<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 11, 1998
SUBJECT TO AMENDMENT
REGISTRATION NOS. 333-49077
333-49077-01
333-49077-02
333-49077-03
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
DUKE CAPITAL DELAWARE 56-0282142
CORPORATION
DUKE CAPITAL DELAWARE 51-0379862
FINANCING TRUST I
DUKE CAPITAL DELAWARE 51-0379863
FINANCING TRUST II
DUKE CAPITAL DELAWARE 51-0379864
FINANCING TRUST III
(EXACT NAME OF EACH (STATE OR OTHER (I.R.S. EMPLOYER
REGISTRANT AS JURISDICTION OF IDENTIFICATION
SPECIFIED IN ITS INCORPORATION OR NOS.)
CHARTER) ORGANIZATION)
422 SOUTH CHURCH STREET
CHARLOTTE, NORTH CAROLINA 28202
704-594-6200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,INCLUDING AREA CODE, OF
EACH REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------
RICHARD J. OSBORNE JOHN SPUCHES
VICE PRESIDENT AND CHIEF DEWEY BALLANTINE LLP
FINANCIAL OFFICER 1301 AVENUE OF THE AMERICAS
422 SOUTH CHURCH STREET NEW YORK, NEW YORK 10019
CHARLOTTE, NORTH CAROLINA 28202 TELEPHONE NO. 212-259-7700
TELEPHONE NO. 704-382-5159
(NAMES, ADDRESSES, INCLUDING ZIP CODES, AND TELEPHONE NUMBERS, INCLUDING AREA
CODES, OF AGENTS FOR SERVICE OF EACH REGISTRANT)
--------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]______
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]______
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
--------------
CALCULATION OF REGISTRATION FEE
============================================================================
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
AMOUNT OFFERING PRICE PROPOSED MAXIMUM
TITLE OF EACH CLASS OF TO BE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) UNIT(1)(2)(3) PRICE(1)(2)(3) REGISTRATION FEE(1)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Duke Capital Financing Trust I Trust
Preferred Securities................
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Duke Capital Financing Trust II Trust
Preferred Securities................
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Duke Capital Financing Trust III
Trust Preferred Securities..........
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Duke Capital Corporation Senior
Notes...............................
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Duke Capital Corporation Junior
Subordinated Notes .................
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Duke Capital Corporation Guarantees
with respect to Trust Preferred
Securities of Duke Capital Financing
Trust I, Duke Capital Financing
Trust II and Duke Capital Financing
Trust III(4)(5).....................
- -------------------------------------------------------------------------------------------------------------
Total................................ $1,000,000,000 100% $1,000,000,000 $295,000
</TABLE>
============================================================================
(1) There are being registered hereunder such presently indeterminate number
of Trust Preferred Securities of Duke Capital Financing Trust I, Duke
Capital Financing Trust II and Duke Capital Financing Trust III and such
presently indeterminate principal amount of Senior Notes and Junior
Subordinated Notes of Duke Capital Corporation with an aggregate initial
offering price not to exceed $1,000,000,000. Junior Subordinated Notes
also may be issued to Duke Capital Financing Trust I, Duke Capital
Financing Trust II or Duke Capital Financing Trust III and later
distributed upon dissolution and distribution of the assets thereof, which
would include such Junior Subordinated Notes for which no separate
consideration will be received. Pursuant to Rule 457(o) under the
Securities Act of 1933, which permits the registration fee to be
calculated on the basis of the maximum offering price of all the
securities listed, the table does not specify by each class information as
to the amount to be registered, proposed maximum offering price per unit
or proposed maximum aggregate offering price.
(2) Estimated solely for the purpose of determining the registration fee.
(3) Exclusive of accrued interest and distributions, if any.
(4) No separate consideration will be received for the Duke Capital
Corporation Guarantees. Pursuant to Rule 457(n) under the Securities Act
of 1933, no separate fee is payable in respect of the Duke Capital
Corporation Guarantees.
(5) Includes the obligations of Duke Capital Corporation under the respective
Trust Agreements, the Subordinated Indenture, the related series of Junior
Subordinated Notes, the respective Guarantees and the respective
Agreements as to Expenses and Liabilities, which include the Corporation's
covenant to pay any indebtedness, expenses or liabilities of the Trusts
(other than obligations pursuant to the terms of the Trust Preferred
Securities or other similar interests), all as described in this
registration statement.
--------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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<PAGE>
EXPLANATORY NOTE
This Registration Statement includes two prospectus supplements. The first
relates to the proposed offering of Trust Preferred Securities as described
therein currently planned to commence as soon as practicable after the
effective date of the Registration Statement depending upon market conditions.
The second is a form that may be used in connection with issuances from time
to time of Senior Notes.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MAY , 1998)
SUBJECT TO COMPLETION, DATED MAY 8, 1998
[ ] PREFERRED SECURITIES
DUKE CAPITAL FINANCING TRUST [ ]
% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS SET FORTH HEREIN, BY
DUKE CAPITAL CORPORATION
A SUBSIDIARY OF DUKE ENERGY CORPORATION
----------
The % Cumulative Trust Preferred Securities (the "Preferred Securities")
offered hereby will evidence preferred undivided beneficial interests,
representing 97% undivided beneficial interests in the assets of Duke Capital
Financing Trust [ ], a statutory business trust created under the laws of the
State of Delaware (the "Trust"). Duke Capital Corporation, a Delaware
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 % Junior Subordinated Notes
due , (the "Series Junior Subordinated Notes").
(continued on page S-2)
----------
SEE "RISK FACTORS" BEGINNING ON PAGE S-8 OF THIS PROSPECTUS SUPPLEMENT FOR
CERTAIN INFORMATION RELEVANT TO AN INVESTMENT IN THE PREFERRED SECURITIES,
INCLUDING THE PERIOD AND CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS OF
DISTRIBUTIONS ON THE PREFERRED SECURITIES MAY BE DEFERRED AND THE RELATED
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF SUCH DEFERRAL.
----------
Application has been made to list the Preferred Securities on the New York
Stock Exchange, Inc. If so 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.
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<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO THE
OFFERING PRICE DISCOUNT(1) TRUST(2) (3)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Preferred Security.............. $ (2) $
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Total............................... $ (2) $
</TABLE>
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- --------------------------------------------------------------------------------
(1) The Corporation and the Trust have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) In view of the fact that the entire proceeds of the sale of the Preferred
Securities will be invested in the Series Junior Subordinated Notes, the
Corporation has agreed to pay to the Underwriters as compensation (the
"Underwriters' Compensation") for their arranging the investment therein of
such proceeds $ per Preferred Security (or $ in the aggregate);
provided, that such compensation for sales of 10,000 or more Preferred
Securities to a single purchaser will be $ per Preferred Security.
Therefore, to the extent of such sales, the actual amount of Underwriters'
Compensation will be less than the aggregate amount specified in the
preceding sentence. See "Underwriting."
(3) Expenses of the offering to be paid by the Corporation are estimated to be
approximately $ .
----------
The Preferred Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that delivery of the Preferred Securities will be made only in book-
entry form through the facilities of The Depository Trust Company, on or about
, (the "Issue Date") against payment therefor in immediately
available funds.
----------
----------
The date of this Prospectus Supplement is , 1998.
<PAGE>
(continued from page 1)
The Series 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 be entitled to receive cumulative
cash distributions at the rate of % per annum (the "Securities Rate"),
accruing from the date of original issuance and payable, unless deferred,
quarterly in arrears on March 31, June 30, September 30 and December 31 of
each year (each, a "Distribution Date"), commencing on , . The
Securities Rate and the Distribution Dates for the Preferred Securities will
correspond to the interest rate and interest payment dates on the Series
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
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 JUNIOR SUBORDINATED NOTES BY EXTENDING THE INTEREST PAYMENT PERIOD ON
THE SERIES 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
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 Junior Subordinated Notes--Option
to Extend Interest Payment Period," "Risk Factors--Option to Extend Interest
Payment Period" and "Material Federal Income Tax Considerations--Original
Issue Discount." Deferred installments of interest on the Series 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 at the end of any Extension Period as received on the Series
Junior Subordinated Notes.
The Trust Securities will be subject to mandatory redemption upon repayment
of the Series Junior Subordinated Notes at maturity or their earlier
redemption. The Series Junior Subordinated Notes will be redeemable at the
option of the Corporation, in whole or in part, from time to time, on or after
, , 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 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 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 , , Senior
Indebtedness of the Corporation aggregated approximately $ . If
the Series Junior Subordinated Notes are distributed to the holders of the
Trust Securities, the Corporation will use its best efforts to have the Series
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 to make such distributions (the "Guarantee").
Accordingly, if the Corporation fails to make required payments on the Series
Junior Subordinated Notes, the Trust will not have sufficient funds to make
the related distributions, and the Guarantee does not apply to the payment of
distributions when the Trust does not have sufficient funds legally and
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 Junior Subordinated Notes.
See "Description of the Preferred Securities--Events of Default" and
"Relationship Among the Preferred
S-2
<PAGE>
Securities, the Series 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 most senior preferred stock that may be issued by the Corporation. See
"Description of the Guarantees" in the accompanying Prospectus. The
Corporation has, through the Guarantee, the Subordinated Note Indenture, the
Series 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 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 $ 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 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. SUCH TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF
PREFERRED SECURITIES TO COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF
PENALTY BIDS. 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............. Duke Capital Corporation (the "Corporation"), a
wholly-owned subsidiary of Duke Energy
Corporation, serves as the parent company to a
number of affiliates of Duke Energy Corporation
which are primarily engaged in the interstate
transportation and storage of natural gas, in
the gathering, processing, marketing and
intrastate transportation and storage of natural
gas, natural gas liquids and crude oil, in
natural gas and electric power marketing, in the
acquisition, development and operation of
independent power production facilities, in
risk-management services and in engineering
consulting, construction and other related
energy services.
The Trust................... Duke Capital Financing Trust [ ] (the "Trust") is
a statutory business trust created under
Delaware law solely for the purpose of holding
the Corporation's Series 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 "Subordinated Indenture Trustee")
under the Subordinated Note Indenture pursuant
to which the Series 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
collectively referred to as the "Securities
Trustees."
Preferred Securities The Trust will offer Preferred Securities
Offered..................... 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 , . The Securities Rate
and the Distribution Dates for the Preferred
Securities will correspond to the interest rate
and interest payment dates on the Series
Junior Subordinated Notes, which will constitute
substantially all the assets of the Trust. As a
S-4
<PAGE>
result, if principal or interest is not paid on
the Series 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 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
% Junior Subordinated Notes due , .
The Series 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.
Accordingly, if the Corporation does not make
required payments on the Series Junior
Subordinated Notes, the Trust will not have
sufficient funds to make distributions on the
Preferred Securities, and the Guarantee will not
apply to such distributions until the Trust has
sufficient funds legally and immediately
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 most senior
preferred stock that may be 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 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. See "Risk Factors--Ranking of and
Rights under the Guarantee."
Interest Deferral........... The Corporation has the right to defer payments
of interest on the Series Junior Subordinated
Notes by extending the interest payment period
on the Series 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 Junior Subordinated Notes. The only
restrictions on the Corporation's ability to
defer payments of interest are that during the
Extension Period the Corporation may not, with
certain
S-5
<PAGE>
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
Junior Subordinated Notes. There could be
multiple Extension Periods of varying lengths
throughout the term of the Series Junior
Subordinated Notes.
