<PAGE>
RULE NO. 424(b)(2)
REGISTRATION NO. 333-40679
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED DECEMBER 1, 1997
14,000,000 PREFERRED SECURITIES
DUKE ENERGY CAPITAL TRUST I
7.20% CUMULATIVE QUARTERLY INCOME PREFERRED SECURITIES (QUIPS/SM/)*
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS SET FORTH HEREIN, BY
DUKE ENERGY CORPORATION
---------------
The 7.20% Cumulative Quarterly Income Preferred Securities (the "Preferred
Securities") offered hereby will evidence preferred undivided beneficial
interests, representing 97% undivided beneficial interests in the assets of
Duke Energy Capital Trust I, a statutory business trust created under the laws
of the State of Delaware (the "Trust"). Duke Energy Corporation, a North
Carolina corporation (the "Corporation"), will own all the common securities
(the "Common Securities" and, together with the Preferred Securities, the
"Trust Securities") representing the remaining 3% undivided beneficial
interests in the assets of the Trust. The Trust exists for the sole purpose of
issuing the Preferred Securities and the Common Securities and investing the
proceeds thereof in an equivalent amount of the Corporation's junior
subordinated deferrable interest notes, designated as Series A 7.20% Junior
Subordinated Notes due September 30, 2037 (the "Series A Junior Subordinated
Notes").
The Series A Junior Subordinated Notes will be unsecured obligations of the
Corporation and will be subordinate and junior in right of payment to Senior
Indebtedness of the Corporation, as described herein. See "Description of the
Junior Subordinated Notes--Subordination" in the accompanying Prospectus.
Holders of the Preferred Securities will
--------------- (continued on page S-2)
SEE "RISK FACTORS" BEGINNING ON PAGE S-8 FOR CERTAIN INFORMATION RELEVANT TO
AN INVESTMENT IN THE PREFERRED SECURITIES.
---------------
Application has been made to list the Preferred Securities on the New York
Stock Exchange, Inc. If approved, trading of the Preferred Securities on the
New York Stock Exchange, Inc. 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 SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT(1) TRUST(2) (3)
-------------- ------------ ------------
<S> <C> <C> <C>
Per Preferred Security................. $25.00 (2) $25.00
Total.................................. $350,000,000 (2) $350,000,000
</TABLE>
- -------
(1) The Corporation and the Trust have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities
Act of 1933, as amended. See "Underwriting."
(2) In view of the fact that the proceeds of the sale of the Preferred
Securities will be used to purchase the Series A Junior Subordinated
Notes, the Underwriting Agreement provides that the Corporation will pay
to the Underwriters, as compensation ("Underwriters' Compensation") for
their arranging the investment therein of such proceeds, $0.7875 per
Preferred Security; provided, that such compensation will be $0.50 per
Preferred Security sold to certain institutions. Accordingly, the maximum
aggregate amount of Underwriters' Compensation will be $11,025,000 but the
actual amount of Underwriters' Compensation will be less than such amount
to the extent that Preferred Securities are sold to such institutions. See
"Underwriting."
(3) Expenses of the offering to be paid by the Corporation are estimated to be
approximately $600,000.
---------------
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 in book-entry only form
through the facilities of The Depository Trust Company on or about December 8,
1997 (the "Issue Date") against payment therefor in immediately available
funds.
- -------
*QUIPS is a service mark of Goldman, Sachs & Co.
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SALOMON SMITH BARNEY
---------------
The date of this Prospectus Supplement is December 3, 1997.
<PAGE>
(continued from page 1)
be entitled to receive cumulative cash distributions at the rate of 7.20% 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 (each, a "Distribution Date"), commencing on
December 31, 1997. The Securities Rate and the Distribution Dates for the
Preferred Securities will correspond to the interest rate and interest payment
dates on the Series A Junior Subordinated Notes, which will constitute
substantially all the assets of the Trust. As a result, if principal or
interest is not paid on the Series A Junior Subordinated Notes, no amounts
will be paid on the Preferred Securities. THE CORPORATION HAS THE RIGHT TO
DEFER PAYMENTS OF INTEREST ON THE SERIES A JUNIOR SUBORDINATED NOTES BY
EXTENDING THE INTEREST PAYMENT PERIOD ON THE SERIES A 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 and the
Corporation will not be permitted, subject to certain exceptions described
herein, to declare or pay any dividend or distribution on, or redeem or
otherwise purchase, any of its capital stock or make any guarantee payments
with respect to the foregoing, or make any payment on, or redeem or otherwise
purchase, any debt securities issued by the Corporation which rank pari passu
(equal in priority) with or junior to the Series A Junior Subordinated Notes.
During any Extension Period, holders of Preferred Securities will be required
to include income in the form of original issue discount in their gross 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
Series A 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 Series A Junior Subordinated Notes
will bear interest at a rate per annum equal to the Securities Rate,
compounded quarterly, to the date of payment to the extent permitted by
applicable law. 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 Trust Securities will be subject to mandatory redemption upon repayment
of the Series A Junior Subordinated Notes at maturity or their earlier
redemption. The Series A Junior Subordinated Notes will be redeemable at the
option of the Corporation, in whole or in part, from time to time, on or after
December 31, 2002, or at any time, in whole, within 90 days following the
occurrence of a Tax Event or Investment Company Act Event (either, a "Special
Event"). The Corporation will have the right at any time to terminate the
Trust and cause the Series A Junior Subordinated Notes to be distributed to
the holders of the Trust Securities in liquidation of the Trust. See
"Description of the Preferred Securities--Special Event Redemption or
Distribution." The Series A Junior Subordinated Notes will be subordinate and
junior in right of payment to all Senior Indebtedness (as defined herein) of
the Corporation. See "Description of the Junior Subordinated Notes--
Subordination" in the accompanying Prospectus. As of September 30, 1997,
Senior Indebtedness of the Corporation aggregated approximately
$3,593,542,000. If the Series A Junior Subordinated Notes are distributed to
the holders of the Trust Securities, the Corporation will use its best efforts
to have the Series A Junior Subordinated Notes listed on the New York Stock
Exchange, Inc. ("NYSE") or on such other exchange as the Preferred Securities
are then listed. See "Description of the Preferred Securities--Special Event
Redemption or Distribution."
The payment of distributions on the Preferred Securities will be guaranteed
by the Corporation, but only to the extent that the Trust has funds legally
and immediately available therefor (the "Guarantee"). If the Corporation fails
to make required payments on the Series A Junior Subordinated Notes, the Trust
will not have sufficient funds to make such distributions, and the Guarantee
does not cover the payment of distributions when the Trust does not have
sufficient funds legally and
S-2
<PAGE>
immediately available therefor. In such event, to the extent permitted by
applicable law, the remedy of a holder of Preferred Securities is to enforce
the Property Trustee's rights under the Series A Junior Subordinated Notes.
See "Description of the Preferred Securities--Events of Default" and
"Relationship Among the Preferred Securities, the Series A Junior Subordinated
Notes and the Guarantee." The Corporation'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 preferred stock or preferred stock A of the
Corporation. See "Description of the Guarantees" in the accompanying
Prospectus. The Corporation has, through the Guarantee, the Subordinated Note
Indenture, the Series A 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.
In the event of the redemption of the Series A 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, after satisfaction of liabilities of creditors of
the Trust (in the case of dissolution, winding-up or termination of the
Trust), a liquidation amount of $25 plus accrued and unpaid distributions
thereon to the date of payment (the "Redemption Price"), unless in connection
with such dissolution, winding-up or termination, the Series A 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 or certificates 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 (as defined herein) in DTC. Except
as described herein, Preferred Securities in certificated form will not be
issued in exchange for the global certificate or certificates. See
"Description of the Preferred Securities--Book-Entry Only Issuance--The
Depository Trust Company."
----------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE PREFERRED
SECURITIES, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING
TRANSACTIONS IN SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY BID, IN
CONNECTION WITH THE OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
S-3
<PAGE>
SUMMARY OF OFFERING
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and in
the accompanying Prospectus. Capitalized terms not otherwise defined shall
have the meanings assigned in the Glossary.
The Corporation.............. The Corporation, as Duke Power Company,
completed a merger with PanEnergy Corp on June
18, 1997 and adopted its present name at that
time. It has its principal executive offices
at 422 South Church Street, Charlotte, North
Carolina 28202, telephone (704) 594-0887.
The Corporation is a global energy company with
more than $20 billion in assets and conducts
business in four principal areas: electric
operations, energy transmission, energy
services and diversified operations.
The Trust.................... Duke Energy Capital Trust I is a statutory
business trust created under Delaware law
solely for the purpose of holding the
Corporation's Series A Junior Subordinated
Notes and issuing Preferred Securities and
Common Securities evidencing the entire
beneficial interest therein (and engaging in
activities necessary, appropriate, convenient
or incidental thereto).
The Trustees................. The Chase Manhattan Bank will act as property
trustee (the "Property Trustee") of the Trust.
Two officers of the Corporation also will act
as trustees (the "Administrative Trustees") of
the Trust. Chase Manhattan Bank Delaware will
be an additional trustee (the "Delaware
Trustee") of the Trust. The Chase Manhattan
Bank will act as trustee (the "Indenture
Trustee") under the Subordinated Note
Indenture pursuant to which the Series A
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 The Trust will offer 14,000,000 Preferred
Offered...................... 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
(each, a "Distribution Date"), commencing on
December 31, 1997. The Securities Rate and the
Distribution Dates for the Preferred
Securities will correspond to the interest
rate and interest payment dates on the Series
A Junior Subordinated Notes, which will
constitute substantially all the assets of
S-4
<PAGE>
the Trust. As a result, if principal or
interest is not paid on the Series A 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.
Series A 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
7.20% Junior Subordinated Notes due September
30, 2037. The Series A Junior Subordinated
Notes will be subordinate and junior in right
of payment to all indebtedness for borrowed
money and other obligations of the Corporation
included in the definition of Senior
Indebtedness. See "Description of the Junior
Subordinated Notes--Subordination" in the
accompanying Prospectus.
Guarantee................... The payment of distributions on the Preferred
Securities is guaranteed by the Corporation
under the Guarantee, but only to the extent the
Trust has funds legally and immediately
available to make such distributions. If the
Corporation does not make principal or interest
payments on the Series A 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 legally available
therefor. The obligations of the Corporation
under the Guarantee will be subordinate and
junior in right of payment to all other
liabilities of the Corporation and will rank
pari passu with the preferred stock or
preferred stock A issued by the Corporation.
See "Risk Factors--Ranking of and Rights Under
the Guarantee" herein and "Description of the
Guarantees" in the accompanying Prospectus. The
Corporation has, through the Guarantee, the
Subordinated Note Indenture, the Series A
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 Corporation has the right to defer payments
of interest on the Series A Junior Subordinated
Notes by extending the interest payment period
on the Series A Junior Subordinated Notes, at
any time and from time to time, for up to 20
consecutive quarters (each, an "Extension
Period"), but not beyond the stated maturity of
the Series A Junior Subordinated Notes. The
only restrictions on the Corporation's ability
to defer payments of interest are that
S-5
<PAGE>
during the Extension Period the Corporation may
not, with certain exceptions, (i) pay dividends
on, or redeem or otherwise purchase, any of its
capital stock or (ii) pay principal or interest
on, or redeem or otherwise purchase, any debt
securities ranking pari passu with or
subordinate to the Series A Junior Subordinated
Notes. There could be multiple Extension
Periods of varying lengths throughout the term
of the Series A Junior Subordinated Notes.
If interest payments on the Series A Junior
Subordinated Notes are deferred, distributions
on the Preferred Securities will also be
deferred. During an Extension Period, holders
of Preferred Securities will be required to
include income in the form of original issue
discount ("OID") in their gross income for
federal income tax purposes in advance of the
receipt of the cash payments attributable to
such deferred interest. See "Description of the
Series A Junior Subordinated Notes--Option to
Extend Interest Payment Period" and "Certain
Federal Income Tax Considerations--Original
Issue Discount" and "--Market Discount."
Deferred installments of interest will bear
interest at a rate per annum equal to the
Securities Rate, compounded quarterly, to the
date of payment to the extent permitted by
applicable law.
Redemption; Distribution.... The Preferred Securities are subject to
mandatory redemption upon repayment of the
Series A Junior Subordinated Notes at maturity
or their earlier redemption. The Series A
Junior Subordinated Notes are redeemable by the
Corporation, in whole or in part, from time to
time on or after December 31, 2002, or at any
time, in whole, within 90 days following the
occurrence of a Special Event. If a partial
redemption of the Series A Junior Subordinated
Notes would result in the delisting of the
Preferred Securities, the Corporation may
redeem the Series A Junior Subordinated Notes
only in whole. Any partial redemption of the
Series A Junior Subordinated Notes will be
effected by the redemption of an equivalent
liquidation amount of Trust Securities, to be
allocated approximately 97% to the Preferred
Securities and 3% to the Common Securities. See
"Description of the Preferred Securities--
Redemption" and "--Special Event Redemption or
Distribution."
The Corporation will have the right at any time
to terminate the Trust and cause the Series A
Junior Subordinated Notes to be distributed to
the holders of the Preferred Securities in
liquidation of the Trust. This right is
optional and wholly within the discretion of
the Corporation. Circumstances under which the
Corporation may determine to exercise such
right could include the occurrence of an
Investment Company Act Event or a Tax Event,
adverse tax consequences to the Corporation or
the Trust that are not
S-6
<PAGE>
within the definition of a Tax Event because
they do not result from an amendment or change
described in such definition, and changes in
the accounting requirements applicable to the
Preferred Securities as described under
"Accounting Treatment" in the accompanying
Prospectus. See "Description of the Preferred
Securities--Special Event Redemption or
Distribution."
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
Corporation shall have received an opinion of
counsel experienced in such matters (which may
be counsel to the Corporation) 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 Series A Junior Subordinated Notes, (ii)
interest payable on the Series A Junior
Subordinated Notes would not be deductible by
the Corporation 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 Issue Date. An
"Investment Company Act Event" means that the
Administrative Trustees and the Corporation
shall have received an opinion of counsel
experienced in such matters (which may be
counsel to the Corporation) to the effect that,
as a result of the occurrence of a change in
law or regulation or a written change in
interpretation or application of law or
regulation by any legislative body, court,
governmental agency or regulatory authority on
or 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 Series A Junior
Subordinated Notes, each Preferred Security
shall be entitled to receive a liquidation
amount of $25 plus accrued and unpaid
distributions thereon (including any interest
thereon) to the date of payment.
S-7
<PAGE>
RISK FACTORS
Prospective purchasers of Preferred Securities should carefully review the
information contained elsewhere in this Prospectus Supplement and in the
accompanying Prospectus and should consider particularly the following
matters:
RANKING OF AND RIGHTS UNDER THE SERIES A JUNIOR SUBORDINATED NOTES
No amounts will be available to make payments on the Preferred Securities
except from payments made on the Series A Junior Subordinated Notes. The
obligations of the Corporation under the Series A Junior Subordinated Notes
are subordinate and junior in right of payment to all present and future
Senior Indebtedness of the Corporation. As of September 30, 1997, Senior
Indebtedness of the Corporation aggregated approximately $3,593,542,000. There
are no terms in the Preferred Securities, the Series A Junior Subordinated
Notes or the Guarantee that limit the Corporation's ability to incur
additional indebtedness, including Senior Indebtedness. See "Description of
the Guarantees" and "Description of the Junior Subordinated Notes--
Subordination" in the accompanying Prospectus.
RANKING OF AND RIGHTS UNDER THE GUARANTEE
The Corporation's obligations under the Guarantee are subordinate and junior
in right of payment to all liabilities of the Corporation and will be pari
passu with the preferred stock or preferred stock A issued by the Corporation.
