and conditions of the exchange or conversion, at the option of the holders of Mortgage Bonds of any series, of the Mortgage Bonds of such series for or into Mortgage Bonds of other series or stock or other securities of the Company or any other corporation; or (n) to change the words "Mortgage Bonds" to "First Mortgage Bonds" in the descriptive title of all Outstanding Bonds at any time after the discharge of the First Mortgage; or (o) to comply with the rules or regulations of any national securities exchange on which any of the Mortgage Bonds may be listed; or (p) to modify Section 3.01(a) to increase the aggregate principal amount of Mortgage Bonds which may be authenticated and delivered under the New Mortgage. (See Section 14.01.) Without limiting the generality of the foregoing, if the Trust Indenture Act is amended after the date of the New Mortgage in such a way as to require changes to the New Mortgage or the incorporation therein of additional provisions or so as to permit changes to, or the elimination of, provisions which, at the date of the New Mortgage or at any time thereafter, were required by the Trust Indenture Act to be contained in the New Mortgage, the Company and the New Mortgage Trustee may, without the consent of any Holders, enter into one or more supplemental indentures to evidence or effect such amendment. (See Section 14.01.) Except as provided above, the consent of the Holders of not less than a majority in aggregate principal amount of the Mortgage Bonds of all series then Outstanding, considered as one class, is required for the purpose of adding any provisions to, or changing in any manner, or eliminating any of the provisions of, the New Mortgage pursuant to one or more supplemental indentures; provided, however, if less than all of the series of Mortgage Bonds Outstanding are directly affected by a proposed supplemental indenture, then the consent only of the Holders of a majority in aggregate principal amount of Outstanding Mortgage Bonds of all series so directly affected, considered as one class, will be required; and provided, further, that if the Mortgage Bonds of any series have been issued in more than one tranche and if the proposed supplemental indenture directly affects the rights of the Holders of one or more, but less than all, such tranches, then the consent only of the Holders of a majority in aggregate principal amount of the Outstanding Mortgage Bonds of all tranches so directly affected, considered as one class, will be required; and provided, further, that no such amendment or modification may, without the consent of each Holder of the Outstanding New Mortgage of each series or tranche directly affected thereby, (a) change the Stated Maturity of the principal of, or any installment of principal of or interest on, any Mortgage Bond, or reduce the principal amount thereof or the rate of interest thereon (or the amount of any installment of interest thereon) or change the method of calculating such rate or reduce any premium payable upon the redemption thereof, or reduce the amount of the principal of a Discount Bond that would be due and payable upon a declaration of acceleration of maturity or change the coin or currency (or other property) in which any Mortgage Bond or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the redemption date), (b) permit the creation of any lien ranking prior to the lien of the New Mortgage with respect to all or substantially all of the Mortgaged Property or terminate the lien of the New Mortgage on all or substantially all of the Mortgaged Property, or deprive such Holder of the benefit of the security of the lien of the New Mortgage, (c) reduce the percentage in principal amount of the Outstanding Mortgage Bonds of such series or tranche, the consent of the Holders of which is required for any such supplemental 28 indenture, or the consent of the Holder of which is required for any waiver of compliance with any provision of the New Mortgage or any default thereunder and its consequences, or reduce the requirements for quorum or voting, or (d) modify certain of the provisions of the New Mortgage relating to supplemental indentures, waiver of certain covenants and waivers of past defaults. A supplemental indenture which changes or eliminates any covenant or other provision of the New Mortgage which has expressly been included solely for the benefit of the Holders of, or which is to remain in effect only so long as there shall be Outstanding Mortgage Bonds of one or more specified series, or one or more tranches thereof, or modifies the rights of the Holders of Mortgage Bonds of such series or tranches with respect to such covenant or other provision, will be deemed not to affect the rights under the New Mortgage of the Holders of the Mortgage Bonds of any other series or tranche. (See Section 14.02.) WAIVER The Holders of at least a majority in aggregate principal amount of all Mortgage Bonds may waive the Company's obligations to comply with certain covenants, including the Company's obligation to maintain its corporate existence and properties, pay taxes and discharge liens, maintain certain insurance and to make such recordings and filings as are necessary to protect the security of the Holders and the rights of the New Mortgage Trustee, provided that such waiver occurs before the time such compliance is required. The Holders of at least a majority of the aggregate principal amount of Outstanding Mortgage Bonds of all affected series or tranches, considered as one class, may waive, before the time for such compliance, compliance with the Company's obligation to maintain an office or agency where the Mortgage Bonds of such series or tranches may be surrendered for payment, registration, transfer or exchange, and compliance with any other covenant specified in a supplemental indenture respecting such series or tranches. (See Section 6.09.) EVENTS OF DEFAULT Each of the following events constitutes an Event of Default under the New Mortgage: (1) failure to pay interest on any Mortgage Bond within 60 days after the same becomes due; (2) failure to pay principal or premium, if any, on any Mortgage Bond within 15 days after its Maturity; (3) failure to perform or breach of any covenant or warranty of the Company in the New Mortgage (other than a covenant or a warranty a default in the performance of which or breach of which is dealt with elsewhere under this paragraph) for a period of 60 days after there has been given to the Company by the New Mortgage Trustee, or to the Company and the New Mortgage Trustee by the Holders of at least 50% in principal amount of Outstanding Mortgage Bonds, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default," unless the New Mortgage Trustee, or the New Mortgage Trustee and the Holders of a principal amount of Mortgage Bonds not less than the principal amount of Mortgage Bonds the Holders of which gave such notice, as the case may be, agree in writing to an extension of such period prior to its expiration; provided, however, that the New Mortgage Trustee, or the New Mortgage Trustee and such Holders, as the case may be, will be deemed to have agreed to an extension of such period if corrective action has been initiated by the Company within such period and is being diligently pursued; (4) certain events relating to reorganization, bankruptcy and insolvency of the Company and appointment of a receiver or trustee for its property; or (5) the occurrence of a Matured Event of Default under any Class "A" Mortgage; provided that the waiver or cure of any such Matured Event of Default and the rescission and annulment of the consequences thereof shall constitute a waiver of the corresponding Event of Default under the New Mortgage and a rescission and annulment of the consequences thereof. (See Section 10.01.) REMEDIES If an Event of Default occurs and is continuing, then the New Mortgage Trustee or the Holders of not less than a majority in principal amount of Mortgage Bonds then Outstanding may declare the principal 29 amount (or if the Mortgage Bonds are Discount Bonds, such portion of the principal amount as may be provided for such Discount Bonds pursuant to the terms of the New Mortgage) of all of the Mortgage Bonds together with premium, if any, and interest accrued, if any, thereon to be immediately due and payable. At any time after such declaration of the maturity of the Mortgage Bonds then Outstanding, but before the sale of any of the Mortgaged Property and before a judgment or decree for payment of money shall have been obtained by the New Mortgage Trustee as provided in the New Mortgage, the Event or Events of Default giving rise to such declaration of acceleration will, without further act, be deemed to have been waived, and such declaration and its consequences will, without further act, be deemed to have been rescinded and annulled, if: (a) the Company has paid or deposited with the New Mortgage Trustee a sum sufficient to pay: (1) all overdue interest, if any, on all Mortgage Bonds then Outstanding; (2) the principal of and premium, if any, on any Mortgage Bonds then Outstanding which have become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates prescribed therefor in such Mortgage Bonds; and (3) all amounts due to the New Mortgage Trustee as compensation and reimbursement as provided in the New Mortgage; and (b) any other Event or Events of Default other than the non-payment of the principal of Mortgage Bonds which shall have become due solely by such declaration of acceleration, shall have been cured or waived as provided in the New Mortgage. (See Sections 10.02 and 10.17.) The New Mortgage provides that, under certain circumstances and to the extent permitted by law, if an Event of Default occurs and is continuing, the New Mortgage Trustee has the power to take possession of, and to hold, operate and manage, the Mortgaged Property, or with or without entry, sell the Mortgaged Property. If the Mortgaged Property is sold, whether by the New Mortgage Trustee or pursuant to judicial proceedings, the principal of the Outstanding Mortgage Bonds, if not previously due, will become immediately due, together with premium, if any, and any accrued interest. (See Sections 10.03, 10.04 and 10.05.) If an Event of Default occurs and is continuing, the Holders of a majority in principal amount of the Mortgage Bonds then Outstanding will have the right to direct the time, method and place of conducting any proceedings for any remedy available to the New Mortgage Trustee or exercising any trust or power conferred on the New Mortgage Trustee, provided that (a) such direction does not conflict with any rule of law or with the New Mortgage, and could