If interest payments on the Series 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
Junior Subordinated Notes--Option to Extend
Interest Payment Period" and "Material Federal
Income Tax Considerations--Original Issue
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 Junior
Subordinated Notes at maturity or their earlier
redemption. The Series Junior Subordinated
Notes are redeemable by the Corporation, in
whole or in part, from time to time on or after
, , or at any time, in whole, within 90
days following the occurrence of a Special
Event. If a partial redemption of the Series
Junior Subordinated Notes would result in the
delisting of the Preferred Securities, the
Corporation may redeem the Series Junior
Subordinated Notes only in whole. Any partial
redemption of the Series 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
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 within the definition of a Tax
Event because they do not result from an
amendment or change described in such
S-6
<PAGE>
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 Junior Subordinated Notes, (ii)
interest payable on the Series 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"). See "Risk Factors--Special Event
Redemption or Distribution."
Redemption Price............ In the event of the redemption of the Trust
Securities or other termination of the Trust
without distribution of the Series Junior
Subordinated Notes, each holder of a 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 JUNIOR SUBORDINATED NOTES
No amounts will be available to make payments on the Preferred Securities
except from payments made on the Series Junior Subordinated Notes. The
obligations of the Corporation under the Series Junior Subordinated Notes
are subordinate and junior in right of payment to all present and future
Senior Indebtedness of the Corporation.
The Corporation conducts its business through subsidiaries. Accordingly, the
ability of the Corporation to meet its obligations under the Series Junior
Subordinated Notes will be dependent on the earnings and cash flows of its
subsidiaries and the ability of its subsidiaries to pay dividends or to
advance or repay funds to the Corporation. In addition, the rights of the
Corporation and its creditors to participate in the assets of any subsidiary
upon the latter's liquidation or recapitalization will be subject to the prior
claims of such subsidiary's creditors. As of , , Senior Indebtedness
of the Corporation aggregated approximately $ . There are no terms in the
Preferred Securities, the Series 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 most senior preferred stock that may be issued by the
Corporation. If the Corporation were to default in its obligation to make
payments on the Series 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
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
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
Junior Subordinated Notes. Deferred installments of interest on the Series
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 any 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 Junior Subordinated Notes. See "Description of the Preferred
Securities--Distributions" and "Description of the Series Junior
Subordinated Notes--Option to Extend Interest Payment Period" and "--Certain
Covenants."
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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 "Material 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
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 receive a different
return on its investment than 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 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
Junior Subordinated Notes in cash (with the result that the Preferred
Securities will be redeemed). In addition, the Corporation will have the right
at any time to terminate the Trust and cause the Series 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 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 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."
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 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. See "Description of the Preferred Securities--Voting Rights."
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 Junior Subordinated Notes will be included in the gross income
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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 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 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 "Material 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 Junior Subordinated Notes, in whole or in part, at any time on or
after , 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 Junior
Subordinated Notes and may receive Series Junior Subordinated Notes upon the
termination of the Trust, prospective purchasers of Preferred Securities are
making an investment decision with regard to the Series Junior Subordinated
Notes and should carefully review all the information regarding the Series
Junior Subordinated Notes contained herein. See "Description of the Preferred
Securities--Special Event Redemption or Distribution" and "Description of the
Series Junior Subordinated Notes."
Prior to this offering, there has been no public market for the Preferred
Securities, and there can be no assurance that an active public market for the
Preferred Securities will develop or, if one does develop, that it will be
sustained after this offering. See "Plan of Distribution" in the accompanying
Prospectus.
In connection with this offering and in compliance with applicable law and
industry practice, the Underwriters may overallot or effect transactions which
stabilize, maintain or otherwise affect the market price of the Preferred
Securities at levels above those which might otherwise prevail in the open
market, including by entering stabilizing bids. A stabilizing bid means the
placing of any bid, or the effecting of any purchase, for the purpose of
pegging, fixing or maintaining the price of a security. In general, purchases
of a security for the purpose of stabilization could cause the price of the
security to be higher than it might be in the absence of such purchases. See
"Underwriting."
INVESTMENT IN TRUST INVOLVES RISKS PARALLEL TO THOSE OF INVESTMENT IN
CORPORATION
As with an investment in the Corporation, an investment in the Trust
involves risks associated with operating conditions, competitive factors,
economic conditions, industry conditions and equity market conditions.
CONSEQUENCES OF HIGHLY LEVERAGED TRANSACTION
The Subordinated Note Indenture does not contain provisions that afford
holders of the Series Junior Subordinated Notes protection in the event of
a highly leveraged transaction involving the Corporation.
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DUKE CAPITAL FINANCING TRUST [ ]
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 January 29, 1998. 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 Junior Subordinated Notes,
and (iii) engaging in only those other activities necessary, appropriate,
convenient or incidental thereto. The Trust has a term of approximately
years from its creation, but may terminate earlier as provided in the Trust
Agreement.
Upon issuance of the Preferred Securities, the purchasers thereof will own
all of the Preferred Securities. The 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 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 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 Junior Subordinated Notes. To the extent payments in
respect of the Series 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 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) 594-6200.
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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
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 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 holders of a majority in aggregate liquidation
amount of the Preferred Securities may direct the Property Trustee to enforce
its rights under the Series 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 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 or provided for in the Series Junior Subordinated
Notes. The above mechanisms and obligations, together with the Corporation's
obligations under the Agreement as to Expenses and Liabilities, provide 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 , . 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
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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
Subordinated 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.
The Corporation has the right under the Subordinated Note Indenture to defer
payments of interest on the Series Junior Subordinated Notes by extending
the interest payment period from time to time on the Series 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 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
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 Junior Subordinated Notes. See
"Description of the Series Junior Subordinated Notes."
REDEMPTION
The Preferred Securities are subject to mandatory redemption upon repayment
of the Series Junior Subordinated Notes at maturity or their earlier
redemption. The Series Junior Subordinated Notes will mature on ,
and may be redeemed, in whole or in part, at the option of the
Corporation, at any time on or after , 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 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
Junior Subordinated Notes--Optional Redemption." If a partial redemption of
the Series Junior Subordinated Notes would result in the delisting of the
Preferred Securities, the Corporation may redeem the Series 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.
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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 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 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 Junior Subordinated Notes, (ii) interest payable on the Series
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 1940 Act, which change becomes
effective on or after the Issue Date.
DISTRIBUTION OF SERIES JUNIOR SUBORDINATED NOTES UPON TERMINATION OF TRUST
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
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 Junior Subordinated Notes are distributed to the holders of the
Preferred Securities, the Corporation will use its best efforts to have the
Series 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 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 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 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.
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There can be no assurance as to the market prices for the Preferred
Securities or the Series 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 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.
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 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 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.
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DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the 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 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
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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
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 , , 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 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 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
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.
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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 Trust Agreement
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, with respect to the Series Junior
Subordinated Notes ("Subordinated Note Indenture Event of Default") (see
"Description of the Junior Subordinated Notes--Events of Default" in the
accompanying Prospectus); or
(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 the 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, the
Administrative Trustees 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 Subordinated Note Indenture Event of Default occurs and is continuing,
then, pursuant to the Trust Agreement, (i) the holders of Preferred Securities
will rely on the enforcement by the Property Trustee of its rights against the
Corporation as the holder of the Series Junior Subordinated Notes and (ii)
the holders of a majority in aggregate liquidation amount of the Preferred
Securities will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Property Trustee or
to direct the exercise of any trust or power conferred upon the Property
Trustee under the Trust Agreement, including the right to direct the Property
Trustee to exercise the remedies available to it as a holder of the Series
Junior Subordinated Notes. If the Property Trustee fails to enforce its rights
under the Series Junior Subordinated Notes, a holder of Preferred Securities
may, to the extent permitted by applicable law and as provided in the Trust
Agreement, institute a legal proceeding against the Corporation to enforce its
rights under the Trust Agreement without first instituting any legal
proceeding against the Property Trustee or any other person or entity,
including 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 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
Junior Subordinated Notes. See "Relationship Among the Preferred Securities,
the Series Junior Subordinated Notes and the Guarantee" herein and
"Description of the Guarantees--Events of Default" in the accompanying
Prospectus.
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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.
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 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
Subordinated Indenture Trustee (as defined herein), or executing any trust or
power conferred on the Subordinated Indenture Trustee with respect to the
Series 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 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 Junior Subordinated Notes, where such consent shall
be required, or to any other action, as the holder of the Series 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 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 Subordinated Indenture
Trustee with respect to the Series 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.
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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,
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
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expressly appoints a trustee of such successor entity possessing the same
powers and duties as the Property Trustee as the holder of the Series Junior
Subordinated Notes, (iii) the Preferred Securities or any Successor Securities
are listed, or any Successor Securities will be listed upon notification of
issuance, on any national securities exchange or other organization on which
the Preferred Securities are then listed, (iv) such 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.
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,
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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 Subordinated
Indenture Trustee and Guarantee Trustee and serves as Trustee under the Senior
Indenture of the Corporation pursuant to which Senior Notes of the Corporation
are issuable. The Corporation and certain of its affiliates maintain deposit
accounts and banking relationships with The Chase Manhattan Bank.
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 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 JUNIOR SUBORDINATED NOTES
Set forth below is a description of the terms of the Series 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 Junior Subordinated Notes will be issued as a series of Junior
Subordinated Notes under the Subordinated Note Indenture. The Series Junior
Subordinated Notes will be limited in aggregate principal amount to
$ , such amount being the aggregate liquidation amount of the Trust
Securities.
The entire principal amount of the Series 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
, . The Series Junior Subordinated Notes are not subject to any
sinking fund provision.
The interest rate and interest and other payment dates of the Series
Junior Subordinated Notes will correspond to those of the Preferred
Securities, as described herein.
The Series Junior Subordinated Notes will rank pari passu with the other
series of Junior Subordinated Notes issued under the Subordinated Note
Indenture.
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OPTIONAL REDEMPTION
The Corporation will have the right to redeem the Series Junior
Subordinated Notes, in whole or in part, without premium, from time to time,
on or after , , 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 Junior Subordinated Notes would result in the
delisting of the Preferred Securities, the Corporation may redeem the Series
Junior Subordinated Notes only in whole.
INTEREST
Each Series 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 , , to the
person in whose name such Series 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 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 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 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 right to defer payments
of interest by extending the interest payment period on the Series Junior
Subordinated Notes.
The Corporation shall give the holder or holders of the Series Junior
Subordinated Notes and the Subordinated 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 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 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 Junior Subordinated Notes (if the holder is the Trust) after
paying taxes, duties,
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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 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 Junior Subordinated Notes and such extension shall be continuing or
(ii) if at such time a Subordinated Note Indenture Event of Default 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 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 or (ii) dividends
or distributions in capital stock of the Corporation.
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 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 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 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 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 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.
S-24
<PAGE>
Under current United States federal income tax laws, Defeasance would be
treated as an exchange of the relevant Series Junior Subordinated Notes in
which holders of such Series Junior 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 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 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.
