<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 22, 1995.
REGISTRATION NO. 33-61265
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
PRE-EFFECTIVE AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
VIRGINIA ELECTRIC AND POWER COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER OR GOVERNING DOCUMENT)
VIRGINIA 54-0418825
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) NUMBER)
VIRGINIA POWER CAPITAL TRUST I
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER OR GOVERNING DOCUMENT)
DELAWARE APPLIED FOR
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) NUMBER)
ONE JAMES RIVER PLAZA, RICHMOND, VIRGINIA 23219-3932
(804) 771-3000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
J. KENNERLY DAVIS, JR., VICE PRESIDENT, TREASURER AND CORPORATE SECRETARY
PHILIP W. NICHOLS, CASH MANAGEMENT ADMINISTRATOR
VIRGINIA ELECTRIC AND POWER COMPANY
ONE JAMES RIVER PLAZA
RICHMOND, VIRGINIA 23219-3932
(804) 771-3000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
WITH A COPY TO:
JOHN J. BEARDSWORTH, JR. ROBERT L. BURRUS, JR.
HUNTON & WILLIAMS MCGUIRE, WOODS, BATTLE & BOOTHE,
951 EAST BYRD STREET L.L.P.
RICHMOND, VIRGINIA 23219-4074 ONE JAMES CENTER
RICHMOND, VIRGINIA 23219-4030
CALCULATION OF REGISTRATION FEE
<TABLE>
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF SECURITIES BEING OFFERING PRICE AGGREGATE AMOUNT OF
BEING REGISTERED REGISTERED PER UNIT (1) OFFERING PRICE (1) REGISTRATION FEE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Virginia Power Capital
Trust I Preferred
Securities............. 5,400,000 100% $135,000,000 $46,552
- ---------------------------------------------------------------------------------------
Virginia Electric and
Power Company % Junior
Subordinated Notes,
Series A(2)............
- ---------------------------------------------------------------------------------------
Virginia Electric and
Power Company Preferred
Securities
Guarantee(2)(3)
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for calculating the registration fee.
(2) No separate consideration is to be received for the Junior Subordinated
Notes or Preferred Securities Guarantee.
(3) Includes the rights of the holders of Preferred Securities under the
Guarantee Agreement and certain back-up undertakings described in the
Registration Statement.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AMENDING: PART I -- PROSPECTUS
PART II -- EXHIBITS
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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 BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Preliminary Prospectus, dated August , 1995
PROSPECTUS
5,400,000 PREFERRED SECURITIES
VIRGINIA POWER CAPITAL TRUST I
% TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
VIRGINIA ELECTRIC AND POWER COMPANY
-----------
The % Trust Preferred Securities (the Preferred Securities) offered hereby
evidence preferred undivided beneficial interests, representing 97% beneficial
ownership of the assets of Virginia Power Capital Trust I, a statutory business
trust formed under the laws of the State of Delaware (the Trust). Virginia
Electric and Power Company, a Virginia public service corporation (the
Company), will own all the common securities (the Common Securities and,
together with the Preferred Securities, the Trust Securities) representing the
remaining 3% beneficial ownership of the assets of the Trust. The Trust exists
for the sole purpose of issuing the Preferred Securities and Common Securities
and investing the proceeds thereof in an equivalent amount of the Company's
Series A % junior subordinated deferrable interest notes (the Junior
Subordinated Notes) due September 30, 2025; PROVIDED, HOWEVER, THAT THE COMPANY
MAY, SUBJECT TO COMPLIANCE WITH CERTAIN CONDITIONS, EXTEND THE MATURITY THEREOF
FOR UP TO AN ADDITIONAL TEN YEARS.
The Junior Subordinated Notes will be unsecured obligations of the Company
and will be subordinate and junior in right of payment to Senior Indebtedness
of the Company, as described herein. Holders of the Preferred Securities are
entitled to receive cumulative cash distributions at the rate of % per annum
(the Securities Rate), accruing from the date of original issuance and payable,
unless deferred, quarterly in arrears on March 31, June 30, September 30 and
December 31 of each year commencing September 30, 1995 (each, a Distribution
Date).
(continued on next page)
-----------
SEE "RISK FACTORS" AT PAGE 7 FOR CERTAIN INFORMATION RELEVANT TO AN
INVESTMENT IN THE PREFERRED SECURITIES, INCLUDING THE PERIOD AND CIRCUMSTANCES
DURING AND UNDER WHICH PAYMENTS OF DISTRIBUTIONS ON THE PREFERRED SECURITIES
MAY BE DEFERRED AND THE RELATED UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
OF SUCH DEFERRAL.
-----------
Application has been made to list the Preferred Securities on the New York
Stock Exchange, Inc. (the NYSE). If approved, trading of the Preferred
Securities on the NYSE is expected to commence within a 30 day period after the
initial delivery of the Preferred Securities. See "Underwriting."
-----------
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. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
================================================================================
<TABLE>
<CAPTION>
Price To Underwriting Proceeds to
Public(1) Discount(2)(3) Trust(2)(3)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Preferred Security.................... % % %
- --------------------------------------------------------------------------------
Total..................................... $ $ $
</TABLE>
================================================================================
(1) Plus accrued distributions, if any, from the Issue Date.
(2) The Company and the Trust have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933, as amended. See "Underwriting."
(3) Because the proceeds of the sale of the Preferred Securities will be
invested in Junior Subordinated Notes, the Company has agreed to pay to the
Underwriters as compensation (the Underwriters' Compensation) for their
arranging the investment therein of such proceeds, $ per Preferred
Security, except for Preferred Securities sold to certain institutions, for
which the Underwriters' Compensation will be $ per Preferred Security.
Therefore, to the extent that Preferred Securities are sold to such
institutions, the actual amount of Underwriters' Compensation will be less
than the aggregate amount specified above. See "Underwriting."
(4) Expenses of the offering to be paid by the Company are estimated to be
approximately $512,500.
-----------
The Preferred Securities are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
delivery of the Preferred Securities will be made only in book-entry form
through the facilities of The Depository Trust Company on or about August ,
1995 (the Issue Date).
-----------
LEHMAN BROTHERS
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
WHEAT FIRST BUTCHER SINGER
August , 1995
<PAGE>
(continued from previous page)
The Securities Rate and the Distribution Dates for the Preferred Securities
will correspond to the interest rate and interest and other payment dates on
the Junior Subordinated Notes, which will be the sole assets of the Trust. As
a result, if principal or interest is not paid on the Junior Subordinated
Notes, no amounts will be paid on the Preferred Securities. THE COMPANY HAS
THE RIGHT TO DEFER PAYMENTS OF INTEREST ON THE JUNIOR SUBORDINATED NOTES BY
EXTENDING THE INTEREST PAYMENT PERIOD ON THE JUNIOR SUBORDINATED NOTES, AT ANY
TIME AND FROM TIME TO TIME, FOR UP TO 20 CONSECUTIVE QUARTERS (EACH, AN
EXTENSION PERIOD). If interest payments are so deferred, distributions on the
Preferred Securities also will be deferred. During any deferral period,
holders of Preferred Securities will continue to have income for United States
federal income tax purposes in advance of the receipt of the cash payments
attributable to such deferred interest. See "Description of the Junior
Subordinated Notes--Option to Extend Interest Payment Period," "Risk Factors--
Option to Extend Interest Payment Period" and "Certain Federal Income Tax
Considerations--Original Issue Discount" and "--Market Discount." Deferred
installments of interest on the Junior Subordinated Notes will bear interest,
compounded quarterly, at a rate equal to one-quarter of the Securities Rate.
The payment of such deferred interest, together with interest thereon, will be
distributed to the holders of the Preferred Securities as received at the end
of any Extension Period.
The Preferred Securities are subject to mandatory redemption upon repayment
of the Junior Subordinated Notes at maturity or their earlier redemption. The
Junior Subordinated Notes are redeemable at the option of the Company, (in
whole or in part), from time to time, on or after September 30, 2000, or at
any time in whole upon the occurrence of a Tax Event or Investment Company Act
Event (either, a Special Event). Upon the occurrence of a Special Event, the
Company will have the option to redeem the Junior Subordinated Notes (and the
Trust Securities will also be redeemed) or distribute the Junior Subordinated
Notes pro rata to the holders of the Trust Securities. If the Junior
Subordinated Notes are distributed to the holders of the Preferred Securities,
the Company will use its best efforts to have the Junior Subordinated Notes
listed on the NYSE or on such other exchange as the Preferred Securities are
then listed. See "Description of the Preferred Securities--Special Event
Redemption or Distribution" and "Description of the Junior Subordinated
Notes."
The payment of distributions on the Preferred Securities is guaranteed by
the Company under the Guarantee Agreement, but only to the extent that the
Trust has funds available therefor (the Guarantee). If the Company fails to
make required payments on the Junior Subordinated Notes, the Trust will not
have sufficient funds to pay such distributions, and the Guarantee does not
cover the payment of distributions when the Trust does not have sufficient
funds therefor. In such event, the remedy of a holder of Preferred Securities
is to enforce the rights of the Trust as holder of the Junior Subordinated
Notes. The Company's obligations under the Guarantee are subordinate and
junior in right of payment to all of its other liabilities and will rank pari
passu with the most senior preferred stock of the Company. See "Description of
the Guarantee." The Company has, through the Guarantee, the Indenture, the
Junior Subordinated Notes, the Trust Agreement and the Agreement as to the
Expenses and Liabilities, fully and unconditionally guaranteed, subject to
certain subordination provisions, all the Trust's obligations with respect to
the Preferred Securities.
In the event of the redemption of the Junior Subordinated Notes or the
voluntary or involuntary dissolution, winding up or termination of the Trust,
the holders of the Preferred Securities will be entitled to receive, for each
Preferred Security, a liquidation amount of $25 plus accrued and unpaid
distributions thereon (including interest thereon) to the date of payment (the
Redemption Price), unless in connection with such dissolution, the Junior
Subordinated Notes are distributed to the holders of the Preferred Securities.
See "Description of the Preferred Securities--Liquidation Distribution Upon
Dissolution."
The Preferred Securities initially will be represented by a global
certificate registered in the name of The Depository Trust Company (DTC) or
its nominee. Beneficial interests in the Preferred Securities will be shown
on, and transfers thereof will be effected only through, records maintained by
Participants in DTC. Except as described herein, Preferred Securities in
certificated form will not be issued in exchange for the global certificates.
See "Description of the Preferred Securities--Book-Entry Only Issuance--The
Depository Trust Company."
----------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NYSE, IN THE OVER-THE-COUNTER
MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT
ANY TIME.
2
<PAGE>
AVAILABLE INFORMATION
The Company and the Trust have filed with the Securities and Exchange
Commission (the Commission) a combined registration statement on Form S-3 (the
Registration Statement, which term encompasses any amendments thereof and
exhibits thereto) under the Securities Act of 1933, as amended (the 1933 Act).
As permitted by the rules and regulations of the Commission, this Prospectus
does not contain all of the information set forth in the Registration Statement
and the exhibits and schedules thereto, to which reference is hereby made.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the 1934 Act), and in accordance therewith
files reports and other information with the Commission. Such reports and other
information can be inspected and copied at the public reference facilities of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's Regional Offices at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York
10048. Copies of such material can also be obtained at prescribed rates by
writing to the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. In addition, reports and other material
concerning the Company can be inspected at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005, and the Chicago Stock
Exchange, 440 South LaSalle Street, Chicago, Illinois, 60605. Although the
Company is not required to send a copy of its latest Annual Report to
Shareholders to holders of the Preferred Securities, the Company will, upon
request, send to any holder of such securities a copy of its latest Annual
Report to Shareholders, as filed with the Commission, which contains financial
information that has been examined and reported upon, with an opinion
expressed, by independent certified public accountants.
No separate financial statements of the Trust are included herein. The
Company has determined that such statements would not be material to holders of
the Preferred Securities because the Trust has no independent operations and
exists for the sole purpose of investing the proceeds of the sale of the Trust
Securities in the Junior Subordinated Notes. The Trust is currently not subject
to the informational reporting requirements of the 1934 Act.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission pursuant to the
1934 Act and are incorporated herein by reference and made a part of this
Prospectus:
(a) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994;
(b) the Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1995 and June 30, 1995; and
(c) the Company's Current Reports on Form 8-K, dated February 21, 1995,
March 22, 1995 and April 17, 1995.
All documents filed by the Company or the Trust, as the case may be, with the
Commission pursuant to Sections 13(a), 13(c) or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of this
offering shall be deemed to be incorporated herein by reference and made a part
of this Prospectus 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 modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all documents incorporated herein by reference (other than the
exhibits to such documents unless such exhibits are specifically incorporated
by reference). Such requests should be directed to Virginia Electric and Power
Company, One James River Plaza, Richmond, VA 23219-3932, Attention: Corporate
Secretary, Telephone: (804) 771-3000.
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus. Capitalized terms
not otherwise defined shall have the meanings assigned in the Glossary.
THE COMPANY............. The Company was incorporated in Virginia in 1909 and
has its principal office at One James River Plaza,
Richmond, Virginia 23219-3932, telephone (804) 771-
3000. The Company is a wholly-owned subsidiary of
Dominion Resources, Inc. (Dominion Resources).
The Company is a regulated public utility engaged in
the generation, purchase, transmission, distribution
and sale of electric energy within a 30,000 square
mile service area in Virginia and in northeastern
North Carolina. It transacts business under the name
Virginia Power in Virginia and under the name North
Carolina Power in North Carolina. Its Virginia
service area comprises about 65% of Virginia's total
land area but accounts for over 80% of its
population.
THE TRUST............... Virginia Power Capital Trust I, a statutory business
trust organized under Delaware law solely for the
purpose of holding the Company's Junior Subordinated
Notes and issuing Preferred Securities and Common
Securities evidencing the entire beneficial interest
therein (and engaging in activities necessary or
incidental thereto).
THE TRUSTEES............ Chemical Bank will act as property trustee (the
Property Trustee) of the Trust. Two employees of the
Company also will act as trustees (the Administrative
Trustees) of the Trust. Chemical Bank Delaware will
be an additional trustee (the Delaware Trustee) of
the Trust. Chemical Bank also will act as trustee
(the Indenture Trustee) under the Subordinated Note
Indenture pursuant to which the Junior Subordinated
Notes will be issued and will act as trustee under
the Guarantee (the Guarantee Trustee).
The Property Trustee, Delaware Trustee and
Administrative Trustees are sometimes referred to as
the Securities Trustees.
PREFERRED SECURITIES
OFFERED................ 5,400,000 units of Preferred Securities evidencing
preferred undivided beneficial interests in the
assets of the Trust. Holders of the Preferred
Securities are entitled to receive cumulative cash
distributions at the Securities Rate, accruing from
the date of original issuance and payable quarterly
in arrears on March 31, June 30, September 30 and
December 31 of each year, commencing on September 30,
1995 (each, a Distribution Date). The Securities Rate
and the Distribution Dates for the Preferred
Securities will correspond to the interest rate and
payment dates on the Junior Subordinated Notes, which
will be the sole assets of the Trust. As a result, if
principal or interest is not paid on the Junior
Subordinated Notes, no amounts will be paid on the
Preferred Securities. See "Description of the
Preferred Securities" herein.
RECORD DATE............. The record date for each Distribution Date will be
the close of business on the 15th calendar day prior
to such Distribution Date.