not involve the New Mortgage Trustee in personal liability in circumstances where indemnity would not, in the New Mortgage Trustee's sole discretion, be adequate, (b) such direction is not unduly prejudicial to the rights of the nonassenting Holders, and (c) the New Mortgage Trustee may take any other action deemed proper by the New Mortgage Trustee which is not inconsistent with such discretion. (See Section 10.16.) The New Mortgage provides that no Holder of any Mortgage Bond will have any right to institute any proceeding, judicial or otherwise, with respect to the New Mortgage, or for the appointment of a receiver or trustee, or for any other remedy thereunder, unless (a) such Holder has previously given to the New Mortgage Trustee written notice of a continuing Event of Default; (b) the Holders of not less than a majority in aggregate principal amount of the Mortgage Bonds then Outstanding have made written request to the New Mortgage Trustee to institute proceedings in respect of such Event of Default and have offered the New Mortgage Trustee reasonable indemnity against cost and liabilities incurred in complying with such request; and (c) for 60 days after receipt of such notice, the New Mortgage Trustee has failed to institute any such proceeding and no direction inconsistent with such request has been given to the New Mortgage Trustee during such 60-day period by the Holders of a majority in aggregate principal amount of Mortgage Bonds then Outstanding. Furthermore, no Holder will be entitled to institute any such action if and to the extent that such action would disturb or prejudice the rights of other Holders. (See Section 10.11.) Notwithstanding that the right of a Holder to institute a proceeding with respect to the New Mortgage is subject to certain conditions precedent, each Holder of a Mortgage Bond has the right, which is absolute and unconditional, to receive payment of the principal of and premium, if any, and interest, if any, on such Mortgage Bond when 30 due and to institute suit for the enforcement of any such payment, and such rights may not be impaired without the consent of such Holder. (See Section 10.12.) The New Mortgage provides that the New Mortgage Trustee give the Holders notice of any default under the New Mortgage to the extent required by the Trust Indenture Act, unless such default shall have been cured or waived, except that no such notice to Holders of a default of the character described in paragraph (3) under "Events of Default" shall be given until at least 45 days after the occurrence thereof. (See Section 11.02.) The Trust Indenture Act currently permits the New Mortgage Trustee to withhold notice of default (except for certain payment defaults) if the New Mortgage Trustee in good faith determines the withholding of such notice to be in the interests of the Holders. As a condition precedent to certain actions by the New Mortgage Trustee in the enforcement of the lien of the New Mortgage and institution of action on the Mortgage Bonds, the New Mortgage Trustee may require adequate indemnity against costs, expense and liabilities to be incurred in connection therewith. (See Sections 10.11 and 11.01.) In addition to every other right and remedy provided in the New Mortgage, the New Mortgage Trustee may exercise any right or remedy available to the New Mortgage Trustee in its capacity as owner and holder of Pledged Bonds which arises as a result of a default or Matured Event of Default under any Class "A" Mortgage, whether or not an Event of Default under the New Mortgage has then occurred and is continuing. (See Section 10.20.) DEFEASANCE Any Mortgage Bond or Bonds, or any portion of the principal amount thereof, will be deemed to have been paid for purposes of the New Mortgage, and the entire indebtedness of the Company in respect thereof will be deemed to have been satisfied and discharged, if there has been irrevocably deposited with the New Mortgage Trustee, in trust: (a) money (including Funded Cash) in the amount which will be sufficient, or (b) Eligible Obligations (as described below), which do not contain provisions permitting the redemption or other prepayment thereof at the option of the issuer thereof, the principal of and the 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 when due the principal of and premium, if any, and interest, if any, due and to become due on such Mortgage Bond or Bonds or portions thereof. (See Section 9.01.) For this purpose, Eligible Obligations include direct obligations of, or obligations unconditionally guaranteed by, the United States of America, entitled to the benefit of the full faith and credit thereof, and certificates, depositary receipts or other instruments which evidence a direct ownership interest in such obligations or in any specific interest or principal payments due in respect thereof. While there is no legal precedent directly on point, it is possible that, for federal income tax purposes, any deposit contemplated in the preceding paragraph could be treated as a taxable exchange of the related Mortgage Bonds for an issue of obligations of the trust or a direct interest in the cash and securities held in the trust. In that case, Holders of such Mortgage Bonds would recognize gain or loss as if the trust obligations or the cash or securities deposited, as the case may be, had actually been received by them in exchange for their Mortgage Bonds. Such Holders thereafter would be required to include in income a share of the income, gain or loss of the trust. The amount so required to be included in income could be different from the amount that would be includible in the absence of such deposit. Prospective investors are urged to consult their own tax advisors as to the specific consequences to them of such deposit. RESIGNATION OF THE NEW MORTGAGE TRUSTEE The New Mortgage Trustee may resign at any time by giving written notice thereof to the Company or may be removed at any time by Act of the Holders of a majority in principal amount of Mortgage Bonds then Outstanding delivered to the New Mortgage Trustee and the Company. No resignation or removal of the New Mortgage Trustee and no appointment of a successor trustee will become effective until the acceptance of appointment by a successor trustee in accordance with the requirements of the New Mortgage. In addition, so long as no Event of Default or event which, after notice or lapse of time, or both, would become an Event of Default has occurred and is continuing, under certain circumstances, if the Company has delivered to the New Mortgage Trustee a resolution of its Board of Directors appointing a successor trustee 31 and such successor has accepted such appointment in accordance with the terms of the New Mortgage, the New Mortgage Trustee will be deemed to have resigned and the successor will be deemed to have been appointed as trustee in accordance with the New Mortgage. (See Section 11.10.) CONCERNING THE NEW MORTGAGE TRUSTEE The Chase Manhattan Bank (N.A.), the Trustee under the New Mortgage, has been a regular depositary of funds of the Company. As trustee under both the New Mortgage and the First Mortgage, The Chase Manhattan Bank (N.A.) would have a conflicting interest for purposes of the Trust Indenture Act if an Event of Default were to occur under either mortgage. In that case, the New Mortgage Trustee may be required to eliminate such conflicting interest by resigning either as New Mortgage Trustee or as First Mortgage Trustee. There are other instances under the Trust Indenture Act which would require the resignation of the New Mortgage Trustee, such as an affiliate of the New Mortgage Trustee acting as underwriter with respect to any of the Mortgage Bonds. TRANSFER The transfer of the Mortgage Bonds may be registered, and Mortgage Bonds may be exchanged for other Mortgage Bonds of the same series and tranche, of authorized denominations and of like tenor and aggregate principal amount, at the office of The Chase Manhattan Bank (N.A.), as Bond Registrar for the Mortgage Bonds, in Brooklyn, New York. The Company may change the place for registration of transfer of the Mortgage Bonds, may appoint one or more additional Bond Registrars (including the Company) and may remove any Bond Registrar, all at its discretion. (See Section 6.02.) The applicable Prospectus Supplement will identify any new place for registration of transfer and additional Bond Registrar appointed, and will disclose the removal of any Bond Registrar effected, prior to the date of such Prospectus Supplement. Except as otherwise provided in the applicable Prospectus Supplement, no service charge will be made for any transfer or exchange of the Mortgage Bonds, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of the Mortgage Bonds. The Company will not be required to issue, and no Bond Registrar will be required to register, the transfer of or to exchange (a) Mortgage Bonds of any series (including the Mortgage Bonds) during a period of 15 days prior to giving any notice of redemption, or (b) any Mortgage Bond selected for redemption in whole or in part, except the unredeemed portion of any Mortgage Bond being redeemed in part. (See Section 3.05.) DESCRIPTION OF THE SUBORDINATED DEBT SECURITIES The following description sets forth certain general terms and provisions of the Subordinated Debt Securities to which any Prospectus Supplement may relate. The particular terms of the Subordinated Debt Securities offered by any Prospectus Supplement and the extent, if any, to which such general terms and provisions may apply to the Subordinated Debt Securities so offered will be described in the Prospectus Supplement relating to such Debt Securities. The Subordinated Debt Securities may be issued, in one or more series, from time to time under an Indenture dated as of , 1995 (the "Indenture"), between the Company and The Chase Manhattan Bank N.A., as trustee (the "Indenture Trustee"), which shall act as indenture trustee for the purposes of the Trust Indenture Act of 1939, as amended. The form of the Indenture is filed as an exhibit to the Registration Statement. Capitalized terms used in this section which are not otherwise defined in this Prospectus shall have the meanings set forth in the Indenture. The following summaries of certain provisions of the Subordinated Debt Securities and the Indenture do not purport to be complete and are subject to, and are qualified in their entirety by express reference to all the provisions of the Indenture, including the definitions therein of certain terms. GENERAL The Subordinated Debt Securities will be direct, unsecured, subordinated obligations of the Company. The Indenture does not limit the aggregate principal