S-25
<PAGE>
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE SERIES JUNIOR SUBORDINATED NOTES AND THE GUARANTEE
As long as payments of interest and other payments are made when due on the
Series 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 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
Junior Subordinated Notes will correspond to the distribution rate and
distribution and other payment dates for the Preferred Securities; (iii) the
Corporation will 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 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,
then (i) the holders of Preferred Securities will rely on the enforcement by
the Property Trustee of its rights against the Corporation as the holder of
the Series Junior Subordinated Notes and (ii) the holders of a majority in
aggregate liquidation amount of the Preferred Securities will have the right
to direct the time, method, and place of conducting any proceeding for any
remedy available to the Property Trustee or to direct the exercise of any
trust or power conferred upon the Property Trustee under the Trust Agreement,
including the right to direct the Property Trustee to exercise the remedies
available to it as a holder of the Series Junior Subordinated Notes. If the
Property Trustee fails to enforce its rights under the Series Junior
Subordinated Notes, a holder of Preferred Securities may, to the extent
permitted by applicable law and as provided in the Trust Agreement, institute
a legal proceeding against the Corporation to enforce its rights under the
Trust Agreement without first instituting any legal proceeding against the
Property Trustee or any other person or entity, including 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 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 Junior Subordinated Notes. The
Trust Agreement also provides a mechanism whereby the holders of Preferred
Securities may appoint a substitute Property Trustee if a Subordinated Note
Indenture Event of Default occurs and is continuing.
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 its 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 Junior
Subordinated Notes, the Trust Agreement and the Agreement as to Expenses and
Liabilities, as described above, provide a full and unconditional guarantee,
subject to certain subordination provisions, by the Corporation of the
payments due on the Preferred Securities.
Upon any voluntary or involuntary dissolution, winding-up or termination of
the Trust, unless the Series 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.
S-26
<PAGE>
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 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 the shareholder of
the Corporation receives 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 Junior Subordinated Notes relative to other creditors and the
shareholder 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
with respect to the Series Junior Subordinated Notes. However, in the event
of a default under, or acceleration of, Senior Indebtedness, the subordination
provisions of the Series Junior Subordinated Notes provide that no payments
may be made in respect of the Series 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 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 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 Junior Subordinated Notes.
S-27
<PAGE>
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
The following is the opinion of Dewey Ballantine LLP, counsel to the
Corporation and the Trust, as to the material United States income tax
consequences of the purchase, ownership and disposition of the Preferred
Securities, insofar as it relates to matters of law and legal conclusions.
This discussion 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) that acquire
Preferred Securities on their original issue at their original offering price.
Moreover, it does not include 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,
tax-exempt organizations, dealers in securities or currencies, 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 discussion 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 discussion 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 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 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 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 Junior Subordinated Notes would at
that time be treated as issued with OID and all the stated interest payments
on the Series 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 Junior Subordinated
Notes.
Because income on the Preferred Securities will constitute interest or OID,
corporate Holders will not be entitled to a dividends-received deduction with
respect to any income recognized with respect to the Preferred Securities.
S-28
<PAGE>
SALE OF PREFERRED SECURITIES
Upon the sale, retirement (including redemption) or other taxable
disposition of all or part of a Preferred Security, a Holder 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, 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 included in
taxable income by the Holder and reduced by any prior payments on the Series
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 Junior Subordinated Notes between the portion of the Series Junior
Subordinated Notes redeemed and the portion retained by the Holder in order to
determine gain or loss.
RECEIPT OF SERIES JUNIOR SUBORDINATED NOTES UPON LIQUIDATION OF THE TRUST
As described under "Description of the Preferred Securities--Special Event
Redemption or Distribution," Series 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 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 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 Junior Subordinated Notes would
constitute a taxable event to Holders of Preferred Securities and a Holder's
holding period in Series Junior Subordinated Notes would begin on the date
such Series 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,"
S-29
<PAGE>
which generally will include distributions of interest and principal payments
on the Series Junior Subordinated Notes and payment of the proceeds from the
disposition of Preferred Securities. Any amount withheld from a Holder under
the backup withholding rules will be allowed as a refund or a credit against
such Holder's United States federal income tax liability, provided the
required information is furnished to the IRS.
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 (the "Underwriters"), and each of the Underwriters,
for whom and , are acting as representatives (the
"Representatives"), has severally agreed to purchase the number of Preferred
Securities set forth opposite its name below. In the Underwriting Agreement,
the several Underwriters have agreed, subject to the terms and conditions set
forth therein, to purchase all the Preferred Securities offered hereby if any
of the Preferred Securities are purchased. In the event of default by an
Underwriter, the Underwriting Agreement provides that, in certain
circumstances, the purchase commitments of the nondefaulting Underwriters may
be increased or the Underwriting Agreement may be terminated.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER PREFERRED SECURITIES
----------- --------------------
<S> <C>
----------
Total...............................................
==========
</TABLE>
The Underwriters propose to offer the Preferred Securities, in part,
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus Supplement, and, in part, to certain securities
dealers at such price less a concession of $ per Preferred Security. The
Underwriters may allow, and such dealers may reallow, a concession not in
excess of $ per Preferred Security to certain brokers and 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.
In view of the fact that the proceeds of the sale of the Preferred
Securities will be used to purchase the Series Junior Subordinated Notes,
the Underwriting Agreement provides that the Corporation will pay as
compensation (the "Underwriters' Compensation") to the Underwriters arranging
the investment therein of such proceeds, an amount in immediately available
funds of $ per Preferred Security (or $ in the aggregate) for the
accounts of the several Underwriters; provided that, such compensation for
sales of 10,000 or more Preferred Securities to any single purchaser will be
$ per Preferred Security. Therefore, to the extent of such sales, the actual
amount of Underwriters' Compensation will be less than the aggregate amount
specified in the preceding sentence.
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 Junior Subordinated Notes or any debt securities
substantially similar to the Series Junior Subordinated Notes or equity
securities substantially similar to the Preferred Securities (except for the
Series Junior Subordinated Notes and the Preferred Securities issued
pursuant to the Underwriting Agreement), without the prior written consent of
the Representatives.
Application has been made to list the Preferred Securities on the NYSE. If
so approved, trading of the Preferred Securities on the NYSE is expected to
commence within a 30-day period after the initial delivery of the Preferred
Securities. 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.
S-31
<PAGE>
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 this offering and in compliance with applicable law and
industry practice, the Underwriters may overallot or effect transactions which
stabilize, maintain or otherwise affect the market price of the Preferred
Securities at levels above those which might otherwise prevail in the open
market, including by entering stabilizing bids. A stabilizing bid means the
placing of any bid, or the effecting of any purchase, for the purpose of
pegging, fixing or maintaining the price of a security.
In general, purchases of a security for the purpose of stabilization could
cause the price of the security to be higher than it might be in the absence
of such purchases.
Neither the Corporation, the Trust, nor any of the Underwriters makes any
representation or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the price of the Preferred
Securities. In addition, neither the Corporation, the Trust, nor any of the
Underwriters makes any representation that the Underwriters will engage in
such transactions or that such transactions once commenced, will not be
discontinued without notice.
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, P.A., Wilmington, Delaware, special Delaware
counsel to the Corporation and the Trust. The validity of the Series 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. The validity of the Series Junior
Subordinated Notes and the Guarantee will be passed upon for the Underwriters
by Sullivan & Cromwell, New York, New York.
S-32
<PAGE>
GLOSSARY
<TABLE>
<CAPTION>
<C> <S>
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
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 Capital 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
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 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.
</TABLE>
S-33
<PAGE>
<TABLE>
<C> <S>
Issue Date................................. The date set forth on the cover
page hereof on which the Series
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 as 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 Junior Subordinated Notes........ The junior subordinated
deferrable interest notes of the
Corporation designated as Series
% Junior Subordinated Notes
due , .
Special Event.............................. A Tax Event or an Investment
Company Act Event.
Subordinated Indenture Trustee............. The trustee under the
Subordinated Note Indenture;
initially, The Chase Manhattan
Bank.
Subordinated Note Indenture................ The indenture pursuant to which
the Corporation's Series
Junior Subordinated Notes will be
issued.
Subordinated Note Indenture
Event of Default.......................... As described, with respect to the
Series Junior Subordinated
Notes, under "Description of the
Junior Subordinated Notes--Events
of Default" in the accompanying
Prospectus.
Tax Event.................................. An event of the type described in
"Description of the Preferred
Securities--Special Event
Redemption or Distribution."
</TABLE>
S-34
<PAGE>
<TABLE>
<S> <C>
Trust...................................... Duke Capital Financing Trust [ ], 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-35
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR IN-
CORPORATED BY REFERENCE IN THIS PROSPECTUS 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 CAPITAL FINANCING
TRUST [ ] OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLE-
MENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL UNDER
ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE CORPORATION OR DUKE CAPITAL FINANCING TRUST [ ] SINCE THE DATE
HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OF-
FER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Summary of Offering....................................................... S-4
Risk Factors.............................................................. S-8
Duke Capital Financing Trust [ ].......................................... S-11
Description of the Preferred Securities................................... S-12
Description of the Series Junior Subordinated Notes.................... S-22
Relationship Among the Preferred Securities, the Series Junior
Subordinated Notes and the Guarantee..................................... S-26
Material Federal Income Tax Considerations................................ S-28
Underwriting.............................................................. S-31
Legal Opinions............................................................ S-32
Glossary.................................................................. S-33
PROSPECTUS
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 3
Duke Capital Corporation.................................................. 4
The Trusts................................................................ 8
Use of Proceeds........................................................... 8
Description of the Senior Notes........................................... 9
Description of the Junior Subordinated Notes.............................. 18
Description of the Preferred Securities................................... 25
Description of the Guarantees............................................. 26
Accounting Treatment...................................................... 28
Plan of Distribution...................................................... 28
Legal Matters............................................................. 29
Experts................................................................... 29
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[ ]
PREFERRED SECURITIES
DUKE CAPITAL
FINANCING TRUST [ ]
% CUMULATIVE TRUST
PREFERRED SECURITIES
FULLY AND UNCONDITIONALLY GUARANTEED,
AS SET FORTH HEREIN, BY
DUKE CAPITAL CORPORATION
A SUBSIDIARY OF DUKE ENERGY CORPORATION
----------------------
PROSPECTUS SUPPLEMENT
----------------------
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MAY , 1998)
SUBJECT TO COMPLETION, DATED MAY 8, 1998
$[ ]
DUKE CAPITAL CORPORATION
A SUBSIDIARY OF DUKE ENERGY CORPORATION
SERIES % SENIOR NOTES DUE ,
-----------
Interest on the Series % Senior Notes due , (the "Series Senior
Notes") will be payable semi-annually on and of each year, commencing
, . The Series Senior Notes are not redeemable prior to maturity.
The Series Senior Notes will be direct, unsecured and unsubordinated
obligations of Duke Capital Corporation (the "Corporation") ranking pari passu
with all other unsecured and unsubordinated obligations of the Corporation. The
Senior Note Indenture (as defined) contains no restrictions on the amount of
additional indebtedness that may be incurred thereunder by the Corporation.
The Series Senior Notes 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 Series Senior
Notes 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, Series Senior Notes in certificated form will not be issued
in exchange for the global certificate or certificates. See "Description of the
Series Senior Notes--Book-Entry Only Issuance--The Depository Trust Company."