If the Corporation were to default in its obligation to pay amounts payable on
the Series A Junior Subordinated Notes, the Trust would lack available funds
for 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.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Corporation has the right under the Subordinated Note Indenture, at any
time, and from time to time, to defer payments of interest on the Series A
Junior Subordinated Notes for a period of up to 20 consecutive quarters (each,
an "Extension Period"), but not beyond the stated maturity of the Series A
Junior Subordinated Notes. Prior to the termination of any Extension Period,
the Corporation 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. During an Extension Period,
the Corporation will have the right to make partial payments of interest on
any Interest Payment Date. Upon the termination of any Extension Period and
the payment of all amounts then due, the Corporation 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 Series A
Junior Subordinated Notes. Deferred installments of interest on the Series A
Junior Subordinated Notes will bear interest at a rate per annum equal to the
Securities Rate, compounded quarterly, to the date of payment to the extent
permitted by applicable law. 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 Corporation's ability to defer payments of
interest are that during any Extension Period the Corporation may not, with
certain exceptions, (i) pay dividends on, or redeem or otherwise purchase, any
of its capital stock or (ii) pay principal or interest on, or redeem or
otherwise purchase, any debt securities ranking pari passu with or subordinate
to the Series A Junior Subordinated Notes. See "Description of the Preferred
Securities--Distributions" and "Description of the Series A Junior
Subordinated Notes--Option to Extend Interest Payment Period" and "--Certain
Covenants."
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<PAGE>
Should the Corporation exercise its right to defer payments of interest,
each holder of Preferred Securities will be required to include income in the
form of OID in its gross income 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" and "--Sale of Preferred Securities."
INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES OF AN INVESTMENT IN THE PREFERRED SECURITIES.
The Corporation has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Series A
Junior Subordinated Notes. However, should the Corporation 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 Corporation's
right to defer interest payments, the market price of the Preferred Securities
(which represent an undivided beneficial interest in the Series A Junior
Subordinated Notes) may be more volatile than other similar securities that do
not have such rights.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
Upon the occurrence of a Special Event, the Corporation will have the
option, within 90 days following the occurrence thereof, to redeem the Series
A Junior Subordinated Notes in cash (with the result that the Preferred
Securities shall be redeemed). In addition, the Corporation will have the
right at any time to terminate the Trust and cause the Series A Junior
Subordinated Notes to be distributed to the holders of the Preferred
Securities in liquidation of the Trust. See "Description of the Preferred
Securities--Special Event Redemption or Distribution."
There can be no assurance as to the market price for the Series A Junior
Subordinated Notes that may be distributed in exchange for Preferred
Securities if a termination or liquidation of the Trust were to occur.
Accordingly, the Series A Junior Subordinated Notes that the investor may
receive on termination and liquidation of the Trust may trade at a discount to
the price that the investor paid to purchase the Preferred Securities offered
hereby. See "Description of the Preferred Securities--Special Event Redemption
or Distribution."
POSSIBLE TAX LAW CHANGES
The Clinton Administration's budget proposals for fiscal year 1997 and
fiscal year 1998 contained provisions, which, if applicable to the Series A
Junior Subordinated Notes, would have prevented the Corporation from deducting
interest thereon for United States federal income tax purposes. These
provisions were not included in the Taxpayer Relief Act of 1997. There can be
no assurance that future legislative proposals, future regulations or official
administrative pronouncements, or future judicial decisions will not affect
the ability of the Corporation to deduct interest on the Series A Junior
Subordinated Notes. Such a change could give rise to a Tax Event, which would
permit the Corporation to cause a redemption of the Preferred Securities, as
described more fully under "Description of the Preferred Securities--Special
Event Redemption or Distribution."
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 or Delaware Trustee under certain
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<PAGE>
circumstances, will not be entitled to vote to appoint, remove or replace any
of the Securities Trustees, 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. 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. If a Preferred Security is disposed
of prior to the occurrence of an Extension Period, any portion of the amount
received that is attributable to accrued interest will be treated as interest
income to a U.S. holder for tax purposes and will not be treated as part of
the amount realized for purposes of determining gain or loss on the
disposition of the Preferred Security. If an Extension Period occurs, interest
on the Series A 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. Should an Extension Period occur, a holder who disposes of his Preferred
Securities between record dates for payments of distributions thereon would be
required to include accrued but unpaid interest on the Series A Junior
Subordinated Notes through the date of disposition in income as OID, and to
add such amount to his adjusted tax basis in his pro rata share of the related
Series A Junior Subordinated Notes deemed disposed of. To the extent the
selling price is less than the holder's adjusted tax basis, 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
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 Corporation's ability to redeem
the Series A Junior Subordinated Notes, in whole or in part, at any time on or
after December 31, 2002 at a redemption price equal to 100% of the principal
amount to be redeemed plus accrued but unpaid interest. In addition, because
holders of Preferred Securities will be paid only from payments on the Series
A Junior Subordinated Notes and may receive Series A Junior Subordinated Notes
upon the termination of the Trust, prospective purchasers of Preferred
Securities are making an investment decision with regard to the Series A
Junior Subordinated Notes and should carefully review all the information
regarding the Series A Junior Subordinated Notes contained herein. See
"Description of the Preferred Securities--Special Event Redemption or
Distribution" and "Description of the Series A Junior Subordinated Notes."
DUKE ENERGY CAPITAL TRUST I
The Trust is a statutory business trust created under Delaware law pursuant
to the filing of a certificate of trust with the Delaware Secretary of State
on November 14, 1997. The Trust's business is defined in a trust agreement,
executed by the Corporation, 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 Supplement and the
accompanying Prospectus form 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 and selling the Trust Securities representing undivided
beneficial interests in the assets of the Trust, (ii) investing the gross
proceeds of the Trust Securities in the Series A Junior Subordinated Notes,
and (iii) engaging in only those other activities necessary, appropriate,
convenient or incidental thereto. The Trust has a term of approximately 45
years from its creation, but may terminate earlier as provided in the Trust
Agreement.
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Upon issuance of the Preferred Securities, the purchasers thereof will own
all of the Preferred Securities. The Corporation 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
Subordinated Note Indenture 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 Corporation as the holder of the
Common Securities. Two officers of the Corporation initially will serve as
Administrative Trustees. The Chase Manhattan Bank will serve as Property
Trustee and will hold legal title to the Series A Junior Subordinated Notes
issued by the Corporation on behalf of the Trust and the holders of the Trust
Securities. Chase Manhattan Bank Delaware will serve as Delaware Trustee. In
certain circumstances, the holders of a majority in liquidation amount of the
Preferred Securities will be entitled to appoint a substitute Property Trustee
or Delaware Trustee. See "Description of the Preferred Securities--Events of
Default."
The Property Trustee will hold legal title to the Series A Junior
Subordinated Notes for the benefit of the Trust and the holders of the Trust
Securities and will have the power, with certain exceptions, to exercise all
rights, powers and privileges under the Subordinated Note Indenture as the
holder of the Series A Junior Subordinated Notes. To the extent payments in
respect of the Series A Junior Subordinated Notes are made to the Property
Trustee, the Property Trustee will make payments of distributions and payments
on liquidation, redemption and otherwise to the holders of the Trust
Securities. Subject to the right of the holders of the Preferred Securities to
appoint a substitute Property Trustee or Delaware Trustee under certain
circumstances, the Corporation, as the holder of all the Common Securities,
will have the right to appoint, remove or replace any of the Securities
Trustees.
The Series A Junior Subordinated Notes will constitute substantially all of
the assets of the Trust. Other assets that may constitute "Trust Property" (as
that term is defined in the Trust Agreement) include any cash on deposit in,
or owing to, the payment account as established under the Trust Agreement, as
well as any other property or assets held by the Property Trustee pursuant to
the Trust Agreement. In addition, the Trust may, from time to time, receive
cash from the Corporation pursuant to the Agreement as to Expenses and
Liabilities.
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."
The Trust's office in the State of Delaware is c/o Chase Manhattan Bank
Delaware, 1201 Market Street, Wilmington, Delaware 19801. The principal place
of business of the Trust shall be c/o the Corporation, 422 South Church
Street, Charlotte, North Carolina 28202, telephone (704) 382-8122, Attn:
Corporate Secretary.
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 Agreement, 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, the Delaware Business Trust
Act, 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
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reference to, the Trust Agreement, the form of which is filed as an exhibit to
the Registration Statement of which this Prospectus Supplement and the
accompanying Prospectus are 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 Corporation. 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 Subordinated Note Indenture 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 for borrowed money by
the Trust. Pursuant to the Trust Agreement, the Property Trustee will own and
hold the Series A Junior Subordinated Notes for the benefit of the Trust and
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 Corporation on a subordinated
basis as and to the extent described under "Description of the Guarantees" in
the accompanying Prospectus. The Guarantee does not cover payment of
distributions or amounts payable on redemption of the Preferred Securities or
otherwise in respect of the Preferred Securities when the Trust does not have
legally and immediately available funds sufficient to make such distributions
or payments. In such event, the remedy of a holder of Preferred Securities is
to direct the Property Trustee to enforce its rights under the Series A Junior
Subordinated Notes. In addition, a holder of Preferred Securities may
institute a legal proceeding directly against the Corporation, without first
instituting a legal proceeding against the Property Trustee or any other
person or entity, for enforcement of payment to such holder of principal of or
interest on the Series A Junior Subordinated Notes having a principal amount
equal to the aggregate liquidation amount of the Preferred Securities of such
holder on or after the due dates specified in the Series A Junior Subordinated
Notes. The above mechanisms and obligations, together with the Corporation's
obligations under the Agreement as to Expenses and Liabilities, constitute a
full and unconditional guarantee, subject to certain subordination provisions,
by the Corporation of the payments due on the Preferred Securities.
DISTRIBUTIONS
Distributions on the Preferred Securities will be fixed at the Securities
Rate and will accrue from the Issue Date and, except in the event of an
Extension Period, will be payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year, commencing on December 31, 1997. 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 the date the payment was
originally payable. A "Business Day" shall mean any day other than a Saturday
or Sunday, a day on which banks in New York City are authorized or obligated
by law or executive order to remain closed or a day on which the principal
corporate trust office of the Property Trustee or the Indenture Trustee is
closed for business.
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.
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The Corporation has the right under the Subordinated Note Indenture to defer
payments of interest on the Series A Junior Subordinated Notes by extending
the interest payment period from time to time on the Series A 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
Series A Junior Subordinated Notes will bear interest at a rate per annum
equal to the Securities Rate, compounded quarterly, to the date of payment to
the extent permitted by applicable law. During an Extension Period, the
Corporation will have the right to make partial payments of interest on any
Interest Payment Date. If distributions are deferred, the deferred
distributions and accrued interest thereon shall be paid, if funds are legally
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 Series A
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 legally and immediately available
for the payment of such distributions. The Trust's funds available for
distribution to the holders of the Preferred Securities will be limited to
payments received under the Series A Junior Subordinated Notes. See
"Description of the Series A Junior Subordinated Notes."
REDEMPTION
The Preferred Securities are subject to mandatory redemption upon repayment
of the Series A Junior Subordinated Notes at maturity or their earlier
redemption. The Series A Junior Subordinated Notes will mature on September
30, 2037 and may be redeemed, in whole or in part, at the option of the
Corporation, at any time on or after December 31, 2002 or at any time in whole
within 90 days following the occurrence of a Special Event, in each case at a
Redemption Price equal to 100% of the principal amount to be redeemed plus
accrued but unpaid interest (including any Additional Interest) to the
Redemption Date. Upon the repayment of the Series A Junior Subordinated Notes,
whether at maturity or upon redemption, the proceeds from such repayment or
payment shall simultaneously be applied to redeem a like liquidation amount of
Trust Securities upon not less than 30 nor more than 60 days' notice, at the
Redemption Price. See "Description of the Series A Junior Subordinated Notes--
Optional Redemption." If a partial redemption of the Series A Junior
Subordinated Notes would result in the delisting of the Preferred Securities,
the Corporation may redeem the Series A Junior Subordinated Notes only 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 as described under "--Book-Entry Only Issuance--The Depository Trust
Company" below. If the Preferred Securities are no longer in book-entry only
form, the Preferred Securities to be redeemed will be selected by such method
as the Property Trustee shall deem fair and appropriate and which 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; provided, however, that before undertaking
the redemption of the Preferred Securities on other than a pro rata basis, the
Property Trustee shall have received an opinion of counsel that the status of
the Trust as a grantor trust for United States federal income tax purposes
would not be adversely affected.
The Redemption Price for each Preferred Security shall equal the 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 at any time, the Corporation will
have the option to redeem, within 90 days following the occurrence thereof,
the Series A Junior Subordinated Notes in whole (and thus cause the redemption
of the Preferred Securities in whole). A Special Event is either a Tax Event
or an Investment Company Act Event.
A "Tax Event" means that the Administrative Trustees and the Corporation
shall have received an opinion of counsel experienced in such matters (which
may be counsel to the Corporation) to the
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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 Series A Junior Subordinated
Notes, (ii) interest payable on the Series A Junior Subordinated Notes would
not be deductible by the Corporation 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 Issue Date. See "Risk Factors--
Possible Tax Law Changes."
An "Investment Company Act Event" means that the Administrative Trustees and
the Corporation shall have received an opinion of counsel experienced in such
matters (which may be counsel to the Corporation) to the effect that, as a
result of the occurrence of a change in law or regulation or a written change
in interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority on or 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.
The Corporation will have the right at any time to terminate the Trust and,
after satisfaction of liabilities to creditors of the Trust, cause the Series
A Junior Subordinated Notes to be distributed to the holders of the Preferred
Securities in liquidation of the Trust. See "--Liquidation Distribution Upon
Dissolution" below. This right is optional and wholly within the discretion of
the Corporation. Circumstances under which the Corporation may determine to
exercise such right could include the occurrence of an Investment Company Act
Event or a Tax Event, adverse tax consequences to the Corporation or the Trust
that are not within the definition of a Tax Event because they do not result
from an amendment or change described in such definition, and changes in the
accounting requirements applicable to the Preferred Securities as described
under "Accounting Treatment" in the accompanying Prospectus.
If Series A Junior Subordinated Notes are distributed to the holders of the
Preferred Securities, the Corporation will use its best efforts to have the
Series A 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 Series A Junior Subordinated Notes upon termination 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 Series A Junior Subordinated Notes to be
delivered upon such distribution and (iii) any certificates representing
Preferred Securities not held by the depositary or its nominee will be deemed
to represent Series A Junior Subordinated Notes having an aggregate principal
amount equal to the aggregate 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, such Preferred Securities, until such
certificates are presented to the Corporation or its agent for transfer or
reissuance.
There can be no assurance as to the market prices for the Preferred
Securities or the Series A Junior Subordinated Notes that may be distributed
in exchange for the Preferred Securities if a termination and liquidation of
the Trust were to occur. Accordingly, the Preferred Securities that an
investor may purchase, or the Series A Junior Subordinated Notes that the
investor may receive on termination and liquidation of the Trust, may trade at
a discount to the price that the investor paid to purchase the Preferred
Securities.
REDEMPTION PROCEDURES
In the event that fewer than all of the Trust Securities are to be redeemed,
then the aggregate liquidation amount of the Trust Securities to be redeemed
shall be allocated 97% to the Preferred Securities and 3% to the Common
Securities.
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The Preferred Securities redeemed on each redemption date shall be redeemed
at the Redemption Price with the proceeds from the contemporaneous redemption
of the Series A Junior Subordinated Notes. The Redemption Price of Preferred
Securities shall be deemed payable on each redemption date only to the extent
that the Trust has funds legally and immediately available for payment of such
Redemption Price.
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, subject to the immediately preceding
paragraph, the Property Trustee will irrevocably deposit with the securities
depositary, so long as the Preferred Securities are in book-entry only form,
sufficient funds to pay the applicable Redemption Price. See "--Book-Entry
Only Issuance--The Depository Trust Company" below. If the Preferred
Securities are not in book-entry only form, the Property Trustee, subject to
the immediately preceding paragraph, will irrevocably deposit with the Paying
Agent funds sufficient to pay the applicable Redemption Price and will give
the Paying Agent irrevocable instructions to pay the Redemption Price to the
holders thereof upon surrender of their Preferred Securities certificates. 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 Corporation pursuant to the Guarantee, distributions on
such Preferred Securities will continue to accrue at the then applicable rate,
from such redemption date originally established by the Trust for such
Preferred Securities to the date such Redemption Price is actually paid. See
"--Events of Default" below, "Relationship Among the Preferred Securities, the
Series A Junior Subordinated Notes and the Guarantee" herein and "Description
of the Guarantees--Events of Default" in the accompanying Prospectus.