amount of Subordinated Debt Securities that may be issued thereunder and provides that Subordinated Debt Securities may be issued thereunder from time to 32 time in one or more series. The Subordinated Debt Securities are issuable in one or more series pursuant to an indenture supplement to the Indenture or a resolution of the Company's Board of Directors or a special committee thereof (each, a "Supplemental Indenture"). The Restated Certificate of Incorporation of the Company limits, subject to certain exceptions, the amount of unsecured indebtedness that the Company may issue or assume, without the consent of the holders of a majority of the total number of shares of preferred stock then outstanding, to 25% of the aggregate of (i) the total principal amount of all outstanding bonds or other securities representing secured indebtedness of the Company, and (ii) the total of the capital stocks and premiums thereon and the surplus of the Company as then stated on the Company's books. At March 31, 1995, the Company could have issued approximately $57 million of unsecured indebtedness (such as the Subordinated Debt Securities) without violating this provision. Reference is made to the Prospectus Supplement relating to any Subordinated Debt Securities being offered for, among other things, the following terms thereof: (1) the title of the Subordinated Debt Securities; (2) any limit on the aggregate principal amount of such Subordinated Debt Securities; (3) the percentage of the principal amount at which such Subordinated Debt Securities will be issued and, if other than the principal amount thereof, the portion of the principal amount thereof payable upon acceleration of the maturity thereof, or the method by which such portion shall be determined; (4) the date or dates on which the principal of such Subordinated Debt Securities will be payable; (5) the rights, if any, to defer payments of interest on the Subordinated Debt Securities by extending the interest payment period, and the duration of such extensions; (6) the subordination terms of the Subordinated Debt Securities of such series; (7) the rate or rates at which such Subordinated Debt Securities will bear interest, or the method by which such rate or rates shall be determined, and the date or dates from which such interest shall accrue, or the method by which such date or dates shall be determined; (8) the dates on which such interest will be payable and the Regular Record Dates for any Interest Payment Dates and the basis on which interest shall be calculated; (9) the dates, if any, on which, the price or prices at which the Subordinated Debt Securities may, pursuant to any mandatory or optional sinking fund provisions, be redeemed by the Company and other detailed terms and provisions of such sinking funds; (10) the date, if any, after which, and the price or prices at which, the Subordinated Debt Securities may, pursuant to any optional redemption provisions, be redeemed at the option of the Company or of the Holder thereof, and other detailed terms and provisions of such optional redemption; (11) whether and under what circumstances the Company will pay Additional Amounts as contemplated by Section 1005 of the Indenture on such Subordinated Debt Securities to any Holder who is not a United States person (including any modification to the definition of such term as provided for in the Indenture as originally executed) in respect to any tax, assessment or governmental charge and, if so, whether the Company will have the option to redeem such Subordinated Debt Securities rather than pay such Additional Amounts (and the terms of any such option); (12) any deletions from, modifications of or additions to the Events of Default or covenants of the Company with respect to such Subordinated Debt Securities, whether or not such Events of Default or covenants are consistent with the Events of Default or covenants set forth herein; (13) any security for such Subordinated Debt Securities; and (14) any other terms of such Subordinated Debt Securities. For a description of the terms of any series of the Subordinated Debt Securities, reference must be made to both the Prospectus Supplement relating thereto and to the description of Subordinated Debt Securities set forth herein. Unless otherwise indicated in the Prospectus Supplement relating thereto, the Subordinated Debt Securities will be issued in United States dollars in fully registered form, without coupons, in denominations of $25 or any integral multiple thereof. No service charge will be made for any transfer or exchange of the Subordinated Debt Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Unless otherwise indicated in the Prospectus Supplement relating thereto, the principal of, and any premium or interest on, the Subordinated Debt Securities will be payable, and the Subordinated Debt Securities will be exchangeable and transfers thereof will be registrable, at the Place of Payment; provided that, at the option of the Company, payment of interest may be made by check mailed to the address of the person entitled thereto as it appears in the Security Register. 33 The Indenture does not contain any provisions that may afford the Holders of Subordinated Debt Securities protection in the event of a highly leveraged transaction or other transaction involving the Company that may occur in connection with a takeover attempt resulting in a decline in the credit rating of the Subordinated Debt Securities. The Indenture also does not contain any provisions that would limit the ability of the Company to incur indebtedness. REGISTRATION AND TRANSFER Subordinated Debt Securities will be issued as Registered Securities and either will be in certificated form or will be represented by Global Securities. Registered Securities will be issuable in denominations of $25 and integral multiples of $25 or in such other denominations as may be in the terms of the Subordinated Debt Securities. Registered Securities will be exchangeable for other Registered Securities of the same series and of a like aggregate principal amount and tenor of different authorized denominations. Registered Securities may be presented for registration of transfer (duly endorsed or accompanied by a written instrument of transfer), at the corporate trust office of the Indenture Trustee in New York, New York, or at the office of any transfer agent designated by the Company for such purpose with respect to any series of Subordinated Debt Securities and referred to in any Prospectus Supplement. No service charge will be made for any transfer or exchange of Subordinated Debt Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. If any Prospectus Supplement refers to any transfer agent (in addition to the Indenture Trustee) initially designated by the Company with respect to any series of Subordinated Debt Securities, the Company may at any time rescind the designation of any such transfer agent or approve a change in the location at which any such transfer agent acts, except that, if Subordinated Debt Securities of a series are issuable solely as Registered Securities, the Company will be required to maintain a transfer agent in each Place of Payment for such series. The Company may at any time designate additional transfer agents with respect to any series of Subordinated Debt Securities. In the event of any redemption of any Subordinated Debt Securities, the Company shall not be required to: (i) issue, register the transfer of or exchange any Subordinated Debt Securities during a period beginning at the opening of business 15 days before any selection of Subordinated Debt Securities of that series to be redeemed and ending at the close of business on the day of mailing of the relevant notice of redemption; (ii) register the transfer of or exchange any Subordinated Debt Securities, or portion thereof, called for redemption, except the unredeemed portion of any Subordinated Debt Security being redeemed in part; or (iii) issue, register the transfer of or exchange any Subordinated Debt Securities that has been surrendered for repayment at the option of the Holder, except the portion if any, thereof not to be so repaid. GLOBAL SECURITIES The Subordinated Debt Securities of a series may be issued in whole or in part in the form of one or more Global Securities (as such term is defined below), which will be deposited with, or on behalf of, a depositary (the "Depositary") or its nominee identified in the applicable Prospectus Supplement. In such case, one or more Global Securities will be issued in a denomination or aggregate denomination equal to the portion of the aggregate principal amount of outstanding Subordinated Debt Securities of the series to be represented by such Global Security or Global Securities. Unless and until it is exchanged in whole or in part for Subordinated Debt Securities in registered form, a Global Security may not be registered for transfer or exchange except as (i) a whole by the Depositary for such Global Security to a nominee of such Depositary, by a nominee of such Depositary to such Depositary or another nominee of such Depositary or by such Depositary, or by any nominee to a successor Depositary or a nominee of such successor Depositary, and (ii) in the circumstances described in the applicable Prospectus Supplement. The term "Global Security," when used with respect to any series of Subordinated Debt Securities, means a Debt Security that is executed by the Company and authenticated and delivered by the Indenture Trustee to the Depositary or pursuant to the Depositary's instruction, which shall be registered in the name of the Depositary or its nominee and which shall represent, and shall be denominated in an amount equal to the aggregate principal amount of, all 34 of the Outstanding Subordinated Debt Securities of such series or any portion thereof, in either case having the same terms, including, without limitation, the same original issue date, date or dates on which principal is due, and interest rate or method of determining the interest rate. The specific terms of the depositary arrangement with respect to any portion of a series of Subordinated Debt Securities to be represented by a Global Security will be described in the applicable Prospectus Supplement. The Company expects that the following provisions will apply to depositary arrangements. Unless otherwise specified in the applicable Prospectus Supplement, Subordinated Debt Securities that are to be represented by a Global Security to be deposited with or on behalf of a Depositary will be represented by a Global Security registered in the name of such Depositary or its nominee. Upon the issuance of such Global Security, and