-----------
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>
PRICE TO UNDERWRITING PROCEEDS TO THE
PUBLIC (1) DISCOUNTS (2) CORPORATION (3)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Series Senior Note.............. % % %
- --------------------------------------------------------------------------------
Total................................. $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from the date of original issuance.
(2) The Corporation has agreed to indemnify the several Underwriters against
certain liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(3) Before deducting expenses of the offering payable by the Corporation
estimated to be $ .
-----------
The Series Senior Notes are offered by the several Underwriters, 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 Series Senior
Notes will be made in book-entry form through the facilities of DTC on or about
, against payment therefor in immediately available funds.
-----------
-----------
The date of this Prospectus Supplement is , 1998.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SERIES SENIOR
NOTES, INCLUDING OVERALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN
SUCH SERIES SENIOR NOTES. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDER-
WRITING."
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............. Duke Capital Corporation (the "Corporation"), a
wholly-owned subsidiary of Duke Energy
Corporation, serves as the parent company to a
number of affiliates of Duke Energy Corporation
which are primarily engaged in the interstate
transportation and storage of natural gas, in
the gathering, processing, marketing and
intrastate transportation and storage of natural
gas, natural gas liquids and crude oil, in
natural gas and electric power marketing, in the
acquisition, development and operation of
independent power production facilities, in
risk-management services and in engineering
consulting, construction and other related
energy services.
Series Senior Notes
Offered.................... The Corporation is offering $ aggregate
principal amount of its Series Senior Notes.
Interest on the Series Senior Notes will be
payable semi-annually on and of each
year, commencing , .
Ranking..................... The Series Senior Notes will be direct,
unsecured and unsubordinated obligations of the
Corporation ranking pari passu with all other
unsecured and unsubordinated obligations of the
Corporation. The Senior Note Indenture contains
no restrictions on the amount of additional
indebtedness that may be incurred thereunder by
the Corporation.
Redemption.................. The Series Senior Notes may not be redeemed
prior to maturity.
S-2
<PAGE>
DESCRIPTION OF THE SERIES SENIOR NOTES
Set forth below is a description of the specific terms of the Series
Senior Notes. This description supplements, and should be read together with,
the description of the general terms and provisions of the Senior Notes set
forth in the accompanying Prospectus under the caption "Description of the
Senior 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 Senior Note Indenture.
Certain capitalized terms used herein are defined in the Senior Note
Indenture.
GENERAL
The Series Senior Notes will be issued as a series of Senior Notes under
the Senior Note Indenture. The Series Senior Notes will be limited in
aggregate principal amount to $ .
The entire principal amount of the Series Senior Notes will mature and
become due and payable, together with any accrued and unpaid interest thereon,
on , . The Series Senior Notes are not subject to any sinking fund
provision.
INTEREST
Each Series Senior Note will bear interest at the rate of % per annum
(the "Securities Rate") from the date of original issuance, payable semi-
annually on and of each year commencing , . Interest will be
payable generally to the person in whose name the Series Senior Note is
registered at the close of business on the or regular record date
next preceding the or interest payment date. 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
Senior 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) with the
same force and effect as if made on such date.
REDEMPTION
The Series Senior Notes may not be redeemed prior to maturity.
DENOMINATIONS
The Series Senior Notes will be issuable in denominations of $ 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 Senior Notes ("Defeasance")
on and after the date certain conditions set forth in the Senior Note
Indenture are satisfied. See "Description of the Senior Notes--Defeasance and
Covenant Defeasance" in the accompanying Prospectus.
Under current United States federal income tax law, Defeasance would be
treated as an exchange of the relevant Series Senior Notes in which holders
of such Series Senior 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.
S-3
<PAGE>
The provisions of the Senior Note Indenture that provide for Covenant
Defeasance (as described in "Description of the Senior Notes--Defeasance and
Covenant Defeasance" in the accompanying Prospectus) will apply to the Series
Senior Notes.
Under current United States federal income tax law, unless accompanied by
other changes in the terms of the Senior Notes, Covenant Defeasance should not
be treated as a taxable exchange.
BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as the initial securities
depositary for the Series Senior Notes. The Series Senior Notes will be
issued only as fully registered securities registered in the name of Cede &
Co., DTC's nominee. One or more fully registered global Series Senior Note
certificates will be issued, representing in the aggregate the total principal
amount of Series Senior Notes, 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 Participants"). DTC is
owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., 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 Series Senior Notes within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Series
Senior Notes on DTC's records. The ownership interest of each actual purchaser
of Series Senior Notes ("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
Series Senior Notes. Transfers of ownership interests in the Series Senior
Notes 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 Series Senior Notes,
except in the event that use of the book-entry system for the Series Senior
Notes is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Series Senior
Notes. DTC's records reflect only the identity of the Direct Participants to
whose accounts such Series Senior Notes 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.
S-4
<PAGE>
Redemption notices will be sent to DTC. If less than all of the Series
Senior Notes are being redeemed, DTC will reduce the amount of interest of
each Direct Participant in the Series Senior Notes in accordance with its
procedures.
Although voting with respect to the Series Senior Notes is limited, in
those cases where a vote is required, neither DTC nor Cede & Co. will itself
consent or vote with respect to Series Senior Notes. Under its usual
procedures, DTC would mail an Omnibus Proxy to the Corporation 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
Series Senior Notes are credited on the record date (identified in a listing
attached to the Omnibus Proxy).
Payments on the Series Senior Notes 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 or the Corporation, subject
to any statutory or regulatory requirements as may be in effect from time to
time. Payment to DTC is the responsibility of the Corporation, 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 of an interest in a global
Series Senior Note will not be entitled to receive physical delivery of
Series Senior Notes. Accordingly, each Beneficial Owner must rely on the
procedures of DTC to exercise any rights under the Series Senior Notes. The
laws of some jurisdictions require that certain purchasers of securities take
physical delivery of securities in definitive form. Such laws may impair the
ability to transfer beneficial interests in a global Series Senior Note.
DTC may discontinue providing its services as securities depositary with
respect to the Series Senior Notes at any time by giving reasonable notice
to the Corporation. Under such circumstances, in the event that a successor
securities depositary is not obtained within 90 days, Series Senior Note
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 Series Senior Notes. In that event, certificates for the Series Senior
Notes 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 believes to be reliable,
but the Corporation takes no responsibility for the accuracy thereof. The
Corporation 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.
S-5
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement") among the Corporation and
and (the "Underwriters"), the Corporation has agreed
to sell to each of the Underwriters named below, and each of the Underwriters
has severally agreed to purchase the principal amount of Series Senior Notes
set forth opposite its name below. In the Underwriting Agreement, the several
Underwriters have agreed, subject to the terms and conditions set forth
therein, to purchase all the Series Senior Notes offered hereby if any of
the Series Senior Notes are purchased. In the event of default by an
Underwriter, the Underwriting Agreement provides that, in certain
circumstances, the purchase commitments of the nondefaulting Underwriters may
be increased or the Underwriting Agreement may be terminated.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
UNDERWRITERS SERIES SENIOR NOTES
------------ ----------------------
<S> <C>
$
------
Total........................................... $
======
</TABLE>
The Corporation has been advised by the Underwriters that the Underwriters
propose initially to offer the Series Senior Notes to the public at the
public offering price set forth on the cover page of this Prospectus
Supplement, and to certain dealers at such price less a concession not in
excess of % of the principal amount. The Underwriters may allow, and such
dealers may reallow, a discount not in excess of % of the principal amount
of the Series Senior Notes to certain other dealers. After the initial
public offering, the public offering price, concession and discount may be
changed.
In connection with the offering of the Series Senior Notes, the
Underwriters may engage in overallotment, stabilizing transactions and
syndicate covering transactions in accordance with Regulation M under the
Securities Exchange Act of 1934, as amended. Overallotment involves sales in
excess of the offering size, which creates a short position for the
Underwriters. Stabilizing transactions involve bids to purchase the Series
Senior Notes in the open market for the purpose of pegging, fixing or
maintaining the price of the Series Senior Notes. Syndicate covering
transactions involve purchases of the Series Senior Notes in the open
market after the distribution has been completed in order to cover short
positions. Such stabilizing transactions and syndicate covering transactions
may cause the price of the Series Senior Notes to be higher than it would
otherwise be in the absence of such transactions. Such activities, if
commenced, may be discontinued at any time.
The Corporation has 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.
S-6
<PAGE>
GLOSSARY
1933 Act................... The Securities Act of 1933, as amended.
1934 Act................... The Securities Exchange Act of 1934, as amended.
Corporation................ Duke Capital Corporation.
DTC........................ The Depository Trust Company, a "clearing
corporation" that initially will hold (through
its agents) a global certificate or certificates
evidencing the Series Senior Notes.
Securities Rate............ The per annum interest rate on the Series
Senior Notes as set forth under "Description of
the Series Senior Notes--Interest" in this
Prospectus Supplement.
Senior Note Indenture...... The indenture pursuant to which the Series
Senior Notes will be issued.
Senior Indenture Trustee... The trustee under the Senior Note Indenture;
initially, The Chase Manhattan Bank.
Series Senior Notes...... The Series % Senior Notes due , of the
Corporation.
S-7
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCOR-
PORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN CONNEC-
TION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE CORPORATION OR THE UNDERWRITERS. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER OR THEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE CORPORATION SINCE THE DATE HERE-
OF. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PROSPECTUS SUPPLEMENT
<S> <C>
Summary of Offering........................................................ S-2
Description of the Series Senior Notes................................... S-3
Underwriting............................................................... S-6
Glossary................................................................... S-7
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 3
Duke Capital Corporation................................................... 4
The Trusts................................................................. 8
Use of Proceeds............................................................ 8
Description of the Senior Notes............................................ 9
Description of the Junior Subordinated Notes............................... 18
Description of the Preferred Securities.................................... 25
Description of the Guarantees.............................................. 26
Accounting Treatment....................................................... 28
Plan of Distribution....................................................... 28
Legal Matters.............................................................. 29
Experts.................................................................... 29
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$[ ]
DUKE CAPITAL
CORPORATION
A SUBSIDIARY OF DUKE ENERGY CORPORATION
SERIES % SENIOR NOTES
DUE ,
----------------------
PROSPECTUS SUPPLEMENT
----------------------
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS SUBJECT TO COMPLETION, DATED MAY 8, 1998
$1,000,000,000
DUKE CAPITAL CORPORATION
SENIOR NOTES
JUNIOR SUBORDINATED NOTES
----------
DUKE CAPITAL FINANCING TRUST I
DUKE CAPITAL FINANCING TRUST II
DUKE CAPITAL FINANCING TRUST III
TRUST PREFERRED SECURITIES
FULLY AND UNCONDITIONALLY GUARANTEED, AS SET FORTH HEREIN, BY
DUKE CAPITAL CORPORATION
A SUBSIDIARY OF DUKE ENERGY CORPORATION
----------
Duke Capital Corporation, a Delaware corporation (the "Corporation"), may
offer, from time to time, (i) its senior notes (the "Senior Notes") in one or
more series or (ii) its junior subordinated notes (the "Junior Subordinated
Notes") in one or more series. The Senior Notes will be unsecured obligations
of the Corporation and will rank pari passu (equal in priority) with all other
unsecured and unsubordinated debt of the Corporation. 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.