Subject to the foregoing and to applicable law (including, without
limitation, United States federal securities laws), the Corporation or any of
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 the initial 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.
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 1934 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
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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).
Distributions, redemption proceeds and other payments in respect of 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 is the case with securities held for the account
of customers registered in "street name," and will be the responsibility of
such Participant and not of DTC, the Trust, any trustee or the Corporation,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of distributions, redemption proceeds and other amounts
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
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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 within 90 days, Preferred Securities certificates
will be printed and delivered to the holders of record. Additionally, the
Corporation 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
has been obtained from sources that the Corporation and the Trust believe to
be reliable, but the Corporation 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,
2041, or earlier upon (i) the occurrence of a Bankruptcy Event (as defined in
the Trust Agreement) in respect of the Corporation, dissolution or liquidation
of the Corporation, or dissolution of the Trust pursuant to a judicial decree;
(ii) the delivery of written direction to the Property Trustee by the
Corporation, as Depositor, at any time (which direction is optional and wholly
within the discretion of the Corporation, as Depositor) to terminate the Trust
and distribute the Series A Junior Subordinated Notes to the holders of the
Preferred Securities and the Common Securities in liquidation of the Trust
(see "--Special Event Redemption or Distribution" above); or (iii) the payment
at maturity or redemption of all of the Series A Junior Subordinated Notes,
and the consequent payment of the Trust Securities.
If an early termination occurs as described in clause (i) or (ii) above, the
Trust shall be liquidated, and the Property Trustee shall distribute to each
holder of Preferred Securities and Common Securities, after the satisfaction
of liabilities to creditors of the Trust, a like principal amount of Series A
Junior Subordinated Notes, unless in the case of an event described in clause
(i) such distribution is determined by the Administrative Trustees 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 the aggregate of the
liquidation amount of $25 per Trust Security plus accrued and unpaid
distributions thereon to the date of payment (such amount being the
"Liquidation Distribution"). If such Liquidation Distribution can be paid only
in part because the Trust has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then subject to the next succeeding
sentence, the amounts payable by the Trust on the Trust Securities shall be
paid on a pro rata basis. The holder of the Common Securities will be entitled
to receive payments upon any such dissolution pro rata with the holders of the
Preferred Securities, except that if a Subordinated Note Indenture 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 Trust
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 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 Subordinated Note Indenture ("Subordinated Note Indenture Event of
Default") (see "Description of the Junior Subordinated Notes--Events of
Default" in the accompanying Prospectus); or
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(ii)default by the Trust in the payment of any distribution when it
becomes due and payable, and the continuation of such default for a period
of 30 days; or
(iii)default by the Trust 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, of any covenant or warranty of
the Securities 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 Securities Trustees by the holders of at least
25% 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, unless holders in liquidation amount of outstanding Preferred
Securities not less than the liquidation amount of outstanding Preferred
Securities the holders of which gave such notice, agree in writing to an
extension of such period prior to its expiration; provided, however, that
the holders of such liquidation amount of outstanding Preferred Securities
shall be deemed to have agreed to an extension of such period if corrective
action is initiated by the Securities Trustees within such period and is
being diligently pursued; or
(v)the occurrence of certain events of bankruptcy or insolvency with
respect to the Trust.
Within 90 days after the occurrence of any default under the Trust
Agreement, the Property Trustee shall transmit notice of any such default
known to the Property Trustee to the holders of Trust Securities and the
Corporation, unless such default shall have been cured or waived. For such
purpose, the term "default" means any event which is, or after notice or lapse
of time or both would become, a Trust Agreement Event of Default.
If a Trust Agreement Event of Default occurs and is continuing, then,
pursuant to the Trust Agreement, holders of a majority in aggregate
liquidation amount of Preferred Securities have the right 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 under the
Trust Agreement to exercise the remedies available to it as holder of the
Series A Junior Subordinated Notes. If the Property Trustee fails to enforce
its rights under the Series A Junior Subordinated Notes, a holder of Preferred
Securities may, to the extent permitted by applicable law, institute a legal
proceeding directly against the Corporation to enforce the Property Trustee's
rights under the Series A Junior Subordinated Notes, without first instituting
any legal proceeding against the Property Trustee or the Trust.
Notwithstanding the foregoing, a holder of Preferred Securities may institute
a legal proceeding directly against the Corporation, without first instituting
a legal proceeding against the Property Trustee or any other person or entity,
for enforcement of payment to such holder of principal of or interest on the
Series A Junior Subordinated Notes having a principal amount equal to the
aggregate liquidation amount of the Preferred Securities of such holder on or
after the due dates specified in the Series A Junior Subordinated Notes. See
"Relationship Among the Preferred Securities, the Series A Junior Subordinated
Notes and the Guarantee" herein and "Description of the Guarantees--Events of
Default" in the accompanying Prospectus.
Unless a Subordinated Note Indenture 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 Subordinated Note Indenture Event
of Default has occurred and is continuing, the Property Trustee and the
Delaware Trustee may be removed at such time by act of the holders of a
majority in liquidation amount of the Preferred Securities, delivered to the
appropriate Securities Trustee (in its individual capacity and on behalf of
the Trust). No resignation or removal of any Securities Trustee and no
appointment of a successor shall be effective until the acceptance of
appointment by the successor Trustee in accordance with the requirements of
the Trust Agreement.
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If a Subordinated Note Indenture Event of Default has occurred and is
continuing, the holders of Preferred Securities shall have a preference over
the holders of Common Securities upon dissolution of the Trust as described
above. See "--Liquidation Distribution Upon Dissolution."
VOTING RIGHTS
Except as described in "--Amendment of the Trust Agreement" herein, in
"Description of the Guarantees--Amendments and Assignment" in the accompanying
Prospectus and in the immediately succeeding paragraphs and except as
otherwise required by law and the Trust Agreement, the holders of the
Preferred Securities will have no voting rights.
So long as any Series A Junior Subordinated Notes are held by the Property
Trustee, the Securities Trustees shall not (i) direct the time, method and
place of conducting any proceeding for any remedy available to the Indenture
Trustee (as defined herein), or executing any trust or power conferred on the
Indenture Trustee with respect to the Series A Junior Subordinated Notes, (ii)
consent to waive any past default which is waivable under Section 513 of the
Subordinated Note Indenture, (iii) exercise any right to rescind or annul a
declaration that the principal of all the Series A Junior Subordinated Notes
shall be due and payable, or (iv) consent to any amendment, modification or
termination of the Subordinated Note Indenture or the Series A Junior
Subordinated Notes, where such consent shall be required, or to any other
action, as the holder of the Series A Junior Subordinated Notes, under the
Subordinated Note Indenture, without, in each case, obtaining the prior
approval of the holders of at least 66 2/3% in liquidation amount of the
outstanding Preferred Securities; provided, however, that where a consent
under the Subordinated Note Indenture would require the consent of each holder
of Series A 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 holders of the Preferred
Securities, except pursuant to a subsequent vote of such holders. The Property
Trustee shall notify all holders of the Preferred Securities of any notice of
default received from the Indenture Trustee with respect to the Series A
Junior Subordinated Notes.
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 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,
and such amendment or proposal shall not be effective except with the approval
of the holders of at least 66 2/3% in liquidation amount of the outstanding
Preferred Securities.
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 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 (whether of record or beneficially) by the
Corporation, the Administrative Trustees or any affiliate of the Corporation
or any Administrative Trustee shall, for purposes of such vote or consent, be
treated as if they were not outstanding.
CO-PROPERTY TRUSTEES AND SEPARATE PROPERTY TRUSTEE
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 holder of
the Common Securities and the Property Trustee shall have power to appoint,
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and upon the written request of the Property Trustee, the Corporation, 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
Corporation, 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 a Subordinated Note
Indenture Event of Default has occurred and is continuing, the Property
Trustee alone shall have power to make such appointment.
AMENDMENT OF THE TRUST AGREEMENT
The Trust Agreement may be amended from time to time by the Corporation and
the Securities Trustees without the consent of the holders of the Trust
Securities (i) to cure any ambiguity, correct or supplement any provision
therein which may be inconsistent with any other provision therein, or to make
any other provisions with respect to matters or questions arising under the
Trust Agreement, which shall not be inconsistent with the other provisions of
the Trust Agreement; provided that the amendment does not adversely affect in
any material respect the interests of any holder of Trust Securities, or (ii)
to modify, eliminate or add to any provisions of the Trust Agreement to such
extent as shall be necessary to ensure that the Trust will not be classified
as other than a grantor trust for United States federal income tax purposes.
Except as provided in the succeeding paragraph, other amendments to the Trust
Agreement may be made (i) upon approval of the holders of not less than 66
2/3% in aggregate liquidation amount of the Trust Securities then outstanding
and (ii) upon receipt by the Securities Trustees of an opinion of counsel to
the effect that such amendment will not affect the Trust's status as a grantor
trust or the Trust's exemption from the 1940 Act.
Notwithstanding the foregoing, without the consent of each affected holder
of Trust Securities, the Trust Agreement may not be amended to (i) change the
amount or timing of any distribution (or any payment upon redemption) on the
Trust Securities or otherwise adversely affect the amount of any distribution
(or any payment upon redemption) required to be made in respect of the Trust
Securities as of a specified date, (ii) restrict the right of a holder of
Trust Securities to institute suit for the enforcement of any such payment on
or after such date, (iii) change the purpose of the Trust, (iv) authorize the
issuance of any additional beneficial interests in the Trust, or (v) 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 entity, except as
described below. The Trust may, at the request of the Corporation, with the
consent of the Administrative Trustees 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 Corporation expressly appoints a trustee of
such successor entity possessing the same powers and duties as the Property
Trustee as the holder of the Series A Junior Subordinated Notes, (iii) the
Preferred Securities or any Successor Securities are listed, or any Successor
Securities will be listed upon notification of issuance,
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on any national securities exchange or other organization on which the
Preferred Securities are then listed, (iv) such consolidation, amalgamation,
merger or replacement does not cause the Preferred Securities (including any
Successor Securities) to be downgraded by any nationally recognized
statistical rating organization, (v) such consolidation, amalgamation, merger
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
substantially identical to that of the Trust, (vii) prior to such
consolidation, amalgamation, merger or replacement, the Corporation and the
Property Trustee have received an opinion of counsel to the effect that (A)
such consolidation, amalgamation, merger 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 consolidation, amalgamation, merger 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 Corporation owns all of
the common securities of such successor entity and 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 United States federal income tax purposes.
Any corporation or other entity into which any of the Property Trustee, the
Delaware Trustee or any Administrative Trustee that is not a natural person
may be merged or converted or with which it may be consolidated, or any
corporation or other entity resulting from any merger, conversion or
consolidation to which any such Securities Trustee shall be a party, or any
corporation or other entity succeeding to all or substantially all the
corporate trust business of any such Securities Trustee, shall be the
successor of such Securities Trustee under the Trust Agreement; provided that
such corporation or other entity is otherwise qualified and eligible.
PAYMENT AND PAYING AGENT
So long as DTC is acting as securities depositary for the Preferred
Securities, 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. 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 in the Security Register (as such term is
defined in the Trust Agreement). 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
Corporation. In such event, the Administrative Trustees shall appoint a
successor to act as Paying Agent.
REGISTRAR AND TRANSFER AGENT
It is anticipated that the Property Trustee, or one of its affiliates, will
act as registrar and transfer agent (the "Security Registrar") 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 Security Registrar will not be required to register or cause to be
registered any transfer of Preferred Securities that have been called for
redemption.
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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 Chase Manhattan Bank, the Property Trustee, also serves as Indenture
Trustee and Guarantee Trustee. The Corporation and certain of its affiliates
maintain deposit accounts and banking relationships with The Chase Manhattan
Bank. The Chase Manhattan Bank serves as trustee under the Corporation's First
and Refunding Mortgage pursuant to which First and Refunding Mortgage Bonds of
the Corporation are outstanding.
GOVERNING LAW
The Trust Agreement and the Trust Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware;
provided that the immunities and standard of care of the Property Trustee
shall be governed by New York law.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to operate the Trust
so that the Trust will not be deemed to be an "investment company" required to
be registered under the 1940 Act or taxed as other than a grantor trust for
United States federal income tax purposes and so that the Series A Junior
Subordinated Notes will be treated as indebtedness of the Corporation for
United States federal income tax purposes. In this connection, the
Administrative Trustees and the Corporation are authorized to take any action,
not inconsistent with applicable law, the Trust's certificate of trust or the
Trust Agreement, that the Administrative Trustees and the Corporation
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 SERIES A JUNIOR SUBORDINATED NOTES
Set forth below is a description of the terms of the Series A Junior
Subordinated Notes. This description supplements, and should be read together
with, the description of the general terms and provisions of the Junior
Subordinated Notes set forth in the accompanying Prospectus under the caption
"Description 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 description in the accompanying Prospectus and the
Subordinated Note Indenture (as defined therein). Certain capitalized terms
used herein are defined in the Subordinated Note Indenture.
GENERAL
The Series A Junior Subordinated Notes will be issued as a series of Junior
Subordinated Notes under the Subordinated Note Indenture. The Series A Junior
Subordinated Notes will be limited in aggregate principal amount to
$360,824,750, such amount being the aggregate liquidation amount of the Trust
Securities.
The entire principal amount of the Series A Junior Subordinated Notes will
mature and become due and payable, together with any accrued and unpaid
interest thereon (including any Additional Interest (as defined below)), on
September 30, 2037. The Series A Junior Subordinated Notes are not subject to
any sinking fund provision.
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The interest rate and interest and other payment dates of the Series A
Junior Subordinated Notes will correspond to those of the Preferred
Securities, as described herein.
The Series A Junior Subordinated Notes will rank pari passu with the other
series of Junior Subordinated Notes issued under the Subordinated Note
Indenture.
OPTIONAL REDEMPTION
The Corporation will have the right to redeem the Series A Junior
Subordinated Notes, in whole or in part, without premium, from time to time,
on or after December 31, 2002, or at any time in whole within 90 days
following 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 any Additional Interest) to the Redemption Date. If a
partial redemption of the Series A Junior Subordinated Notes would result in
the delisting of the Preferred Securities, the Corporation may redeem the
Series A Junior Subordinated Notes only in whole.
INTEREST
Each Series A Junior Subordinated Note will 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 on December 31, 1997, to
the person in whose name such Series A Junior Subordinated Note is registered
at the close of business on the fifteenth calendar day prior to such payment
date; provided that interest payable at the stated maturity of principal of
the Series A Junior Subordinated Notes or on a Redemption Date will be paid to
the person to whom such principal is payable. The amount of interest payable
will be computed on the basis of a 360-day year of twelve 30-day months. In
the event that any date on which interest is payable on the Series A 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 the date the payment was
originally payable.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Corporation will have the right at any time, and from time to time, to
defer payments of interest on the Series A Junior Subordinated Notes by
extending the interest payment period for up to 20 consecutive quarters, but
not beyond the stated maturity date. Upon the termination of an Extension
Period, the Corporation shall pay all interest then accrued and unpaid
(including any Additional Interest) on the next succeeding Interest Payment
Date. Prior to the termination of any Extension Period, the Corporation 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 consecutive quarters. During an
Extension Period, the Corporation will have the right to make partial payments
of interest on any Interest Payment Date. Upon the termination of any
Extension Period and the payment of all amounts then due, the Corporation may
select a new Extension Period, subject to the above requirements. The
Corporation has no present intention of exercising its rights to defer
payments of interest by extending the interest payment period on the Series A
Junior Subordinated Notes.