the deposit of such Global Security with or on behalf of the Depositary for such Global Security, the Depositary will credit on its book-entry registration and transfer system the respective principal amounts of the Subordinated Debt Securities represented by such Global Security to the accounts of institutions that have accounts with such Depositary or its nominee ("participants"). The accounts to be credited will be designated by the underwriters or agents of such Subordinated Debt Securities or, if such Subordinated Debt Securities are offered and sold directly by the Company, by the Company. Ownership of beneficial interests in such Global Security will be limited to participants or persons that may hold interests through participants. Ownership of beneficial interests by participants in such Global Security will be shown on, and the transfer of that ownership interest will be effected only through, records maintained by the Depositary or its nominee for such Global Security. Ownership of beneficial interests in such Global Security by persons that hold through participants will be shown on, and the transfer of that ownership interest within such participant will be effected only through, records maintained by such participant. The laws of some jurisdictions require that certain purchasers of securities take physical delivery of such securities in certificated form. The foregoing limitations and such laws may impair the ability to transfer beneficial interests in such Global Securities. So long as the Depositary for a Global Security, or its nominee, is the registered owner of such Global Security, such Depositary or such nominee, as the case may be, will be considered the sole owner or Holder of the Subordinated Debt Securities represented by such Global Security for all purposes under the Indenture. Unless otherwise specified in the applicable Prospectus Supplement, owners of beneficial interests in such Global Security will not be entitled to have Subordinated Debt Securities of the series represented by such Global Security registered in their names, will not receive or be entitled to receive physical delivery of Subordinated Debt Securities of such series in certificated form and will not be considered the Holders thereof for any purposes under the Indenture. Accordingly, each person owning a beneficial interest in such Global Security must rely on the procedures of the Depositary and, if such person is not a participant, on the procedures of the participant through which such person owns its interest to exercise any rights of a Holder under the Indenture. The Company understands that under existing industry practices, if the Company requests any action of Holders or an owner of a beneficial interest in such Global Security desires to give any notice or take any action a Holder is entitled to give or take under the Indenture, then the Depositary would authorize the participants to give such notice or take such action, and participants would authorize beneficial owners owning through such participants to give such notice or take such action or would otherwise act upon the instructions of beneficial owners owning through them. Principal of and any premium and interest on a Global Security will be payable in the manner described in the applicable Prospectus Supplement. CONSOLIDATION, MERGER AND SALE The Indenture does not contain any covenant which restricts the Company's ability to merge or consolidate with or into any other corporation, sell or convey all or substantially all of its assets to any person, firm or corporation or otherwise engage in restructuring transactions. EVENTS OF DEFAULT The Indenture provides, with respect to any series of Subordinated Debt Securities outstanding thereunder, that any one or more of the following events that has occurred and is continuing shall constitute an 35 Event of Default: (i) default in the payment of any interest upon or any Additional Amounts payable in respect of any Subordinated Debt Security of that series, or of any coupon appertaining thereto, when the same becomes due and payable and continues for 30 days; provided, however, that, a valid extension of the interest payment period by the Company for the Subordinated Debt Securities shall not constitute a default in the payment of interest for this purpose, and provided further that, if Subordinated Debt Securities are issued to a NWPS Trust, or a trustee of such trust, in connection with the issuance of Trust Securities by such NWPS Trust, said 30-day period will be replaced by a ten-day period; (ii) default in the payment of the principal of or any premium on any Subordinated Debt Security of that series when due, whether at maturity, upon redemption, by declaration or otherwise; provided, however, that, a valid extension of the maturity of the Subordinated Debt Securities shall not constitute a default for this purpose; (iii) default in the deposit of any sinking fund payment, when and as due by the terms of any Subordinated Debt Securities of that series; (iv) default in the performance or breach of any covenant or agreement of the Company in the Indenture with respect to any Subordinated Debt Security of that series, continued for 60 days after written notice to the Company from the Indenture Trustee or from the holders of at least 25% of the outstanding Subordinated Debt Securities of that series; (v) certain events in bankruptcy, insolvency or reorganization of the Company; (vi) the voluntary or involuntary dissolution, winding-up or termination of a NWPS Trust to which (or to a trustee of such trust to which) Subordinated Debt Securities were issued in connection with the issuance of Trust Securities by such NWPS Trust, except in connection with the distribution of Subordinated Debt Securities to the holders of Trust Securities in liquidation of such NWPS Trust, the redemption of all of the Trust Securities of such NWPS Trust, or certain mergers, consolidations or amalgamations, each as permitted by the Declaration of such NWPS Trust; and (vii) any other Event of Default provided with respect to Subordinated Debt Securities of that series. The Company is required to file annually with the Indenture Trustee an officer's certificate as to the Company's compliance with all conditions and covenants under the Indenture. The Indenture provides that the Indenture Trustee may withhold notice to the Holders of Subordinated Debt Securities of any default, except in the case of a default on the payment of the principal of (or premium), if any, or interest on any Subordinated Debt Securities or the payment of any sinking fund installment with respect to such Subordinated Debt Securities if it considers it in the interest of the Holders of Subordinated Debt Securities to do so. If an Event of Default, other than certain events with respect to bankruptcy, insolvency and reorganization of the Company or any Significant Subsidiary, occurs and is continuing with respect to Subordinated Debt Securities of a particular series, the Indenture Trustee or the Holders of not less than 25% in principal amount of Outstanding Subordinated Debt Securities of that series may declare the Outstanding Subordinated Debt Securities of that series due and payable immediately. If an Event of Default with respect to certain events of bankruptcy, insolvency or reorganization of the Company or any Significant Subsidiary with respect to Subordinated Debt Securities of a particular series shall occur and be continuing, then the principal of all the Outstanding Subordinated Debt Securities of that series, and accrued and unpaid interest thereon, shall automatically be due and payable without any act on the part of the Indenture Trustee or any Holder. Subject to the provisions relating to the duties of the Indenture Trustee, if an Event of Default with respect to Subordinated Debt Securities of a particular series occurs and is continuing, the Indenture Trustee shall be under no obligation to exercise any of its rights or powers under the Indenture at the request or direction of any of the Holders of Subordinated Debt Securities of such series, unless such Holders shall have offered to the Indenture Trustee reasonable indemnity and security against the costs, expenses and liabilities that might be incurred by it in compliance with such request. Subject to such provisions for the indemnification of the Indenture Trustee, the Holders of a majority in principal amount of the Outstanding Subordinated Debt Securities of such series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee under the Indenture, or exercising any trust or power conferred on the Indenture Trustee with respect to the Subordinated Debt Securities of that series. The Indenture Trustee may refuse to follow directions in conflict with law or the Indenture that may involve the Indenture Trustee in personal liability or may be unduly prejudicial to Holders not joining therein. 36 The Holders of not less than a majority in principal amount of the Outstanding Subordinated Debt Securities of any series may, on behalf of the Holders of all the Subordinated Debt Securities of such series and any related coupons, waive any past default under the Indenture with respect to such series and its consequences, except a default (i) in the payment of the principal of (or premium, if any) or interest on or Additional Amounts payable in respect of any Subordinated Debt Security of such series unless such default has been cured and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration and any applicable premium has been deposited with the Indenture Trustee or (ii) in respect of a covenant or provision that cannot be modified or amended without the consent of the Holder of each Outstanding Subordinated Debt Security of such series affected thereby. MODIFICATION OR WAIVER Modification and amendment of the Indenture may be made by the Company and the Indenture Trustee with the consent of the Holders of not less than a majority in principal amount of all Outstanding Subordinated Debt Securities or any series that are affected by such modification or amendment; provided that, no such modification or amendment may, without the consent of the Holder of each Outstanding Subordinated Debt Security of such series, among other things, (i) change the Stated Maturity of the principal of (or premium, if any, on) or any installment of principal of or interest on any Subordinated Debt Security of such series, (ii) reduce the principal amount or the rate of interest on or any Additional Amounts payable in respect of, or any premium payable upon the redemption of, any Subordinated Debt Security of such series, or change the redemption provisions of any Subordinated