Duke Capital Financing Trust I, Duke Capital Financing Trust II and Duke
Capital Financing Trust III, each a statutory business trust created 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. The Corporation
will own all the common securities (the "Common Securities" and, together with
the Preferred Securities, the "Trust Securities") representing common undivided
beneficial interests in the assets of the respective Trusts. 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 with the most
senior preferred stock that may be issued by 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 Notes of the Corporation
with terms corresponding to the terms of such Trust's Preferred Securities.
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.
As described herein, the Corporation will, through each Guarantee, the
Subordinated Note Indenture, the Junior Subordinated Notes of the related
series, the related Trust Agreement and the related Agreement as to Expenses
and Liabilities, fully and unconditionally guarantee all of each Trust's
obligations with respect to its Preferred Securities.
Specific terms of the Senior Notes of any series, the Junior Subordinated
Notes of any series or 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 securities, which will describe,
without limitation and where applicable, the following: (a) in the case of
Senior Notes or Junior Subordinated Notes, the specific designation, aggregate
principal amount, denominations, maturity, interest payment dates, interest
rate (or the method of determining such rate), any redemption, exchange or
sinking fund provisions, and any other specific terms of the offering, and (b)
in the case of Preferred Securities, 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 Senior Notes, Junior Subordinated Notes and 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 Senior Notes, Junior Subordinated Notes and Preferred Securities shall
not exceed $1,000,000,000.
The Prospectus Supplement relating to any series of Senior Notes or Junior
Subordinated Notes or the Preferred Securities will contain information
concerning material United States federal income tax considerations, if
applicable to such Senior Notes, Junior Subordinated Notes or 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 Senior Notes, Junior Subordinated Notes and 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 Senior
Notes, Junior Subordinated Notes or 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 Senior Notes,
Junior Subordinated Notes or Preferred Securities.
----------
May , 1998
<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 has filed with the Commission a registration statement on
Form 10 (the "Form 10") for the registration of its common stock, without par
value, pursuant to Section 12(g) of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and, as a result, is subject to the informational
requirements of the 1934 Act, and in accordance therewith will file periodic
and current reports and other information with the Commission. The
Registration Statement, the Form 10 and such reports 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. The Commission maintains a Web site (http://www.sec.gov) that contains
reports, 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
its sole purpose is investing the proceeds of the sale of its Trust Securities
in Junior Subordinated Notes. The Corporation does not expect that any of the
Trusts will be filing reports under the 1934 Act with the Commission.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Form 10 filed by the Corporation with the Commission is incorporated in
and made a part of this Prospectus by reference.
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 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 CAPITAL
CORPORATION, P.O. BOX 1005, CHARLOTTE, NORTH CAROLINA 28201, TELEPHONE (704)
382-3853 OR (800) 488-3853 (TOLL-FREE).
3
<PAGE>
DUKE CAPITAL CORPORATION
The Corporation is a wholly-owned subsidiary of Duke Energy Corporation
("Duke Energy") which, under the name of Duke Power Company, completed a
merger with PanEnergy Corp ("PanEnergy") on June 18, 1997 and changed its name
to its present form. As a result, PanEnergy became a wholly-owned subsidiary
of Duke Energy. Subsequent to the merger, Duke Energy contributed all of the
common stock of PanEnergy to the Corporation, which, under the name of Church
Street Capital Corp., served as the parent company of Duke Energy's non-
utility operations. The combination of the Corporation and PanEnergy was
accounted for similar to a pooling of interests and, accordingly, the
consolidated financial statements for periods prior to the combination were
restated to include the operations of PanEnergy. The Corporation provides
financing and credit enhancement services for its subsidiaries and conducts
its operating activities through its business segments as follows:
Energy Transmission
The Corporation is 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 Pipe Line 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.
[LOGO OF U.S. MAP DEPICTING DELIVERY MARKETS]
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., Duke Energy Marketing, L.P., and Duke/Louis Dreyfus L.L.C.,
the Corporation markets natural gas and electric power and provides risk
management services to utilities, municipalities and other large energy users.
4
<PAGE>
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
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 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.
The scope of the activities of Energy Services is shown below.
[LOGO OF U.S. MAP DEPICTING ENERGY SERVICES]
[LOGO OF WORLD MAP DEPICTING ENERGY SERVICES]
5
<PAGE>
Other Operations
Crescent Resources, Inc. ("Crescent Resources") conducts real estate
management, forestry, and commercial and residential real estate development
operations. DukeNet Communications, Inc. ("DukeNet") develops and manages
communications systems, including fiber optic and wireless digital network
services.
The scope of the activities of Crescent Resources and DukeNet is shown
below.
[LOGO OF U.S. MAP DEPICTING CRESCENT RESOURCES AND DUKENET]
The principal executive offices of the Corporation are located at 422 South
Church Street, Charlotte, North Carolina 28202, telephone (704) 594-6200.
6
<PAGE>
The following financial information is qualified in its entirety by the
financial statements included in the Form 10 incorporated by reference in this
Prospectus. See "Incorporation of Certain Documents by Reference."
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1997(1) 1996(1) 1995(1)
--------- -------- --------
<S> <C> <C> <C>
INCOME STATEMENT DATA
Operating Revenues.................................. $11,914.8 $7,816.1 $5,187.7
Operating Expenses.................................. 11,079.0 6,946.8 4,393.9
--------- -------- --------
Operating Income................................... 835.8 869.3 793.8
Other Income, Net................................... 36.7 20.1 18.0
--------- -------- --------
Earnings Before Interest and Taxes.................. 872.5 889.4 811.8
Interest Expense.................................... 214.2 232.1 239.5
Income Before Extraordinary Item.................... 380.3 399.0 348.1
Net Income.......................................... 380.3 382.3 348.1
</TABLE>
- --------
(1) Data reflects accounting for the combination of the Corporation and
PanEnergy on June 30, 1997 similar to a pooling of interests. As a result,
the data gives effect to the combination as if it had occurred as of
January 1, 1995.
<TABLE>
<S> <C> <C> <C>
BALANCE SHEET DATA
Property, Plant and Equipment, net ................. $ 6,065.2 $5,800.7 $5,429.1
Total Assets........................................ 11,096.8 9,751.7 8,225.8
Short-term Debt .................................... 137.7 359.1 150.0
Long-term Debt, including current portion........... 2,941.3 2,203.3 2,401.9
</TABLE>
FINANCIAL RATIOS
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges (1)................. 3.7 3.6 3.2 2.7 2.1
</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.
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 January 29, 1998. 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 Agreement will be qualified as an indenture under the Trust Indenture
Act of 1939, as amended (the "1939 Act"). 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.
Each Trust's business and affairs will be conducted by its trustees, which
shall be appointed by the Corporation as the holder of the Common Securities:
two officers of the Corporation as Administrative Trustees; The Chase
Manhattan Bank as Property Trustee; and Chase Manhattan Bank Delaware as
Delaware Trustee. The Property Trustee of each Trust will act as the indenture
trustee with respect to such Trust for purposes of compliance with the
provisions of the 1939 Act.
The principal place of business of each Trust shall be c/o the Corporation,
422 South Church Street, Charlotte, North Carolina 28202, telephone (704) 594-
6200.
Reference is made to the Prospectus Supplement relating to the Preferred
Securities of a Trust for further information concerning such Trust.
USE OF PROCEEDS
Each Trust will invest the proceeds received from the sale of the Preferred
Securities in Junior Subordinated Notes. Except as may be otherwise described
in an applicable Prospectus Supplement, the net proceeds received by the
Corporation from such investment and any proceeds received from the sale of
its Senior Notes or other sales of its Junior Subordinated Notes will be used
for general corporate purposes, including capital expenditures, working
capital, debt repayments and advances to affiliates.
8
<PAGE>
DESCRIPTION OF THE SENIOR NOTES
Set forth below is a description of the terms of the Senior Notes. The
following description does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, the Senior Indenture, dated as
of April 1, 1998, between the Corporation and The Chase Manhattan Bank, as
trustee (the "Senior Indenture Trustee"), as to be supplemented, with respect
to a series of Senior Notes, by a supplemental indenture (each, a
"Supplemental Indenture") thereto establishing such series of Senior Notes
(the Senior Indenture, as so supplemented and as such indenture may be further
supplemented from time to time, is hereinafter referred to as the "Senior Note
Indenture"), the form of which Senior 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 Senior Notes will include
those stated in the Senior Note Indenture with respect to such series and
those made a part of the Senior Note Indenture by reference to the 1939 Act.
Certain capitalized terms used herein are defined in the Senior Note
Indenture.
GENERAL
The Senior Notes will be issued as one or more series of unsecured senior
debt securities under the Senior Note Indenture and will rank pari passu with
all other unsecured and unsubordinated debt of the Corporation. The Senior
Note Indenture does not limit the aggregate principal amount of Senior Notes
that may be issued thereunder and provides that Senior Notes may be issued
from time to time in one or more series pursuant to supplemental indentures or
pursuant to resolutions of the Corporation's Board of Directors or a duly
authorized committee thereof. The Senior Notes of a series need not be issued
at the same time or bear interest at the same rate or mature on the same date.
The Corporation conducts its business through subsidiaries. Accordingly, the
ability of the Corporation to meet its obligations under the Senior Notes will
be dependent on the earnings and cash flows of its subsidiaries and the
ability of its subsidiaries to pay dividends or to advance or repay funds to
the Corporation. In addition, the rights of the Corporation and its creditors
to participate in the assets of any subsidiary upon the latter's liquidation
or recapitalization will be subject to the prior claims of such subsidiary's
creditors.
Reference is made to the applicable Prospectus Supplement (the "Prospectus
Supplement") for the following terms of any particular series of Senior Notes:
(i) the title of such series of Senior Notes; (ii) any limit on the aggregate
principal amount of such Senior Notes; (iii) the date or dates on which the
principal of any of such Senior Notes will be payable or the method by which
such date or dates will be determined, and the right, if any, of the
Corporation to shorten or extend the date on which the principal of any Senior
Notes of the series is payable; (iv) the rate or rates at which any of such
Senior 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 any of such Senior Notes will be payable, if other than the
principal corporate trust office of the Senior Indenture Trustee; (viii) the
obligation, if any, of the Corporation to redeem or purchase any of such
Senior 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 any of such Senior Notes may be redeemed or purchased pursuant to
such obligation; (ix) the terms and conditions, if any, on which any of such
Senior Notes may be redeemed at the option of the Corporation; (x) if
applicable, the fact that certain terms of the Senior Note Indenture which are
described below under the caption "Defeasance and Covenant Defeasance" will
not apply to any of such Senior Notes; (xi) the currency, currencies or
currency units in which the principal of and any premium and interest on any
of such Senior 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;
(xii) if the principal of or any premium or interest on any of such Senior
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 Senior Notes are stated to be payable, then the currency, currencies or
currency units in which such payments will be made, the terms and
9
<PAGE>
conditions upon which such election is to be made and the amount so payable
(or the manner of determining any such amount); (xiii) the portion of the
principal amount of any of such Senior Notes which will be payable upon
declaration of acceleration of the maturity thereof, if other than the entire
principal amount thereof; (xiv) whether any of such Senior 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"; (xv) any addition
to, change in or deletion from the Events of Default or covenants with respect
to any of such Senior Notes; (xvi) any index or formula used to determine the
amount of principal of or any premium or interest on any of such Senior Notes
and the manner of determining any such amounts; (xvii) if the principal amount
payable at the stated maturity of any of such Senior 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 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 (xviii) any other terms of
such Senior Notes.