JUNIOR SUBORDINATED
NOTES.................. The Trust will invest the proceeds from the issuance
of the Preferred Securities and Common Securities in
an equivalent amount of Series A % junior
subordinated deferrable interest notes due September
30,
4
<PAGE>
2025; provided, however, that the Company may,
subject to compliance with certain conditions, extend
the maturity for up to an additional ten years. The
conditions to extension are that (i) the Company not
be bankrupt or insolvent, or otherwise in default on
the Junior Subordinated Notes, (ii) the Company has
timely paid all amounts due on the Junior
Subordinated Notes for the preceding six quarters
without deferral, (iii) the Trust is not in arrears
on payments on the Trust Securities and (iv) the
Junior Subordinated Notes or Preferred Securities are
then rated in one of the four highest rating
categories by a nationally recognized statistical
rating organization. The Junior Subordinated Notes
will be subordinate and junior in right of payment to
all current indebtedness for borrowed money and other
obligations of the Company included in the definition
of Senior Indebtedness, and will rank pari passu with
trade debt of the Company. See "Description of the
Junior Subordinated Notes--Subordination."
GUARANTEE............... The payment of distributions on the Preferred
Securities is guaranteed by the Company under the
Guarantee, but only to the extent the Trust has funds
available to make such distributions. If the Company
does not make principal or interest payments on the
Junior Subordinated Notes, the Trust will not have
sufficient funds to make distributions on the
Preferred Securities, in which event the Guarantee
will not apply to such distributions until the Trust
has sufficient funds available therefor. The
obligations of the Company under the Guarantee will
be subordinate and junior in right of payment to all
other liabilities of the Company and will rank pari
passu with the most senior preferred stock issued by
the Company. See "Risk Factors--Ranking of and Rights
Under Guarantee" and "Description of the Guarantee"
herein. The Company has, through the Guarantee, the
Indenture, the Junior Subordinated Notes, the Trust
Agreement and the Agreement as to Expenses and
Liabilities, fully and unconditionally guaranteed,
subject to certain subordination provisions, all the
Trust's obligations with respect to the Preferred
Securities.
INTEREST DEFERRAL....... The Company has the right to defer payments of
interest on the Junior Subordinated Notes by
extending the interest payment period on the Junior
Subordinated Notes, at any time and from time to
time, for up to 20 consecutive quarters (each, an
Extension Period). The only restrictions on the
Company's ability to defer payments of interest are
that during the Extension Period the Company may not
(i) pay dividends on or redeem any of its capital
stock or (ii) pay principal or interest on any debt
securities ranking pari passu or subordinate to the
Junior Subordinated Notes. There could be multiple
Extension Periods of varying lengths throughout the
term of the Junior Subordinated Notes.
If interest payments on the Junior Subordinated Notes
are deferred, distributions on the Preferred
Securities will also be deferred. During an Extension
Period, holders of Preferred Securities will continue
to have income for federal income tax purposes in
advance of the receipt of the cash payments
attributable to such deferred interest. See
"Description of the Junior Subordinated Notes--Option
to Extend Interest Payment Period" and "Certain
Federal Income Tax Considerations--Original Issue
Discount" and "--Market Discount." Deferred interest
will bear interest, compounded quarterly, at a rate
5
<PAGE>
equal to one quarter of the Securities Rate from the
date of deferral to the date of payment.
REDEMPTION.............. The Preferred Securities are subject to mandatory
redemption upon repayment of the Junior Subordinated
Notes at maturity or their earlier redemption. The
Junior Subordinated Notes are redeemable by the
Company, (in whole or in part), from time to time on
or after September 30, 2000, or at any time in whole
upon the occurrence of a Special Event. Upon the
occurrence of a Special Event, the Company will have
the option to redeem the Junior Subordinated Notes
(and thus the Preferred Securities) or, subject to
certain conditions, distribute the Junior
Subordinated Notes pro rata to the holders of the
Trust Securities. If a partial redemption of the
Junior Subordinated Notes would result in the
delisting of the Preferred Securities, the Company
may only redeem the Junior Subordinated Notes in
whole. Any partial redemption of the Junior
Subordinated Notes will be effected by the redemption
of an equivalent amount of Trust Securities, to be
allocated approximately 97% to the Preferred
Securities and 3% to the Common Securities. The
Preferred Securities to be redeemed in connection
with any partial redemption will be selected by such
method as the Property Trustee shall deem fair and
appropriate. See "Description of the Preferred
Securities--Redemption."
Special Event.......... A Special Event means a Tax Event or an Investment
Company Act Event. A "Tax Event" means that the
Administrative Trustees and the Company shall have
received an opinion from independent tax counsel
experienced in such matters (which may be counsel to
the Company) to the effect that, as a result of (a)
any amendment to, or change (including any announced
prospective change) in, the laws (or any regulations
thereunder) of the United States or any political
subdivision or taxing authority thereof or therein or
(b) any amendment to, or change in, an interpretation
or application of such laws or regulations, there is
more than an insubstantial risk that (i) the Trust
would be subject to United States federal income tax
with respect to income accrued or received on the
Junior Subordinated Notes, (ii) interest payable to
the Trust on the Junior Subordinated Notes would not
be deductible by the Company for United States
federal income tax purposes or (iii) the Trust would
be subject to more than a de minimis amount of other
taxes, duties or other governmental charges, which
change or amendment becomes effective on or after the
date of this Prospectus. An "Investment Company Act
Event" means that the Administrative Trustees and the
Company shall have received an opinion of independent
counsel (which may be counsel to the Company) to the
effect that, as a result of a change in law or
regulation or a written change in interpretation or
application of law or regulation by any court,
governmental agency or regulatory authority after the
Issue Date, there is more than an insubstantial risk
that the Trust is or will be considered an investment
company under the Investment Company Act of 1940, as
amended (the 1940 Act).
Redemption Price....... In the event of the redemption of the Trust
Securities or other termination of the Trust without
distribution of the Junior Subordinated Notes, each
Preferred Security shall be entitled to receive a
liquidation amount of $25 plus accrued and unpaid
distributions thereon (including interest thereon) to
the date of payment.
6
<PAGE>
RISK FACTORS
Prospective purchasers of Preferred Securities should carefully review the
information contained elsewhere in this Prospectus and should consider
particularly the following matters:
RANKING OF AND RIGHTS UNDER THE JUNIOR SUBORDINATED NOTES
No amounts will be available to make payments on the Preferred Securities
except from payments made on the Junior Subordinated Notes. The obligations of
the Company under the Junior Subordinated Notes are subordinate and junior in
right of payment to all present and future Senior Indebtedness of the Company.
At June 30, 1995, Senior Indebtedness of the Company aggregated $4.3 billion.
There are no terms in the Preferred Securities, the Junior Subordinated Notes
or the Preferred Securities Guarantee that limit the Company's ability to incur
additional indebtedness, including indebtedness that ranks senior to the Junior
Subordinated Notes. THE SUBORDINATED NOTE INDENTURE DOES NOT CONTAIN PROVISIONS
THAT AFFORD HOLDERS OF JUNIOR SUBORDINATED NOTES PROTECTION IN THE EVENT OF A
HIGHLY LEVERAGED TRANSACTION INVOLVING THE COMPANY. ANY SUCH TRANSACTION,
HOWEVER, WOULD REQUIRE REGULATORY APPROVAL, AND MANAGEMENT OF THE COMPANY
BELIEVES SUCH APPROVAL WOULD BE UNLIKELY FOR A TRANSACTION THAT WOULD RESULT IN
THE COMPANY HAVING A HIGHLY LEVERAGED CAPITAL STRUCTURE. See "Description of
the Guarantee" and "Description of the Junior Subordinated Notes--
Subordination."
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If (i) the Trust fails to pay distributions in full on the Preferred
Securities for more than 20 consecutive quarterly distribution periods, or (ii)
a Trust Agreement Event of Default occurs and is continuing, then the holders
of Preferred Securities would rely on the enforcement by the Property Trustee
of its rights against the Company as the holder of the Junior Subordinated
Notes. In addition, the holders of a majority in aggregate liquidation amount
of the Preferred Securities will have the right to direct the time, method, and
place of conducting any proceeding for any remedy available to the Property
Trustee or to direct the exercise of any trust or power conferred upon the
Property Trustee under the Trust Agreement, including the right to direct the
Property Trustee to exercise the remedies available to it as a holder of the
Junior Subordinated Notes. If the Property Trustee fails to enforce its rights
under the Junior Subordinated Notes, a holder of Preferred Securities may
institute a legal proceeding against the Company without first instituting any
legal proceeding against the Property Trustee or any other person or entity,
including the Trust. Upon the occurrence of any of the events described in
clauses (i) or (ii) above, the holders of the Preferred Securities also will be
entitled, by majority vote, to appoint a Substitute Property Trustee, who shall
have the same rights, powers and privileges as the Property Trustee. See
"Description of the Preferred Securities" and "Description of the Junior
Subordinated Notes."
RANKING OF AND RIGHTS UNDER THE GUARANTEE
The Company's obligations under the Guarantee are subordinate and junior in
right of payment to all liabilities of the Company and will be pari passu with
the most senior preferred stock issued by the Company. IF THE COMPANY WERE TO
DEFAULT IN ITS OBLIGATION TO PAY AMOUNTS PAYABLE ON THE JUNIOR SUBORDINATED
NOTES, THE TRUST WOULD LACK AVAILABLE FUNDS FOR THE PAYMENT OF DISTRIBUTIONS OR
AMOUNTS PAYABLE ON REDEMPTION OF THE PREFERRED SECURITIES OR OTHERWISE, AND IN
SUCH EVENT HOLDERS OF THE PREFERRED SECURITIES WOULD NOT BE ABLE TO RELY UPON
THE GUARANTEE FOR PAYMENT OF SUCH AMOUNTS. The holders of a majority in
liquidation amount of the Preferred Securities will have the right to direct
the time, method and place of conducting any proceeding for any remedy
available to the Guarantee Trustee or to direct the exercise of any trust or
power conferred upon the Guarantee Trustee under the Guarantee. If an Event of
Default occurs under the Guarantee, the holders of the Preferred Securities may
request the enforcement by the Guarantee Trustee, as the holder of the
Guarantee for the benefit of the holders of the Preferred Securities, of its
rights against the Company. A holder of Preferred Securities may institute a
legal proceeding against the Company upon the Guarantee without first
requesting enforcement by the Guarantee Trustee or instituting any legal
proceeding against the Guarantee Trustee or any other person or entity. See
"Description of the Guarantee."
7
<PAGE>
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company has the right under the Subordinated Note Indenture, at any time,
and from time to time, to defer payments of interest on the Junior Subordinated
Notes for a period of up to 20 consecutive quarters (each an Extension Period),
but not beyond the stated maturity of the Junior Subordinated Notes. Prior to
the termination of any Extension Period, the Company may further defer payments
of interest, provided that such Extension Period, together with all such
previous and further extensions thereof, may not exceed 20 consecutive
quarters. Upon the termination of any Extension Period and the payment of all
amounts then due, the Company may select a new Extension Period, subject to the
above requirements. There could be multiple Extension Periods of varying
lengths throughout the term of the Junior Subordinated Notes. Deferred
installments of interest on the Junior Subordinated Notes will bear interest,
compounded quarterly, at a rate equal to one-quarter of the Securities Rate.
The payment of such deferred interest, together with interest thereon, will be
passed through to the holders of the Preferred Securities as received at the
end of any Extension Period.
The only restrictions on the Company's ability to defer payments of interest
are that during any Extension Period the Company may not (i) pay dividends on
or redeem any of its capital stock or (ii) pay principal or interest on any
debt securities ranking pari passu or subordinate to the Junior Subordinated
Notes. The Company may elect to defer payment of interest at a time when
prevailing interest rates are higher or significantly higher than the
Securities Rate payable on the Preferred Securities. In that event, holders
would be denied the opportunity to invest funds they would otherwise receive at
the higher interest rates. See "Description of the Preferred Securities--
Distributions" and "Description of the Junior Subordinated Notes--Option to
Extend Interest Payment Period."
Should the Company exercise its rights to defer payments of interest, each
holder of Preferred Securities will continue to accrue income (as original
issue discount--OID) for United States federal income tax purposes in respect
of the deferred interest allocable to its Preferred Securities. As a result,
holders of Preferred Securities will recognize income for United States federal
income tax purposes in advance of the receipt of cash and will not receive the
cash from the Trust related to such income if such holders dispose of their
Preferred Securities prior to the record date for the date on which
distributions of such amounts are made. See "Certain Federal Income Tax
Considerations--Original Issue Discount." INVESTORS SHOULD CONSULT WITH THEIR
OWN TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES OF AN INVESTMENT IN THE
PREFERRED SECURITIES.
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Junior
Subordinated Notes. However, should the Company determine to exercise such
right in the future, the market price of the Preferred Securities is likely to
be affected. A holder that disposes of its Preferred Securities during an
Extension Period, therefore, might not receive the same return on its
investment as a holder that continues to hold its Preferred Securities. In
addition, as a result of the existence of the Company's right to defer interest
payments, the market price of the Preferred Securities (which represent an
undivided beneficial interest in the Junior Subordinated Notes) may be more
volatile than other securities on which original issue discount accrues that do
not have such rights.
REDEMPTION
The Preferred Securities are subject to mandatory redemption upon repayment
of the Junior Subordinated Notes at maturity or their earlier redemption. The
Company has the option to redeem all or any part of the Junior Subordinated
Notes on September 30, 2000, or at any time thereafter without payment of any
premium. The Company may elect to redeem the Junior Subordinated Notes at a
time when prevailing interest rates are lower or significantly lower than the
Securities Rate payable on the Preferred Securities. In that event, holders
would be denied the opportunity to invest the funds received at a rate as high
as the Securities Rate.
8
<PAGE>
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
If a Special Event shall occur and be continuing, the Company will have the
option either to redeem the Junior Subordinated Notes in cash (with the result
that the Preferred Securities shall be redeemed) or cause the dissolution of
the Trust, with the result that Junior Subordinated Notes with an aggregate
principal amount equal to the aggregate stated liquidation amount of, with an
interest rate identical to the Securities Rate of, and accrued and unpaid
interest equal to accrued and unpaid distributions on, the Trust Securities
would be distributed to the holders of the Trust Securities, in liquidation of
such holders' interests in the Trust on a pro rata basis, within 90 days
following the occurrence of such Special Event; provided, however, that in the
case of the occurrence of a Tax Event, as a condition of such dissolution and
distribution, the Property Trustee shall have received an opinion from
independent tax counsel experienced in such matters (a No Recognition Opinion),
which opinion may rely on published revenue rulings of the Internal Revenue
Service, to the effect that the holders of the Trust Securities will not
recognize any gain or loss for United States federal income tax purposes as a
result of such dissolution and distribution of Junior Subordinated Notes; and,
provided, further, that, if at the time there is available to the Company or
the Trust the opportunity to eliminate, within such 90 day period, the Special
Event by taking some ministerial action, such as filing a form or making an
election, or pursuing some other similar reasonable measure, which would have
no adverse effect on the Company or the Trust, the holders of the Trust
Securities, the Company or the Trust will pursue such measure in lieu of
redemption or dissolution.
There can be no assurance as to the market prices for the Preferred
Securities or the Junior Subordinated Notes that may be distributed in exchange
for Preferred Securities if a dissolution or liquidation of the Trust were to
occur. Accordingly, the Preferred Securities that an investor may purchase, or
the Junior Subordinated Notes that the investor may receive on dissolution and
liquidation of the Trust, may trade at a discount to the price that the
investor paid to purchase the Preferred Securities offered hereby. Because
holders of Preferred Securities will be paid only from payments on the Junior
Subordinated Notes and may receive Junior Subordinated Notes upon the
occurrence of a Special Event, prospective purchasers of Preferred Securities
are making an investment decision with regard to the Junior Subordinated Notes
and should carefully review all the information regarding the Junior
Subordinated Notes contained herein. See "Description of the Preferred
Securities--Special Event Redemption or Distribution" and "Description of the
Junior Subordinated Notes."