The Corporation shall give the holder or holders of the Series A Junior
Subordinated Notes and the Indenture Trustee notice of its selection or
extension of an Extension Period at least one Business Day prior to the
earlier of (i) the record date relating to the Interest Payment Date on which
the
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Extension Period is to commence or relating to the Interest Payment Date on
which an Extension Period that is being extended would otherwise terminate or
(ii) the date the Corporation or the Trust is required to give notice to the
NYSE or other applicable self-regulatory organization of the record date or
the date such distributions are payable.
ADDITIONAL INTEREST
"Additional Interest" with respect to the Series A Junior Subordinated Notes
is defined in the Subordinated Note Indenture as (i) such additional amounts
as may be required so that the net amounts received and retained by a holder
of Series A Junior Subordinated Notes (if the holder is the Trust) after
paying taxes, duties, assessments or governmental charges of whatever nature
(other than withholding taxes) imposed by the United States or any other
taxing authority will not be less than the amounts the holder would have
received had no such taxes, duties, assessments, or other governmental charges
been imposed; and (ii) such interest as shall accrue on interest due and not
paid on an Interest Payment Date, accruing at the Securities Rate from the
applicable Interest Payment Date to the date of payment , compounded
quarterly, on each Interest Payment Date, to the extent permitted by
applicable law.
CERTAIN COVENANTS
The Corporation covenants in the Subordinated Note Indenture, for the
benefit of the holders of Series A Junior Subordinated Notes and the holders
of the Preferred Securities, that, (i) if at such time the Corporation shall
have given notice of its election to extend an interest payment period for the
Series A Junior Subordinated Notes and such extension shall be continuing or
(ii) if at such time a Subordinated Note Indenture Event of Default with
respect to the Series A Junior Subordinated Notes shall have occurred and be
continuing, (a) the Corporation shall not declare or pay any dividend or make
any distributions with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock, and (b) the
Corporation shall not make any payment of interest, principal or premium, if
any, on or repay, repurchase or redeem any debt securities (including
guarantees other than the Guarantee) issued by the Corporation which rank pari
passu with or junior to the Series A Junior Subordinated Notes. None of the
foregoing, however, shall restrict (i) any of the actions described in the
preceding sentence resulting from any reclassification of the Corporation's
capital stock or the exchange or conversion of one class or series of the
Corporation's capital stock for another class or series of the Corporation's
capital stock, (ii) the declaration and payment of a dividend or distribution
or similar share purchase rights in the future, (iii) repurchases, redemptions
or other acquisitions of shares of the Corporation's capital stock in
connection with any employment contract, benefit plan or other similar
arrangement with or for the benefit of employees, officers or directors or a
stock purchase and dividend reinvestment plan, (iv) acquisitions of shares of
the Corporation's capital stock in connection with the issuance of shares of
the Corporation's capital stock (or securities convertible into or
exchangeable for shares of the Corporation's capital stock) as consideration
in an acquisition transaction that was entered into prior to the commencement
of the relevant Extension Period, (v) dividends or distributions in capital
stock of the Corporation, (vi) the purchase of fractional interests in shares
of the Corporation's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged
or (vii) mandatory sinking fund payments with respect to any series of the
Corporation's preferred stock or preferred stock A; provided that the
aggregate stated value of all such series outstanding at the time of any such
payment does not exceed 5% of the aggregate of (1) the total principal amount
of all bonds or other securities representing secured indebtedness issued or
assumed by the Corporation and then outstanding and (2) the capital and
surplus of the Corporation to be stated on the books of account of the
Corporation after giving effect to such payment; provided, however, that any
moneys deposited into any sinking fund and not in violation of this provision
may thereafter be applied to the purchase or redemption of such preferred
stock or preferred stock A in accordance with the terms of such sinking fund
without regard to the foregoing restrictions.
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The Subordinated Note Indenture further provides that, for so long as the
Trust Securities remain outstanding, the Corporation covenants (i) directly or
indirectly to maintain 100% ownership of the Common Securities of the Trust;
provided, however, that any permitted successor of the Corporation under the
Subordinated Note Indenture may succeed to the Corporation'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 Series A Junior Subordinated Notes to the holders of Trust
Securities in liquidation of such 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.
BOOK-ENTRY AND ISSUANCE
If distributed to holders of Trust Securities in connection with the
voluntary or involuntary dissolution, winding-up or liquidation of the Trust,
the Series A Junior Subordinated Notes are expected to be issued in the form
of one or more global certificates registered in the name of the securities
depositary or its nominee. In such event, the procedures applicable to the
transfer and payment of the Series A 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."
DENOMINATIONS
The Series A Junior Subordinated Notes will be issuable in registered form
without coupons in denominations of $25 or any integral multiples thereof.
DEFEASANCE
The Corporation may cause itself to be discharged from its obligations (with
certain exceptions) with respect to any Series A Junior Subordinated Notes
("Defeasance"), on and after the date certain conditions set forth in the
Subordinated Note Indenture are satisfied. See "Description of the Junior
Subordinated Notes--Defeasance and Covenant Defeasance" in the accompanying
Prospectus.
Under current United States federal income tax laws, Defeasance would be
treated as an exchange of the relevant Series A Junior Subordinated Notes in
which holders of such Subordinated Notes might recognize gain or loss. In
addition, thereafter, the amount, timing and character of amounts that holders
would be required to include in income might be different from that which
would be includible in the absence of such Defeasance. Prospective investors
are urged to consult their own tax advisors as to the specific consequences of
a Defeasance, including the applicability and effect of tax laws other than
the United States federal income tax laws.
The provisions of the Subordinated Note Indenture that provide for Covenant
Defeasance (as described in "Description of the Junior Subordinated Notes--
Defeasance and Covenant Defeasance" in the accompanying Prospectus) shall not
apply to the Series A Junior Subordinated Notes.
MISCELLANEOUS
The Corporation will have the right at all times to assign any of its rights
or obligations under the Subordinated Note Indenture with respect to the
Series A Junior Subordinated Notes to a direct or indirect wholly-owned
subsidiary of the Corporation; provided that, in the event of any such
assignment, the Corporation will remain primarily liable for the performance
of all such obligations.
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RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE SERIES A JUNIOR SUBORDINATED NOTES AND THE GUARANTEE
As long as payments of interest and other payments are made when due on the
Series A 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 Series A Junior Subordinated Notes will be
equal to the sum of the aggregate liquidation amount of the Trust Securities;
(ii) the interest rate and interest and other payment dates on the Series A
Junior Subordinated Notes will correspond to the distribution rate and
distribution and other payment dates for the Preferred Securities; (iii) the
Corporation shall pay for all costs and expenses of the Trust pursuant to the
Agreement as to Expenses and Liabilities; 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 legally and
immediately available) and other payments due on the Preferred Securities (to
the extent funds therefor are legally and immediately available) are
guaranteed by the Corporation as and to the extent set forth under
"Description of the Guarantees" in the accompanying Prospectus. If the
Corporation does not make the required payments on the Series A Junior
Subordinated Notes, it is not expected that the Trust will have sufficient
funds to make the related distributions on the Preferred Securities. The
Guarantee is a guarantee from the time of its issuance, but does not apply to
any payment of distributions unless and until the Trust has sufficient funds
legally and immediately available for the payment of such distributions.
If a Subordinated Note Indenture Event of Default occurs and is continuing,
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 Series A Junior
Subordinated Notes, including proceeding directly against the Corporation to
enforce the Series A Junior Subordinated Notes. If the Property Trustee fails
to enforce its rights under the Series A Junior Subordinated Notes, any holder
of Preferred Securities may, to the extent permitted by applicable law,
institute a legal proceeding directly against the Corporation to enforce the
Property Trustee's rights under the Series A Junior Subordinated Notes without
first instituting any legal proceeding against the Property Trustee or any
other person or entity. Notwithstanding the foregoing, a holder of Preferred
Securities may institute a legal proceeding directly against the Corporation,
without first instituting a legal proceeding against the Property Trustee or
any other person or entity, for enforcement of payment to such holder of
principal of or interest on the Series A Junior Subordinated Notes having a
principal amount equal to the aggregate liquidation amount of the Preferred
Securities of such holder on or after the due dates specified in the Series A
Junior Subordinated Notes.
If the Corporation 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. In addition,
any holder of Preferred Securities may institute a legal proceeding directly
against the Corporation 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 Guarantee, the Subordinated Note Indenture, the Series A Junior
Subordinated Notes, the Trust Agreement and the Agreement as to Expenses and
Liabilities, as described above, constitute a full and unconditional
guarantee, subject to certain subordination provisions, by the Corporation of
the payments due on the Preferred Securities.
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Upon any voluntary or involuntary dissolution, winding-up or termination of
the Trust, unless the Series A Junior Subordinated Notes are distributed in
connection therewith, 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 Corporation, the Property
Trustee, as holder of the Series A Junior Subordinated Notes, would be a
subordinated creditor of the Corporation, subordinated in right of payment to
all Senior Indebtedness, but entitled to receive payment in full of principal
and interest, before any shareholders of the Corporation receive payments or
distributions. Because the Corporation is guarantor under the Guarantee and
has agreed to pay for all costs, expenses and liabilities of the Trust (other
than the Trust's obligations to holders of the Preferred Securities) pursuant
to the Agreement as to Expenses and Liabilities, the positions of a holder of
Preferred Securities and a holder of Series A Junior Subordinated Notes
relative to other creditors and to shareholders of the Corporation in the
event of liquidation or bankruptcy of the Corporation 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 Subordinated Note
Indenture. However, in the event of a default under, or acceleration of,
Senior Indebtedness, the subordination provisions of the Series A Junior
Subordinated Notes provide that no payments may be made in respect of the
Series A Junior Subordinated Notes until such Senior Indebtedness has been
paid in full (in the case of any payment by, or distribution of assets of, the
Corporation to creditors upon any dissolution, winding-up, liquidation or
reorganization of the Corporation), or all amounts due thereon have been paid
(in the case of a payment default thereunder (beyond any period of grace) or
the acceleration of the maturity of such Senior Indebtedness because of a
default with respect to such Senior Indebtedness). Failure to make required
payments on the Series A Junior Subordinated Notes would (with the lapse of
time, in the case of defaults in the payment of interest) constitute a
Subordinated Note Indenture Event of Default, except that failure to make
interest payments on the Series A Junior Subordinated Notes will not be a
Subordinated Note Indenture 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 Series A Junior
Subordinated Notes.
S-27
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain material United States federal income
tax consequences of the ownership and disposition of the Preferred Securities
and constitutes the opinion of Dewey Ballantine LLP, counsel to the
Corporation and the Trust, insofar as it relates to matters of law and legal
conclusions. This summary deals only with Preferred Securities held as capital
assets within the meaning 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 important to a Holder
in light of the Holder's particular circumstances or to Holders subject to
special rules, such as certain financial institutions, real estate investment
trusts, regulated investment companies, 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, (iii) an estate the income of which is subject to United States
federal income taxation regardless of its source, and (iv) a trust if (a) a
court within the United States is able to exercise primary supervision over
the administration of the trust and (b) one or more U.S. persons have the
authority to control all substantial decisions of the trust. 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 will be treated as a "grantor trust" and not as an association
taxable as a corporation for federal income tax purposes. Thus, for federal
income tax purposes, each Holder will be treated as the beneficial owner of a
pro rata undivided interest in the Series A Junior Subordinated Notes and,
consequently, will be required to include in income the Holder's pro rata
share of the entire income from the Series A 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 OID, if any, 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
Under applicable income tax regulations, the Corporation believes that the
Series A Junior Subordinated Notes will not be treated as issued with OID. It
should be noted that these regulations have not yet been addressed in any
rulings or other interpretations by the Internal Revenue Service (the "IRS").
Accordingly, it is possible that the IRS could take a position contrary to the
interpretations described herein. Should the Corporation exercise its option
to defer payments of interest, the Series A Junior Subordinated Notes would at
that time be treated as issued with OID and all the stated interest payments
on the Series A Junior Subordinated Notes would thereafter be treated as OID
for so long as they remained outstanding. As a result, all Holders would, in
effect, be required to accrue interest income even if such Holders are on a
cash method of accounting. Consequently, in the event that the payment of
interest is deferred, a Holder could be required to include OID in income on
an economic accrual basis, notwithstanding that the Corporation will not make
any interest payments during such period on the Series A Junior Subordinated
Notes.
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 Series A Junior Subordinated
Notes acquires such Preferred
S-28
<PAGE>
Security with "market discount." However, market discount with respect to a
Preferred Security will be considered to be zero if it is de minimis. Market
discount will be de minimis 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 Series A Junior Subordinated Notes multiplied by (ii)
the number of complete years to maturity of such Series A Junior Subordinated
Notes after the date of purchase. The purchaser of a Preferred Security with
more than a de minimis 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 Series A Junior Subordinated
Notes) as ordinary income to the extent of accrued (but not previously taxed)
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 Series A 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 interest 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 Series A 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 de minimis
amount) as OID and accrue such discount on a constant-yield basis in the same
manner as the Holder accrues OID.
SALE OF PREFERRED SECURITIES
Upon the sale, retirement (including redemption) or other taxable
disposition of all or part of a Preferred Security, a Holder thereof will
recognize gain or loss equal to the difference between the amount realized on
such sale, retirement or other disposition and such Holder's adjusted tax
basis in the Preferred Security or part thereof. If the Holder disposes of a
Preferred Security prior to the occurrence of an Extension Period, any portion
of the amount received that is attributable to accrued interest will be
treated as interest income to the Holder and will not be treated as part of
the amount realized for purposes of determining gain or loss on the
disposition of the Preferred Security. 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. In the case of individuals,
"net capital gain," i.e., the excess of net long-term capital gain over net
short-term capital loss is generally subject to a reduced rate of federal
income tax. Capital gains and losses from property held for more than 18
months will be taken into account in determining "adjusted net capital gain,"
which is subject to a further reduction in the rate of tax pursuant to a
recent amendment of the Code. Also, in taxable years beginning after December
31, 2000, an additional reduction in the rate of tax may be available in
certain circumstances for capital gains from property held by the taxpayer for
more than five years. A Holder's adjusted tax basis in a Preferred Security
acquired by purchase will generally 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 Series A Junior Subordinated Notes distributed with respect to
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 Series A Junior Subordinated Notes
S-29
<PAGE>
between the portion of the Series A Junior Subordinated Notes redeemed and the
portion retained by the Holder in order to determine gain or loss.
RECEIPT OF SERIES A JUNIOR SUBORDINATED NOTES UPON LIQUIDATION OF THE TRUST
As described under "Description of the Preferred Securities--Special Event
Redemption or Distribution," Series A 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 Series A Junior Subordinated Notes equal to the Holder's
aggregate tax basis in its Preferred Securities. A Holder's holding period
with respect to the Series A Junior Subordinated Notes so received in
liquidation of the Trust would include the period for which the Preferred
Securities were held by such Holder.
If, however, the Trust is characterized for United States federal income tax
purposes as an association taxable as a corporation at the time of its
dissolution, the distribution of the Series A Junior Subordinated Notes would
constitute a taxable event to Holders of Preferred Securities and a Holder's
holding period in Series A Junior Subordinated Notes would begin on the date
such Series A Junior Subordinated Notes were received.
INFORMATION REPORTING TO HOLDERS
Income on the Preferred Securities will be reported to Holders on Form 1099,
which form should be mailed to Holders of Preferred Securities by January 31
following each calendar year.
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 Series A Junior Subordinated Notes.
POSSIBLE TAX LAW CHANGES
The Clinton Administration's budget proposals for fiscal year 1997 and
fiscal year 1998 contained provisions, which, if applicable to the Series A
Junior Subordinated Notes, would have prevented the Corporation from deducting
interest thereon for United States federal income tax purposes. These
provisions were not included in the Taxpayer Relief Act of 1997. There can be
no assurance that future legislative proposals, future regulations or official
administrative pronouncements, or future judicial decisions will not affect
the ability of the Corporation to deduct interest on the Series A Junior
Subordinated Notes. Such a change could give rise to a Tax Event, which would
permit the Corporation to cause a redemption of the Preferred Securities, as
described more fully under "Description of the Preferred Securities--Special
Event Redemption or Distribution."