Unless otherwise indicated in the Prospectus Supplement relating thereto,
the Senior Notes will be issued only in fully registered form, without
coupons, and no service charge will be made for any registration of transfer
or exchange of the Senior Notes, but the Corporation may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
Senior Notes, including Original Issue Discount Senior Notes, may be offered
and sold at a substantial discount below their principal amount. Special
United States federal income tax and other considerations, if any, applicable
thereto will be described in the applicable Prospectus Supplement. In
addition, certain special United States federal income tax or other
considerations, if any, applicable to any Senior Notes which are denominated
in a currency or currency unit other than U.S. dollars may be described in the
applicable Prospectus Supplement.
The Senior Note Indenture does not contain provisions that afford any
holders of Senior Notes protection in the event of a highly leveraged
transaction involving the Corporation.
GLOBAL SECURITIES
Some or all of the Senior Notes of a series of Senior Notes 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.
The specific terms of the depositary arrangement with respect to any Senior
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,
Senior 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 amounts of the Senior 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 Senior Notes or by the
Corporation, if such Senior 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.
10
<PAGE>
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 Senior
Notes represented by such Global Security for all purposes under the Senior
Note Indenture. Except as set forth below, owners of beneficial interests in
the Global Security will not be entitled to have the Senior Notes represented
by such Global Security registered in their names, will not receive or be
entitled to receive physical delivery of the Senior Notes in definitive form
and will not be considered the owners or holders thereof under the Senior Note
Indenture.
Payment of principal of and any premium and interest on Senior 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 Senior Notes. None of the Corporation, the Senior Indenture
Trustee, any Paying Agent or the Security Registrar for such Senior 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 Senior Notes or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
The Corporation expects that a Depositary for Senior 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 Senior 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 Senior Notes in definitive registered form in
exchange for the Global Security or Global Securities representing such Senior
Notes. In addition, the Corporation may at any time determine not to have any
Senior Notes represented by one or more Global Securities and, in such event,
will issue Senior Notes in definitive registered form in exchange for the
Global Securities representing such Senior 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 the Senior Notes represented by such
Global Security equal in principal amount to such beneficial interest and to
have such Senior Notes registered in its name.
EVENTS OF DEFAULT
The following will be Events of Default under the Senior Note Indenture with
respect to Senior Notes of any series issued thereunder (unless inapplicable
to the particular series or otherwise modified or deleted in a supplemental
indenture, as set forth in the applicable Prospectus Supplement): (a) failure
to pay principal of or any premium on any Senior Note of that series when due;
(b) failure to pay any interest on any Senior Note of that 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
pursuant to the terms of such Senior Notes; (c) failure to make any sinking
fund payment when and as due by the terms of any Senior Note of that series,
continued for 60 days; (d) failure to perform any covenant of the Corporation
in the Senior Note Indenture (other than a covenant which has expressly been
included in the Senior Note Indenture solely for the benefit of series of
Senior Notes other than that series), continued for 90 days after written
notice has been given by the Senior Indenture Trustee or the holders of at
least 33% in principal amount of the outstanding Senior Notes of that series
(unless such time period
11
<PAGE>
is extended by the Senior Indenture Trustee or by the Senior Indenture Trustee
and the holders of a principal amount of Senior Notes of that series not less
than the principal amount of Senior Notes the holders of which had given such
notice of default; provided, however, that the Senior Indenture Trustee, or
the Senior 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, as further provided in
the Senior Note Indenture); (e) certain events in bankruptcy, insolvency or
reorganization of the Corporation; and (f) any other Event of Default provided
with respect to Senior Notes of that series.
If an Event of Default with respect to Senior Notes of a series occurs and
is continuing, then the Senior Indenture Trustee or the holders of not less
than 33% in principal amount of the outstanding Senior Notes of that series
may, by notice to the Corporation (and to the Senior Indenture Trustee if
given by holders), declare to be immediately due and payable the principal
amount (or, if any Senior Notes of that series are Original Issue Discount
Senior Notes, such portion of the principal amount as may be specified in the
terms of the series) of all Senior Notes of that series. However, the 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 Senior Indenture Trustee, if (i) the
Corporation has paid or deposited with the Senior Indenture Trustee a sum
sufficient to pay all overdue interest on the Senior Notes of such series, the
principal of and any premium on the Senior Notes of such series which have
become due otherwise than by such declaration of acceleration and interest
thereon at the rate or rates prescribed therefor in such Senior Notes,
interest on overdue interest at the rate or rates prescribed therefor in the
Senior Notes of such series (to the extent permitted by applicable law), and
all amounts due to the Senior Indenture Trustee under the Senior Note
Indenture and (ii) all Events of Default with respect to the Senior Notes of
such series (other than the nonpayment of the principal of the Senior Notes of
such series which became due solely by such declaration of acceleration) have
been cured or waived. Reference is made to the Prospectus Supplement relating
to any series of Senior Notes which are Original Issue Discount Senior Notes
for the particular provisions relating to acceleration of a portion of the
principal amount of such Original Issue Discount Senior Notes upon the
occurrence of an Event of Default and the continuation thereof.
Subject to the provisions of the Senior Note Indenture relating to the
duties of the Senior Indenture Trustee in case of a continuing Event of
Default under the Senior Note Indenture, the Senior Note Indenture provides
that the Senior Indenture Trustee will be under no obligation to exercise any
of its rights or powers under the Senior Note Indenture at the request or
direction of any of the holders unless such holders shall have offered to the
Senior 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 Senior Indenture Trustee, the
holders of a majority in principal amount of the outstanding Senior Notes of
any series have the right to direct the time, method and place of conducting
any proceedings for any remedy available to the Senior Indenture Trustee or
exercising any trust or power conferred on the Senior Indenture Trustee with
respect to the Senior Notes of that series. The Senior Indenture Trustee may
withhold notice to the holders of Senior Notes of any series of any default
(except in payment of principal or interest) with respect to such series of
Senior Notes, if it in good faith considers it in the interest of holders to
do so.
No holder of a Senior Note of any series will have any right to institute
any proceeding with respect to the Senior Note Indenture or for any remedy
thereunder unless such holder has previously given the Senior Indenture
Trustee written notice of a continuing Event of Default with respect to the
Senior Notes of that series and unless the holders of not less than a majority
in principal amount of the outstanding Senior Notes of that series have made
such written request, and offered reasonable indemnity, to the Senior
Indenture Trustee to institute such proceeding, and the Senior Indenture
Trustee has not received from the holders of a majority in principal amount of
the outstanding Senior Notes of that 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 Senior Note will have an absolute and unconditional right to
receive payment of the principal of and any premium and, subject to certain
limitations, interest on such Senior Note on the stated maturity thereof (or,
in the case of redemption, on the Redemption Date) and to institute suit for
the enforcement of any such payment.
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<PAGE>
The Corporation is required to furnish annually to the Senior 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
Senior Note Indenture or, if there has been a default, specifying such default
and its status.
REGISTRATION AND TRANSFER
If the Senior Notes of a series (or of a series and specified tenor) are to
be redeemed, the Corporation will not be required to (i) issue, register the
transfer of, or exchange any Senior Notes of that series (or of that series
and specified tenor, as the case may be) during a period of fifteen days
immediately preceding the date notice is mailed identifying the Senior Notes
of that series that are called for redemption or (ii) register the transfer of
or exchange any Senior Note so selected for redemption, in whole or in part,
except the unredeemed portion of any such Senior Note being redeemed in part.
DENOMINATIONS
Unless otherwise set forth in the applicable Prospectus Supplement, the
Senior Notes will be issuable in denominations of $1,000 or any integral
multiples thereof.
PAYMENT AND PAYING AGENT
Payment of principal of any Senior Notes will be made only against surrender
to the Paying Agent of such Senior Notes. Interest on Senior 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 Senior 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 Senior Notes.
Unless otherwise set forth in the applicable Prospectus Supplement, the
Senior Indenture Trustee will act as Paying Agent with respect to the Senior
Notes and the principal corporate trust office of the Senior 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 Senior 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 Senior Notes will thereafter look only to the Corporation
for payment thereof.
MODIFICATION; WAIVER
The Corporation and the Senior Indenture Trustee may amend or modify (with
certain exceptions) the Senior Note Indenture with the consent of the holders
of not less than a majority in aggregate principal amount of the outstanding
Senior Notes of all series of Senior 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 Senior Note affected thereby,
(a) change the stated maturity of the principal of, or any installment of
principal of or interest on, any Senior Note; (b) reduce the principal amount
of, or the rate of interest on, or any premium payable upon the redemption of,
any Senior Note or reduce the amount of principal of any Senior 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
Senior Note; (d) impair the right to institute suit for the enforcement of any
such payment on any Senior Note on or after the stated maturity thereof (or
date of redemption); (e) reduce the percentage in principal amount of Senior
Notes of any series, the consent of whose holders is required to amend or
modify the Senior Note Indenture, to waive compliance with certain provisions
of the Senior Note Indenture or to waive certain defaults; or (f) with certain
exceptions, modify the above provisions or the sections of the Senior Note
Indenture governing waiver of certain covenants and past defaults.
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In addition, the Corporation and the Senior Indenture Trustee may execute,
without the consent of any holders of the Senior Notes, supplemental
indentures for certain other purposes, including for the purpose of creating a
new series of Senior Notes.
The holders of not less than a majority in aggregate principal amount of the
outstanding Senior Notes of any series may waive, insofar as that series is
concerned, compliance by the Corporation with certain restrictive provisions
of the Senior Note Indenture. The holders of not less than a majority in
aggregate principal amount of the outstanding Senior Notes of all series under
the Senior Note Indenture with respect to which a default has occurred and is
continuing (voting as one class) may waive any past default under the Senior
Note Indenture with respect to all such series, except a default in the
payment of principal of, or any premium or interest on any Senior Note of such
series or in respect of a covenant or provision under the Senior Note
Indenture which cannot be amended or modified without the consent of the
holder of each outstanding Senior Note affected thereby.
CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER
The Senior Note Indenture provides that the Corporation may consolidate or
merge with or into another corporation or other entity of a sort specified in
the Senior 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, if any, assumes by supplemental indenture the Corporation's
obligations under the Senior Note Indenture and the Senior Notes issued
thereunder and the Corporation delivers an officers' certificate and an
opinion of counsel to the Senior Indenture Trustee stating that all conditions
precedent in the Senior 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 Senior Note Indenture and
the Senior Notes issued thereunder, and the satisfaction of any other
conditions precedent provided for in the Senior Note Indenture, the successor
will succeed to and be substituted for the Corporation under the Senior Note
Indenture and the Corporation will be relieved of its obligations under the
Senior Note Indenture and the Senior Notes.