LIMITED VOTING RIGHTS
Holders of Preferred Securities will have limited voting rights and, except
for the rights of holders of Preferred Securities to appoint a Substitute
Property Trustee upon the occurrence of certain events described herein, will
not be entitled to vote to appoint, remove or replace the Property Trustee,
which voting rights are vested exclusively in the holder of the Common
Securities.
TRADING CHARACTERISTICS OF PREFERRED SECURITIES
The Preferred Securities are expected to be listed on the NYSE, subject to
official notice of issuance. Accordingly, the Preferred Securities are expected
to trade at a price that takes into account the value, if any, of accrued but
unpaid distributions; thus, purchasers will not pay and sellers will not
receive accrued and unpaid interest with respect to the Preferred Securities
that is not included in the trading price thereof. Nonetheless, interest on the
Junior Subordinated Notes will be included in the gross income of U.S. holders
of Preferred Securities as it accrues rather than when it is paid. To the
extent the selling price is less than the holder's adjusted tax basis (which
will include, in the form of OID, all accrued but unpaid interest), a holder
generally will recognize a capital loss. Subject to certain limited exceptions,
capital losses cannot be applied to offset ordinary income for United States
federal income tax purposes. See "Certain Federal Income Tax Considerations--
Original Issue Discount" and "--Sale of Preferred Securities."
The trading price of the Preferred Securities is likely to be sensitive to
the level of interest rates generally. If interest rates rise in general, the
trading price of the Preferred Securities may decline to reflect the
9
<PAGE>
additional yield requirements of the purchasers. Conversely, a decline in
interest rates may increase the trading price of the Preferred Securities,
although any increase will be moderated by the Company's ability to call the
Junior Subordinated Notes at any time on or after September 30, 2000. In
addition, because payment of the Preferred Securities is dependent upon the
Company's ability to pay the Junior Subordinated Notes, negative developments
affecting the Company may adversely affect the trading price of the Preferred
Securities.
VIRGINIA POWER CAPITAL TRUST I
The Trust is a statutory business trust formed under Delaware law pursuant to
the filing of a certificate of trust with the Delaware Secretary of State in
July 1995. The Trust's business is defined in a trust agreement, executed by
the Company, as Depositor, and the Delaware Trustee thereunder. This trust
agreement will be amended and restated in its entirety on the Issue Date
substantially in the form filed as an exhibit to the Registration Statement of
which this Prospectus forms a part (the Trust Agreement). The Trust Agreement
will be qualified as an indenture under the Trust Indenture Act of 1939, as
amended (the 1939 Act). The Trust exists for the exclusive purposes of (i)
issuing the Trust Securities representing undivided beneficial interests in the
assets of the Trust, (ii) investing the gross proceeds of the Trust Securities
in the Junior Subordinated Notes and (iii) engaging in only those other
activities necessary or incidental thereto. The Trust has a term of
approximately 40 years, but may terminate earlier as provided in the Trust
Agreement.
Upon issuance of the Preferred Securities, the purchasers thereof will own
all of the Preferred Securities. The Company will acquire all of the Common
Securities, which will have an aggregate liquidation amount equal to
approximately 3% of the total capital of the Trust. The Common Securities will
rank pari passu, and payments will be made thereon pro rata, with the Preferred
Securities, except that upon the occurrence and continuance of a Trust
Agreement Event of Default, the rights of the holders of 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 Trust's business and affairs will be conducted by the Securities
Trustees, which shall be appointed by the Company as the holder of the Common
Securities. Two employees of the Company initially will serve as Administrative
Trustees. Chemical Bank will serve as Property Trustee and will hold the Junior
Subordinated Notes issued by the Company. Chemical Bank Delaware will serve as
Delaware Trustee to ensure compliance with the Delaware Business Trust Act. In
certain circumstances, the holders of a majority in liquidation amount of the
Preferred Securities will be entitled to appoint a Substitute Property Trustee.
See "Description of the Preferred Securities--Voting Rights."
The Property Trustee will hold title to the Junior Subordinated Notes for the
benefit of the holders of the Trust Securities and will have the power to
exercise all rights, powers and privileges under the Subordinated Note
Indenture as the holder of the Junior Subordinated Notes. In addition, the
Property Trustee will maintain exclusive control of a segregated non-interest
bearing bank account (the Payment Account) to hold all payments made in respect
of the Junior Subordinated Notes for the benefit of the holders of Trust
Securities. The Property Trustee will make payments of distributions and
payments on liquidation, redemption and otherwise to the holders of the Trust
Securities out of funds from the Payment Account. Subject to the right of the
holders of the Preferred Securities to appoint a Substitute Property Trustee,
the Company, as the holder of all the Common Securities, will have the right to
appoint, remove or replace all the Securities Trustees. The Company will pay
all fees and expenses related to the Trust and the offering of the Trust
Securities. See "Description of the Junior Subordinated Notes--Miscellaneous."
The rights of the holders of the Preferred Securities, including economic
rights, rights to information and voting rights, are as set forth in the Trust
Agreement, the Delaware Business Trust Act and the 1939 Act. See "Description
of the Preferred Securities."
10
<PAGE>
The Trust's registered office in the State of Delaware is c/o Chemical Bank
Delaware, 1201 Market Street, Wilmington, Delaware 19801. The principal place
of business of the Trust shall be c/o the Company Treasurer, One James River
Plaza, Richmond, Virginia 23219-3932, telephone (804) 771-3000, Attn: The
Administrative Trustees.
SELECTED FINANCIAL INFORMATION
The summary of financial information set forth below for the years 1990-1994
was derived from, and should be read in conjunction with, the audited financial
statements and the Selected Financial Data contained in the Company's most
recent Annual Report on Form 10-K. Information for the 12 months ended June 30,
1995, and as of such date, is derived from financial statements that have not
been audited but which, in the opinion, of the Company's management, contain
all adjustments, consisting of only normal recurring accruals, necessary to
present fairly the Company's financial position and results of operations and
cash flows for such period, and should be read in conjunction with the
Company's most recent Quarterly Report on Form 10-Q. See "Incorporation Of
Certain Documents By Reference."
<TABLE>
<CAPTION>
12 MONTHS
ENDED YEARS
JUNE 30, ----------------------------------
1995 1994 1993 1992 1991 1990
--------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues (millions)..... $4,126 $4,171 $4,187 $3,680 $3,688 $3,462
Operating income (millions)....... 698 731 813 762 817 806
Income before cumulative effect of
a change in accounting principle
(millions)....................... 405 447 509 456 487 450
Cumulative effect of a change in
accounting principle (millions).. 14
------ ------ ------ ------ ------ ------
Net income (millions)............. 405 447 509 470 487 450
====== ====== ====== ====== ====== ======
Ratio of earnings to combined
fixed charges and preferred stock
dividends........................ 2.41 2.65 2.81 2.53 2.44 2.21
</TABLE>
In the ratio of earnings to combined fixed charges and preferred stock
dividends, earnings are determined by adding taxes on income and fixed charges
to Net Income. Fixed charges consist of interest charges (without reduction for
Allowance for Funds Used During Construction) on long-term and short-term debt,
and such portion of rentals as is representative of the interest factor. These
earnings are then divided by the sum of total fixed charges and the preferred
stock dividend factor representative of pre-tax income required to pay total
preferred stock dividends for the applicable year.
11
<PAGE>
CAPITALIZATION
(UNAUDITED)
(MILLIONS)
<TABLE>
<CAPTION>
AS OF
JUNE 30, 1995
ACTUAL PRO FORMA(*)
------------- ------------
<S> <C> <C>
Long-Term Debt...................................... $3,952 $3,952
Company-Obligated Mandatorily Redeemable Preferred
Securities of Subsidiary Trust**................... -- 135
Preferred Stock
Not Subject to Mandatory Redemption............... 594 509
Subject to Mandatory Redemption................... 221 180
------ ------
Total Preferred Stock........................... 815 689
Common Stock Equity................................. 4,009 4,009
------ ------
Total Capitalization............................ $8,776 $8,785
====== ======
</TABLE>
- --------
(*) Reflects the following pro forma adjustments:
(i) Issuance of the Junior Subordinated Notes and Trust Securities.
(ii) The repurchase of certain of the Company's Preferred Stock with the
proceeds of this offering.
(**) The % Junior Subordinated Notes totaling $139,175,250 principal amount
constitute 100% of the Trust's assets.
The Company will present the Preferred Securities as a separate line item on
the balance sheet entitled "Company--Obligated Mandatorily Redeemable Preferred
Securities of Subsidiary Trust" and will include a footnote on the face of the
balance sheet that states "As described in the footnotes to the financial
statements, the % Junior Subordinated Notes totaling $139,175,250 principal
amount constitute 100% of the Trust's assets."
USE OF PROCEEDS
The proceeds of the sale of the Preferred Securities will be invested by the
Trust in the Junior Subordinated Notes of the Company. The Company will use the
net proceeds from the sale of such Junior Subordinated Notes to redeem
outstanding preferred stock of the Company and for other general corporate
purposes.
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the Trust
Agreement. The Trust Agreement will be qualified as an indenture under the 1939
Act. The Property Trustee will act as the indenture trustee with respect to the
Trust, as well as the Guarantee, for purposes of compliance with the provisions
of the 1939 Act. The terms of the Preferred Securities will include those
stated in the Trust Agreement and those made part of the Trust Agreement by the
1939 Act. The following summary of the principal terms and provisions of the
Preferred Securities does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the Trust Agreement, a copy of which
is filed as an exhibit to the Registration Statement, of which this Prospectus
is a part, as well as the 1939 Act.
GENERAL
The Trust Agreement authorizes the Administrative Trustees, on behalf of the
Trust, to issue the Preferred Securities, which represent preferred undivided
beneficial interests in the assets of the Trust, and the Common Securities,
which represent common undivided beneficial interests in the assets of the
Trust. All of the Common Securities will be owned by the Company. The Common
Securities rank pari passu, and payments will be made thereon on a pro rata
basis with, the Preferred Securities, except that upon the occurrence of a
Trust Agreement Event of Default, the rights of the holders of the Common
Securities to receive payment of periodic distributions and payments upon
liquidation, redemption and otherwise will be subordinated to the rights of the
holders of the Preferred Securities. The Trust Agreement does not permit the
issuance by the Trust of any securities other than the Trust Securities or the
incurrence of any indebtedness by the Trust. Pursuant to the Trust Agreement,
the Property Trustee will own and hold the
12
<PAGE>
Junior Subordinated Notes for the benefit of the holders of the Trust
Securities. The payment of distributions out of money held by the Trust, and
payments upon redemption of the Preferred Securities or liquidation of the
Trust, are guaranteed by the Company on a subordinated basis as and to the
extent described under "Description of the Guarantee." The Guarantee does not
cover payment of distributions on the Preferred Securities when the Trust does
not have sufficient available funds to make such distributions. In such event,
the remedy of a holder of Preferred Securities is to direct the Property
Trustee to enforce its rights under the Junior Subordinated Notes. The above
mechanisms and obligations, taken together with the Agreement as to Expenses
and Liabilities constitute a full and unconditional guarantee by the Company of
payments due on the Preferred Securities. See "Description of the Preferred
Securities--Voting Rights."
DISTRIBUTIONS
Distributions on the Preferred Securities will be fixed at the Securities
Rate and will accrue from the Issue Date and will be payable quarterly in
arrears on March 31, June 30, September 30 and December 31 of each year,
commencing September 30, 1995. In the event that any date on which
distributions are to be made on the Preferred Securities is not a Business Day,
then payment of the distributions payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay) except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date. A "Business Day" shall mean any day other than
Saturday, Sunday or any day on which banking institutions in New York City (or
in the jurisdiction in which the Indenture Trustee's or Property Trustee's
principal offices are located) are authorized or required by law to close.
Distributions payable on any Distribution Date will be payable to the holders
of record on the Record Date for such Distribution Date, which is the close of
business on the fifteenth calendar day preceding such Distribution Date.
Subject to any applicable laws and regulations and the provisions of the Trust
Agreement, each such payment will be made as described under "--Book-Entry Only
Issuance--The Depository Trust Company" below. The amount of distributions
payable for any period will be computed on the basis of a 360-day year of
twelve 30-day months.
The Company has the right under the Subordinated Note Indenture to defer
payments of interest on the Junior Subordinated Notes by extending the interest
payment period from time to time on the Junior Subordinated Notes (each, an
Extension Period) which, if exercised, would defer quarterly distributions on
the Preferred Securities during any such extended interest payment period.
Deferred installments of interest on the Junior Subordinated Notes will bear
interest, compounded quarterly, at a rate equal to one quarter of the
Securities Rate. If distributions are deferred, the deferred distributions and
accrued interest thereon shall be paid, if funds are available therefor, to
holders of record of the Preferred Securities as they appear on the books and
records of the Trust on the Record Date next following the termination of such
Extension Period. See "Description of the Junior Subordinated Notes--Interest"
and "--Option to Extend Interest Payment Period."
Distributions on the Preferred Securities must be paid on the Distribution
Dates to the extent that the Trust has funds available for the payment of such
distributions in the Payment Account. The Trust's funds available for
distribution to the holders of the Preferred Securities will be limited to
payments received under the Junior Subordinated Notes. See "Description of the
Junior Subordinated Notes."
REDEMPTION
The Preferred Securities are subject to mandatory redemption upon repayment
of the Junior Subordinated Notes at maturity or their earlier redemption. The
Junior Subordinated Notes will mature on September 30, 2025, subject to
extension, and may be redeemed, in whole or in part, at the option of the
Company, at any time on or after September 30, 2000, or at any time in whole in
certain circumstances upon the occurrence of a Special Event. Upon the
repayment of the Junior Subordinated Notes, whether at maturity or upon
redemption, the proceeds from such repayment or payment shall simultaneously be
applied to redeem a like amount of Trust Securities upon not less than 30 nor
more than 60 days notice, at the
13
<PAGE>
Redemption Price. See "Description of the Junior Subordinated Notes--Optional
Redemption." If a partial redemption of the Junior Subordinated Notes would
result in the delisting of the Preferred Securities, the Company may only
redeem the Junior Subordinated Notes in whole. In the event that fewer than all
of the outstanding Preferred Securities are to be redeemed, the Preferred
Securities to be redeemed will be selected by such method as the Property
Trustee shall deem fair and appropriate and which, based upon an opinion of
counsel, may provide for the selection for redemption of portions (equal to $25
or integral multiples thereof) of the aggregate liquidation amount of Preferred
Securities of a denomination larger than $25.
The Redemption Price for each Preferred Security shall equal the stated
liquidation amount of $25 plus accrued and unpaid distributions thereon to the
date of payment.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
Upon the occurrence of a Special Event, the Company will have the option to
redeem the Junior Subordinated Notes (and thus the Preferred Securities) or,
subject to certain conditions, distribute the Junior Subordinated Notes pro
rata to the holders of the Trust Securities; provided, however, that, if at the
time there is available to the Company or the Trust the opportunity to
eliminate, within such 90 day period, the Special Event by taking some
ministerial action, such as filing a form or making an election, or pursuing
some other similar reasonable measure, which would have no adverse effect on
the Trust, the Company or the holders of the Trust Securities, the Company or
the Trust will pursue such measure in lieu of redemption or dissolution. A
Special Event is either an Investment Company Act Event or a Tax Event.
An "Investment Company Act Event" means that the Administrative Trustees and
the Company shall have received an opinion of independent counsel (which may be
counsel to the Company) to the effect that, as a result of a change in law or
regulation or a written change in interpretation or application of law or
regulation by any court, governmental agency or regulatory authority after the
Issue Date, there is more than an insubstantial risk that the Trust is or will
be considered an investment company under the 1940 Act.