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.
S-30
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement"), the Trust has agreed to sell to each of the
Underwriters named below, and each of such Underwriters, for whom Goldman,
Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan
Stanley & Co. Incorporated, PaineWebber Incorporated, Prudential Securities
Incorporated and Salomon Brothers Inc are acting as representatives (the
"Representatives"), has 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 of the Preferred Securities
offered hereby if any of the Preferred Securities are purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER PREFERRED SECURITIES
----------- --------------------
<S> <C>
Goldman, Sachs & Co. ................................... 1,730,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... 1,726,000
Morgan Stanley & Co. Incorporated....................... 1,726,000
PaineWebber Incorporated................................ 1,726,000
Prudential Securities Incorporated...................... 1,726,000
Salomon Brothers Inc.................................... 1,726,000
BancAmerica Robertson Stephens.......................... 140,000
BNY Capital Markets, Inc. .............................. 140,000
BT Alex. Brown Incorporated............................. 140,000
Citicorp Securities, Inc. .............................. 140,000
SBC Warburg Dillon Read Inc. ........................... 140,000
A.G. Edwards & Sons, Inc. .............................. 140,000
EVEREN Securities, Inc. ................................ 140,000
First Chicago Capital Markets, Inc. .................... 140,000
Interstate/Johnson Lane Corporation..................... 140,000
Lehman Brothers Inc. ................................... 140,000
J.P. Morgan Securities Inc. ............................ 140,000
Wheat, First Securities, Inc. .......................... 140,000
Advest, Inc. ........................................... 70,000
Robert W. Baird & Co. Incorporated...................... 70,000
J.C. Bradford & Co. .................................... 70,000
Cowen & Company......................................... 70,000
Craigie Incorporated.................................... 70,000
Crowell, Weedon & Co. .................................. 70,000
Dain Bosworth Incorporated.............................. 70,000
Fahnestock & Co. Inc. .................................. 70,000
J.J.B. Hilliard, W.L. Lyons, Inc. ...................... 70,000
Janney Montgomery Scott Inc. ........................... 70,000
Legg Mason Wood Walker Incorporated..................... 70,000
McDonald & Company Securities, Inc. .................... 70,000
McGinn, Smith & Co., Inc. .............................. 70,000
Morgan Keegan & Company, Inc. .......................... 70,000
The Ohio Company........................................ 70,000
Olde Discount Corporation............................... 70,000
Piper Jaffray Inc. ..................................... 70,000
Principal Financial Securities, Inc. ................... 70,000
Pryor, McClendon, Counts & Co., Inc. ................... 70,000
Rauscher Pierce Refsnes, Inc. .......................... 70,000
</TABLE>
S-31
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER PREFERRED SECURITIES
----------- --------------------
<S> <C>
Raymond James & Associates, Inc. ....................... 70,000
The Robinson-Humphrey Company, LLC...................... 70,000
Roney & Co., L.L.C. .................................... 70,000
Sutro & Co. Incorporated................................ 70,000
Trilon International Inc. .............................. 70,000
Tucker Anthony Incorporated............................. 70,000
U.S. Clearing Corp. .................................... 70,000
Wedbush Morgan Securities............................... 70,000
----------
Total............................................... 14,000,000
==========
</TABLE>
The Underwriters have advised the Corporation and the Trust that they
propose to offer the Preferred Securities in part directly to the public at
the initial public offering price, 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 $0.50 per Preferred Security. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of $0.40 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 Representatives.
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 Representatives have
advised the Corporation and the Trust that they intend to make a market in the
Preferred Securities prior to the commencement of trading on the NYSE. The
Representatives 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.
In connection with the offering, the Underwriters may purchase and sell the
Preferred Securities in the open market. These transactions may include over-
allotment and stabilizing transactions and purchases to cover syndicate short
positions created in connection with the offering. Stabilizing transactions
consist of certain bids or purchases for the purpose of preventing or
retarding a decline in the market price of the Preferred Securities; and
syndicate short positions involve the sale by the Underwriters of a greater
number of Preferred Securities than they are required to purchase from the
Trust in the offering. The Underwriters also may impose a penalty bid, whereby
selling concessions allowed to syndicate members or other broker dealers in
respect of the securities sold in the offering for their account may be
reclaimed by the syndicate if such Preferred Securities are repurchased by the
syndicate in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the Preferred
Securities, which may be higher than the price that might otherwise prevail in
the open market; and these activities, if commenced, may be discontinued at
any time. These transactions may be effected on the NYSE, in the over-the-
counter market or otherwise.
S-32
<PAGE>
The Corporation and the Trust have agreed, during the period of 15 days from
the date of the Underwriting Agreement, not to sell, offer to sell, grant any
option for the sale of, or otherwise dispose of any Preferred Securities, any
security convertible into or exchangeable into or exercisable for Preferred
Securities or the Series A Junior Subordinated Notes or any debt securities
substantially similar to the Series A Junior Subordinated Notes or equity
securities substantially similar to the Preferred Securities (except for the
Series A Junior Subordinated Notes and the Preferred Securities issued
pursuant to the Underwriting Agreement), without the prior written consent of
the Representatives.
The Corporation and the Trust have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the 1933 Act.
Certain of the Underwriters engage in transactions with, and, from time to
time, have performed services for, the Corporation and its affiliates in the
ordinary course of business.
LEGAL OPINIONS
Certain matters of Delaware law relating to the validity of the Preferred
Securities will be passed upon on behalf of the Corporation and the Trust by
Richards, Layton & Finger, Wilmington, Delaware, special Delaware counsel to
the Corporation and the Trust. The validity of the Series A Junior
Subordinated Notes, the Guarantee and certain matters relating thereto, as
well as certain matters relating to United States federal income tax
considerations, will be passed upon on behalf of the Corporation by Dewey
Ballantine LLP, New York, New York. Certain matters of North Carolina law will
be passed upon on behalf of the Corporation by Peter C. Buck, Esq., Deputy
General Counsel of the Corporation. Certain legal matters will be passed upon
for the Underwriters by Brown & Wood LLP, New York, New York.
S-33
<PAGE>
GLOSSARY
<TABLE>
<CAPTION>
<S> <C>
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
Corporation as defined under
"Description of the Series A
Junior Subordinated Notes--
Additional Interest."
Administrative Trustees.................... Robert T. Lucas III and S. L.
Love.
Agreement as to Expenses and Liabilities... The agreement between the
Corporation and the Trust
pursuant to which the Corporation
has agreed to pay all
indebtedness, expenses or
liabilities of the Trust, other
than the Trust's obligations to
pay to the holders of the
Preferred Securities the amounts
due such holders pursuant to the
terms thereof.
Code....................................... The Internal Revenue Code of
1986, as amended.
Common Securities.......................... The Trust Securities being sold
to the Corporation.
Corporation................................ Duke Energy Corporation.
Delaware Trustee........................... Chase Manhattan Bank Delaware.
DTC........................................ The Depository Trust Company, a
"clearing corporation" that
initially will hold (through its
agents) a global certificate or
certificates evidencing the
Preferred Securities.
Distribution Dates......................... March 31, June 30, September 30
and December 31 of each year.
Extension Period........................... Any period during which interest
is not paid on the Series A
Junior Subordinated Notes (and,
consequently, on the Preferred
Securities) at the election of
the Corporation to the extent
permitted under the terms of the
Series A Junior Subordinated
Notes.
Guarantee.................................. The guarantee by the Corporation
of the payments by the Trust on
the Preferred Securities from
funds legally and immediately
available in the Trust.
Guarantee Payments......................... Payments required to be made
pursuant to the Guarantee as
described in "Description of the
Guarantees--General" in the
accompanying Prospectus.
Guarantee Trustee.......................... The trustee under the Guarantee;
initially, The Chase Manhattan
Bank.
Indenture Trustee.......................... The trustee under the
Subordinated Note Indenture;
initially, The Chase Manhattan
Bank.
</TABLE>
S-34
<PAGE>
<TABLE>
<S> <C>
Issue Date................................. The date set forth on the cover
page hereof on which the Series A
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.................. Unsecured junior subordinated
debt securities of the
Corporation that may be issued in
one or more series pursuant to
the Subordinated Note Indenture.
NYSE....................................... New York Stock Exchange, Inc.
Preferred Securities....................... The Trust Securities being
offered to investors pursuant to
this Prospectus Supplement and
the accompanying Prospectus.
Property Trustee........................... A trustee under the Trust
Agreement designated to hold the
trust property; initially The
Chase Manhattan Bank.
Record Date................................ The close of business on the 15th
calendar day prior to a
Distribution Date.
Redemption Price........................... The liquidation amount of $25 per
Preferred Security, plus accrued
and unpaid distributions thereon
(including any interest thereon)
to the date of payment.
Securities Rate............................ The per annum interest rate
expressed as a percentage of the
liquidation amount of $25 per
Preferred Security, and set forth
on the cover page of this
Prospectus Supplement.
Securities Trustees........................ The Property Trustee,
Administrative Trustees and
Delaware Trustee.
Senior Indebtedness........................ Indebtedness of the Corporation
described under "Description of
the Junior Subordinated Notes--
Subordination" in the
accompanying Prospectus.
Series A Junior Subordinated Notes......... The junior subordinated
deferrable interest notes of the
Corporation designated as Series
A 7.20% Junior Subordinated Notes
due September 30, 2037.
Special Event.............................. A Tax Event or an Investment
Company Act Event.
Subordinated Note Indenture................ The indenture pursuant to which
the Corporation's Series A Junior
Subordinated Notes will be
issued.
Subordinated Note Indenture
Event of Default.......................... As described under "Description
of the Series A Junior
Subordinated Notes--Events of
Default."
Tax Event.................................. An event of the type described in
"Description of the Preferred
Securities--Special Event
Redemption or Distribution."
</TABLE>
S-35
<PAGE>
<TABLE>
<S> <C>
Trust...................................... Duke Energy 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 the
Preferred Securities--Events of Default."
Trust Securities........................... The Preferred Securities and the Common
Securities.
</TABLE>
S-36
<PAGE>
PROSPECTUS
$350,000,000
DUKE ENERGY CAPITAL TRUST I
DUKE ENERGY CAPITAL TRUST II
TRUST PREFERRED SECURITIES
FULLY AND UNCONDITIONALLY GUARANTEED, AS SET FORTH HEREIN, BY
DUKE ENERGY CORPORATION
---------------
Duke Energy Capital Trust I and Duke Energy Capital Trust II, each a
statutory business trust formed under the laws of the State of Delaware
(individually, a "Trust" and collectively, the "Trusts"), may offer, from time
to time, trust preferred securities (collectively, the "Preferred Securities")
representing preferred undivided beneficial interests in the assets of the
respective Trusts. Duke Energy Corporation, a North Carolina corporation (the
"Corporation"), will own all the common securities (the "Common Securities"
and, together with the Preferred Securities, the "Trust Securities") of each
Trust. The payment of periodic cash distributions on the Preferred Securities
of each Trust and payments on liquidation or redemption with respect to such
Preferred Securities, in each case to the extent such Trust has funds legally
and immediately available therefor, will be guaranteed by the Corporation as
described herein (individually, a "Guarantee" and collectively, the
"Guarantees"). See "Description of the Guarantees." The Corporation's
obligations under each Guarantee will be subordinate and junior in right of
payment to all of its other liabilities and will rank pari passu (equal in
priority) with the preferred stock or preferred stock A of the Corporation.
Concurrently with the issuance by a Trust of its Preferred Securities, such
Trust will invest the proceeds thereof and of the Corporation's purchase of
the Common Securities of such Trust in a related series of junior subordinated
deferrable interest notes (collectively, the "Junior Subordinated Notes") of
the Corporation with terms corresponding to the terms of such Trust's
Preferred Securities. The Junior Subordinated Notes will be unsecured
obligations of the Corporation and will be subordinate and junior in right of
payment to Senior Indebtedness (as defined herein) of the Corporation. Junior
Subordinated Notes may subsequently be distributed pro rata to holders of the
Trust Securities of a Trust in connection with the termination of such Trust
upon the occurrence of certain events as may be described in an accompanying
Prospectus Supplement.
Specific terms of the Preferred Securities of any Trust in respect of which
this Prospectus is being delivered will be set forth in an accompanying
Prospectus Supplement with respect to such Preferred Securities, which will
describe, without limitation and where applicable, the following: the specific
designation, number of Preferred Securities, liquidation amount per security,
distribution rate (or the method of determining such rate), dates on which
distributions will be payable, voting rights, any redemption, exchange or
sinking fund provisions, and any other rights, preferences, privileges,
limitations and restrictions.
The Preferred Securities may be offered in amounts, at prices and on terms
to be determined at the time of offering; provided, however, that the
aggregate initial public offering price of all Preferred Securities shall not
exceed $350,000,000.
The Prospectus Supplement relating to any series of Preferred Securities
will contain information concerning certain United States federal income tax
considerations, if applicable to such Preferred Securities.
---------------
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.
---------------
The Preferred Securities may be sold directly, through agents, underwriters
or dealers as designated from time to time, or through a combination of such
methods. See "Plan of Distribution." If agents or any underwriters or dealers
are involved in the sale of Preferred Securities in respect of which this
Prospectus is being delivered, the names of such agents, underwriters or
dealers and any applicable commissions or discounts will be set forth in or
may be calculated from the Prospectus Supplement with respect to such
Preferred Securities.
---------------
The date of this Prospectus is December 1, 1997.
<PAGE>
AVAILABLE INFORMATION
The Corporation and the Trusts 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 thereto, to which reference is hereby
made.
The Corporation is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and in
accordance therewith files periodic and current reports and other information
with the Commission. Information concerning directors and officers, their
remuneration, the principal holders of securities of the Corporation and any
material interest of such persons in transactions with the Corporation, as of
particular dates, is disclosed in proxy statements distributed to shareholders
of the Corporation and filed with the Commission. Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, 500 West Madison Street, Suite 1400,
Chicago, Ill, 60661, and Seven World Trade Center, Suite 1300, New York, N.Y.
10048. Copies of such material can also be obtained at prescribed rates from
the Public Reference Section of the Commission at its principal office at 450
Fifth Street, N.W., Washington, D.C. 20549. In addition, reports, proxy
statements and other information concerning the Corporation can be inspected
at the offices of the New York Stock Exchange, Inc. ("NYSE"), 20 Broad Street,
New York, N.Y. 10005, where certain securities of the Corporation are listed.
The Commission maintains a Web site (http://www.sec.gov) that contains
reports, proxy and information statements and other information regarding
registrants, such as the Corporation, that file electronically with the
Commission.
No separate financial statements of any Trust are included herein. The
Corporation considers that such statements would not be material to holders of
the Preferred Securities because each Trust has no independent operations and
exists for the sole purpose of investing the proceeds of the sale of its Trust
Securities in Junior Subordinated Notes.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Corporation with the Commission are
incorporated in this Prospectus by reference as of their respective dates of
filing and shall be deemed to be a part hereof:
. Annual report on Form 10-K of the Corporation for the year ended
December 31, 1996.
. Quarterly reports on Form 10-Q of the Corporation for the quarters
ended March 31, 1997, June 30, 1997 and September 30, 1997.
. Current reports on Form 8-K of the Corporation dated April 25, 1997,
May 30, 1997, June 18, 1997, June 27, 1997, September 2, 1997 and
November 19, 1997.
. Definitive Joint Proxy Statement-Prospectus of the Corporation and
PanEnergy Corp dated March 13, 1997.
. Annual Report on Form 10-K of PanEnergy Corp for the year ended
December 31, 1996.
. Quarterly Reports on Form 10-Q of PanEnergy Corp for the quarters ended
March 31, 1997 and June 30, 1997.
All documents filed by the Corporation with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the 1934 Act subsequent to the date of
this Prospectus and prior to the termination of the offering made by this
Prospectus and the accompanying Prospectus Supplement shall be deemed to be
incorporated herein by reference and made a part of this Prospectus from the
respective dates 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 and the
accompanying Prospectus Supplement 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 such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus or the
accompanying Prospectus Supplement.