NEGATIVE PLEDGE
The Senior Note Indenture provides that the Corporation will not, nor will
it permit any Principal Subsidiary of the Corporation to, while any of the
Senior Notes remain outstanding, create, or suffer to be created or to exist,
any mortgage, lien, pledge, security interest or other encumbrance of any kind
upon any Principal Property of the Corporation or any Principal Subsidiary of
the Corporation or upon any shares of stock of any Principal Subsidiary of the
Corporation, whether such Principal Property is, or shares of stock are, now
owned or hereafter acquired, to secure any indebtedness for borrowed money of
the Corporation, unless it makes effective provision whereby the Senior Notes
then outstanding will be secured by such mortgage, lien, pledge, security
interest or other encumbrance equally and ratably with any and all
indebtedness for borrowed money thereby secured so long as any such
indebtedness shall be so secured; provided, however, that neither the
Corporation nor any Principal Subsidiary of the Corporation will be precluded
from creating, or from suffering to be created or to exist, any mortgages,
liens, pledges, security interests or other encumbrances, or any agreements,
with respect to (i) purchase money mortgages, or other purchase money liens,
pledges, security interests or other encumbrances of any kind upon property
acquired after the date of the Senior Note Indenture by the Corporation or any
Principal Subsidiary of the Corporation, or mortgages, liens, pledges,
security interests or other encumbrances of any kind existing on any property
or any shares of stock at the time of the acquisition thereof (including
mortgages, liens, pledges, security interests or other encumbrances which
exist on any property or any shares of stock of a Person which is consolidated
with or merged with or into the Corporation or any Principal Subsidiary of the
Corporation or which transfers or leases all or substantially all of its
properties to the Corporation or any Principal Subsidiary of the Corporation),
or conditional sales agreements or other title retention agreements and leases
in the nature of title retention agreements with respect to any property
acquired after the date of the Senior Note Indenture; provided, however, that
no such mortgage, lien, pledge, security interest or other encumbrance will
extend to or cover any other property of the Corporation or such Principal
Subsidiary of the Corporation; (ii) mortgages, liens, pledges, security
interests or other encumbrances of any kind upon any property of the
Corporation or any Principal Subsidiary of the Corporation or any shares of
stock of any Principal Subsidiary of the Corporation existing as of the date
of the initial issuance of the Senior Notes or upon the property or any shares
of stock of any corporation, which mortgages, liens, pledges, security
interests or other encumbrances
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existed at the time such corporation became a Principal Subsidiary of the
Corporation; liens for taxes or assessments or other governmental charges or
levies; pledges or deposits to secure obligations under workers' compensation
laws, unemployment insurance and other social security legislation, including
liens of judgments thereunder which are not currently dischargeable; pledges
or deposits to secure performance in connection with bids, tenders, contracts
(other than contracts for the payment of money) or leases to which the
Corporation or any Principal Subsidiary of the Corporation is a party; pledges
or deposits to secure public or statutory obligations of the Corporation or
any Principal Subsidiary of the Corporation; builders', materialmen's,
mechanics', carriers', warehousemen's, workers', repairmen's, operators',
landlords' or other like liens in the ordinary course of business, or deposits
to obtain the release of such liens; pledges or deposits to secure, or in lieu
of, surety, stay, appeal, indemnity, customs, performance or return-of-money
bonds; other pledges or deposits for similar purposes in the ordinary course
of business; liens created by or resulting from any litigation or proceeding
which at the time is being contested in good faith by appropriate proceedings;
liens incurred in connection with the issuance of bankers' acceptances and
lines of credit, bankers' liens or rights of offset and any security given in
the ordinary course of business to banks or others to secure any indebtedness
payable on demand or maturing within 12 months of the date that such
indebtedness is originally incurred; liens incurred in connection with
repurchase, swap or other similar agreements (including, without limitation,
commodity price, currency exchange and interest rate protection agreements);
leases made, or existing on property acquired, in the ordinary course of
business; liens securing industrial revenue or pollution control bonds; liens,
pledges, security interests or other encumbrances on any property arising in
connection with any defeasance, covenant defeasance or in-substance defeasance
of indebtedness of the Corporation or any Principal Subsidiary of the
Corporation, including the Senior Notes; liens created in connection with, and
created to secure, a non-recourse obligation; zoning restrictions, easements,
licenses, rights-of-way, restrictions on the use of property or minor
irregularities in title thereto, which do not, in the opinion of the
Corporation, materially impair the use of such property in the operation of
the business of the Corporation or the value of such property for the purpose
of such business; (iii) mortgages, liens, pledges, security interests or other
encumbrances in favor of the United States of America, any State, any foreign
country or any department, agency or instrumentality or political subdivision
of any such jurisdiction, to secure partial, progress, advance or other
payments pursuant to any contract or statute or to secure any indebtedness
incurred for the purpose of financing all or any part of the purchase price or
the cost of constructing or improving the property subject to such mortgages,
including, without limitation, mortgages to secure indebtedness of the
pollution control or industrial revenue bond type; (iv) indebtedness which may
be issued by the Corporation or any Principal Subsidiary of the Corporation in
connection with a consolidation or merger of the Corporation or any Principal
Subsidiary of the Corporation with or into any other Person (which may be an
affiliate of the Corporation or any Principal Subsidiary of the Corporation)
in exchange for or otherwise in substitution for secured indebtedness of such
Person ("Third Party Debt") which by its terms (1) is secured by a mortgage on
all or a portion of the property of such Person, (2) prohibits secured
indebtedness from being incurred by such Person, unless the Third Party Debt
shall be secured equally and ratably with such secured indebtedness or (3)
prohibits secured indebtedness from being incurred by such Person; (v)
indebtedness of any Person which is required to be assumed by the Corporation
or any Principal Subsidiary of the Corporation in connection with a
consolidation or merger of such Person, with respect to which any property of
the Corporation or any Principal Subsidiary of the Corporation is subjected to
a mortgage, lien, pledge, security interest or other encumbrance; (vi)
mortgages, liens, security interests or other encumbrances on property held or
used by the Corporation or any Principal Subsidiary of the Corporation in
connection with the exploration for, or development, gathering, production,
storage or marketing of, natural gas, oil or other minerals (including
liquified gas and synthetic gas); (vii) mortgages, liens, pledges, security
interests or other encumbrances of any kind upon any property acquired,
constructed, developed or improved by the Corporation or any Principal
Subsidiary of the Corporation (whether alone or in association with others)
after the date of the Senior Note Indenture which are created prior to, at the
time of, or within 18 months after such acquisition (or in the case of
property constructed, developed or improved, after the completion of such
construction, development or improvement and commencement of full commercial
operation of such property, whichever is later) to secure or provide for the
payment of any part of the purchase price or cost thereof; provided that in
the case of such construction, development or improvement the mortgages,
liens, pledges, security interests or other encumbrances shall not apply to
any property theretofore owned by the Corporation or any Principal Subsidiary
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of the Corporation other than theretofore unimproved real property; (viii)
mortgages, liens, pledges, security interests and other encumbrances in favor
of the Corporation, one or more Principal Subsidiaries of the Corporation, one
or more wholly-owned Subsidiaries of the Corporation or any of the foregoing
in combination; (ix) the replacement, extension or renewal (or successive
replacements, extensions or renewals), as a whole or in part, of any mortgage,
lien, pledge, security interest or other encumbrance, or of any agreement,
referred to above in clauses (i) through (viii) inclusive, or the replacement,
extension or renewal (not exceeding the principal amount of indebtedness
secured thereby together with any premium, interest, fee or expense payable in
connection with any such replacement, extension or renewal) of the
indebtedness secured thereby; provided that such replacement, extension or
renewal is limited to all or a part of the same property that secured the
mortgage, lien, pledge, security interest or other encumbrance replaced,
extended or renewed (plus improvements thereon or additions or accessions
thereto); or (x) any other mortgage, lien, pledge, security interest or other
encumbrance not excepted by the foregoing clauses (i) through (ix); provided
that immediately after the creation or assumption of such mortgage, lien,
pledge, security interest or other encumbrance, the aggregate principal amount
of indebtedness for borrowed money of the Corporation secured by all
mortgages, liens, pledges, security interests and other encumbrances created
or assumed under the provisions of clause (x) will not exceed an amount equal
to 10% of common stockholder's equity of the Corporation, as shown on its
consolidated balance sheet for the accounting period occurring immediately
prior to the creation or assumption of such mortgage, lien, pledge, security
interest or other encumbrance.
For the purposes of the preceding paragraph, the following terms have the
meanings hereafter specified: "Principal Property" means any natural gas
pipeline, natural gas gathering system, natural gas storage facility, natural
gas processing plant or other plant or facility located in the United States
that in the opinion of the Board of Directors or management of the Corporation
is of material importance to the business conducted by the Corporation and its
consolidated subsidiaries taken as a whole; "Principal Subsidiary" means any
Subsidiary which owns a Principal Property; and "Subsidiary" means, as to any
Person, a corporation of which more than 50% of the outstanding shares of
stock having ordinary voting power (other than stock having such power only by
reason of contingency) is at the time owned, directly or indirectly through
one or more intermediaries, or both, by such Person.
DEFEASANCE AND COVENANT DEFEASANCE
The Senior Note Indenture provides that, unless the terms of a given series
of Senior Notes provide otherwise, the Corporation may cause itself to be (a)
discharged from its obligations (with certain exceptions) with respect to any
Senior Notes or series of Senior Notes ("Defeasance") and (b) released from
its obligations under certain covenants especially established in respect of
any Senior Notes or series of Senior Notes and from the obligations, if
applicable, described above under the caption "Negative Pledge" with respect
to any such Senior Notes ("Covenant Defeasance"), on and after the date
certain conditions set forth in the Senior Note Indenture are satisfied. Such
conditions include the irrevocable deposit with the Senior Indenture Trustee,
in trust for such purpose, of money and/or Government Obligations (as defined
in the Senior 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 Senior Notes on the
stated maturities of such payments or upon redemption.
Defeasance by the Corporation with respect to any Senior Notes of a series
is permitted under certain circumstances under the Senior Note Indenture
notwithstanding the Corporation's prior Covenant Defeasance with respect to
Senior Notes of that series. Following a Defeasance, payment of any of such
Senior Notes may not be accelerated because of an Event of Default (as defined
in the Senior Note Indenture). Following a Covenant Defeasance, payment of
Senior Notes may not be accelerated under the Senior Note Indenture by
reference to the covenants noted under clause (b) above. However, if such an
acceleration were to occur, the realizable value at the acceleration date of
the money and Government Obligations in the defeasance trust could be less
than the principal and interest then due on such Senior Notes, in that the
required deposit in the defeasance trust is based upon scheduled cash flows
rather than market value, which will vary depending upon interest rates and
other factors.
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Under current United States federal income tax law, the Defeasance
contemplated in the preceding paragraphs would be treated as an exchange of
the relevant Senior Notes in which holders of Senior 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.
Under current United States federal income tax law, unless accompanied by
other changes in the terms of the Senior Notes, Covenant Defeasance should not
be treated as a taxable exchange.
INFORMATION CONCERNING THE SENIOR INDENTURE TRUSTEE
The Chase Manhattan Bank, the Senior Indenture Trustee, will also serve as
the Subordinated Indenture Trustee and as Property Trustee and Guarantee
Trustee with respect to any Preferred Securities issued by the Trusts. The
Corporation and certain of its affiliates maintain deposit accounts and
banking relationships with The Chase Manhattan Bank.