"Tax Event" means that the Administrative Trustees and the Company shall have
received an opinion from independent tax counsel experienced in such matters
(which may be counsel to the Company) to the effect that, as a result of (a)
any amendment to, or change (including any announced prospective change) in,
the laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein or (b) any amendment to, or
change in, an interpretation or application of such laws or regulations, there
is more than an insubstantial risk that (i) the Trust would be subject to
United States federal income tax with respect to income accrued or received on
the Junior Subordinated Notes, (ii) interest payable to the Trust on the Junior
Subordinated Notes would not be deductible by the Company for United States
federal income tax purposes or (iii) the Trust would be subject to more than a
de minimis amount of other taxes, duties or other governmental charges, which
change or amendment becomes effective on or after the date of this Prospectus.
Prior to the distribution of Junior Subordinated Notes in connection with the
occurrence of a Special Event, the Property Trustee shall have received an
opinion from independent tax counsel experienced in such matters (a No
Recognition Opinion), which opinion may rely on published revenue rulings of
the Internal Revenue Service, to the effect that the holders of the Trust
Securities will not recognize any gain or loss for United States federal income
tax purposes as a result of such dissolution and distribution of Junior
Subordinated Notes.
If Junior Subordinated Notes are distributed to the holders of the Preferred
Securities, the Company will use its best efforts to have the Junior
Subordinated Notes listed on the NYSE or on such other exchange as the
Preferred Securities are then listed. After the date for any distribution of
Junior Subordinated Notes upon dissolution of the Trust, (i) the Preferred
Securities and the Guarantee will no longer be deemed to be outstanding, (ii)
the depositary or its nominee, as the record holder of the Preferred
Securities, will receive a registered global certificate or certificates
representing the Junior Subordinated Notes to be delivered upon
14
<PAGE>
such distribution and (iii) any certificates representing Preferred Securities
and the Guarantee not held by the depositary or its nominee will be deemed to
represent Junior Subordinated Notes having an aggregate principal amount equal
to the aggregate stated liquidation amount of, with an interest rate identical
to the Securities Rate of, and accrued and unpaid interest equal to accrued and
unpaid distribution on, such Preferred Securities, until such certificates are
presented to the Company or its agent for transfer or reissuance.
There can be no assurance as to the market prices for the Preferred
Securities or the Junior Subordinated Notes that may be distributed in exchange
for the Preferred Securities if a dissolution and liquidation of the Trust were
to occur. Accordingly, the Preferred Securities that an investor may purchase,
or the Junior Subordinated Notes that the investor may receive on dissolution
and liquidation of the Trust, may trade at a discount to the price that the
investor paid to purchase the Preferred Securities offered hereby.
REDEMPTION PROCEDURES
The Trust may not redeem fewer than all of the outstanding Preferred
Securities unless all accrued and unpaid distributions have been paid on all
Preferred Securities for all quarterly distribution periods terminating on or
prior to the date of redemption. In the event that fewer than all of the Trust
Securities are to be redeemed, then the aggregate liquidation preference for
the Trust Securities to be redeemed shall be allocated 97% to the Preferred
Securities and 3% to the Common Securities.
If the Property Trustee gives a notice of redemption in respect of Preferred
Securities (which notice will be irrevocable), then, by 2:00 P.M., New York
City time, on the redemption date, provided that the Company has paid to the
Property Trustee a sufficient amount of cash in connection with the related
redemption or maturity of the Junior Subordinated Notes, the Property Trustee
will irrevocably deposit with the depositary funds sufficient to pay the
applicable Redemption Price. See "--Book-Entry Only Issuance--The Depository
Trust Company." If notice of redemption shall have been given and funds
deposited as required, then immediately prior to the close of business on the
date of such deposit, distributions will cease to accrue and all rights of
holders of such Preferred Securities so called for redemption will cease,
except the right of the holders of such Preferred Securities to receive the
Redemption Price, but without interest on such Redemption Price. In the event
that any date fixed for redemption of Preferred Securities is not a Business
Day, then payment of the Redemption Price payable on such date will be made on
the next succeeding day which is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such Business Day
falls in the next calendar year, such payment will be made on the immediately
preceding Business Day. In the event that payment of the Redemption Price in
respect of Preferred Securities is improperly withheld or refused and not paid
either by the Trust or by the Company pursuant to the Guarantee, distributions
on such Preferred Securities will continue to accrue to the same extent as
interest on the Junior Subordinated Notes.
Subject to the foregoing and to applicable law (including, without
limitation, United States federal securities laws), the Company or its
affiliates may, at any time and from time to time, purchase outstanding
Preferred Securities by tender, in the open market or by private agreement.
BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
The Depository Trust Company (DTC) will act as securities depositary for the
Preferred Securities. The Preferred Securities will be issued only as fully
registered securities registered in the name of Cede & Co., DTC's nominee. One
or more fully registered global Preferred Securities certificates will be
issued, representing in the aggregate the total number of Preferred Securities,
and will be deposited with DTC.
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DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants (Participants) deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations (Direct Participants). DTC is
owned by a number of its Direct Participants and by the NYSE, the American
Stock Exchange, Inc., and the National Association of Securities Dealers, Inc.
Access to the DTC system is also available to others such as securities brokers
and dealers, banks and trust companies that clear through or maintain a
custodial relationship with a Direct Participant, either directly or indirectly
(Indirect Participants). The rules applicable to DTC and its Participants are
on file with the Commission.
Purchases of Preferred Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Securities on DTC's records. The ownership interest of each actual purchaser of
Preferred Securities (Beneficial Owner) is in turn to be recorded on the Direct
and Indirect Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchases, but Beneficial Owners are expected to
receive written confirmations providing details of the transactions, as well as
periodic statements of their holdings, from the Direct or Indirect Participants
through which the Beneficial Owners purchased Preferred Securities. Transfers
of ownership interests in the Preferred Securities are to be accomplished by
entries made on the books of Participants acting on behalf of Beneficial
Owners. Beneficial Owners will not receive certificates representing their
ownership interests in Preferred Securities, except in the event that use of
the book-entry system for the Preferred Securities is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Preferred
Securities. DTC's records reflect only the identity of the Direct Participants
to whose accounts such Preferred Securities are credited, which may or may not
be the Beneficial Owners. The Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants,
by Direct Participants to Indirect Participants, and by Direct Participants and
Indirect Participants to Beneficial Owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Redemption notices shall be sent to DTC. If less than all of the Preferred
Securities are being redeemed, DTC will reduce the amount of the interest of
each Direct Participant in the Preferred Securities in accordance with its
procedures.
Although voting with respect to the Preferred Securities is limited, in those
cases where a vote is required, neither DTC nor Cede & Co. will itself consent
or vote with respect to Preferred Securities. Under its usual procedures, DTC
would mail an Omnibus Proxy to the Trust as soon as possible after the record
date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to
those Direct Participants to whose accounts the Preferred Securities are
credited on the record date (identified in a listing attached to the Omnibus
Proxy).
Distribution payments on the Preferred Securities will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on the relevant payment
date in accordance with their respective holdings shown on DTC's records unless
DTC has reason to believe that it will not receive payments on such payment
date. Payments by participants to Beneficial Owners will be governed by
standing instructions and customary practices, as in the case with securities
held for the account of customers registered in "street name," and
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will be the responsibility of such Participant and not of DTC, the Trust, any
trustee or the Company, subject to any statutory or regulatory requirements as
may be in effect from time to time. Payment of distributions to DTC is the
responsibility of the Trust, disbursement of such payments to Direct
Participants is the responsibility of DTC, and disbursement of such payments to
the Beneficial Owners is the responsibility of Direct and Indirect
Participants.
Except as provided herein, a Beneficial Owner in a global Preferred Security
will not be entitled to receive physical delivery of Preferred Securities.
Accordingly, each Beneficial Owner must rely on the procedures of DTC to
exercise any rights under the Preferred Securities. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of securities in definitive form. Such laws may impair the ability to
transfer beneficial interests in a global Preferred Security.
DTC may discontinue providing its services as securities depositary with
respect to the Preferred Securities at any time by giving reasonable notice to
the Trust. Under such circumstances, in the event that a successor securities
depositary is not obtained, Preferred Securities certificates will be printed
and delivered to the holders of record. Additionally, the Company may decide to
discontinue use of the system of book-entry transfers through DTC (or a
successor depositary) with respect to the Preferred Securities. In that event,
certificates for the Preferred Securities will be printed and delivered to the
holders of record.
The information in this section concerning DTC and DTC's book-entry system
have been obtained from sources that the Company and the Trust believe to be
reliable, but the Company and the Trust take no responsibility for the accuracy
thereof. The Trust has no responsibility for the performance by DTC or its
Participants of their respective obligations as described herein or under the
rules and procedures governing their respective operations.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
Pursuant to the Trust Agreement, the Trust shall terminate on September 30,
2035, or earlier upon (i) the bankruptcy, dissolution or insolvency of the
Company, or dissolution of the Trust, (ii) the occurrence of a Special Event
followed by the distribution of the Junior Subordinated Notes, or (iii) the
payment or redemption of all of the Trust Securities.
If an early termination occurs as described in clause (i) above, the Trust
shall be liquidated by the Securities Trustees as expeditiously as they shall
determine to be appropriate by causing the Property Trustee to distribute to
each holder of Preferred Securities and Common Securities a like amount of
Junior Subordinated Notes, unless such distribution is determined by the
Property Trustee not to be practical, in which event such holders will be
entitled to receive, out of the assets of the Trust available for distribution
to holders after satisfaction of liabilities to creditors, an amount equal to,
in the case of holders of Preferred Securities, the aggregate of the stated
liquidation preference of $25 per Preferred Security plus accrued and unpaid
distributions thereon to the date of payment (such amount being the "Liquidated
Distribution"). If such Liquidated Distribution can be paid only in part
because the Trust has insufficient assets available to pay in full the
aggregate Liquidated Distribution, then the amounts payable directly by the
Trust on the Preferred Securities shall be paid on a pro rata basis. The
holder(s) of the Common Securities will be entitled to receive distributions
upon any such dissolution pro rata with the holders of the Preferred
Securities, except that if a Trust Agreement Event of Default has occurred and
is continuing, the Preferred Securities shall have a preference over the Common
Securities.
EVENTS OF DEFAULT
Any one of the following events constitutes an "Event of Default" under the
Trust Agreement (Trust Agreement Event of Default) with respect to the
Preferred Securities issued thereunder (whatever the reason for such Event of
Default, and whether it shall be voluntary or involuntary or be effected by
operation of law
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or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(i) the occurrence of an "Event of Default" as defined in Section 501 of
the Indenture (see "Description of Junior Subordinated Securities--Events
of Default"); or
(ii) default by the Property Trustee in the payment of any distribution
when it becomes due and payable, and continuation of such default for a
period of 30 days; or
(iii) default by the Property Trustee in the payment of any Redemption
Price of any Preferred Security or Common Security when it becomes due and
payable; or
(iv) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Trustees in the Trust Agreement (other than
a covenant or warranty a default in the performance of which or the breach
of which is dealt with in clause (ii) or (iii) above), and continuation of
such default or breach for a period of 60 days after there has been given,
by registered or certified mail, to such Trustee by the Holders of at least
10% in liquidation amount of the outstanding Preferred Securities a written
notice specifying such default or breach and requiring it to be remedied
and stating that such notice is a "Notice of Default" under the Trust
Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Securities Trustees.
Within 90 Business Days after the occurrence of any event which is, or after
notice or lapse of time or both would become, an Event of Default, the Property
Trustee shall transmit notice of any default actually known to the Property
Trustee to the holders of Preferred Securities and the Company, unless such
Event of Default shall have been cured or waived.
Unless a Trust Agreement Event of Default shall have occurred and be
continuing, the Securities Trustees may be removed at any time by act of the
holder of the Common Securities. If a Trust Agreement Event of Default has
occurred and is continuing, the Property Trustee may be removed at such time by
act of the holders of a majority in liquidation preference of the Preferred
Securities, delivered to the Property Trustee (in its individual capacity and
on behalf of the Trust). No resignation or removal of the Property Trustee and
no appointment by the successor shall be effective until the acceptance of
appointment by the successor Property Trustee in accordance with the provisions
of the Trust Agreement.
If a Trust Agreement Event of Default has occurred and is continuing, the
Preferred Securities shall have a preference over the Common Securities upon
dissolution of the Trust as described above. See "--Liquidation Distribution
Upon Dissolution."
VOTING RIGHTS
Except as provided below and under "Description of the Guarantee--Amendments
and Assignment" and as otherwise required by law and the Trust Agreement, the
holders of the Preferred Securities will have no voting rights.
If any proposed amendment to the Trust Agreement provides for, or the
Securities Trustees otherwise propose to effect (i) any action that would
adversely affect the powers, preferences or special rights of the holders of
the Preferred Securities, whether by way of amendment to the Trust Agreement or
otherwise or (ii) the dissolution, winding up or termination of the Trust,
other than pursuant to the Trust Agreement, then the holders of outstanding
Preferred Securities will be entitled to vote as a class on such amendment or
proposal of the Securities Trustees, and such amendment or proposal shall not
be effective except with the approval of the holders of 66 2/3% in liquidation
preference of such outstanding Preferred Securities.
So long as any Junior Subordinated Notes are held by the Property Trustee,
the Property Trustee shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the
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Indenture Trustee (as defined herein), or executing any trust or power
conferred on the Indenture Trustee with respect to the Junior Subordinated
Notes, (ii) waive any past default which is waivable under Section 513 of the
Indenture, (iii) exercise any right to rescind or annul a declaration that the
principal of all the Junior Subordinated Notes shall be due and payable or (iv)
consent to any amendment, modification or termination of the Subordinated Note
Indenture or the Junior Subordinated Notes, where such consent shall be
required, without, in each case, obtaining the prior approval of the holders of
at least 66 2/3% in liquidation preference of the outstanding Preferred
Securities; provided, however, that where a consent under the Subordinated Note
Indenture would require the consent of each holder of Junior Subordinated Notes
affected thereby, no such consent shall be given by the Securities Trustees
without the prior consent of each holder of Preferred Securities. The
Securities Trustees shall not revoke any action previously authorized or
approved by a vote of the Preferred Securities. The Property Trustee shall
notify all holders of the Preferred Securities of any notice of default
received from the Indenture Trustee. In addition to obtaining the foregoing
approvals of the holders of the Preferred Securities, prior to taking any of
the foregoing actions, the Property Trustee shall obtain an opinion of counsel
experienced in such matters to the effect that the Trust will not be classified
as other than a grantor trust for federal income tax purposes on account of
such action.
Any required approval of holders of Preferred Securities may be given at a
separate meeting of holders of Preferred Securities convened for such purpose
or pursuant to written consent. The Administrative Trustees will cause a notice
of any meeting at which holders of Preferred Securities are entitled to vote,
or of any matter upon which action by written consent of such holders is to be
taken, to be given to each holder of record of Preferred Securities in the
manner set forth in the Trust Agreement.
Notwithstanding that holders of Preferred Securities are entitled to vote or
consent under any of the circumstances described above, any of the Preferred
Securities that are owned by the Company, the Securities Trustees or any
affiliate of the Company or any Securities Trustee, shall, for purposes of such
vote or consent, be treated as if they were not outstanding.