THE CORPORATION WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT ARE 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 THE INVESTOR RELATIONS DEPARTMENT, DUKE ENERGY
CORPORATION, P.O. BOX 1005, CHARLOTTE, NORTH CAROLINA 28201, TELEPHONE: (704)
382-3853 OR (800) 488-3853 (TOLL-FREE).
3
<PAGE>
DUKE ENERGY CORPORATION
Duke Power Company completed a merger with PanEnergy Corp on June 18, 1997
and changed its name to Duke Energy Corporation. The Corporation is a global
energy company with more than $20 billion in assets which conducts business in
four principal areas of operations:
Electric Operations
The Corporation is engaged in the generation, transmission, distribution and
sale of electric energy in the central portion of North Carolina and the
western portion of South Carolina, comprising the area in both States known as
the Piedmont Carolinas. The Corporation's service territory, approximately
two-thirds of which lies in North Carolina, covers approximately 20,000 square
miles and includes a number of cities, of which the largest are Charlotte,
Greensboro, Winston-Salem and Durham in North Carolina and Greenville and
Spartanburg in South Carolina. The Corporation supplies electric service to
approximately two million residential, commercial and industrial customers in
over 200 cities, towns and unincorporated communities. As of September 30,
1997, the Corporation owned 31 generating facilities with a total capacity of
17,246 MW. Net generation of electricity by source for the nine-month period
ended September 30, 1997 was as follows: fossil, 58%; nuclear, 40%, and
hydroelectric (including pumped storage), 2%. The Corporation's wholly-owned
utility subsidiary, Nantahala Power & Light Company, supplies electric service
to approximately 55,000 customers, most of which are residential, in five
counties in western North Carolina. The Corporation's electric utility service
territory, in which its business is conducted under the name "Duke Power", is
shown below.
[MAP DEPICTING THE SOUTHEAST PORTION OF THE UNITED STATES AND HIGHLIGHTING THE
CORPORATION'S ELECTRIC UTILITY SERVICE AREA IN NORTH CAROLINA AND
SOUTH CAROLINA].
4
<PAGE>
Energy Transmission
The Corporation is also engaged in the interstate transportation and storage
of natural gas. Through its four major pipeline subsidiaries--Texas Eastern
Transmission Corporation, Algonquin Gas Transmission Company, Panhandle
Eastern Pipeline Company and Trunkline Gas Company--the Corporation owns and
operates one of the nation's largest gas transmission networks delivering
approximately 12% of the natural gas consumed in the United States. This fully
interconnected, 37,500-mile system can receive natural gas from most major
North American producing regions for delivery to markets throughout the Mid-
Atlantic, New England and Midwest states as shown below.
[MAP OF THE UNITED STATES SHOWING THE LOCATION OF THE PIPELINES OF THE
CORPORATION'S FOUR MAJOR PIPELINE SUBSIDIARIES].
Energy Services
The Energy Services group offers a broad variety of worldwide services in
energy asset monetization, engineering, construction, liquids, gas and
electric marketing, risk management, natural gas liquids shipping, gas
processing and transport and "inside-the-fence" and merchant power generation.
The Field Services unit is engaged in the business of purchasing, gathering,
transporting and marketing natural gas, natural gas liquids and crude oil to
industrial end users, local distribution companies, liquid petroleum gas
wholesalers and retailers and refiners. Through Duke Energy Trading and
Marketing L.L.C. and Duke Energy Marketing, L.P., the Corporation markets
natural gas and electric power and provides risk management services to
utilities, municipalities and other large energy users.
Duke Engineering & Services, Inc., provides full-scope engineering,
technical and professional services to public and private sector clients
worldwide in all phases of nuclear, renewable and conventional power
generation, from conceptual design through construction and full life-cycle
operation. Specialized capabilities include engineering, design, project and
construction management, operations and maintenance, quality assurance,
environmental management, facility siting, petroleum services, power delivery
services and safety and health training. Duke/Fluor Daniel provides services
5
<PAGE>
related to the engineering, procurement, construction and operation and
maintenance of fossil-fueled generating stations. The Global Asset Development
group develops, owns, manages and operates energy projects internationally,
electric generation facilities in the United States and Canada, and on-site,
"inside-the-fence" electric generation and energy conversion facilities for
industrial customers. DukeSolutions is the Corporation's unregulated retail
energy services provider, offering customers a "one-stop shop" solution for
natural gas and electric commodities, energy efficiency and productivity
services and asset monetization.
Diversified Operations
Crescent Resources, Inc. conducts real estate management, forestry, and
commercial and residential real estate development operations. DukeNet
Communications, Inc., develops and manages communications systems, including
fiber optic and wireless digital network services. Duke Water Operations
provides franchised water service to 20,000 customers in parts of North
Carolina and South Carolina.
The principal executive offices of the Corporation are located at 422 South
Church Street, Charlotte, North Carolina 28202, telephone (704) 594-0887.
----------------
Recent Development
On November 18, 1997, Duke Energy Power Services Inc., a subsidiary of the
Corporation ("DEPS"), entered into an agreement with Pacific Gas and Electric
Company ("PG&E") for the purchase of three electric generating plants in
California for $501 million. The agreement followed acceptance by PG&E of
DEPS's winning bid in connection with the auction held by PG&E as part of its
electric generating divestiture program. The sale of the plants to DEPS is
subject to approval of the California Public Utilities Commission. If
approved, the sale is expected to close by March 31, 1998. Pursuant to
California's electric restructuring law, DEPS must contract with PG&E to
operate and maintain the facilities for two years following the sale. The
transaction does not include any contracts for the output of the plants.
The plants covered by the agreement are as follows:
<TABLE>
<CAPTION>
NET
OPERATING
CAPACITY
GENERATION TYPE COUNTY LOCATION NUMBER OF UNITS MW
- --------------- --------------- --------------- ---------
<S> <C> <C> <C>
Gas-fired:
Moss Landing Monterey 2 1,478
Morro Bay San Luis Obispo 4 1,002
Diesel fueled
combustion
turbine:
Oakland Alameda 3 165
-----
TOTAL 2,645
</TABLE>
6
<PAGE>
The following financial information is qualified in its entirety by the
financial statements included in the documents incorporated by reference in
this Prospectus. See "Incorporation of Certain Documents by Reference."
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------ ---------------------------
1997 1996(1) 1996(1) 1995(1) 1994(1)
--------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Operating Revenues.............. $11,719.2 $8,551.8 $12,333.6 $9,694.7 $9,115.0
Net Income...................... 789.8 881.4 1,074.3 1,018.1 864.1
Earnings for Common Stock....... 756.6 848.2 1,030.1 969.2 814.4
Earnings per Share of Common
Stock.......................... $2.10 $2.34 $2.85 $2.68 $2.26
Earnings per share of Common
Stock before extraordinary
items.......................... -- -- 2.90 -- --
</TABLE>
- --------
(1) Data reflects accounting for the merger between the Corporation and
PanEnergy Corp as a pooling of interests. As a result, the data gives
effect to the merger as if it had occurred as of January 1, 1994.
<TABLE>
<CAPTION>
CAPITALIZATION AS OF
SEPTEMBER 30, 1997
-------------------------------
ACTUAL AS ADJUSTED (1)
-------------------------------
(MILLIONS, EXCEPT PERCENTAGES)
<S> <C> <C> <C>
Common Stock Equity........................... $7,597.7 $7,597.7 51.8%
Preferred Stocks (including current portion) . 684.0 331.5 2.3
Guaranteed Preferred Beneficial Interests in
Corporation's Subordinated Notes............. -- 350.0 2.4
Debt (including short-term debt).............. 6,380.9 6,380.9 43.5
----------- ----------- -------
Total....................................... $14,662.6 $14,660.1 100.0%
=========== =========== =======
</TABLE>
- --------
(1) Reflects the issuance of the Preferred Securities that may be offered from
time to time pursuant to this Prospectus and the applicable Prospectus
Supplement.
FINANCIAL RATIOS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------ ------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges
(1)................................ 4.3 4.5 4.3 4.0 3.6 3.3 2.8
Ratio of Earnings to Fixed Charges
and Preferred Dividends Combined
(2)................................ 3.8 4.0 3.8 3.5 3.2 2.9 2.4
</TABLE>
- --------
(1) For purposes of this ratio (i) earnings consists of income from continuing
operations before income taxes and fixed charges and (ii) fixed charges
consist of all interest deductions and the interest component of rentals.
(2) For purposes of this ratio (i) earnings consist of income from continuing
operations before income taxes and fixed charges, (ii) fixed charges
consist of all interest deductions and the interest component of rentals
and (iii) preferred dividends represent an amount equal to the earnings
which, on a pre-tax basis, would be required to meet the dividends on
preferred stocks.
7
<PAGE>
THE TRUSTS
Each 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
on November 14, 1997. Each Trust's business is defined in a trust agreement,
executed by the Corporation, as Depositor, and the Delaware Trustee
thereunder. The trust agreement of each Trust will be amended and restated in
its entirety substantially in the form filed as an exhibit to the Registration
Statement of which this Prospectus forms a part (the "Trust Agreement"). Each
Trust exists for the exclusive purposes of (i) issuing its Trust Securities
representing undivided beneficial interests in the assets of such Trust, (ii)
investing the gross proceeds of its Trust Securities in a related series of
Junior Subordinated Notes, and (iii) engaging in only those other activities
necessary, appropriate, convenient or incidental thereto.
The principal place of business of each Trust shall be c/o the Corporation,
422 South Church Street, Charlotte, North Carolina 28202, telephone (704) 382-
8122, Attn: Corporate Secretary.
Reference is made to the Prospectus Supplement relating to the Preferred
Securities of a Trust for further information concerning such Trust.
ACCOUNTING TREATMENT
For financial reporting purposes, each Trust will be treated as a subsidiary
of the Corporation and, accordingly, the accounts of the Trusts will be
included in the consolidated financial statements of the Corporation. The
Preferred Securities will be presented as a separate line item in the
consolidated balance sheets of the Corporation entitled "Guaranteed Preferred
Beneficial Interests in Corporation's Subordinated Notes." For financial
reporting purposes, the Corporation will record distributions payable on the
Preferred Securities as an expense in the consolidated statement of income.
USE OF PROCEEDS
Each Trust will invest the proceeds received from the sale of the Preferred
Securities in Junior Subordinated Notes. The net proceeds received by the
Corporation from such investment will be used to purchase or redeem from time
to time certain of the Corporation's presently outstanding securities when
such transactions will result in an overall cost savings to the Corporation or
to repay outstanding short-term debt pending any such purchase or redemption.
DESCRIPTION OF THE PREFERRED SECURITIES
Each Trust may issue only one series of Preferred Securities having terms
described in the Prospectus Supplement relating thereto. The Trust Agreement
of each Trust will authorize the Administrative Trustees, on behalf of the
Trust, to issue the Preferred Securities of such Trust. The Preferred
Securities of each Trust will have such terms, including distributions,
redemption, voting, liquidation rights and such other preferred, deferral or
other special rights or such restrictions as shall be set forth in the Trust
Agreement of such Trust. Reference is made to the Prospectus Supplement
relating to the Preferred Securities of a Trust for specific terms, including
(i) the distinctive designation of such Preferred Securities; (ii) the number
of Preferred Securities issued by such Trust; (iii) the annual distribution
rate (or method of determining such rate) for Preferred Securities of such
Trust and the date or dates on which such distributions shall be payable; (iv)
the date or dates, or method of determining the date or dates, from which
distributions on the Preferred Securities shall be cumulative; (v) the amount
or amounts that shall be paid out of the assets of such Trust to the holders
of the Preferred Securities of such Trust upon voluntary or involuntary
dissolution, winding-up or termination
8
<PAGE>
of such Trust; (vi) the obligation, if any, of such Trust to purchase or
redeem such Preferred Securities and the price or prices at which, the period
or periods within which, and the terms and conditions upon which such
Preferred Securities shall be purchased or redeemed, in whole or in part,
pursuant to such obligation; (vii) the voting rights, if any, of such
Preferred Securities in addition to those required by law, including any
requirement for the approval by the holders of Preferred Securities as a
condition to specified action or amendments to the Trust Agreement of such
Trust; (viii) the right, if any, to defer distributions on the Preferred
Securities upon extension of the interest payment period on the related Junior
Subordinated Notes; and (ix) any other relative rights, preferences,
privileges, limitations or restrictions of such Preferred Securities not
inconsistent with the Trust Agreement of such Trust or applicable law. All
Preferred Securities offered hereby will be guaranteed by the Corporation to
the extent set forth under "Description of the Guarantees." Any material
United States federal income tax considerations applicable to an offering of
Preferred Securities will be described in the Prospectus Supplement relating
thereto.
DESCRIPTION OF THE GUARANTEES
Set forth below is a summary of information concerning the Guarantees that
will be executed and delivered by the Corporation for the benefit of the
holders of Preferred Securities of the respective Trusts from time to time.
Each Guarantee will be qualified as an indenture under the 1939 Act. The Chase
Manhattan Bank will act as indenture trustee under each Guarantee (the
"Guarantee Trustee") for purposes of the 1939 Act. The terms of the respective
Guarantees 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
reference to, the Guarantees, the form of which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part, and the 1939
Act. Each Guarantee will be held by the Guarantee Trustee for the benefit of
the holders of the Preferred Securities to which it relates.
GENERAL
Pursuant to each Guarantee, the Corporation will irrevocably and
unconditionally agree, to the extent set forth therein, to pay in full, to the
holders of the related Preferred Securities, the Guarantee Payments (as
defined herein), to the extent not paid by, or on behalf of, the related
Trust, regardless of any defense, right of set-off or counterclaim that the
Corporation may have or assert against any person. The following payments or
distributions (without duplication) with respect to the Preferred Securities
of any Trust to the extent not paid or made by, or on behalf of, such Trust
will be subject to the Guarantee related thereto: (i) any accrued and unpaid
distributions required to be paid on the Preferred Securities of such Trust
but if and only if and to the extent that such Trust has funds legally and
immediately available therefor, (ii) the redemption price, including all
accrued and unpaid distributions to the date of redemption (the "Redemption
Price"), with respect to any Preferred Securities called for redemption by
such Trust, but if and only to the extent such Trust has funds legally and
immediately available therefor, and (iii) upon a dissolution, winding-up or
termination of such Trust (other than in connection with the distribution of
Junior Subordinated Notes to the holders of Trust Securities of such Trust or
the redemption of all of the Preferred Securities of such Trust), the lesser
of (a) the aggregate of the liquidation amount and all accrued and unpaid
distributions on the Preferred Securities of such Trust to the date of
payment, to the extent such Trust has funds legally and immediately available
therefor, and (b) the amount of assets of such Trust remaining available for
distribution to holders of Preferred Securities of such Trust in liquidation
of such Trust (the "Guarantee Payments"). The Corporation's obligation to make
a Guarantee Payment may be satisfied by direct payment of the required amounts
by the Corporation to the holders of the related Preferred Securities or by
causing the related Trust to pay such amounts to such holders.
9
<PAGE>
Each Guarantee will be a full and unconditional guarantee, subject to
certain subordination provisions, of the Guarantee Payments with respect to
the related Preferred Securities from the time of issuance of such Preferred
Securities, but will not apply to the payment of distributions and other
payments on such Preferred Securities when the related Trust does not have
sufficient funds legally and immediately available to make such distributions
or other payments. IF THE CORPORATION DOES NOT MAKE THE REQUIRED PAYMENTS ON
THE JUNIOR SUBORDINATED NOTES HELD BY THE PROPERTY TRUSTEE UNDER ANY TRUST,
SUCH TRUST WILL NOT MAKE THE RELATED PAYMENTS ON ITS PREFERRED SECURITIES.