Debt Securities (iii) change any obligation of the Company to pay Additional Amounts in respect of any Subordinated Debt Security of such series, (iv) reduce the amount of principal of a Subordinated Debt Security of such series that is an Original Issue Discount Security and would be due and payable upon a declaration of acceleration of the Maturity thereof, (v) adversely affect any right of repayment at the option of the Holder of any Subordinated Debt Security of such series, (vi) change the place or currency of payment of principal of, or any premium or interest on, any Subordinated Debt Security of such series, (vii) impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof or any Redemption Date or Repayment Date therefor, (viii) reduce the above-stated percentage of Holders of Outstanding Subordinated Debt Securities of such series necessary to modify or amend the Indenture or to consent to any waiver thereunder or reduce the requirements for voting or quorum described below, (ix) modify the change of control provisions, if any, or (x) modify the foregoing requirements or reduce the percentage of Outstanding Subordinated Debt Securities of such series necessary to waive any past default. Modification and amendment of the Indenture may be made by the Company and the Indenture Trustee without the consent of any Holder, for any of the following purposes: (i) to evidence the succession of another person to the Company as obligor under the Indenture; (ii) to add to the covenants of the Company for the benefit of the Holders of all or any series of Subordinated Debt Securities; (iii) to add Events of Default for the benefit of the Holders of all or any series of Subordinated Debt Securities; (iv) to change or eliminate any provisions of the Indenture, provided that any such change or elimination shall become effective only when there are no Outstanding Subordinated Debt Securities of any series created prior thereto that are entitled to the benefit of such provision; (v) to establish the form or terms of Subordinated Debt Securities of any series; (vi) to secure the Subordinated Debt Securities; (vii) to provide for the acceptance of appointment by a successor Indenture Trustee or facilitate the administration of the trusts under the Indenture by more than one Indenture Trustee; and (viii) to close the Indenture with respect to the authentication and delivery of additional series of Subordinated Debt Securities, or to cure any ambiguity, defect or inconsistency in the Indenture, provided such action does not adversely affect the interest of Holders of Subordinated Debt Securities of any series. CERTAIN COVENANTS If Subordinated Debt Securities are issued to a NWPS Trust or a trustee of such trust in connection with the issuance of Trust Securities by such NWPS Trust and (i) there shall have occurred any event that would constitute an Event of Default or (ii) the Company shall be in default with respect to its payment of any obligations under the related Guarantee or Common Securities Guarantee, then (a) the Company shall not declare or pay dividends on, or make a distribution with respect to or redeem, purchase or acquire, or make a 37 liquidation payment with respect to, any of its capital stock, and (b) the Company shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by the Company that rank pari passu with or junior to such Subordinated Debt Securities; provided, however, that, restriction (a) above does not apply to any stock dividends paid by the Company where the dividend stock is the same stock as that on which the dividend is being paid. If Subordinated Debt Securities are issued to a NWPS Trust or a trustee of such trust in connection with the issuance of Trust Securities by such NWPS Trust, and the Company shall have given notice of its election to defer payments of interest on such Subordinated Debt Securities by extending the interest payment period as provided in the Indenture and such period, or any extension thereof, shall be continuing then (a) the Company shall not declare or pay dividends on, or make a distribution with respect to or redeem, purchase or acquire, or make a liquidation payment with respect to, any of its capital stock, and (b) the Company shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by the Company that rank pari passu with or junior to such Subordinated Debt Securities; provided, however, that, the restriction (a) above does not apply to any stock dividends paid by the Company, where the dividend stock is the same as that on which the dividend is being paid. If Subordinated Debt Securities are issued to a NWPS Trust or a trustee of such trust in connection with the issuance of Trust Securities by such NWPS Trust, for so long as such Trust Securities remain outstanding, the Company will covenant (i) to directly or indirectly maintain 100% ownership of the Common Securities of such NWPS Trust; provided, however, that any permitted successor of the Company under the Indenture may succeed to the Company's ownership of such Common Securities and (ii) to use its reasonable efforts to cause such NWPS Trust (a) to remain a statutory business trust, except in connection with the distribution of Subordinated Debt Securities to the holders of Trust Securities in liquidation of such NWPS Trust, the redemption of all of the Trust Securities of such NWPS Trust, or certain mergers, consolidations or amalgamations, each as permitted by the Declaration of such NWPS Trust, and (b) to otherwise continue to be classified as a grantor trust for United States federal income tax purposes. SECURITY AND SUBORDINATION Any security for the Subordinated Debt Securities will be described in the Prospectus Supplement that will accompany this Prospectus. The Subordinated Debt Securities will be subordinated and junior in right of payment to certain other indebtedness of the Company to the extent set forth in the Prospectus Supplement that will accompany this Prospectus. GOVERNING LAW The Indenture and the Subordinated Debt Securities will be governed by, and construed in accordance with, the internal laws of the State of New York. INFORMATION CONCERNING THE INDENTURE TRUSTEE The Indenture Trustee, prior to default, undertakes to perform only such duties as are specifically set forth in the Indenture and, after default, shall exercise the same degree of care as a prudent individual would exercise in the conduct of his or her own affairs. Subject to such provision, the Indenture Trustee is under no obligation to exercise any of the powers vested in it by the Indenture at the request of any holder of Subordinated Debt Securities, unless offered reasonable indemnity by such holder against the costs, expenses and liabilities that might be incurred thereby. The Indenture Trustee is not required to expand or risk its own funds or otherwise incur personal financial liability in the performance of its duties if the Indenture Trustee reasonably believes that repayment or adequate indemnity is not reasonably assured to it. DEFEASANCE The Indenture provides that, except as may be provided in respect of any series of Subordinated Debt Securities, the provisions of Article Fourteen shall apply to the Subordinated Debt Securities of any series and the Company may elect either to (a) except in respect of any Subordinated Debt Securities to which a NWPS Trust or a trustee of such trust is the holder, defease and be discharged from any and all obligations with respect to such Subordinated Debt Securities (except for the obligation to pay Additional Amounts, if any, to a holder who is not a United States person upon the occurrence of certain events of tax, assessment or 38 governmental charge with respect to payments on such Subordinated Debt Securities and the obligations to register the transfer or exchange of such Subordinated Debt Securities, to replace temporary or mutilated, destroyed, lost or stolen Subordinated Debt Securities, to maintain an office or agency in respect of such Subordinated Debt Securities, and to hold moneys for payment in trust) ("Defeasance") or (b) be released from its obligations with respect to such Subordinated Debt Securities under Section 1402 or, if provided pursuant to Section 1403 of the Indenture, its obligations with respect to any other covenant, and any omission to comply with such obligations shall not constitute a default or an Event of Default with respect to such Subordinated Debt Securities ("covenant defeasance"), in either case, upon the irrevocable deposit by the Company with the Indenture Trustee (or other qualifying trustee), in trust, of an amount, in such Currency in which such Subordinated Debt Securities are then specified as payable at Stated Maturity, or Government Obligations (as defined below), or both, applicable to such Subordinated Debt Securities (with such applicability being determined on the basis of the currency, currency unit or composite currency in which such Subordinated Debt Securities are then specified as payable at Stated Maturity) which through the scheduled payment of principal and interest in accordance with their terms will provide money in an amount sufficient to pay the principal of (and premium, if any) and interest, if any, on such Subordinated Debt Securities, and any mandatory sinking fund or analogous payments thereon, on the scheduled due dates therefor. Such a trust may only be established if, among other things, the Company has delivered to the Indenture Trustee an Opinion of Counsel (as specified in the Indenture) to the effect that the Holders of such Subordinated Debt Securities will not recognize income, gain or loss for United States federal income tax purposes as a result of such defeasance or covenant defeasance and will be subject to United States federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance or covenant defeasance had not occurred; provided that, such Opinion of Counsel, in the case of defeasance under clause (a) above, must refer to and be based upon a revenue ruling of the Internal Revenue Service or a change in applicable United States federal income tax law occurring after the date of the Indenture. "Government Obligations" means securities that are (i) direct obligations of the government that issued the Currency in which the Subordinated Debt Securities of a particular series are payable, for the payment of which its full faith and credit is pledged, or (ii) obligations of a person controlled or supervised by and acting as an agency or instrumentality of the government that issued the Currency in which the Subordinated Debt Securities of such series are payable, the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America or such other government, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank or trust company as custodian with respect to any such Government Obligation or a specific payment of interest on or principal of any such Government Obligation held by such custodian for the account of the holder of a depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Obligation or the specific payment of interest in or principal of the Government Obligation evidenced by such depository receipt. Unless otherwise provided in the Prospectus Supplement, if, after the Company has deposited funds and/or Government Obligations to effect defeasance or covenant defeasance relating thereto with respect to Subordinated Debt Securities of any series, (a) the Holder of a Subordinated Debt Security of such series is entitled to and does elect, pursuant to the terms of such Subordinated Debt Security, to receive payment in a currency other than that in which such deposit has been made in respect of such Subordinated Debt Security or (b) the currency in which such deposit has been made in respect of any Subordinated Debt Security of such series ceases to be used by its government of issuance, then the indebtedness represented by such Subordinated Debt Security shall be deemed to have been, and will be, fully discharged and satisfied through the payment of the principal of (and premium, if any) and interest, if any, on such Subordinated Debt Security as they become due out of the proceeds yielded by converting the amount so deposited in respect of such Subordinated Debt Security into the Currency in which such Subordinated Debt Security becomes 39 payable as a result of such election or such cessation of usage based on the applicable Market Exchange Rate. Unless otherwise provided in the Prospectus Supplement, all payments of principal of (and premium, if any) and interest, if any, and Additional Amounts, if any, on any Subordinated Debt Security that is payable in a Foreign Currency that ceases to be used by its government of issuance shall be made in U. S. Dollars. In the event the Company effects covenant defeasance with respect to (i) any Subordinated Debt Securities and any related coupons and (ii) such Subordinated Debt Securities are declared due and payable because of the occurrence of any Event of Default, other than the Event of Default described in clause (iii) or (v) under "Events of Default," with respect to any covenant for which there has been defeasance, the Currency and/or Government Obligations on deposit with the Indenture Trustee will be sufficient to pay amounts due on such Subordinated Debt Securities at the time of their Stated Maturity but may not be sufficient to pay amounts due on such Subordinated Debt Securities at the time of the acceleration resulting from such Event of Default. However, the Company would remain liable to make payment of such amounts due at the time of acceleration. The Prospectus Supplement may further describe the provisions, if any, permitting such defeasance or covenant defeasance, including any modifications to the provisions described above, with respect to the Subordinated Debt Securities of or within a particular series and any related coupons. MISCELLANEOUS The Company will have the right at all times to assign any of its respective rights or obligations under the Indenture to a direct or indirect wholly-owned subsidiary of the Company; provided, that, in the event of any such assignment, the Company will remain liable for all of their respective obligations. Subject to the foregoing, the Indenture will be binding upon and inure to the benefit of the parties thereto and their respective successors and assigns. The Indenture provides that it may not otherwise be assigned by the parties thereto. DESCRIPTION OF THE PREFERRED SECURITIES Each NWPS Trust may issue, from time to time, only one series of Preferred Securities having terms described in the Prospectus Supplement relating thereto. The Declaration of each NWPS Trust authorizes the Regular Trustees of such NWPS Trust to issue on behalf of such NWPS Trust one series of Preferred Securities. The Declaration will be qualified as an indenture under the Trust Indenture Act. The Preferred Securities will have such terms, including distributions, redemption, voting, liquidation rights and such other preferred, deferred or other special rights or such restrictions as shall be set forth in the Declaration or made part of the Declaration by the Trust Indenture Act. Reference is made to the Prospectus Supplement relating to the Preferred Securities of a NWPS Trust for specific terms, including (i) the distinctive designation of such Preferred Securities, (ii) the number of Preferred Securities issued by such NWPS Trust, (iii) the annual distribution rate (or method of determining such rate) for Preferred Securities issued by such NWPS Trust and the date or dates upon which such distributions shall be payable (provided, however, that, distributions on such Preferred Securities shall be payable on a quarterly basis to holders of such Preferred Securities as of a record date in each quarter during which such Preferred Securities are outstanding), (iv) whether distributions on Preferred Securities issued by such NWPS Trust shall be cumulative, and, in the case of Preferred Securities having such cumulative distribution rights, the date or dates or method of determining the date or dates from which distributions on Preferred Securities issued by such NWPS Trust shall be cumulative, (v) the amount or amounts which shall be paid out of the assets of such NWPS Trust to the holders of Preferred Securities of such NWPS Trust upon voluntary or involuntary dissolution, winding-up or termination of such NWPS Trust, (vi) the obligation, if any, of such NWPS Trust to purchase or redeem Preferred Securities issued by such NWPS Trust and the price or prices at which, the period or periods within which and the terms and conditions upon which Preferred Securities issued by such NWPS Trust shall be purchased or redeemed, in whole or in part, pursuant to such obligation, (vii) the voting rights, if any, of Preferred Securities issued by such NWPS Trust in addition to those required by law, including the number of votes per Preferred Security and any 40 requirement for the approval by the holders of Preferred Securities, or of Preferred Securities issued by one or more NWPS Trusts or of both, as a condition to specified action or amendments to the Declaration of such NWPS Trust, and (viii) any other relevant rights, preferences, privileges, limitations or restrictions of Preferred Securities issued by such NWPS Trust consistent with the Declaration of such NWPS Trust, or with applicable law. All Preferred Securities offered hereby will be guaranteed by the Company to the extent set forth below under "Description of the Guarantees." Certain United States federal income tax considerations applicable to any offering of Preferred Securities will be described in the Prospectus Supplement relating thereto. In connection with the issuance of Preferred Securities, each NWPS Trust will issue one series of Common Securities. The Declaration of each NWPS Trust authorizes the Regular Trustees of each trust to issue on behalf of such NWPS Trust one series of Common Securities having such terms including distributions, redemption, voting, liquidation rights or such restrictions as shall be set forth therein. The terms of the Common Securities issued by a NWPS Trust will be substantially identical to the terms of the Preferred Securities issued by such NWPS Trust and the Common Securities will rank pari passu, and payments will be made thereon pro rata with the Preferred Securities except that, upon an event of default under the Declaration, the rights of the holders of the Common Securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise will be subordinated to the rights of the holders of the Preferred Securities. Except in certain limited circumstances, the Common Securities will also carry the right to vote and to appoint, remove or replace any of the NWPS Trustees of a NWPS Trust. All of the Common Securities of a NWPS Trust will be directly or indirectly owned by the Company. DESCRIPTION OF THE GUARANTEES Set forth below is a summary of information concerning the Guarantees that will be executed and delivered by the Company for the benefit of the holders, from time to time, of Preferred Securities. Each Guarantee will be qualified as an indenture under the Trust Indenture Act. Wilmington Trust Company will act as indenture trustee under each Guarantee (the "Guarantee Trustee"). The terms of each Guarantee will be those set forth in each Guarantee and those made part of each Guarantee by the Trust Indenture Act. The summary does not purport to be complete and is subject in all respects to the provisions of, and is qualified in its entirety by reference to, the form of Guarantee, which is filed as an exhibit to the Registration Statement of which this Prospectus forms a part, and the Trust Indenture Act. Each Guarantee will be held by the Guarantee Trustee for the benefit of the holders of the Preferred Securities of the applicable NWPS Trust. GENERAL Pursuant to each Guarantee, the Company will irrevocably and unconditionally agree, to the extent set forth herein, to pay in full to the holders of the Preferred Securities issued by a NWPS Trust, the Guarantee Payments (as defined herein) (except to the extent paid by such NWPS Trust), as and when due, regardless of any defense, right of set-off or counterclaim which such NWPS Trust may have or assert. The following payments with respect to Preferred Securities issued by a NWPS Trust (the "Guarantee Payments"), to the extent not paid by such NWPS Trust will be subject to the Guarantee (without duplication): (i) any accrued and unpaid distributions that are required to be paid on such Preferred Securities, to the extent the Company has made a payment of interest or principal on the Subordinated Debt Securities, (ii) the redemption price, including all accrued and unpaid distributions to the date of redemption (the "Redemption Price"), to the extent the Company has made a payment of interest or principal on the Subordinated Debt Securities, with respect to any Preferred Securities called for redemption by such NWPS Trust, and (iii) upon a voluntary or involuntary dissolution, winding-up or termination of such NWPS Trust (other than in connection with the distribution of Subordinated Debt Securities to the holders of Preferred Securities or the redemption of all of the Preferred Securities upon the maturity or redemption of the Subordinated Debt Securities) the lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid distributions on such Preferred Securities to the date of payment to the extent such NWPS Trust has funds legally available therefor and (b) the amount of assets of such NWPS Trust remaining available for distribution to 41 holders of such Preferred Securities in liquidation of such NWPS Trust. The Company's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Company to the holders of Preferred Securities or by causing such NWPS Trust to pay such amounts to such holders. Each Guarantee will be a full and unconditional guarantee with respect to the Preferred Securities issued by the applicable NWPS Trust from the time of issuance of such Preferred Securities but will not apply to any payment of distributions due to the extent such NWPS Trust shall lack funds legally available therefor as a result of a failure by the Company to make payments of interest or principal on the Subordinated Debt Securities. If the Company does not make interest payments on the Subordinated Debt Securities purchased by such NWPS Trust, such NWPS Trust will not pay distributions on the Preferred Securities issued by a NWPS Trust and will not have funds legally available therefor. See "Description of the Subordinated Debt Securities." The Company and NWPS Capital believe that the above mechanisms and obligations, taken together, are substantially equivalent to a full and unconditional guarantee by the Company of payments due on the Preferred Securities. The Company has also agreed to irrevocably and unconditionally guarantee the obligations of the NWPS Trusts with respect to the Common Securities (the "Common Securities Guarantee") to the same extent as the Guarantees, except that, upon an event of default under the Indenture, holders of Preferred Securities under the Guarantees shall have priority over holders of Common Securities under the Common Securities Guarantees with respect to distributions and payments on liquidation, redemption or otherwise. CERTAIN COVENANTS OF THE COMPANY In each Guarantee, the Company will covenant that, so long as any Preferred Securities issued by the applicable NWPS Trust remain outstanding, if there shall have occurred any event that would constitute an event of default under such Guarantee or the Declaration of such NWPS Trust, then (a) the Company shall not declare or pay any dividend on, or make any distribution with respect to, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock and (b) the Company shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by the Company which rank pari passu with or junior to such Subordinated Debt Securities. However, each Guarantee will except from the foregoing any stock dividends paid by the Company where the dividend stock is of the same as that on which the dividend is being paid. MODIFICATION OF THE GUARANTEES; ASSIGNMENT Except with respect to any changes that do not materially adversely affect the rights of holders of Preferred Securities (in which case no vote will be required), each Guarantee may be amended only with the prior approval of the holders of not less than 66 2/3% in liquidation amount of the outstanding Preferred Securities issued by the applicable NWPS Trust. The manner of obtaining any such approval of holders of such Preferred Securities will be set forth in an accompanying Prospectus Supplement. All guarantees and agreements contained in a Guarantee shall bind the successors, assignees, receivers, trustees and representatives of the Company and shall inure to the benefit of the holders of the Preferred Securities of the applicable NWPS Trust then outstanding. EVENTS OF DEFAULT An Event of Default under the Guarantee will occur upon the failure of the Company to perform any of its payments or other obligations thereunder. The holders of a majority in liquidation amount of the Preferred Securities to which a Guarantee relates have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee in respect of the Guarantee or to direct the exercise of any trust or power conferred upon the Guarantee Trustee under the Guarantee. If the Guarantee Trustee fails to enforce such Guarantee, any holder of Preferred Securities relating to such Guarantee may, after such holder's written request to the Guarantee Trustee to enforce the Guarantee, institute a legal proceeding directly against the Company to enforce the Guarantee Trustee's rights under such Guarantee without first instituting a legal proceeding against the relevant NWPS Trust, the Guarantee Trustee or any other person or entity. 42 The Company will be required to provide annually to the Guarantee Trustee a statement as to the performance by the Company of certain of its obligations under each of the Guarantees and as to any default in such performance. The Company is required to file annually with the Guarantee Trustee an officer's certificate as to the Company's compliance with all conditions under each of the Guarantees. INFORMATION CONCERNING THE GUARANTEE TRUSTEE The Guarantee Trustee, prior to the occurrence of a default, undertakes to perform only such duties as are specifically set forth in the Guarantee and, after default with respect to a Guarantee, shall exercise the same degree of care as a prudent individual would exercise in the conduct of his or her own affairs. Subject to such provision, the Guarantee Trustee is under no obligation to exercise any of the powers vested in it by a Guarantee Agreement at the request of any holder of Preferred Securities unless it is offered reasonable indemnity against the costs, expenses and liabilities that might be incurred thereby. TERMINATION OF THE GUARANTEES Each Guarantee will terminate as to the Preferred Securities issued by the applicable NWPS Trust upon full payment of the Redemption Price of all Preferred Securities of the NWPS Trust, upon distribution of the Subordinated Debt Securities held by the NWPS Trust to the holders of the Preferred Securities of such NWPS Trust, or upon full payment of the amounts payable in accordance with the Declaration of such NWPS Trust upon liquidation of such NWPS Trust. Each Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any holder of Preferred Securities issued by the applicable NWPS Trust must restore payment of any sums paid under such Preferred Securities or such Guarantee. STATUS OF THE GUARANTEES Each Guarantee will constitute an unsecured obligation of the Company and will rank (i) subordinate and junior in right of payment to all other liabilities of the Company, (ii) pari passu with the most senior preferred or preference stock now or hereafter issued by the Company and with any guarantee now or hereafter entered into by the Company in respect of any preferred or preference stock of any affiliate of the Company, and (iii) senior to the Company's common stock. The terms of the Preferred Securities provide that each holder of Preferred Securities issued by a NWPS Trust by acceptance thereof agrees to the subordination provisions and other terms of the applicable Guarantee. Each Guarantee will constitute a guarantee of payment and not of collection (allowing the guaranteed party to institute a legal proceeding directly against the guarantor to enforce its rights under a Guarantee without instituting a legal proceeding against any other person or entity). GOVERNING LAW The Guarantee will be governed by and construed in accordance with the internal laws of the State of New York. DESCRIPTION OF THE COMMON STOCK GENERAL Under the Company's Restated Certificate of Incorporation, as amended (the "Charter"), the Company is authorized to issue three classes of capital stock: 300,000 shares of Cumulative Preferred Stock, par value $100 per share, of which 26,000 shares of 4 1/2% Cumulative Preferred Stock and 40,000 shares of 5 1/4% Cumulative Preferred Stock are outstanding; 200,000 shares of Preference Stock, par value $50 per share, none of which are outstanding; and 20,000,000 shares of Common Stock, par value $3.50 per share, 7,677,232 of which were outstanding as of June 8, 1995. The Cumulative Preferred Stock and the Preference Stock may be issued at any time by the Board of Directors in such series with such terms as it may fix in resolutions providing for the issuance thereof. The following statements are summaries of certain provisions relating to the Common Stock contained in the Charter, the Company's First Mortgage Bond Indenture, as supplemented to date (the "1940 Indenture"), and the Company's New Mortgage (the 1940 Indenture and the New Mortgage Indenture are 43 referred to together as the "Bond Indentures"). Such summaries are not complete descriptions of the provisions of the Charter and the Bond Indentures and are qualified in their entirety by reference thereto. The Charter and the Bond Indentures are contained in exhibits to reports and registration statements which have been filed with the Commission (see "Available Information"). DIVIDEND RIGHTS Subject to the limitations described in the following three paragraphs, dividends may be paid on the Common Stock out of funds legally available for that purpose, when and as declared by the Company's Board of Directors. The Company may not declare or pay cash dividends on the Common Stock unless full dividends on all Cumulative Preferred Stock and on any Preference Stock then outstanding for the current and all past quarterly dividend periods have been paid or provided for. Also, dividends on the Common Stock may not be paid unless the Company has complied with all sinking fund requirements for those series of the Cumulative Preferred Stock and any Preference Stock which have such requirements. Under the terms of the Charter, for so long as shares of Cumulative Preferred Stock are outstanding, the following dividend limitations may not be exceeded unless authorized by the holders of two-thirds of the outstanding shares of such stock: dividends (other than dividends payable in Common Stock) and other distributions on, or acquisitions by the Company for value of, Common Stock (a) may not exceed 50% of the Company's Net Income Available for Common Stock for the preceding 12-months' period if the "common stock equity" of the Company is less than 20% of "total capitalization" (each calculated as required by the Charter) and (b) may not exceed 75% of such Net Income if such capitalization ratio is 20% or more but less than 25%. If such capitalization ratio is 25% or more, no such dividend, distribution or acquisition shall be declared, paid or effected which would reduce such ratio to less than 25%, except to the extent permitted by clauses (a) and (b). Pursuant to these provisions, at March 31, 1995, retained earnings were not restricted as to availability for cash dividends on the Common Stock and