CO-PROPERTY TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless a Trust Agreement Event of Default shall have occurred and be
continuing, at any time or times, for the purpose of meeting the legal
requirements of the 1939 Act or of any jurisdiction in which any part of the
Trust Property (as defined in the Trust Agreement) may at the time be located,
the Property Trustee shall have power to appoint, and upon the written request
of the Property Trustee, the Company, as Depositor, shall for such purpose join
with the Property Trustee in the execution, delivery and performance of all
instruments and agreements necessary or proper to appoint one or more persons
approved by the Property Trustee either to act as co-property trustee, jointly
with the Property Trustee, of all or any part of such Trust Property, or to act
as separate trustee of any such property, in either case with such powers as
may be provided in the instrument of appointment, and to vest in such person or
persons in such capacity, any property, title, right or power deemed necessary
or desirable, subject to the provisions of the Trust Agreement. If the Company,
as Depositor, does not join in such appointment within 15 days after the
receipt by it of a request so to do, or in case an Event of Default under the
Subordinated Note Indenture has occurred and is continuing, the Property
Trustee alone shall have power to make such appointment.
MODIFICATION OF THE TRUST AGREEMENT
The Trust Agreement may be amended or modified by the Company and the
Securities Trustees (i) to cure any ambiguity, provided that the amendment does
not adversely and materially affect any Holder, and (ii) to ensure that the
Trust will not be classified as other than a grantor trust for federal income
tax purposes. Except as provided in the succeeding paragraph, other amendments
to the Trust Agreement may be made upon approval of not less than 66 2/3% of
the Trust Securities then outstanding as long as such amendment will not affect
the Trust's status as a grantor trust or the Trust's exemption from the 1940
Act.
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Notwithstanding the foregoing, no amendment or modification may be made to
the Trust Agreement if such amendment or modification would (i) change the
amount or timing of any distribution on the Trust Securities (ii) restrict the
right of a Holder to institute suit for enforcement of any payment or (iii)
change the consent required to amend the Trust Agreement.
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
The Trust may not consolidate, amalgamate, merge with or into, or be replaced
by, or convey, transfer or lease its properties and assets substantially as an
entirety to any corporation or other body, except as described below. The Trust
may at the request of the Company, with the consent of the Administrative
Trustee and without the consent of the holders of the Trust Securities,
consolidate, amalgamate, merge with or into, or be replaced by a trust
organized as such under the laws of any State; provided, that (i) such
successor entity either (x) expressly assumes all of the obligations of the
Trust with respect to the Trust Securities or (y) substitutes for the Preferred
Securities other securities having substantially the same terms as the Trust
Securities (the Successor Securities) so long as the Successor Securities rank
the same as the Trust Securities rank in priority with respect to distributions
and payments upon liquidation, redemption and otherwise, (ii) the Company
expressly appoints a trustee of such successor entity possessing the same
powers and duties as the Property Trustee as the holder of the Junior
Subordinated Notes, (iii) the Preferred Securities or any Successor Securities
are listed, or any Successor Securities will be listed upon notification of
issuance, on any national securities exchange or other organization on which
the Preferred Securities are then listed, (iv) such merger, consolidation,
amalgamation or replacement does not cause the Preferred Securities (including
any Successor Securities) to be downgraded by any nationally recognized
statistical rating organization, (v) such merger, consolidation, amalgamation
or replacement does not adversely affect the rights, preferences and privileges
of the holders of the Trust Securities (including any Successor Securities) in
any material respect, (vi) such successor entity has a purpose identical to
that of the Trust, (vii) prior to such merger, consolidation, amalgamation or
replacement, the Company has received an opinion from independent counsel to
the Trust experienced in such matters to the effect that (A) such merger,
consolidation, amalgamation or replacement does not adversely affect the
rights, preferences and privileges of the holders of the Trust Securities
(including any Successor Securities) in any material respect, and (B) following
such merger, consolidation, amalgamation or replacement, neither the Trust nor
such successor entity will be required to register as an investment company
under the 1940 Act and (viii) the Company guarantees the obligations of such
successor entity under the Successor Securities at least to the extent provided
by the Guarantee. Notwithstanding the foregoing, the Trust shall not, except
with the consent of holders of 100% in liquidation amount of the Trust
Securities, consolidate, amalgamate, merge with or into, or be replaced by any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it if such consolidation, amalgamation, merger or
replacement would cause the Trust or the successor entity to be classified as
other than a grantor trust for federal income tax purposes.
Any corporation or other body into which any of the Property Trustee, the
Delaware Trustee or any Administrative Trustee that is not a natural person may
be merged or with which it may be consolidated, or any corporation or other
body resulting from any merger, conversion or consolidation to which any such
Securities Trustee shall be a party, or any corporation or other body
succeeding to all or substantially all the corporate trust business of any such
Securities Trustee, shall be the successor to such Securities Trustee under the
Trust Agreement, provided such corporation is otherwise qualified and eligible.
PAYMENT AND PAYING AGENT
Payments in respect of the Preferred Securities shall be made to DTC, which
is to credit the relevant accounts at DTC on the applicable Distribution Dates
or, if the Preferred Securities are not held by DTC, such payments shall be
made by check mailed to the address of the holder entitled thereto as such
address shall appear on the Register. The Paying Agent shall initially be the
Property Trustee. The Paying Agent shall be permitted to resign as Paying Agent
upon 30 days written notice to the Administrative Trustees and the Depositor.
In such event, the Administrative Trustees shall appoint a successor to act as
Paying Agent.
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REGISTRAR AND TRANSFER AGENT
The Company will act as initial registrar and transfer agent for the
Preferred Securities.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of the Trust, but upon payment in respect of any tax or
other governmental charges which may be imposed in relation to it.
The Trust will not be required to register or cause to be registered any
transfer of Preferred Securities after they have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, prior to the occurrence of a Trust Agreement Event of
Default with respect to the Trust Securities, undertakes to perform only such
duties as are specifically set forth in the Trust Agreement 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 provisions, the
Property Trustee is under no obligation to exercise any of the powers vested in
it by the Trust Agreement at the request of any holder of Preferred Securities,
unless offered reasonable indemnity by such holder against the costs, expenses
and liabilities which might be incurred thereby. The holders of Preferred
Securities will not be required to offer such indemnity in the event such
holders, by exercising their voting rights, direct the Property Trustee to take
any action following a Trust Agreement Event of Default.
Chemical Bank, the Property Trustee, also serves as Indenture Trustee and
Guarantee Trustee. The Company and certain of its affiliates maintain a deposit
account and a banking relationship with Chemical Bank. Chemical Bank serves as
trustee under other indentures pursuant to which debt securities of the Company
or an affiliate of the Company are outstanding.
GOVERNING LAW
The Trust Agreement and the Preferred Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The Securities Trustees are authorized and directed to operate the Trust in
such a way so that the Trust will not be deemed to be an "investment company"
required to be registered under the 1940 Act or characterized as other than a
grantor trust for federal income tax purposes. The Company is authorized and
directed to conduct its affairs so that the Junior Subordinated Notes will be
treated as indebtedness of the Company for federal income tax purposes. In this
connection, the Securities Trustees and the Company are authorized to take any
action, not inconsistent with applicable law, the Trust Agreement or the
articles of incorporation of the Company, that the Securities Trustees and the
Company determine in their discretion to be necessary or desirable for such
purposes, as long as such action does not materially and adversely affect the
interests of the holders of the Preferred Securities.
DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the Guarantee that
will be executed and delivered by the Company for the benefit of the holders
from time to time of Preferred Securities. The Guarantee will be qualified as
an indenture under the 1939 Act. Chemical Bank will act as indenture trustee
under the Guarantee (the Guarantee Trustee) for purposes of the 1939 Act. The
terms of the Guarantee will be those set forth therein and those made part
thereof by the 1939 Act. The following summary does not purport to be complete
and is subject in all respects to the provisions of, and is qualified in its
entirety by
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reference to the Guarantee, which is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part, and the 1939 Act. The
Guarantee will be held by the Guarantee Trustee for the benefit of holders of
the Preferred Securities.
GENERAL
Pursuant to the Guarantee, the Company will irrevocably and unconditionally
agree, to the extent set forth therein, to pay in full, to the holders of the
Preferred Securities, the Guarantee Payments (without duplication), to the
extent not paid by, or on behalf of, the Trust, regardless of any defense,
right of set-off or counterclaim that the Company may have or assert against
the Trust. The following payments or distributions with respect to the
Preferred Securities to the extent not paid or made by, or on behalf of, the
Trust (the Guarantee Payments) will be subject to the Guarantee (without
duplication): (i) any accrued and unpaid distributions required to be paid on
the Preferred Securities to the extent that the Trust has funds available
therefor, (ii) the Redemption Price, with respect to any Preferred Securities
called for redemption by the Trust, to the extent the Trust has funds available
therefor, and (iii) upon a liquidation of the Trust (other than in connection
with the distribution of Junior Subordinated Notes to the holders of Trust
Securities or the redemption of all of the Preferred Securities), the lesser of
(a) the aggregate of the liquidation amount and all accrued and unpaid
distributions on the Preferred Securities to the date of payment, to the extent
the Trust has funds available therefor, and (b) the amount of assets of the
Trust remaining available for distribution to holders of Preferred Securities
in liquidation of the 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 the Trust to pay
such amounts to such holders.
The Guarantee will be a full and unconditional guarantee of the Guarantee
Payments with respect to the Preferred Securities from the time of issuance of
the Preferred Securities, but will not apply to the payment of distributions
and other payments on the Preferred Securities when the Trust does not have
sufficient funds to make such distributions or other payments. IF THE COMPANY
DOES NOT MAKE INTEREST PAYMENTS ON THE JUNIOR SUBORDINATED NOTES HELD BY THE
PROPERTY TRUSTEE, THE TRUST WILL NOT MAKE DISTRIBUTIONS ON THE PREFERRED
SECURITIES.
SUBORDINATION
The Company's obligations under the Guarantee to make the Guarantee Payments
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, including the Junior Subordinated Notes, except those obligations or
liabilities made pari passu or subordinate by their terms, and (ii) pari passu
with the most senior preferred 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 securities of any affiliate of the Company. The terms of the
Preferred Securities provide that each holder of Preferred Securities by
acceptance thereof agrees to the subordination provisions and other terms of
the Guarantee. As of June 30, 1995, the Company's obligations senior in right
of payment to the Guarantee aggregated $4.3 billion. The Company has
outstanding preferred stock that ranks pari passu to the Guarantee and common
stock that ranks junior to the Guarantee. See "Selected Financial Information--
Capitalization."
The Guarantee will constitute a guarantee of payment and not of collection
(that is, the guaranteed party may institute a legal proceeding directly
against the guarantor to enforce its rights under the guarantee without first
instituting a legal proceeding against any other person or entity).
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially and adversely
affect the rights of holders of Preferred Securities (in which case no consent
will be required), the 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. The manner of obtaining any such approval of holders of
the Preferred Securities is set forth under "Description of the Preferred
Securities--Voting Rights." All guarantees and agreements contained in the
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Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Company and shall inure to the benefit of the holders of
the Preferred Securities then outstanding.
TERMINATION
The Guarantee will terminate and be of no further force and effect as to the
Preferred Securities upon full payment of the Redemption Price of all Preferred
Securities, or upon distribution of the Junior Subordinated Notes to the
holders of Preferred Securities, and will terminate completely upon full
payment of the amounts payable upon liquidation of the Trust. The Guarantee
will continue to be effective or will be reinstated, as the case may be, if at
any time any holder of Preferred Securities must repay to the Trust or the
Company, or their respective successors, any sums paid to them under the
Preferred Securities or the Guarantee.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of the
Company to perform any of its payment or other obligations thereunder. The
holders of a majority in liquidation amount of the Preferred Securities 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 the Guarantee,
any holder of Preferred Securities may 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 Guarantee
Trustee or any other person or entity.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of a default with respect to
the Guarantee, undertakes to perform only such duties as are specifically set
forth in such Guarantee 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 provisions, the Guarantee Trustee is under no
obligation to exercise any of the powers vested in it by the Guarantee at the
request of any holder of Preferred Securities, unless offered reasonable
indemnity against the costs, expenses and liabilities which might be incurred
thereby.
Chemical Bank, the Guarantee Trustee, also serves as Property Trustee and as
Indenture Trustee. The Company and certain of its affiliates maintain a deposit
account and a banking relationship with Chemical Bank. Chemical Bank serves as
trustee under other indentures pursuant to which debt securities of the Company
or an affiliate of the Company are outstanding.
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 JUNIOR SUBORDINATED NOTES
Set forth below is a description of the terms of the Junior Subordinated
Notes. The following description does not purport to be complete and is subject
to, and is qualified in its entirety by reference to, the Subordinated Note
Indenture, dated as of August 1, 1995, between the Company, and Chemical Bank,
as trustee (the Indenture Trustee), as supplemented by a First Supplemental
Indenture, dated as of August 1, 1995 (the Subordinated Note Indenture, as so
supplemented, is hereinafter referred to as the Subordinated Note Indenture),
the forms of which are filed as an exhibit to the Registration Statement of
which this Prospectus forms a part. The terms of the Junior Subordinated Notes
will include those stated in the
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Subordinated Note Indenture and those made a part of the Subordinated Note
Indenture by reference to the 1939 Act. Certain capitalized terms used herein
are defined in the Subordinated Note Indenture.
GENERAL
The Junior Subordinated Notes will be issued as unsecured junior subordinated
debt securities under the Subordinated Note Indenture. The Junior Subordinated
Notes will be limited in aggregate principal amount to approximately $140
million, such amount being the approximate amount of the purchase price of the
Preferred Securities and the Common Securities.
The Junior Subordinated Notes are not subject to a sinking fund provision.
The entire principal amount of the Junior Subordinated Notes will mature and
become due and payable, together with any accrued and unpaid interest thereon,
including Additional Interest (as defined herein), if any, on September 30,
2025; provided, however, that the Company may, subject to compliance with
certain conditions, extend the maturity for up to an additional ten years. The
conditions to extension are that (i) the Company not be bankrupt or insolvent,
or otherwise in default on the Junior Subordinated Notes, (ii) the Company has
timely paid all amounts due on the Junior Subordinated Notes for the preceding
six quarters without deferral, (iii) the Trust is not in arrears on payments on
the Trust Securities and (iv) the Junior Subordinated Notes or Preferred
Securities are then rated in one of the four highest rating categories by a
nationally recognized statistical rating organization.
THE SUBORDINATED NOTE INDENTURE DOES NOT CONTAIN PROVISIONS THAT AFFORD
HOLDERS OF JUNIOR SUBORDINATED NOTES PROTECTION IN THE EVENT OF A HIGHLY
LEVERAGED TRANSACTION INVOLVING THE COMPANY. HOWEVER, ANY SUCH TRANSACTION
WOULD REQUIRE REGULATORY APPROVAL, AND MANAGEMENT OF THE COMPANY BELIEVES SUCH
APPROVAL WOULD BE UNLIKELY FOR A TRANSACTION THAT WOULD RESULT IN THE COMPANY
HAVING A HIGHLY LEVERAGED CAPITAL STRUCTURE.
SUBORDINATION
The Junior Subordinated Notes are subordinated and junior in right of payment
to all Senior Indebtedness of the Company. The Junior Subordinated Notes rank
pari passu with obligations to trade creditors of the Company. No payment of
principal of (including redemption payments), or interest on, the Junior
Subordinated Notes may be made if (a) any Senior Indebtedness is not paid when
due and any applicable grace period with respect to such default has ended with
such default not being cured or waived or ceasing to exist, or (b) the maturity
of any Senior Indebtedness has been accelerated because of a default. Upon any
distribution of assets of the Company to creditors upon any dissolution,
winding up, liquidation or reorganization, whether voluntary or involuntary, or
in bankruptcy, insolvency, receivership or other proceedings, all principal of,
premium, if any, and interest due or to become due on, all Senior Indebtedness
must be paid in full before the holders of Junior Subordinated Notes are
entitled to receive or retain any payment. Subject to the prior payment of all
Senior Indebtedness, the rights of the holders of the Junior Subordinated Notes
will be subrogated to the rights of the holders of Senior Indebtedness to
receive payments or distributions applicable to such Senior Indebtedness until
all amounts owing on the Junior Subordinated Notes are paid in full.