SUBORDINATION
The Corporation's obligations under each Guarantee to make the Guarantee
Payments will constitute an unsecured obligation of the Corporation and will
rank (i) subordinate and junior in right of payment to all other liabilities
of the Corporation, including the Junior Subordinated Notes, except those
obligations or liabilities made pari passu or subordinate by their terms, (ii)
pari passu with the preferred stock or preferred stock A now or hereafter
issued by the Corporation, and (iii) senior to all common stock of the
Corporation. The terms of the Preferred Securities will provide that each
holder of Preferred Securities by acceptance thereof agrees to the
subordination provisions and other terms of the Guarantee related thereto. The
Corporation has outstanding preferred stock and preferred stock A that rank
pari passu with the Guarantees and common stock that ranks junior to the
Guarantees. See "Duke Energy Corporation--Selected Consolidated Financial
Information."
Each 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 the related Preferred Securities (in which
case no consent will be required), each Guarantee may be amended only with the
prior approval of the holders of not less than 66 2/3% in liquidation amount
of such outstanding Preferred Securities. All guarantees and agreements
contained in each Guarantee shall bind the successors, assigns, receivers,
trustees and representatives of the Corporation and shall inure to the benefit
of the holders of the related Preferred Securities then outstanding.
TERMINATION
Each Guarantee will terminate and be of no further force and effect as to
the related Preferred Securities upon full payment of the Redemption Price of
all such Preferred Securities, upon distribution of Junior Subordinated Notes
to the holders of such Preferred Securities, or upon full payment of the
amounts payable upon liquidation of the related Trust. Each Guarantee will
continue to be effective or will be reinstated, as the case may be, if at any
time any holder of the related Preferred Securities must restore payment of
any sums paid with respect to such Preferred Securities or under such
Guarantee.
EVENTS OF DEFAULT
An event of default under each Guarantee will occur upon the failure by the
Corporation to perform any of its payment obligations thereunder. The holders
of a majority in liquidation amount of the Preferred Securities to which any
Guarantee relates have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of such Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under such Guarantee. Any holder of the
related Preferred Securities may institute a legal proceeding directly against
the Corporation to enforce its rights under such Guarantee without first
instituting a legal
10
<PAGE>
proceeding against the Guarantee Trustee or any other person or entity. The
holders of a majority in liquidation amount of Preferred Securities of any
series may, by vote, on behalf of the holders of all the Preferred Securities
of such series, waive any past event of default and its consequences.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of any event of default with
respect to any Guarantee and after the curing or waiving of all events of
default with respect to such Guarantee, undertakes to perform only such duties
as are specifically set forth in such Guarantee and, in case an event of
default has occurred and not been cured or waived, 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 any Guarantee at the
request of any holder of the related Preferred Securities, unless offered
reasonable indemnity against the costs, expenses and liabilities which might
be incurred thereby.
The Chase Manhattan Bank, the Guarantee Trustee, also serves as Property
Trustee and as Indenture Trustee. The Corporation and certain of its
affiliates maintain deposit accounts and banking relationships with The Chase
Manhattan Bank. The Chase Manhattan Bank serves as trustee under the
Corporation's First and Refunding Mortgage pursuant to which First and
Refunding Mortgage Bonds of the Corporation are outstanding.
GOVERNING LAW
Each Guarantee will be governed by, and construed in accordance with, the
internal laws of the State of New York.
AGREEMENTS AS TO EXPENSES AND LIABILITIES
Pursuant to each Agreement as to Expenses and Liabilities to be entered into
by the Corporation under each of the Trust Agreements, the Corporation will
irrevocably and unconditionally guarantee to each person or entity to whom the
related Trust becomes indebted or liable the full payment of any indebtedness,
expenses or liabilities of such Trust, other than obligations of such Trust to
pay to the holders of the related Preferred Securities or other similar
interests in such Trust the amounts due such holders pursuant to the terms of
such Preferred Securities or such other similar interests, as the case may be.
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
Indenture, dated as of December 1, 1997, between the Corporation and The Chase
Manhattan Bank, as trustee (the "Indenture Trustee"), as to be supplemented,
with respect to a series of Junior Subordinated Notes, by a supplemental
indenture (each, a "Supplemental Indenture") thereto establishing such series
of Junior Subordinated Notes (the Subordinated Indenture, as so supplemented
and as such Indenture may be further supplemented from time to time, is
hereinafter referred to as the "Subordinated Note Indenture"), the forms of
which Subordinated Note Indenture and Supplemental Indenture are filed as
exhibits to the Registration Statement of which this Prospectus forms a part.
The terms of each series of Junior Subordinated Notes will include those
stated in the Subordinated Note Indenture with respect to such series 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.
11
<PAGE>
GENERAL
The Junior Subordinated Notes will be issued as one or more series of
unsecured subordinated debt securities (all such series of Junior Subordinated
Notes collectively, the "Junior Subordinated Notes" and all series of
Subordinated Notes collectively, the "Subordinated Notes") under the
Subordinated Note Indenture. The Subordinated Note Indenture does not limit
the aggregate principal amount of Subordinated Notes (including Junior
Subordinated Notes) that may be issued thereunder and provides that
Subordinated Notes (including Junior Subordinated Notes) may be issued from
time to time in one or more series pursuant to indentures supplemental to the
Subordinated Note Indenture or pursuant to resolutions of the Corporation's
Board of Directors or a duly authorized committee thereof.
Reference is made to the applicable Prospectus Supplement for the following
terms or any particular series of Junior Subordinated Notes: (i) the title of
such series of Junior Subordinated Notes; (ii) any limit on the aggregate
principal amount of such Junior Subordinated Notes; (iii) the date or dates on
which the principal of such Junior Subordinated Notes will be payable or the
method by which such date or dates will be determined; (iv) the rate or rates
at which such Junior Subordinated Notes will bear interest, if any, or the
method by which such rate or rates will be determined, and the date or dates
from which any such interest will accrue; (v) the Interest Payment Dates on
which any such interest will be payable and the Regular Record Date, if any,
for any such interest payable on any Interest Payment Date; (vi) if
applicable, whether the interest payment periods may be extended by the
Corporation, and, if so, the terms of any such extension; (vii) the place or
places where the principal of and any premium and interest on such Junior
Subordinated Notes will be payable, if other than the principal corporate
trust office of the Indenture Trustee; (viii) the obligation, if any, of the
Corporation to redeem or purchase such Junior Subordinated Notes pursuant to
any sinking fund, purchase fund or analogous provision or at the option of the
holder thereof and the terms and conditions on which such Junior Subordinated
Notes may be redeemed or purchased pursuant to such obligation; (ix) the
denominations in which such Junior Subordinated Notes will be issuable, if
other than denominations of $1,000 or any integral multiple thereof; (x) the
terms and conditions, if any, on which such Junior Subordinated Notes may be
redeemed at the option of the Corporation; (xi) if applicable, the fact that
the terms of the Subordinated Note Indenture which are described below under
the caption "Defeasance and Covenant Defeasance" will not apply to such Junior
Subordinated Notes; (xii) the currency, currencies or currency units in which
the principal of and any premium and interest of such Junior Subordinated
Notes will be payable, if other than U.S. dollars, and the manner of
determining the equivalent thereof in U.S. dollars for any purpose; (xiii) if
the principal of or any premium or interest on such Junior Subordinated Notes
is to be payable, at the election of the Corporation or the Holder thereof, in
one or more currencies or currency units other than those in which such Junior
Subordinated Notes are stated to be payable, then the currency, currencies or
currency units in which such payments will be made, the terms and conditions
upon which such election is to be made and the amount so payable (or the
manner of determining any such amount); (xiv) the portion of the principal
amount of any such Junior Subordinated Notes which will be payable upon
declaration of acceleration of the Maturity thereof, if other than the entire
principal amount thereof; (xv) whether such Junior Subordinated Notes will be
issuable in whole or in part in the form of one or more Global Securities and,
if so, the identity of the depositary (the "Depositary") for any such Global
Security or Global Securities and any provisions regarding the transfer,
exchange or legending of any such Global Security if different from those
described below under the caption "Global Securities;" (xvi) any addition to,
change in or deletion from the Subordinated Note Indenture Events of Default
or covenants of the Corporation with respect to such Junior Subordinated
Notes; (xvii) any index or formula used to determine the amount of principal
of or any premium or interest on such Junior Subordinated Notes and the manner
of determining any such amounts; (xviii) if the principal amount payable at
the stated maturity of such Junior Subordinated Notes will not be determinable
as of any one or more dates prior to the stated maturity, the amount which
will be deemed to be such
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<PAGE>
principal amount as of any such date for any purpose, including the principal
amount thereof which will be due and payable upon any maturity other than the
stated maturity (or the manner of determining any such deemed principal
amount); and (xix) any other terms of such Junior Subordinated Notes.
The interest rate and interest and other payment dates of each series of
Junior Subordinated Notes will correspond to those of the related Preferred
Securities as described in the Prospectus Supplement relating to such
Preferred Securities.
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 Corporation.
SUBORDINATION
Each series of Junior Subordinated Notes will be subordinate and junior in
right of payment, to the extent set forth in the Subordinated Note Indenture,
to all Senior Indebtedness (as defined below) of the Corporation. In the
event, with certain exceptions, (a) of any payment by, or distribution of
assets of, the Corporation to creditors upon any dissolution, winding-up,
liquidation or reorganization of the Corporation, whether in bankruptcy,
insolvency or other proceedings, or (b) that (i) a default (beyond any period
of grace) shall have occurred and be continuing with respect to the payment of
principal, interest or any other monetary amounts due and payable on any
Senior Indebtedness or (ii) the maturity of any Senior Indebtedness shall have
been accelerated because of a default with respect to such Senior
Indebtedness, then the holders of all Senior Indebtedness shall be entitled to
receive payment, in the case of (a) above, of all amounts due or to become due
upon all Senior Indebtedness, and, in the case of (b) above, of all amounts
due thereon, or provision shall be made for such payment, before the holders
of any series of Junior Subordinated Notes are entitled to receive payments of
principal or interest on such Junior Subordinated Notes.
The term "Senior Indebtedness" is defined in the Subordinated Note Indenture
to mean, with respect to any series of Subordinated Notes, the principal of,
and premium, if any, and interest on and any other payment in respect of
indebtedness due pursuant to any of the following, whether outstanding at the
date of execution of the Subordinated Note Indenture or thereafter incurred,
created or assumed: (a) all indebtedness of the Corporation evidenced by
notes, debentures, bonds or other securities sold by the Corporation for money
or other obligations for money borrowed, (b) all indebtedness of others of the
kinds described in the preceding clause (a) assumed by or guaranteed in any
manner by the Corporation or in effect guaranteed by the Corporation through
an agreement to purchase, contingent or otherwise, and (c) all renewals,
extensions or refundings of indebtedness of the kinds described in either of
the preceding clauses (a) and (b), unless, in the case of any particular
indebtedness, renewal, extension or refunding, the instrument creating or
evidencing the same or the assumption or guarantee of the same by its terms
provides that such indebtedness, renewal, extension or refunding is not
superior in right of payment to or is pari passu with such Subordinated Notes.
Such Senior Indebtedness shall continue to be Senior Indebtedness and be
entitled to the benefits of the subordination provisions contained in the
Subordinated Note Indenture irrespective of any amendment, modification or
waiver of any term of such Senior Indebtedness.
Certain future series of Subordinated Notes, if any, may rank senior to, and
hence constitute Senior Indebtedness with respect to, series of Junior
Subordinated Notes.
The Subordinated Note Indenture does not limit the amount of Senior
Indebtedness that may be issued by the Corporation. As of September 30, 1997,
Senior Indebtedness of the Corporation aggregated approximately
$3,593,542,000.
GLOBAL SECURITIES
Some or all of the Subordinated Notes of a series may be represented in
whole or in part by one or more Global Securities that will be deposited with
or on behalf of one or more Depositaries.
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<PAGE>
The specific terms of the depositary arrangement with respect to any
Subordinated Notes of a series will be described in the Prospectus Supplement
relating thereto. The Corporation anticipates that the following provisions
will apply to all depositary arrangements.
Unless otherwise specified in the Prospectus Supplement relating thereto,
Subordinated Notes which are to be represented by a Global Security to be
deposited with or on behalf of a Depositary will be represented by a Global
Security registered in the name of such Depositary or its nominee. Upon the
issuance of a Global Security in registered form, the Depositary for such
Global Security will credit, on its book-entry registration and transfer
system, the respective principal amount of the Subordinated Notes represented
by such Global Security to the accounts of institutions that have accounts
with such Depositary or its nominee ("participants"). The accounts to be
credited will be designated by the underwriters or agents of such Subordinated
Notes or by the Corporation, if such Subordinated Notes are offered and sold
directly by the Corporation. Ownership of beneficial interests in such Global
Securities will be limited to participants or persons that may hold interests
through participants. Ownership of beneficial interests by participants in
such Global Securities will be shown on, and the transfer of any such
ownership interest will be effected only through, records maintained by the
Depositary or its nominee for such Global Security. Ownership of beneficial
interests in Global Securities by persons that hold through participants will
be effected only through records maintained by such participants. The laws of
some jurisdictions require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to transfer beneficial interests in a Global Security.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the
Subordinated Notes represented by such Global Security for all purposes under
the Subordinated Note Indenture. Except as set forth below, owners of
beneficial interests in the Global Security will not be entitled to have the
Subordinated Notes represented by such Global Security registered in their
names, will not receive or be entitled to receive physical delivery of the
Subordinated Notes in definitive form and will not be considered the owners or
holders thereof under the Subordinated Note Indenture.
Payment of principal of and any premium and interest on Subordinated Notes
registered in the name of or held by a Depositary or its nominee will be made
in immediately available funds to the Depositary or its nominee, as the case
may be, as the registered owner or the holder of the Global Security
representing such Subordinated Notes. None of the Corporation, the Trustee,
any Paying Agent or the Security Registrar for such Subordinated Notes will
have any responsibility or liability for any aspect of the records relating
to, or payments made on account of, beneficial ownership interests in a Global
Security for such Subordinated Notes or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
The Corporation expects that a Depositary for Subordinated Notes of a
series, upon receipt of any payment of principal or any premium or interest in
respect of a Global Security, will credit immediately participants' accounts
with payment in amounts proportionate to their respective beneficial interests
in the principal amount of such Global Security as shown on the records of
such Depositary. The Corporation also expects that payments by participants to
owners of beneficial interests in such Global Security held through such
participants will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of
customers registered in "street name", and will be the responsibility of such
participants.
A Global Security may not be transferred in whole or in part except by the
Depositary for such Global Security to a nominee of such Depositary or by a
nominee of such Depositary to such Depositary or another nominee of such
Depositary or by such Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. If a Depositary for Subordinated
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<PAGE>
Notes of a series is at any time unwilling or unable to continue as Depositary
and a successor Depositary is not appointed by the Corporation within 90 days
or if at any time the Depositary ceases to be a clearing agency registered
under the Exchange Act when the Depositary is required to be registered to act
as such Depositary and no successor is appointed by the Corporation within 90
days, then the Corporation will issue Subordinated Notes in definitive
registered form in exchange for the Global Security or Global Securities
representing such Subordinated Notes. In addition, the Corporation may at any
time determine not to have any Subordinated Notes represented by one or more
Global Securities and, in such event, will issue Subordinated Notes in
definitive registered form in exchange for the Global Securities representing
such Subordinated Notes. In any such instance, an owner of a beneficial
interest in a Global Security will be entitled to physical delivery in
definitive form of Subordinated Notes of the series represented by such Global
Security equal in principal amount to such beneficial interest and to have
Subordinated Notes registered in its name.