the Company's "common stock equity" was 47% of its "total capitalization". The Bond Indentures and certain purchase agreements relating to presently outstanding Cumulative Preferred Stock contain covenants limiting the funds available for payment of cash dividends and other distributions on the Common Stock (for payment as well as purchases of Common Stock by the Company). Under the most restrictive of existing covenants in the Bond Indentures or in such purchase agreements, at March 31, 1995, a total of approximately $46,271,000 was available for cash dividends on the Common Stock. In addition, under the 1940 Indenture cash dividends on the Common Stock and purchases of Common Stock may be made only if the aggregate amount expended for maintenance and provided for depreciation by the Company subsequent to January 1, 1946, plus Net Income Available for Common Stock earned after December 31, 1945, which remains after such dividend (or purchase) is equal to not less than the total of 3 1/2% of the fixed tangible property, plant and equipment of the Company for each full year, and a proportionate percentage for any fractional year, which shall have elapsed between January 1, 1946, and the date of such proposed action. VOTING RIGHTS Of the three classes of the Company's authorized capital stock, the Common Stock is the general voting stock. Holders of Common Stock are entitled to one vote for each share held. Except in the case of certain dividend arrearages on the Cumulative Preferred Stock or Preference Stock, the Common Stock is the only class of stock entitled to be voted for the election of directors. LIQUIDATION RIGHTS In the event of a liquidation (whether voluntary or involuntary) or reduction in the Company's capital resulting in any distribution of assets to its stockholders, the holders of the Common Stock are entitled to receive, pro rata according to the number of shares held by each, all of the assets of the Company remaining for distribution after payment to the holders of the Cumulative Preferred Stock and Preference Stock of the full preferential amounts to which they are entitled. 44 CERTAIN OTHER FEATURES Holders of Common Stock do not have any preemptive right to subscribe to or acquire any additional stock or other securities issued by the Company. TRANSFER AGENTS AND REGISTRARS The Transfer Agent and Registrars for the Common Stock are Norwest Bank, Minnesota, and the Company. PROVISIONS WITH POSSIBLE ANTI-TAKEOVER EFFECTS The Company's Charter currently provides for the classification of the Board of Directors into three classes. The Charter limits the number of directors that may be elected to not less than nine nor more than twelve (exclusive of such number of Directors as may be elected by any class of shares of the Company other than the Common Stock on account of specified dividend arrearages in accordance with the Charter) and provides that vacancies on the Board of Directors are to be filled by a majority vote of directors and that directors so chosen shall hold office until the end of the full term of the class in which the vacancy occurred. A vote of the holders of 75% of the Company's outstanding voting stock is required to amend these provisions. In addition, under the Charter and the Delaware General Corporation Law, directors of the Company may only be removed for cause. Removal for cause must be approved by either a majority vote of directors (excluding the director or directors subject to removal) or by a vote of the holders of at least a majority of the Company's outstanding voting stock. In addition, the "fair price provisions" of Charter require that certain proposed business combinations between the Company and any person who is the beneficial owner of more than 10% of the outstanding voting shares of the Company (an "interested party") must be approved by the holders of 75% of the voting shares, unless certain fair price and procedural requirements are met or the business combination is approved by a majority of "Continuing Directors," those directors who were elected prior to the time a person became an interested person and any other director so designated by such directors. A vote of the holders of 75% of the Company's outstanding voting stock is required to amend the fair price provisions. LEGAL OPINIONS The validity of the Offered Securities offered hereby will be passed upon for the Company and the NWPS Trusts by Schiff Hardin & Waite, 7200 Sears Tower, 233 South Wacker Drive, Chicago, Illinois 60606. Certain legal matters will be passed upon for any underwriters, dealers or agents by Winthrop, Stimson, Putnam & Roberts, One Battery Park Plaza, New York, New York 10004. Certain matters of Delaware law relating to the validity of the Preferred Securities will be passed upon by Richards, Layton & Finger, Wilmington, Delaware, special Delaware counsel to the Company and the NWPS Trusts. Schiff Hardin & Waite may rely on the opinion of Richards, Layton & Finger as to certain matters of Delaware law. Legal opinions relating to the Company's franchises, titles to its properties, the lien of the New Mortgage and the lien of the First Mortgage (and certain other matters) will be given as to South Dakota law by Churchill, Manolis, Freeman, Kludt & Kaufman, Huron, South Dakota, local counsel for the Company, as to Nebraska law by Shamberg, Wolf, McDermott & Depue, Grand Island, Nebraska, local counsel for the Company, as to North Dakota law by Pearce and Durick, Bismarck, North Dakota, local counsel for the Company, and as to Iowa law by Nymann & Kohl, Sioux City, Iowa, local counsel for the Company. The statements made in this Prospectus as to matters of law and legal conclusions under the captions "The NWPS Trusts", "Description of the Mortgage Bonds", "Description of the Subordinated Debt Securities", "Description of the Preferred Securities", "Description of the Guarantees" and "Description of the Common Stock" have been prepared under the supervision of, and reviewed by, Schiff Hardin & Waite, counsel for the Company, and such statements are made on the authority of that firm. 45 EXPERTS The audited financial statements of the Company incorporated by reference in this Prospectus have been audited by Arthur Andersen LLP, independent public accountants as indicated in their report with respect thereto and are incorporated by reference herein in reliance upon the authority of said firm as experts in auditing and accounting in giving such report. PLAN OF DISTRIBUTION The Company may sell the Offered Securities in any of the following ways: (i) through underwriters, dealers or agents, including Morgan Stanley & Co. Incorporated; (ii) directly to a limited number of purchasers or to a single purchaser; (iii) through agents or (iv) through any combination of the above. The Prospectus Supplement, with respect to the respective Offered Securities will set forth the terms of the offering of the Offered Securities, including the name or names of any underwriters, dealers or agents, the price to the public of the Offered Securities and the proceeds to the Company from such sale, any underwriting discounts and other items constituting underwriters' compensation, any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers. Any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers may be changed from time to time. If underwriters are used in the sale, the Offered Securities will be acquired by the underwriters for their own account 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. The Offered Securities may be offered to the public either through underwriting syndicates represented by one or more managing underwriters or directly by one or more underwriters. The underwriter or underwriters with respect to a particular underwritten offering of Offered Securities will be named in the Prospectus Supplement relating to such offering and, if an underwriting syndicate is used, the managing underwriter or underwriters will be set forth on the cover page of such Prospectus Supplement. Unless otherwise set forth in the Prospectus Supplement relating hereto, the obligations of the underwriters to purchase the Offered Securities will be subject to certain conditions precedent and the underwriters will be obligated to purchase all the Offered Securities if any are purchased. If dealers are utilized in the sale of the Offered Securities in respect of which this Prospectus is delivered, the Company will sell such Offered Securities to the dealers as principals. The dealers may then resell such Offered Securities to the public at varying prices to be determined by such dealers at the time of resale. The names of the dealers and the terms of the transaction will be set forth in the Prospectus Supplement relating thereto. The Offered 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 Offered Securities in respect to which this Prospectus is delivered will be named, and any commissions payable by the Company to such agent will be set forth in the Prospectus Supplement relating thereto. Unless otherwise indicated in the Prospectus Supplement, any such agent will be acting on a reasonable efforts basis for the period of its appointment. The Offered Securities may be sold directly by the Company to institutional investors or others, who may be deemed to be underwriters within the meaning of the Securities Act with respect to any resale thereof. The terms of any such sales will be described in the Prospectus Supplement relating thereto. Agents, dealers and underwriters may be entitled under agreements entered into with the Company to indemnification by the Company against certain civil liabilities, including liabilities under the Securities Act, or to contribution with respect to payments which such agents, dealers or underwriters may be required to make in respect thereof. Agents, dealers and underwriters may be customers of, engage in transactions with, or perform services for the Company in the ordinary course of business. Each series of Offered Securities will be a new issue of securities and, unless listed on a national securities exchange, will have no established trading market. Any underwriter to whom Offered Securities of 46 any series are sold for public offering and sale may make a market in such series of Offered Securities, but such underwriters will not be obligated to do so and may discontinue any market making at any time without notice. If so indicated in the Prospectus Supplement for any series of Offered Securities, the Offered Securities of such series may be listed on a national securities exchange. No assurance can be given as to the liquidity of, or the trading market for, any Offered Securities. 47 -----END PRIVACY-ENHANCED MESSAGE-----