The term "Senior Indebtedness" means, with respect to the Company, (i) any
payment in respect of (a) indebtedness of the Company for money borrowed
(including any financial derivative, hedging or futures contract or similar
instrument) and (b) indebtedness evidenced by securities, debentures, bonds,
notes or other similar instruments issued by the Company that, by their terms,
are senior or senior subordinated debt securities including, without
limitation, all obligations under its indentures with various trustees; (ii)
all capital lease obligations; (iii) all obligations issued or assumed as the
deferred purchase price of property, all conditional sale obligations and all
obligations of the Company under any title retention agreements (but excluding
trade accounts payable arising in the ordinary course of business); (iv) all
obligations for the reimbursement of any letter of credit, banker's acceptance,
security purchase facility or similar credit
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transaction; (v) all obligations of the type referred to in clauses (i) through
(iv) above of other persons the payment of which the Company is responsible or
liable as obligor, guarantor or otherwise; and (vi) all obligations of the type
referred to in clauses (i) through (v) above of other persons secured by any
lien on any property or asset of the Company (whether or not such obligation is
assumed by the Company), except for (1) any such indebtedness that is by its
terms subordinated to or pari passu with the Junior Subordinated Notes and (2)
any unsecured indebtedness between or among the Company or its affiliates. Such
Senior Indebtedness shall continue to be Senior Indebtedness and be entitled to
the benefits of the subordination provisions irrespective of any amendment,
modification or waiver of any term of such Senior Indebtedness.
The Subordinated Note Indenture does not limit the aggregate amount of Senior
Indebtedness that may be issued by the Company. As of June 30, 1995, Senior
Indebtedness of the Company aggregated $4.3 billion.
OPTIONAL REDEMPTION
The Company shall have the right to redeem the Junior Subordinated Notes, in
whole or in part, from time to time, on or after September 30, 2000, or at any
time in whole in certain circumstances upon the occurrence of a Special Event
as described under "Description of the Preferred Securities--Special Event
Redemption or Distribution," upon not less than 30 nor more than 60 days
notice, at a Redemption Price equal to 100% of the principal amount to be
redeemed plus any accrued and unpaid interest, including Additional Interest,
if any, to the Redemption Date. If a partial redemption of the Junior
Subordinated Notes would result in the delisting of the Preferred Securities,
the Company may only redeem the Junior Subordinated Notes in whole.
INTEREST
Each Junior Subordinated Note shall bear interest at the Securities Rate from
the Issue Date, payable quarterly in arrears on March 31, June 30, September 30
and December 31 of each year, commencing September 30, 1995, to the person in
whose name such Junior Subordinated Note is registered at the close of business
on the fifteenth calendar day prior to such payment date. The amount of
interest payable for any quarter will be computed on the basis of a 360-day
year of twelve 30-day months. The amount of interest payable for any period
shorter than a full quarterly period will be computed on the basis of the
actual number of days elapsed, assuming 30-day months. In the event that any
date on which interest is payable on the Junior Subordinated Notes is not a
Business Day, then payment of the interest payable on such date will be made on
the next succeeding day which is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such Business Day
is in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company shall have the right at any time, and from time to time, to defer
payments of interest on the Junior Subordinated Notes by extending the interest
payment period for up to 20 consecutive quarters, but not beyond the maturity
date. At the end of an Extension Period, the Company shall pay all interest
then accrued and unpaid (including any Additional Interest) (together with
interest thereon at the rate specified for the Junior Subordinated Notes to the
extent permitted by applicable law); provided, that during any such Extension
Period, (a) the Company shall not declare or pay any dividend or make any
distributions with respect to, or redeem, purchase 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 (including guarantees) issued by the
Company which rank pari passu with or junior to the Junior Subordinated Notes.
Prior to the termination of any Extension Period, the Company may further defer
payments of interest by extending the interest payment period, provided that
such Extension Period, together with all such previous and further extensions
thereof, may not exceed 20
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consecutive quarters. Upon the termination of any Extension Period and the
payment of all amounts then due, the Company may select a new Extension Period,
subject to the above requirements. The Company has no present intention of
exercising its rights to defer payments of interest by extending the interest
payment period on the Junior Subordinated Notes.
If the Property Trustee shall be the sole holder of the Junior Subordinated
Notes, the Company shall give the Property Trustee, Administrative Trustees and
Indenture Trustee notice of its selection of such Extension Period one Business
Day prior to the earlier of (i) the Record Date for the related Distribution
Date or (ii) the date the Administrative Trustees are required to give such
notice to the NYSE or other applicable self-regulatory organization or to
holders of the Preferred Securities. The Administrative Trustees shall give
notice of the Company's selection of such Extension Period to the holders of
the Preferred Securities. If the Property Trustee shall not be the sole holder
of the Junior Subordinated Notes, the Company shall give the holders of the
Junior Subordinated Notes notice of its selection of such Extension Period at
least 16 days prior to the earlier of (i) the date such interest payments are
due or (ii) the date the Company is required to give such notice to the NYSE or
other applicable self-regulatory organization or to holders of the Junior
Subordinated Notes.
ADDITIONAL INTEREST
If at any time the Trust shall be required to pay any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States, or any other taxing authority, then, in
any such case, the Company will pay as additional interest (Additional
Interest) such additional amounts as shall be required so that the net amounts
received and retained by the Trust after paying such taxes, duties, assessments
or other governmental charges will be not less than the amounts the Trust would
have received had no such taxes, duties, assessments or other governmental
charges been imposed.
CERTAIN COVENANTS
The Subordinated Note Indenture provides that if (i) there shall have
occurred any event that would constitute an Event of Default under the
Subordinated Note Indenture or (ii) the Company shall be in default with
respect to its payment of any obligations under the Guarantee, then (a) the
Company shall not declare or pay any dividend on, make any distributions with
respect to, or redeem, purchase or make a liquidation payment with respect to,
any of its capital stock, and (b) the Company shall not make any payment of
interest or principal on or repay, repurchase or redeem any debt securities
issued by the Company which rank pari passu with or junior to the Junior
Subordinated Notes.
For so long as the Trust Securities remain outstanding, the Company covenants
(i) to directly or indirectly maintain 100% ownership of the Common Securities
of the Trust; provided, however, that any permitted successor of the Company
under the Subordinated Note Indenture may succeed to the Company's ownership of
such Common Securities, and (ii) to use its reasonable efforts to cause the
Trust (a) to remain a statutory business trust, except in connection with the
distribution of Junior Subordinated Notes to the holders of Trust Securities in
liquidation of the Trust, the redemption of all of the Trust Securities of the
Trust, or certain mergers, consolidations or amalgamations, each as permitted
by the Trust Agreement, and (b) to otherwise continue to be classified as a
grantor trust for United States federal income tax purposes.
EVENTS OF DEFAULT
The Subordinated Note Indenture provides that any one or more of the
following described events, which has occurred and is continuing, constitutes
an "Event of Default" with respect to the Junior Subordinated Notes:
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(a) failure for 60 days to pay interest on the Junior Subordinated Notes,
including any Additional Interest in respect thereof, when due; provided,
however, that a valid extension of the interest payment period by the
Company shall not constitute a default in the payment of interest for this
purpose; or
(b) failure to pay principal or premium, if any, on the Junior
Subordinated Notes when due, whether at maturity or upon earlier
redemption; or
(c) failure to observe or perform any other covenant (other than those
specifically relating to another series of junior subordinated notes)
contained in the Subordinated Note Indenture for 90 days after written
notice to the Company from the Indenture Trustee or the holders of at least
25% in principal amount of the outstanding Junior Subordinated Notes; or
(d) certain events of bankruptcy, insolvency, or reorganization of the
Company.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Notes have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Indenture Trustee.
The Indenture Trustee or the holders of not less than 25% in aggregate
outstanding principal amount of the Junior Subordinated Notes may declare the
principal due and payable immediately on default, but the holders of a majority
in aggregate outstanding principal amount may annul such declaration and waive
the default if the 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.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Notes affected thereby may, on behalf of the holders of all
the Junior Subordinated Notes, waive any past default, except (i) a default in
the payment of principal or interest (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) a default in the covenant of the Company
not to declare or pay dividends on, or redeem, purchase or acquire any of its
capital stock during an Extension Period. A Subordinated Note Indenture Event
of Default also constitutes a Trust Agreement Event of Default. The holders of
Preferred Securities in certain circumstances have the right to direct the
Property Trustee to exercise its rights as the holder of the Junior
Subordinated Notes. See "Description of the Preferred Securities--Events of
Default" and "--Voting Rights."
A voluntary or involuntary dissolution of the Trust prior to redemption or
maturity of the Junior Subordinated Notes would not constitute an Event of
Default with respect to the Junior Subordinated Notes. If the Trust is
dissolved, an event the Company and the Trust consider to be remote, any of the
following could occur: (i) a distribution of the Junior Subordinated Notes to
the holders of the Preferred Securities, or (ii) a permitted redemption at par
of the Junior Subordinated Notes, and a consequent redemption of a like amount
of the Preferred Securities, at the option of the Company under the
circumstances described in "--Optional Redemption" or (iii) the rollover of the
Trust property into another entity with the same characteristics.
BOOK-ENTRY AND ISSUANCE
If distributed to holders of Preferred Securities in connection with the
voluntary or involuntary dissolution, winding up or liquidation of the Trust as
a result of the occurrence of a Special Event, the Junior Subordinated Notes
are expected to be issued in the form of one or more global certificates
registered in the name of the depositary or its nominee. In such event, the
procedures applicable to the transfer and payment of the Junior Subordinated
Notes are expected to be substantially similar to those described with respect
to the Preferred Securities in "Description of the Preferred Securities--Book-
Entry Only Issuance--The Depository Trust Company."
In the event of any redemption in part, the Company shall not be required to
(i) issue, register the transfer of or exchange Junior Subordinated Notes
during a period beginning at the opening of business 15
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days before any selection for redemption of Junior Subordinated Notes and
ending at the close of business on the earliest date on which the relevant
notice of redemption is deemed to have been given to all holders of the Junior
Subordinated Notes and (ii) register the transfer of or exchange any Junior
Subordinated Notes so selected for redemption, in whole or in part, except the
unredeemed portion of any Junior Subordinated Notes being redeemed in part.
PAYMENT AND PAYING AGENT
Payment of principal of the Junior Subordinated Notes will be made only
against surrender to the Paying Agent of the Junior Subordinated Notes.
Principal of and interest on Junior Subordinated Notes will be payable, subject
to any applicable laws and regulations, at the office of such Paying Agent or
Paying Agents as the Company may designate from time to time, except that at
the option of the Company payment of any interest may be made by wire transfer
or by check mailed to the address of the person entitled thereto as such
address shall appear in the Note Register with respect to the Junior
Subordinated Notes. Payment of interest on Junior Subordinated Notes on any
interest payment date will be made to the person in whose name the Junior
Subordinated Notes (or predecessor security) is registered at the close of
business on the Record Date for such interest payment (the fifteenth calendar
day before such interest payment date).
The Company will act as Paying Agent with respect to the Junior Subordinated
Notes. The Company may at any time designate additional Paying Agents or
rescind the designation of any Paying Agents or approve a change in the office
through which any Paying Agent acts.
All moneys paid by the Company to a Paying Agent for the payment of the
principal of or interest on the Junior Subordinated Notes which remain
unclaimed at the end of two years after such principal or interest shall have
become due and payable will be repaid to the Company, and the holder of such
Junior Subordinated Notes will thereafter look only to the Company for payment
thereof.
MODIFICATION
The Subordinated Note Indenture contains provisions permitting the Company
and the Indenture Trustee, with the consent of the holders of not less than a
majority in principal amount of the Junior Subordinated Notes, to modify the
Subordinated Note Indenture or any supplemental indenture affecting that series
or the rights of the holders of the Junior Subordinated Notes; provided, that
no such modification may, without the consent of the holder of each outstanding
Junior Subordinated Note affected thereby, (i) extend the fixed maturity of the
Junior Subordinated Notes, or reduce the principal amount thereof, or reduce
the rate or extend the time of payment of interest thereon, or reduce any
premium payable upon the redemption thereof, without the consent of the holder
of Junior Subordinated Notes so affected or (ii) reduce the percentage of
Junior Subordinated Notes, the holders of which are required to consent to any
such supplemental indenture, without the consent of the holders of each Junior
Subordinated Note then outstanding and affected thereby.
In addition, the Company and the Indenture Trustee may execute, without the
consent of holders of the Junior Subordinated Notes, any supplemental indenture
for certain other usual purposes, including the creation of any new series of
junior subordinated notes.
CONSOLIDATION, MERGER AND SALE
The Subordinated Note 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.
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INFORMATION CONCERNING THE INDENTURE TRUSTEE
The Indenture Trustee, prior to default, undertakes to perform only such
duties as are specifically set forth in the Subordinated Note 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 Subordinated Note Indenture at the request of any
holder of Junior Subordinated Notes, unless offered reasonable indemnity by
such holder against the costs, expenses and liabilities which 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.
Chemical Bank, the Indenture Trustee, also serves as Property Trustee and as
Guarantee Trustee. The Company and certain of its affiliates maintain a deposit
account and a banking relationship with Chemical Bank. Chemical Bank serves as
trustee under other indentures pursuant to which debt securities of the Company
or an affiliate of the Company are outstanding.
GOVERNING LAW
The Subordinated Note Indenture and the Junior Subordinated Notes will be
governed by, and construed in accordance with, the internal laws of the State
of New York.
MISCELLANEOUS
The Company will have the right at all times to assign any of its rights or
obligations under the Subordinated Note 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 its obligations.
Subject to the foregoing, the Subordinated Note Indenture will be binding upon
and inure to the benefit of the parties thereto and their respective successors
and assigns. The Subordinated Note Indenture provides that it may not otherwise
be assigned by the parties thereto.
The Subordinated Note Indenture will also provide that the Company will pay
all fees and expenses related to (i) the offering of the Junior Subordinated
Notes, (ii) the organization, maintenance and dissolution of the Trust, (iii)
the retention of the Trustees and (iv) the enforcement by the Indenture Trustee
of the rights of holders of Preferred Securities.
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
JUNIOR SUBORDINATED NOTES AND THE GUARANTEE
As long as payments of interest and other payments are made when due on the
Junior Subordinated Notes, such payments will be sufficient to cover
distributions and payments due on the Trust Securities primarily because (i)
the aggregate principal amount of Junior Subordinated Notes will be equal to
the sum of the aggregate stated liquidation amount of the Trust Securities;
(ii) the interest rate and interest and other payment dates on the Junior
Subordinated Notes will match the distribution rate and distribution and other
payment dates for the Preferred Securities; (iii) the Company shall pay for all
costs and expenses of the Trust; and (iv) the Trust Agreement provides that the
Securities Trustees shall not cause or permit the Trust to, among other things,
engage in any activity that is not consistent with the purposes of the Trust.
Payments of distributions (to the extent funds therefor are available) and
other payments due on the Preferred Securities (to the extent funds therefor
are available) are guaranteed by the Company as and to the extent set forth
under "Description of the Guarantee." If the Company does not make interest
payments on the Junior Subordinated Notes, it is not expected that the Trust
will have sufficient funds to pay distributions
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on the Preferred Securities. The Guarantee is a full and unconditional
guarantee from the time of its issuance, but does not apply to any payment of
distributions unless and until the Trust has sufficient funds for the payment
of such distributions.