EVENTS OF DEFAULT
The following will be Subordinated Note Indenture Events of Default with
respect to each series of Junior Subordinated Notes (unless deleted or
modified in the supplemental indenture or resolution establishing such series,
as set forth in the applicable Prospectus Supplement); (a) failure to pay the
principal of any Junior Subordinated Note of such series when due; (b) failure
to pay any interest on any Junior Subordinated Note of such series when due,
continued for 60 days; provided, however, that the date on which such payment
is due and payable shall be the date on which the Corporation is required to
make payment following any deferral of payments of interest by the
Corporation; (c) failure to perform any covenant of the Corporation in the
Subordinated Note Indenture applicable to such series, continued for 90 days
after written notice has been given by the Indenture Trustee or the holders of
at least 33% in principal amount of the outstanding Junior Subordinated Notes
of such series (unless such time period is extended by the Indenture Trustee
or by the Indenture Trustee and the holders of a principal amount of Junior
Subordinated Notes of such series not less than the principal amount of such
Notes the holders of which had given such notice of default (provided,
however, that the Indenture Trustee, or the Indenture Trustee and such
holders, as the case may be, will be deemed to have agreed to such an
extension if corrective action is initiated and is being diligently pursued by
the Corporation); and (d) certain events in bankruptcy, insolvency or
reorganization of the Corporation.
If a Subordinated Note Indenture Event of Default with respect to the Junior
Subordinated Notes of a series occurs and is continuing, then the Indenture
Trustee or the holders of not less than 33% in principal amount of the
outstanding Junior Subordinated Notes of such series may, by notice to the
Corporation (and to the Indenture Trustee if given by holders), declare to be
immediately due and payable the principal amount of all Junior Subordinated
Notes of such series. However, the Subordinated Note Indenture Event of
Default giving rise to such declaration will, without further act, be deemed
waived, and such declaration deemed rescinded, at any time after such a
declaration of acceleration and before a judgment or decree for payment of the
money due has been obtained by the Indenture Trustee, if (i) the Corporation
has paid or deposited with the Indenture Trustee a sum sufficient to pay all
overdue interest on the Junior Subordinated Notes of such series, the
principal of the Junior Subordinated Notes of such series which has become due
otherwise than by such declaration of acceleration and interest thereon at the
rate prescribed therefor in such Junior Subordinated Notes, interest on
overdue interest at the rate prescribed therefor in such Junior Subordinated
Notes (to the extent permitted by applicable law), and all amounts due to the
Indenture Trustee, and (ii) all Subordinated Note Indenture Events of Default
with respect to the Junior Subordinated Notes of such series (other than the
nonpayment of the principal which became due solely by such declaration of
acceleration) have been cured or waived.
A holder of Preferred Securities may institute a legal proceeding directly
against the Corporation, without first instituting a legal proceeding against
the Property Trustee or any other person or entity,
15
<PAGE>
for enforcement of payment to such holder of principal of or interest on the
Junior Subordinated Notes of the related series having a principal amount
equal to the aggregate liquidation amount of the Preferred Securities of such
holder on or after the due dates specified in the Junior Subordinated Notes of
such series.
Subject to the provisions of the Subordinated Note Indenture relating to the
duties of the Indenture Trustee in case of a continuing Subordinated Note
Indenture Event of Default, the Subordinated Note Indenture provides that the
Indenture Trustee will be under no obligation to exercise any of its rights or
powers under the Subordinated Note Indenture at the request or direction of
any of the holders unless such holders shall have offered to the Indenture
Trustee reasonable indemnity against the costs, expenses and liabilities which
might be incurred thereby. Subject to such provisions for indemnification and
certain other rights of the Indenture Trustee, the holders of a majority in
principal amount of the outstanding Subordinated Notes of any series have the
right to direct the time, method and place of conducting any proceedings for
any remedy available to the Indenture Trustee or exercising any trust or power
conferred on the Indenture Trustee with respect to such Subordinated Notes.
The Indenture Trustee may withhold notice to the holders of Subordinated Notes
of any series of any default (except in payment of principal or interest) with
respect to such series of Subordinated Notes, if it in good faith considers it
in the interest of holders to do so.
No holder of a Junior Subordinated Note of any series will have any right to
institute any proceeding with respect to the Subordinated Note Indenture or
for any remedy thereunder unless such holder has previously given the
Indenture Trustee written notice of a continuing Subordinated Note Indenture
Event of Default with respect to the Junior Subordinated Notes of such series
and unless the holders of not less than a majority in principal amount of the
outstanding Junior Subordinated Notes of such series have made such written
request, and offered reasonable indemnity, to the Indenture Trustee to
institute such proceeding, and the Indenture Trustee has not received from the
holders of a majority in principal amount of the outstanding Junior
Subordinated Notes of such series a direction inconsistent with such request
and has failed to institute such proceeding within 60 days after receipt of
such notice and offer of indemnity. Notwithstanding the foregoing, the holder
of any Junior Subordinated Note will have an absolute and unconditional right
to receive payment of the principal of and, subject to certain limitations,
interest on such Junior Subordinated Note on the stated maturities thereof
(or, in the case of redemption, on the Redemption Date) and to institute suit
for the enforcement of any such payment.
The Corporation is required to furnish annually to the Indenture Trustee an
officers' certificate to the effect that, to the best knowledge of the
officers providing such certificate, the Corporation is not in default in the
performance and observance of any terms, provisions or conditions of the
Subordinated Note Indenture or, if there has been a default, specifying such
default and its status.
REGISTRATION AND TRANSFER
The Corporation will not be required to (i) issue, register the transfer of,
or exchange Junior Subordinated Notes of a given series during a period of 15
days immediately preceding the date notice is given identifying the Junior
Subordinated Notes of such series that are called for redemption, or (ii)
register the transfer of or exchange any Junior Subordinated Notes of such
series so selected for redemption, in whole or in part, except the unredeemed
portion of any Junior Subordinated Note of such series being redeemed in part.
DENOMINATIONS
Unless otherwise set forth in the applicable Prospectus Supplement, Junior
Subordinated Notes will be issuable in denominations of $1,000 or any integral
multiples thereof.
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<PAGE>
PAYMENT AND PAYING AGENT
Payment of principal of any Junior Subordinated Notes will be made only
against surrender to the Paying Agent of such Junior Subordinated Notes.
Interest on Junior Subordinated Notes will be payable, subject to such
surrender where applicable, at the office of the Paying Agent or, at the
option of the Corporation, (i) by wire transfer to such account at a banking
institution in the United States as is designated in writing to the Indenture
Trustee at least sixteen days prior to the date of payment by the person
entitled thereto or (ii) by check mailed to the address of the person entitled
thereto as such address shall appear in the Security Register with respect to
such Junior Subordinated Notes.
Unless otherwise set forth in the applicable Prospectus Supplement, the
Indenture Trustee will act as Paying Agent with respect to the Junior
Subordinated Notes and the principal corporate trust office of the Indenture
Trustee will serve as the office through which the Paying Agent acts.
Notwithstanding the foregoing, the Corporation 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 Corporation 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 Corporation at the Corporation's
request, and the holder of such Junior Subordinated Notes will thereafter look
only to the Corporation for payment thereof.
MODIFICATION; WAIVER
The Corporation and the Indenture Trustee may amend or modify (with certain
exceptions) the Subordinated Note Indenture with the consent of the holders of
not less than a majority in aggregate principal amount of the outstanding
Subordinated Notes of all series of Subordinated Notes affected thereby
(voting as one class); provided, however, that no such modification or
amendment may, without the consent of the holder of each outstanding
Subordinated Note affected thereby, (a) change the stated maturity of the
principal of, or any installment of principal of or interest on, any
Subordinated Note; (b) reduce the principal amount of, or the rate of interest
on, or any premium payable upon the redemption of, any Subordinated Note or
reduce the amount of principal of any Subordinated Note which would be due and
payable upon acceleration of the maturity thereof; (c) change the currency of
payment of principal of, or any premium or interest on, any Subordinated Note;
(d) impair the right to institute suit for the enforcement of any such payment
on or after the stated maturity thereof (or date of redemption); (e) reduce
the percentage in principal amount of Subordinated Notes of any series, the
consent of whose holders is required to amend or modify the Subordinated Note
Indenture, to waive compliance with certain provisions of the Subordinated
Note Indenture, or to waive certain defaults; or (f) with certain exceptions,
modify the above provisions or the sections of the Subordinated Note Indenture
governing waiver of certain covenants and past defaults. In addition, the
Corporation and the Indenture Trustee may execute, without the consent of any
holders of Subordinated Notes, any supplemental indenture for certain other
usual purposes, including the creation of a new series of Subordinated Notes.
The holders of not less than a majority in aggregate principal amount of the
outstanding Subordinated Notes of any series may waive, insofar as that series
is concerned, compliance by the Corporation with certain restrictive
provisions of the Indenture under which such Subordinated Notes were issued.
The holders of not less than a majority in aggregate principal amount of the
outstanding Subordinated Notes of all series under the Subordinated Note
Indenture with respect to which a default has occurred and is continuing
(voting as one class) may waive any past default under the Subordinated Note
Indenture with respect to all such series, except a default in the payment of
principal of, or any premium or interest on, any Subordinated Note of such
series or in respect of a covenant or provision under the Subordinated Note
Indenture which cannot be amended or modified without the consent of the
holder of each outstanding Subordinated Note affected thereby.
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<PAGE>
The Subordinated Note Indenture may not be amended to alter the
subordination of any Junior Subordinated Notes or any other Subordinated Notes
without the written consent of each holder of Senior Indebtedness then
outstanding that would be adversely affected thereby.
CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER
The Subordinated Note Indenture provides that the Corporation may
consolidate or merge with or into another corporation or other entity of a
sort specified in the Subordinated Note Indenture, or convey or transfer its
properties and assets as an entirety or substantially as an entirety to any
such entity; provided that the successor assumes by supplemental indenture the
Corporation's obligations under the Subordinated Note Indenture and the
Subordinated Notes issued thereunder and delivers to the Indenture Trustee an
officers' certificate and an opinion of counsel stating that all conditions
precedent in the Subordinated Note Indenture relating to such consolidation,
merger, conveyance or transfer have been complied with. Upon the assumption by
the successor of the Corporation's obligations under the Subordinated Note
Indenture and the Subordinated Notes issued thereunder, and the satisfaction
of any other conditions precedent provided for in the Subordinated Note
Indenture, the successor will succeed to and be substituted for the
Corporation under such Indenture and the Corporation will be relieved of its
obligations under the Subordinated Note Indenture and the Subordinated Notes.
DEFEASANCE AND COVENANT DEFEASANCE
The Subordinated Note Indenture provides that, unless the terms of a given
series of Subordinated Notes provide otherwise, the Corporation may cause
itself to be (a) discharged from its obligations (with certain exceptions)
with respect to any Subordinated Notes or series of Subordinated Notes
("Defeasance") and (b) released from its obligations under certain covenants
especially established in respect of such series ("Covenant Defeasance") on
and after the date certain conditions set forth in the Subordinated Note
Indenture are satisfied. Such conditions include the irrevocable deposit with
the Indenture Trustee, in trust for such purpose, of money and/or Government
Obligations (as defined in the Subordinated Note Indenture), which through the
scheduled payment of principal and interest thereon will provide moneys in an
amount sufficient to pay the principal of and any premium and interest on such
Subordinated Notes on the stated maturities of such payments or upon
redemption.
INFORMATION CONCERNING THE INDENTURE TRUSTEE
The Chase Manhattan Bank, the Indenture Trustee, will also serve as Property
Trustee and as Guarantee Trustee. The Corporation and certain of its
affiliates maintain deposit accounts and banking relationships with The Chase
Manhattan Bank. The Chase Manhattan Bank also serves as trustee under the
Corporation's First and Refunding Mortgage pursuant to which First and
Refunding Mortgage Bonds of the Corporation are outstanding.
GOVERNING LAW
The Subordinated Note Indenture and the Subordinated Notes (including the
Junior Subordinated Notes) will be governed by, and construed in accordance
with, the internal laws of the State of New York.
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<PAGE>
PLAN OF DISTRIBUTION
The Trusts may sell the Preferred Securities being offered hereby in one or
more of the following ways from time to time: (i) to underwriters for resale
to the public or to institutional investors; (ii) directly to institutional
investors; or (iii) through agents to the public or to institutional
investors. The Prospectus Supplement with respect to each series of Preferred
Securities will set forth the terms of the offering of such Preferred
Securities, including the name or names of any underwriters or agents, the
purchase price of such Preferred Securities and the proceeds to the applicable
Trust from such sale, any underwriting discounts or agency fees and other
items constituting underwriters' or agents' compensation, any initial public
offering price, any discounts or concessions allowed or reallowed or paid to
dealers and any securities exchange on which such Preferred Securities may be
listed.
If underwriters participate in the sale, such Preferred Securities will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of
sale.
Unless otherwise set forth in the Prospectus Supplement, the obligations of
the underwriters to purchase any series of Preferred Securities will be
subject to certain conditions precedent and the underwriters will be obligated
to purchase all of such series of Preferred Securities, if any are purchased.
Underwriters and agents may be entitled under agreements entered into with
the Corporation and/or the applicable Trust to indemnification against certain
civil liabilities, including liabilities under the 1933 Act. Underwriters and
agents may engage in transactions with, or perform services for, the
Corporation in the ordinary course of business.
Each series of Preferred Securities will be a new issue of securities and
will have no established trading market. Any underwriters to whom Preferred
Securities are sold for public offering and sale may make a market in such
Preferred Securities, but such underwriters will not be obligated to do so and
may discontinue any market making at any time without notice. The Preferred
Securities may or may not be listed on a national securities exchange.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Preferred
Securities will be passed upon on behalf of the Corporation and the Trusts by
Richards, Layton & Finger, Wilmington, Delaware, special Delaware counsel to
the Corporation and the Trusts. The validity of the Junior Subordinated Notes,
the Guarantees and certain matters relating thereto will be passed upon on
behalf of the Corporation by Dewey Ballantine LLP, New York, New York. Certain
matters of North Carolina law will be passed upon on behalf of the Corporation
by Peter C. Buck, Esq., Deputy General Counsel of the Corporation. Certain
legal matters will be passed upon for the underwriters or agents by Brown &
Wood LLP, New York, New York.
EXPERTS
The consolidated financial statements included in the Corporation's annual
report on Form 10-K, which are incorporated herein by reference, have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report which is incorporated herein by reference, and have been so
incorporated in reliance upon such report given upon the authority of that
firm as experts in accounting and auditing. The consolidated financial
statements included in PanEnergy Corp's annual report on Form 10-K for the
year ended December 31, 1996 have been incorporated by reference herein and in
the Registration Statement in reliance upon the report of KPMG Peat Marwick
LLP, independent certified public accountants, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.
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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 SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPEC-
TUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RE-
LIED UPON AS HAVING BEEN AUTHORIZED BY THE CORPORATION, DUKE ENERGY CAPITAL
TRUST I OR THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO
NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY BY ANYONE
IN ANY JURISDICTION 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.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE CORPORATION OR DUKE ENERGY CAP-
ITAL TRUST I SINCE THE DATE HEREOF.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Summary of Offering....................................................... S-4
Risk Factors.............................................................. S-8
Duke Energy Capital Trust I............................................... S-10
Description of the Preferred Securities................................... S-11
Description of the Series A Junior Subordinated Notes..................... S-22
Relationship Among the Preferred Securities, the Series A Junior
Subordinated Notes and the Guarantee..................................... S-26
Certain Federal Income Tax Considerations................................. S-28
Underwriting.............................................................. S-31
Legal Opinions............................................................ S-33
Glossary.................................................................. S-34
PROSPECTUS
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 3
Duke Energy Corporation................................................... 4
The Trusts................................................................ 8
Accounting Treatment...................................................... 8
Use of Proceeds........................................................... 8
Description of the Preferred Securities................................... 8
Description of the Guarantees............................................. 9
Description of the Junior Subordinated Notes.............................. 11
Plan of Distribution...................................................... 19
Legal Matters............................................................. 19
Experts................................................................... 19
</TABLE>
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14,000,000
PREFERRED SECURITIES
DUKE ENERGY
CAPITAL TRUST I
7.20% CUMULATIVE QUARTERLY INCOME PREFERRED SECURITIES
(QUIPS/SM/)
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS SET FORTH HEREIN, BY
DUKE ENERGY CORPORATION
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PROSPECTUS SUPPLEMENT
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GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SALOMON SMITH BARNEY
REPRESENTATIVES OF THE UNDERWRITERS
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