If the Company fails to make interest or other payments on the Junior
Subordinated Notes when due (taking into account any Extension Period), the
Trust Agreement provides a mechanism whereby the holders of the Preferred
Securities may appoint a substitute Property Trustee. Such holders may also
direct the Property Trustee to enforce its rights under the Junior Subordinated
Notes, including proceeding directly against the Company to enforce the Junior
Subordinated Notes. If the Property Trustee fails to enforce its rights under
the Junior Subordinated Notes, a holder of Preferred Securities may institute a
legal proceeding directly against the Company to enforce the Property Trustee's
rights under the Junior Subordinated Notes without first instituting any legal
proceeding against the Property Trustee or any other person or entity.
If the Company fails to make payments under the Guarantee, the Guarantee
provides a mechanism whereby the holders of the Preferred Securities may direct
the Guarantee Trustee to enforce its rights thereunder. If the Guarantee
Trustee fails to enforce the Guarantee, any holder of Preferred Securities may
institute a legal proceeding directly against the Company to enforce the
Guarantee Trustee's rights under the Guarantee without first instituting a
legal proceeding against the Guarantee Trustee or any other person or entity.
The above mechanisms and obligations, taken together, constitute a full and
unconditional guarantee by the Company of the payments due on the Preferred
Securities.
The Preferred Securities evidence the rights of the holders thereof to the
benefits of the Trust, a trust that exists for the sole purpose of issuing
Trust Securities and investing the proceeds thereof in debt securities of the
Company, while the Junior Subordinated Notes represent indebtedness of the
Company. A principal difference between the rights of a holder of a Preferred
Security and a holder of a Junior Subordinated Note is that a holder of a
Junior Subordinated Note will accrue, and (subject to the permissible extension
of the interest period) is entitled to receive, interest on the principal
amount of Junior Subordinated Notes held, while a holder of Preferred
Securities is only entitled to receive distributions if and to the extent the
Trust has funds legally available for the payment of such distributions.
Upon any voluntary or involuntary dissolution, winding up or termination of
the Trust, the holders of Preferred Securities will be entitled to receive, out
of assets, legally available for distribution to holders, the Liquidation
Distribution in cash. See "Description of the Preferred Securities--Liquidation
Distribution Upon Dissolution." Upon any voluntary or involuntary liquidation
or bankruptcy of the Company, the Trust, as holder of the Junior Subordinated
Notes, would be a subordinated creditor of the Company, subordinated in right
of payment to all Senior Indebtedness, but entitled to receive payment in full
of principal and interest, before any stockholders of the Company receive
payments or distributions. Because the Company is guarantor under the Guarantee
and has agreed to pay for all costs, expenses and liabilities of the Trust
(other than withholding taxes and other than the Trust's obligations to holders
of the Preferred Securities), the positions of a holder of Preferred Securities
and a holder of Junior Subordinated Notes relative to other creditors and to
stockholders of the Company in the event of liquidation or bankruptcy of the
Company would be substantially the same.
A default or event of default under any Senior Indebtedness would not
constitute a default or Event of Default under the Junior Subordinated Notes.
However, in the event of payment defaults under, or acceleration of, Senior
Indebtedness, the subordination provisions of the Junior Subordinated Notes
provide that no payments may be made in respect of the Junior Subordinated
Notes until such Senior Indebtedness has been paid in full or any payment
default thereunder has been cured or waived. Failure to make required payments
on the Junior Subordinated Notes would constitute an Event of Default under the
Subordinated Note Indenture except that failure to make interest payments on
the Junior Subordinated Notes will not be an Event of Default during an
Extension Period; provided, however, that any Extension Period may not exceed
20 consecutive quarters or extend beyond the stated maturity of the Junior
Subordinated Notes.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States federal income tax
consequences of the ownership and disposition of the Preferred Securities is
based on the opinion of Hunton & Williams. This summary deals only with
Preferred Securities held as capital assets within the meaning of Section 1221
of the Internal Revenue Code of 1986, as amended to the date hereof (the Code),
by Holders (as defined herein). Moreover, it does not discuss all of the tax
consequences that may be relevant to a Holder in light of his particular
circumstances or to Holders subject to special rules, such as certain financial
institutions, insurance companies, dealers in securities, individual retirement
and certain tax deferred accounts, and persons who engage in a straddle or a
hedge relating to a Preferred Security. Prospective investors should consult
their own tax advisors with regard to the application of the tax considerations
discussed below to their particular situations as well as the application of
any state, local or other tax laws. This summary is based on laws, existing and
proposed regulations, and applicable judicial and administrative
determinations, all of which are subject to change at any time, and any such
changes may be retroactively applied in a manner that could adversely affect
Holders. As used herein, the term "Holder" means a beneficial owner of a
Preferred Security that for United States federal income tax purposes is (i) a
citizen or resident of the United States, (ii) a corporation, partnership or
other entity created or organized in or under the laws of the United States or
of any political subdivision thereof, or (iii) an estate or trust the income of
which is subject to United States federal income taxation regardless of its
source. Thus, the following summary does not address any tax consequences that
apply specifically to nonresident aliens or foreign entities.
TREATMENT OF THE TRUST AND PREFERRED SECURITIES FOR FEDERAL INCOME TAX PURPOSES
The Trust is to be classified as a "grantor trust" and not as an association
taxable as a corporation. Thus, for federal income tax purposes, each Holder
will be treated as the beneficial owner of a pro rata undivided interest in the
Junior Subordinated Notes and, consequently, will be required to include in
income the Holder's pro rata share of the entire income from the Junior
Subordinated Notes. Each Holder generally will determine its net income or loss
with respect to the Trust in accordance with its own method of accounting,
although income arising from original issue discount (OID) must be taken into
account under the accrual method of accounting even if the Holder otherwise
would use the cash receipts and disbursements method.
ORIGINAL ISSUE DISCOUNT
The Junior Subordinated Notes will be issued with OID within the meaning of
Section 1273 of the Code. Because the Holders will be treated for federal
income tax purposes as the owners of the Junior Subordinated Notes, the Holders
will be required to include in income their pro rata shares of OID accruing on
the Junior Subordinated Notes in advance of the receipt of some or all of the
related cash payments on the Preferred Securities. Holders (including Holders
who are cash basis taxpayers) will include such OID in income currently as
interest as it accrues over the life of the Junior Subordinated Notes under a
formula based upon the quarterly compounding of interest at a rate that
provides for a constant yield to maturity. If (as expected) the issue price of
the Junior Subordinated Notes equals the stated principal amount of such Notes,
the amount of OID accruing during each quarterly interest period will be
approximately the same as the amount of interest accruing during such period.
The amount of OID on a Junior Subordinated Note will equal the excess of the
"stated redemption price at maturity" over the "issue price" of the Junior
Subordinated Note. The issue price of each Junior Subordinated Note is expected
to equal the stated principal amount of such Note. Because the terms of the
Junior Subordinated Notes permit the Company to suspend payments of interest on
the Notes for up to 20 consecutive quarters, the stated redemption price at
maturity of the Junior Subordinated Notes will equal the aggregate of all
payments due on the Junior Subordinated Notes, whether designated as principal
or interest. Accordingly, the quarterly interest payments on the Junior
Subordinated Notes will be included in the stated redemption price at maturity
for purposes of determining the amount of OID with which a Junior
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Subordinated Note is issued, and if (as expected) the issue price equals the
stated principal amount of the Junior Subordinated Notes, the OID will equal
the total amount of interest that will be payable (assuming no redemption
before maturity) on the Junior Subordinated Notes.
In general, the amount of OID that must be included in a Holder's income for
a taxable year is the sum of the "daily portions" of OID on the Junior
Subordinated Notes for all days during the taxable year that the Holder owns a
Preferred Security. Such daily portions are determined by allocating to each
day in the accrual period a ratable portion of the OID allocable to that
accrual period. An accrual period is each successive quarterly period that ends
on an Interest Payment Date. In the case of an initial Holder, the amount of
OID allocable to each accrual period is determined by multiplying the "adjusted
issue price" of the related Junior Subordinated Notes by their yield to
maturity (based on compounding at the close of each accrual period and taking
into account the length of the accrual period). The adjusted issue price of a
Junior Subordinated Note at the beginning of any accrual period will be the sum
of its issue price and the amount of OID allocable to all prior accrual
periods, reduced by the amount of any payments made with respect to such Junior
Subordinated Note in all prior accrual periods (and thus will equal
approximately the stated principal amount if the issue price is the stated
principal amount and all accrued interest is paid on each Interest Payment
Date). A subsequent Holder also will be required to include in gross income its
pro rata daily portion of OID with respect to the Junior Subordinated Notes.
However, if a Holder acquires Preferred Securities for an amount greater than
the adjusted issue price of the Junior Subordinated Notes (i.e., at an
acquisition premium), such Holder's daily portions of OID with respect to the
Junior Subordinated Notes will be reduced by an allocable portion of the
acquisition premium.
MARKET DISCOUNT
A purchaser of a Preferred Security at a discount from the adjusted issue
price of such purchaser's pro rata share of the Junior Subordinated Notes
acquires such Preferred Security with "market discount." However, market
discount with respect to a Preferred Security will be considered to be zero if
it is minimal. Market discount will be minimal with respect to a Preferred
Security if it is less than the product of (i) 0.25% of the adjusted issue
price of the purchaser's pro rata share of the Junior Subordinated Notes
multiplied by (ii) the number of complete years to maturity of such Junior
Subordinated Notes after the date of purchase. The purchaser of a Preferred
Security with more than a minimal amount of market discount generally will be
required to treat any gain on the sale, exchange, redemption or other
disposition of all or part of the Preferred Securities (or related Junior
Subordinated Notes) as ordinary income to the extent of accrued (but not
previously taxable) market discount. Market discount generally will accrue
ratably during the period from the date of purchase of such Preferred Security
to the maturity date of the Junior Subordinated Notes, unless the Holder
irrevocably elects to accrue such market discount on the basis of a constant
interest rate.
A Holder who has acquired a Preferred Security at a market discount generally
will be required to defer any deductions of interest expense attributable to
any indebtedness incurred or continued to purchase or carry the Preferred
Security, to the extent such interest expense exceeds the related OID income.
Any such deferred interest expense generally will be allowable as a deduction
not later than the year in which the related market discount income is
recognized. As an alternative to the inclusion of market discount in income
upon disposition of all or a portion of a Preferred Security or the related
Junior Subordinated Notes (including redemptions thereof), a Holder may make an
election (which may not be revoked without the Internal Revenue Service's
consent) to include market discount in income as it accrues on all market
discount instruments acquired by the Holder during or after the taxable year
for which the election is made. In that case, the preceding deferral rule for
interest expense will not apply.
In lieu of the foregoing treatment of market discount and interest expense, a
Holder may elect to treat any market discount (including a minimal amount) as
OID and accrue such discount on a constant-yield basis in the same manner as
the Holder accrues OID.
32
<PAGE>
SALE OF PREFERRED SECURITIES
Upon the sale, retirement (including redemption) or other taxable disposition
of all or part of a Preferred Security, a Holder will recognize gain or loss
equal to the difference between the amount realized on such sale, retirement or
other disposition and the Holder's adjusted tax basis in the Preferred Security
or part thereof. Any recognized gain or loss will be capital gain or loss,
except to the extent of any accrued market discount (see "Market Discount"
above), and such capital gain or loss will be long-term if the holding period
for the Preferred Security is more than one year at the time of sale,
retirement or other disposition. A Holder's adjusted tax basis in a Preferred
Security acquired by purchase will equal the cost of such Preferred Security to
the Holder, increased by the amount of any related accrued OID and market
discount included in taxable income by the Holder and reduced by any prior
payments on the Junior Subordinated Notes distributable on the Preferred
Security. The redemption of only part of a Preferred Security will require an
allocation of the Holder's pro rata share of the adjusted issue price of the
related Junior Subordinated Notes between the redeemed part and the part
retained by the Holder in order to determine gain or loss and future accruals
of OID.
RECEIPT OF JUNIOR SUBORDINATED NOTES UPON LIQUIDATION OF THE TRUST
Under certain circumstances, as described under "Description of the Preferred
Securities--Special Event Redemption or Distribution," Junior Subordinated
Notes may be distributed to Holders in exchange for the Preferred Securities
and in liquidation of the Trust. Such a distribution would be treated as a non-
taxable event to each Holder and each Holder would receive an aggregate tax
basis in the Holder's Junior Subordinated Notes equal to the Holder's aggregate
tax basis in its Preferred Securities. A Holder's holding period with respect
to the Junior Subordinated Notes so received in liquidation of the Trust would
include the period for which the Preferred Securities were held by such Holder.
BACKUP WITHHOLDING
A Holder may be subject to "backup withholding" under certain circumstances.
Backup withholding applies to a Holder if the Holder, among other things, (i)
fails to furnish his social security number or other taxpayer identification
number (TIN) to the payor responsible for backup withholding (for example, the
Holder's securities broker), (ii) furnishes such payor an incorrect TIN, (iii)
fails to provide such payor with a certified statement, signed under penalties
of perjury, that the TIN provided to the payor is correct and that the Holder
is not subject to backup withholding, or (iv) fails to report properly interest
and dividends on his tax return. Backup withholding, however, does not apply to
payments made to certain exempt recipients, such as corporations and tax-exempt
organizations. The backup withholding rate is 31% of "reportable payments,"
which generally will include distributions of interest and principal payments
on the Junior Subordinated Notes.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE MAY NOT BE APPLICABLE TO A
HOLDER, DEPENDING UPON A HOLDER'S PARTICULAR SITUATION, AND THEREFORE EACH
HOLDER SHOULD CONSULT HIS TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES OF
THE OWNERSHIP AND DISPOSITION OF PREFERRED SECURITIES, INCLUDING THE TAX
CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE
EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAW.
33
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the Underwriting Agreement), the Trust has agreed to sell to the Underwriters
named below, and the Underwriters, for whom Lehman Brothers Inc. is acting as
representative (the Representative), have severally agreed to purchase the
number of Preferred Securities set forth opposite their respective names below.
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all the Preferred
Securities offered hereby if any of the Preferred Securities are purchased.
<TABLE>
<CAPTION>
NUMBER OF
PREFERRED
NAME SECURITIES
---- ----------
<S> <C>
Lehman Brothers Inc. .............................................
Dean Witter Reynolds Inc. ........................................
A.G. Edwards & Sons, Inc. ........................................
PaineWebber Incorporated..........................................
Prudential Securities Incorporated................................
Smith Barney Inc. ................................................
Wheat, First Securities, Inc. ....................................
---------
Total......................................................... 5,400,000
=========
</TABLE>
The Underwriters have advised the Trust that they propose to offer the
Preferred Securities in part directly to the public at the price to the public,
as set forth on the cover page of this Prospectus, and in part to certain
securities dealers at such price less a concession not in excess of $ per
Preferred Security. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per Preferred Security to certain other
dealers. After the Preferred Securities are released for sale to the public,
the offering price and other selling terms may from time to time be varied by
the Underwriters.
The Preferred Securities are expected to be approved for listing on the NYSE,
subject to official notice of issuance. Trading of the Preferred Securities on
the NYSE is expected to commence within a 30 day period after the initial
delivery of the Preferred Securities. The Representative has advised the Trust
that it intends to make a market in the Preferred Securities prior to the
commencement of trading on the NYSE. The Representative will have no obligation
to make a market in the Preferred Securities, however, and may cease market
making activities, if commenced, at any time.
Prior to this offering, there has been no public market for the Preferred
Securities. In order to meet one of the requirements for listing the Preferred
Securities on the NYSE, the Underwriters will undertake to sell lots of 100 or
more Preferred Securities to a minimum of 400 beneficial holders.
The Company and the Trust have agreed to indemnify the Underwriters against,
or contribute to payments that the Underwriters may be required to make in
respect of, certain liabilities, including liabilities under the 1933 Act.
The Underwriters engage in transactions with, and, from time to time, have
performed services for, the Company and its affiliates in the ordinary course
of business.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Preferred
Securities will be passed upon on behalf of the Trust by Potter Anderson &
Corroon, Wilmington, Delaware, special Delaware counsel to the Trust. The
validity of the Junior Subordinated Notes, the Guarantee and certain matters
relating thereto will be passed upon on behalf of the Company by Hunton &
Williams, Richmond, Virginia. Certain United States federal income taxation
matters will be passed upon for the Company and the Trust by Hunton &
34
<PAGE>
Williams. Certain legal matters will be passed upon for the Underwriters by
McGuire, Woods, Battle & Boothe, L.L.P., Richmond, Virginia, which also
performs certain legal services for Dominion Resources and its affiliates on
other matters.
EXPERTS
The financial statements incorporated in this prospectus by reference from
the Company's Annual Report on Form 10-K for the year ended December 31, 1994
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report (which report expresses an unqualified opinion and includes an
explanatory paragraph referring to changes in accounting for postretirement
benefits other than pensions in 1993 and for accounting for income taxes in
1992), which is incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
35
<PAGE>
GLOSSARY
1933 ACT......................... The Securities Act of 1933, as amended.
1934 ACT......................... The Securities Exchange Act of 1934, as
amended.
1939 ACT......................... The Trust Indenture Act of 1939, as
amended.
1940 ACT......................... The Investment Company Act of 1940, as
amended.
ADDITIONAL INTEREST.............. Amounts payable by the Company to cover
certain governmental charges, as described
in "Description of the Junior Subordinated
Note--Additional Interest."
ADMINISTRATIVE TRUSTEES.......... Initially, J. Kennerly Davis, Jr. and James
P. Carney.
CODE............................. The Internal Revenue Code of 1986, as
amended.
COMMON SECURITIES................ The Trust Securities being sold to the
Company.
COMPANY.......................... Virginia Electric and Power Company.
DELAWARE TRUSTEE................. Chemical Bank Delaware.
DOMINION RESOURCES............... Dominion Resources, Inc., the parent of the
Company.
DTC.............................. The Depository Trust Company, a "clearing
corporation" that initially will hold
(through its agents) a global certificate
evidencing the Preferred Securities.
DISTRIBUTION DATES............... March 31, June 30, September 30 and
December 31 of each year, commencing
September 30, 1995.
EVENT OF DEFAULT................. As described under "Description of the
Junior Subordinated Notes--Subordinated
Note Indenture Events of Default."
EXTENSION PERIOD................. Any period during which interest is not
paid on the Junior Subordinated Notes (and,
consequently, on the Preferred Securities)
at the election of the Company to the
extent permitted under the terms of the
Junior Subordinated Notes.
GUARANTEE........................ The guarantee by the Company of the
payments by the Trust on the Preferred
Securities from funds available in the
Trust.
GUARANTEE PAYMENTS............... Payments required to be made pursuant to
the Guarantee as described in "Description
of Guarantee--General."
GUARANTEE TRUSTEE................ The trustee under the Guarantee; initially,
Chemical Bank.
INDENTURE TRUSTEE................ The trustee under the Subordinated Note
Indenture; initially, Chemical Bank.
ISSUE DATE....................... The date set forth on the cover page on
which the Junior Subordinated Notes and
Preferred Securities are scheduled to be
issued.
INVESTMENT COMPANY ACT EVENT..... An event of the type described in
"Description of the Preferred Securities--
Special Event Redemption or Distribution."
JUNIOR SUBORDINATED NOTES........
The fixed rate junior subordinated
deferrable interest notes of the Company
due September 30, 2025.
36
<PAGE>
NYSE............................. New York Stock Exchange.
PAYMENT ACCOUNT.................. The account maintained by the Property
Trustee to which amounts paid on the Junior
Subordinated Notes are credited.
PREFERRED SECURITIES............. The Trust Securities being offered to
investors pursuant to this Prospectus.
PROPERTY TRUSTEE................. A trustee under the Trust designated to
hold the trust property; initially Chemical
Bank.
RECORD DATE...................... The close of business on the 15th calendar
day prior to a Distribution Date.
REDEMPTION PRICE................. The stated liquidation amount of $25 per
Preferred Security, plus accrued and unpaid
distributions thereon (and interest
thereon) to the date of payment.
SECURITIES RATE.................. The per annum interest rate expressed as a
percentage of the stated liquidation amount
of $25 per Preferred Security, and set
forth on the cover page.
SECURITIES TRUSTEES.............. The Property Trustee, Administrative
Trustees and Delaware Trustee.
SENIOR INDEBTEDNESS.............. Indebtedness of the Company described
herein under "Description of the Junior
Subordinated Notes--Subordination."
SPECIAL EVENT.................... A Tax Event or Investment Company Act
Event.
SUBORDINATED NOTE INDENTURE...... The indenture pursuant to which the
Company's Junior Subordinated Notes will be
issued to the Trust.
TAX EVENT........................ An event of the type described in
"Description of the Preferred Securities--
Special Event Redemption or Distribution."
TRUST............................ Virginia Power Capital Trust I, a Delaware
business trust that will issue the Trust
Securities.
TRUST AGREEMENT.................. The agreement pursuant to which the Trust
is organized as it may be amended and
restated from time to time.
TRUST AGREEMENT EVENT OF
DEFAULT.......................... As described under "Description of
Preferred Securities--Events of Default."
TRUST SECURITIES................. The Preferred Securities and the Common
Securities.
37
<PAGE>
================================================================================
No dealer, salesperson or other individual has been authorized to give any
information or to make any representations other than those contained or in-
corporated by reference in this Prospectus in connection with the offer made
by this Prospectus and, if given or made, such information or representations
must not be relied upon as having been authorized by the Company, Virginia
Power Capital Trust I or the Underwriters. Neither the delivery of this Pro-
spectus nor any sale made hereunder shall under any circumstance create an im-
plication that there has been no change in the affairs of the Company or Vir-
ginia Power Capital Trust I, since the date hereof. This Prospectus does not
constitute an offer or solicitation by anyone in any state in which such offer
or solicitation is not authorized or in which the person making such offer or
solicitation is not qualified to do so or to anyone to whom it is unlawful to
make such offer or solicitation.
-----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information..................................................... 3
Incorporation of Certain Documents by Reference........................... 3
Prospectus Summary........................................................ 4
Risk Factors.............................................................. 7
Virginia Power Capital Trust I............................................ 10
Selected Financial Information............................................ 11
Use of Proceeds........................................................... 12
Description of the Preferred Securities................................... 12
Description of the Guarantee.............................................. 21
Description of the Junior Subordinated Notes.............................. 23
Relationship among the Preferred Securities, Junior Subordinated Notes and
the Guarantee............................................................ 29
Certain Federal Income Tax Considerations................................. 31
Underwriting.............................................................. 34
Legal Matters............................................................. 34
Experts................................................................... 35
Glossary.................................................................. 36
</TABLE>
================================================================================
================================================================================
5,400,000
PREFERRED SECURITIES
VIRGINIA POWER
CAPITAL TRUST I
% TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT
$25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET
FORTH HEREIN BY
VIRGINIA ELECTRIC
AND
POWER COMPANY
-----------------
PROSPECTUS
August , 1995
-----------------
LEHMAN BROTHERS
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
WHEAT FIRST BUTCHER SINGER
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
Securities and Exchange Commission Fee............................. $ 46,552
Fees and Expense of Trustees....................................... 40,000
Printing Expenses.................................................. 100,000
Counsel Fees....................................................... 125,000
Rating Agency Fees................................................. 80,000
Listing Fees....................................................... 49,200
Accountant's Fees.................................................. 35,000
Miscellaneous...................................................... 36,748
--------
Total.......................................................... $512,500
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article VI of the Restated Articles of Incorporation, as amended, of the
registrant provides that the registrant shall indemnify its directors and
officers to the fullest extent permitted by law. Article 10, Chapter 9, Title
13.1 of the Code of Virginia of 1950, as amended, permits indemnification of
directors and officers, but does not permit indemnification against willful
misconduct or a knowing violation of the criminal law. The registrant maintains
director and officer liability insurance protecting the registrant's directors
and officers against certain claims resulting from their service in such
capacities, and the registrant from the liability assumed by it in accordance
with Article VI of its Restated Articles of Incorporation, as amended. The
current policy covers all occurrences during the period ending September 1,
1995, and is expected to be renewed in the ordinary course of business. In
general, the policy provides coverage for any misstatement, misleading
statement, act, omission, neglect or breach of duty committed or attempted by a
director or officer, but excludes, among other things, acts of deliberate
dishonesty, and acts for personal profit or advantage to which the director or
officer was not entitled.
ITEM 16. EXHIBITS.
<TABLE>
<C> <S>
1 Form of Underwriting Agreement for Preferred Securities.
4(a) Form of Subordinated Note Indenture between Virginia Electric and Power
Company and Chemical Bank, as Trustee.
4(b) Form of Supplemental Indenture between Virginia Electric and Power
Company and Chemical Bank, as Trustee.
4(c) Trust Agreement of Virginia Power Capital Trust I.
4(d) Form of Amended and Restated Trust Agreement.
4(e) Form of Preferred Security (included in Exhibit 4(d) above).
4(f) Form of Junior Subordinated Notes (included in Exhibit 4(b) above).
4(g) Form of Guarantee with respect to Preferred Securities.
4(h) Certificate of Trust (included in Exhibit 4(d) above).
5(a) Opinion and Consent of Hunton & Williams.
5(b) Opinion and Consent of Potter Anderson & Corroon.
8 Tax opinion of Hunton & Williams.
12 Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends.
*23(a) Consent of Deloitte & Touche LLP.
23(b) Consent of Hunton & Williams is contained in Exhibits 5(a) and 8.
23(c) Consent of Potter Anderson & Corroon is contained in Exhibit 5(b).
24 Powers of Attorney with respect to the Company officers and directors
(included herein).
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
25(a) Statement of eligibility and qualification of Chemical Bank with respect
to the
Subordinated Note Indenture.
25(b) Statement of eligibility and qualification of Chemical Bank with respect
to the Guarantee.
25(c) Statement of eligibility and qualification of Chemical Bank with respect
to the Trust.
</TABLE>
- --------
* Filed herewith.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant, Virginia Electric and Power Company, hereby
undertakes that, for purposes of determining any liability under the Securities
Act of 1933 (the Act), each filing of the registrant's annual report pursuant
to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that
is incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, each of the
Registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by either of
the Registrants of expenses incurred or paid by a director, officer or
controlling person of such Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, each of the Registrants
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrants pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
POWER OF ATTORNEY
Each person whose signature appears below hereby authorizes each Agent for
Service named in the registration statement, as attorney-in-fact, to sign on
his behalf individually and in each capacity stated below and file all
amendments and post-effective amendments to the registration statement, and the
registrant hereby confers like authority to sign and file on its behalf.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, VIRGINIA ELECTRIC
AND POWER COMPANY CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT
MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS
AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, HEREUNTO DULY AUTHORIZED, IN THE CITY OF RICHMOND, COMMONWEALTH OF
VIRGINIA, ON THE 22ND DAY OF AUGUST, 1995.
Virginia Electric and Power Company
John B. Adams, Jr.*
By __________________________________
(JOHN B. ADAMS, JR. CHAIRMAN OF
THE BOARD OF DIRECTORS)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND
ON THE 22ND DAY OF AUGUST, 1995.
SIGNATURES TITLE
---------- -----
John B. Adams, Jr.* Chairman of the Board of Directors
- ------------------------------------- and Director
JOHN B. ADAMS, JR.
J.T. Rhodes* President (Chief Executive Officer) and
- ------------------------------------- Director
J. T. RHODES
Director
- -------------------------------------
TYNDALL L. BAUCOM
James F. Betts* Director
- -------------------------------------
JAMES F. BETTS
Benjamin J. Lambert, III* Director
- -------------------------------------
BENJAMIN J. LAMBERT, III
Richard L. Leatherwood* Director
- -------------------------------------
RICHARD L. LEATHERWOOD
Harvey L. Lindsay, Jr.* Director
- -------------------------------------
HARVEY L. LINDSAY, JR.
William T. Roos* Director
- -------------------------------------
WILLIAM T. ROOS
Director
- -------------------------------------
RICHARD L. SHARP
II-3
<PAGE>
SIGNATURES TITLE
---------- -----
Robert H. Spilman* Director
- -------------------------------------
ROBERT H. SPILMAN
Director
- -------------------------------------
WILLIAM G. THOMAS
R.E. Rigsby* Senior Vice President--Finance and
- ------------------------------------- Controller (Chief Financial Officer
R. E. RIGSBY and Principal Accounting Officer)
*By: Philip W. Nichols
---------------------------------
PHILIP W. NICHOLS
ATTORNEY-IN-FACT
II-4
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, Virginia Power
Capital Trust I certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
Amendment No. 2 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Richmond, Commonwealth
of Virginia, on August 22, 1995.
Virginia Power Capital Trust I
By: Virginia Electric and Power Company,
as Depositor
J. Kennerly Davis, Jr.*
---------------------------------
J. Kennerly Davis, Jr.
Vice President, Treasurer and
Corporate Secretary
*By: Philip W. Nichols
_________________________________
PHILIP W. NICHOLS
ATTORNEY-IN-FACT
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ----------
<C> <S> <C>
1 Form of Underwriting Agreement for Preferred Securities.
4(a) Form of Subordinated Note Indenture between Virginia
Electric and Power Company and Chemical Bank, as Trustee.
4(b) Form of Supplemental Indenture between Virginia Electric
and Power Company and Chemical Bank, as Trustee.
4(c) Trust Agreement of Virginia Power Capital Trust I.
4(d) Form of Amended and Restated Trust Agreement.
4(e) Form of Preferred Security (included in Exhibit 4(d)
above).
4(f) Form of Junior Subordinated Notes (included in Exhibit
4(b) above).
4(g) Form of Guarantee with respect to Preferred Securities.
4(h) Certificate of Trust (included in Exhibit 4(d) above).
5(a) Opinion and Consent of Hunton & Williams.
5(b) Opinion and Consent of Potter Anderson & Corroon.
8 Tax opinion of Hunton & Williams.
12 Ratio of Earnings to Combined Fixed Charges and Preferred
Stock Dividends.
*23(a) Consent of Deloitte & Touche LLP.
23(b) Consent of Hunton & Williams is contained in Exhibits
5(a) and 8.
23(c) Consent of Potter Anderson & Corroon is contained in
Exhibit 5(b).
24 Powers of Attorney with respect to the Company officers
and directors (included herein).
25(a) Statement of eligibility and qualification of Chemical
Bank with respect to the Subordinated Note Indenture.
25(b) Statement of eligibility and qualification of Chemical
Bank with respect to the Guarantee.
25(c) Statement of eligibility and qualification of Chemical
Bank with respect to the Trust.
</TABLE>
- --------
* Filed Herewith.
<PAGE>
EXHIBIT 23(a)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Virginia Electric and Power Company on Form S-3 of our report dated February 6,
1995, appearing in the Annual Report on Form 10-K of Virginia Electric and Power
Company for the year ended December 31, 1994 and to the reference to us under
the heading "Experts" in the Prospectus, which is part of this Registration
Statement.
Deloitte & Touche LLP
Richmond, Virginia
August 22, 1995