GOVERNING LAW
The Senior Note Indenture and the Senior Notes will be governed by, and
construed in accordance with, the internal laws of the State of New York.
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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 April 1, 1998, between the Corporation and The Chase
Manhattan Bank, as trustee (the "Subordinated 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.
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 supplemental indentures 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 of 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, and the right, if any,
of the Corporation to shorten or extend the date on which the principal of any
Junior Subordinated Notes of the series is payable; (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
Subordinated 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 terms
and conditions, if any, on which such Junior Subordinated Notes may be
redeemed at the option of the Corporation; (x) if applicable, the fact that
certain 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; (xi) 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; (xii)
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); (xiii) the portion of
the principal amount of any such Junior Subordinated Notes which will be
payable upon declaration of acceleration of the Maturity thereof,
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if other than the entire principal amount thereof; (xiv) 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"; (xv) any addition to, change in or deletion from the Subordinated
Note Indenture Events of Default or the covenants of the Corporation with
respect to such Junior Subordinated Notes; (xvi) 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; (xvii) 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 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
(xviii) any other terms of such Junior Subordinated Notes.
Unless otherwise indicated in the Prospectus Supplement relating thereto,
the Junior Subordinated Notes will be issued only in fully registered form,
without coupons, and no service charge will be made for any registration of
transfer or exchange of the Junior Subordinated Notes, but the Corporation may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
The interest rate and interest and other payment dates of each series of
Junior Subordinated Notes issued to a Trust will correspond to those of the
related Preferred Securities of such Trust 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, subject to 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
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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.
The Corporation conducts its business through subsidiaries. Accordingly, the
ability of the Corporation to meet its obligations under the Junior
Subordinated Notes will be dependent on the earnings and cash flows of its
subsidiaries and the ability of its subsidiaries to pay dividends or to
advance or repay funds to the Corporation. In addition, the rights of the
Corporation and its creditors to participate in the assets of any subsidiary
upon the latter's liquidation or recapitalization will be subject to the prior
claims of such subsidiary's creditors.
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 December 31, 1997,
Senior Indebtedness of the Corporation aggregated approximately $933,788,680.
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.
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
Subordinated Indenture Trustee, any Paying Agent or the Security Registrar for
such Subordinated Notes will have any responsibility or liability for any
aspect of the
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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
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 represented by such Global Security
equal in principal amount to such beneficial interest and to have such
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 inapplicable to
the particular series or otherwise deleted or modified in a supplemental
indenture, as set forth in the applicable Prospectus Supplement); (a) failure
to pay principal of or any premium on 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 pursuant to the terms of such Junior
Subordinated Notes; (c) failure to perform any covenant of the Corporation in
the Subordinated Note Indenture (other than a covenant which has expressly
been included in the Subordinated Note Indenture solely for the benefit of a
series of Junior Subordinated Notes other than that series), continued for 90
days after written notice has been given by the Subordinated 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
Subordinated Indenture Trustee or by the Subordinated 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 Subordinated
Indenture Trustee, or the Subordinated 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 Subordinated
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 Subordinated 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
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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
Subordinated Indenture Trustee, if (i) the Corporation has paid or deposited
with the Subordinated Indenture Trustee a sum sufficient to pay all overdue
interest on the Junior Subordinated Notes of such series, the principal of and
any premium on the Junior Subordinated Notes of such series which have become
due otherwise than by such declaration of acceleration and interest thereon at
the rate or rates prescribed therefor in such Junior Subordinated Notes,
interest on overdue interest at the rate or rates prescribed therefor in such
Junior Subordinated Notes (to the extent permitted by applicable law), and all
amounts due to the Subordinated Indenture Trustee under the Subordinated Note
Indenture 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,
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 Subordinated Indenture Trustee in case of a continuing
Subordinated Note Indenture Event of Default, the Subordinated Note Indenture
provides that the Subordinated 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 Subordinated 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
Subordinated 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 Subordinated Indenture Trustee or exercising any trust or
power conferred on the Subordinated Indenture Trustee with respect to such
Subordinated Notes. The Subordinated 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
Subordinated 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 Subordinated
Indenture Trustee to institute such proceeding, and the Subordinated 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 any premium 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 Subordinated
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.
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REGISTRATION AND TRANSFER
If the Junior Subordinated Notes of a series are to be redeemed, the
Corporation will not be required to (i) issue, register the transfer of, or
exchange any Junior Subordinated Notes of that series during a period of
fifteen days immediately preceding the date notice is mailed 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.
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
Subordinated 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
Subordinated Indenture Trustee will act as Paying Agent with respect to the
Junior Subordinated Notes and the principal corporate trust office of the
Subordinated 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 Subordinated 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 Subordinated Indenture Trustee may execute, without the
consent of any holders of Subordinated Notes, supplemental indentures for
certain other purposes, including for the purpose of creating a new series of
Subordinated Notes.
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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.
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, if any, assumes by supplemental
indenture the Corporation's obligations under the Subordinated Note Indenture
and the Subordinated Notes issued thereunder and the Corporation delivers to
the Subordinated 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 Subordinated 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.
Defeasance by the Corporation with respect to any Subordinated Notes of a
series is permitted under certain circumstances under the Subordinated Note
Indenture notwithstanding the Corporation's prior Covenant Defeasance with
respect to Subordinated Notes of that series. Following a Defeasance, payment
of any of such Subordinated Notes may not be accelerated because of an Event
of Default (as defined in the Subordinated Note Indenture). Following a
Covenant Defeasance, payment of Subordinated Notes may not be accelerated
under the Subordinated Note Indenture by reference to the covenants noted
under clause (b) above. However, if such an acceleration were to occur, the
realizable value at the acceleration date of the money and Government
Obligations in the defeasance trust could be less than the principal and
interest then due on such Subordinated Notes, in that the required deposit in
the defeasance trust is based upon scheduled cash flows rather than market
value, which will vary depending upon interest rates and other factors.
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Under current United States federal income tax law, the Defeasance
contemplated in the preceding paragraphs would be treated as an exchange of
the relevant Subordinated Notes in which holders of 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.
Under current United States federal income tax law, unless accompanied by
other changes in the terms of the Subordinated Notes, Covenant Defeasance
should not be treated as a taxable exchange.
INFORMATION CONCERNING THE INDENTURE TRUSTEE
The Chase Manhattan Bank, the Subordinated Indenture Trustee, will also
serve as the Senior Indenture Trustee and as Property Trustee and Guarantee
Trustee. The Corporation and certain of its affiliates maintain deposit
accounts and banking relationships with The Chase Manhattan Bank.
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.
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 distribution,
redemption, voting and 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 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.
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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.
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 most senior preferred stock that may be 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.
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).
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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 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, will also serve as Property
Trustee and Subordinated Indenture Trustee and as Senior Indenture Trustee.
The Corporation and certain of its affiliates maintain deposit accounts and
banking relationships with The Chase Manhattan Bank.
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.
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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.
PLAN OF DISTRIBUTION
The Corporation may sell the Senior Notes and the Junior Subordinated Notes
and the Trusts may sell the Preferred Securities 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 Senior Notes, Junior
Subordinated Notes or Preferred Securities will set forth the terms of the
offering of such Senior Notes, Junior Subordinated Notes or Preferred
Securities, including the name or names of any underwriters or agents, the
purchase price of such Senior Notes, Junior Subordinated Notes or Preferred
Securities and the proceeds to the Corporation or 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 Senior Notes, Junior
Subordinated Notes or Preferred Securities may be listed.
If underwriters participate in the sale, such Senior Notes, Junior
Subordinated Notes or 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 Senior Notes, Junior Subordinated
Notes or Preferred Securities will be subject to certain conditions precedent
and the underwriters will be obligated to purchase all of such series of
Senior Notes, Junior Subordinated Notes or 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 Senior Notes, Junior Subordinated Notes or Preferred
Securities will be a new issue of securities and will have no established
trading market. Any underwriters to whom Senior Notes, Junior Subordinated
Notes or Preferred Securities are sold for public offering and sale may make a
market in such Senior Notes, Junior Subordinated Notes or Preferred
Securities, but such underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. The Senior Notes,
Junior Subordinated Notes or Preferred Securities may or may not be listed on
a national securities exchange.
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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, P.A., Wilmington, Delaware, special Delaware
counsel to the Corporation and the Trusts. The validity of the Senior Notes,
the Junior Subordinated Notes and the Guarantees and certain matters relating
thereto will be passed upon on behalf of the Corporation by Dewey Ballantine
LLP, New York, New York. The validity of the Senior Notes, the Junior
Subordinated Notes and the Guarantees will be passed upon for the underwriters
or agents by Sullivan & Cromwell, New York, New York.
EXPERTS
The consolidated financial statements included in the Form 10 of the
Corporation, 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'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.
29
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<C> <S>
1.1 -- Form of Underwriting Agreement relating to Senior Notes.
1.2 -- Form of Underwriting Agreement relating to Junior Subordinated
Notes.
1.3 -- Form of Underwriting Agreement relating to Trust Preferred
Securities.
23.1 -- Consent of Deloitte & Touche LLP.
23.2 -- Consent of KPMG Peat Marwick LLP.
</TABLE>
II-1
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT,
DUKE CAPITAL CORPORATION, CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE
THAT IT MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY
CAUSED THIS REGISTRATION STATEMENT OR AMENDMENT THERETO TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN CHARLOTTE, NORTH
CAROLINA, ON THE 8TH DAY OF MAY, 1998.
DUKE CAPITAL CORPORATION
By: R. B. Priory
Chairman of the Board,
President and Chief
Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT OR AMENDMENT THERETO HAS BEEN SIGNED BY THE FOLLOWING
DIRECTORS AND OFFICERS OF DUKE CAPITAL CORPORATION IN THE CAPACITIES AND ON
THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
R. B. Priory Chairman of the Board, May 8, 1998
President and Chief
Executive Officer (Principal
Executive Officer)
R. J. Osborne Vice President and May 8, 1998
Chief Financial Officer
(Principal Financial
Officer)
J. L. Boyer Controller (Principal May 8, 1998
Accounting Officer)
P. M. Anderson
F. J. Fowler
J. T. Hackett
R. S. Lilien All of the Directors May 8, 1998
R. J. Osborne
R. B. Priory
R. C. Ranson
</TABLE>
Robert T. Lucas III, by signing his name hereto, does hereby sign this
document on behalf of Duke Capital Corporation and on behalf of each of the
above-named persons pursuant to a power of attorney duly executed by Duke
Capital Corporation and such persons, filed with the Securities and Exchange
Commission as an exhibit hereto.
/s/ Robert T. Lucas III
-------------------------------------
Robert T. Lucas III
Attorney-in-fact
II-2
<PAGE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, DUKE CAPITAL
FINANCING TRUST I CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT
MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS
REGISTRATION STATEMENT OR AMENDMENT THERETO TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN CHARLOTTE, NORTH CAROLINA, ON THE
8TH DAY OF MAY, 1998.
DUKE CAPITAL FINANCING TRUST I
By: Duke Capital Corporation,
Depositor
/s/ Robert T. Lucas III
By: _________________________________
Robert T. Lucas III
Assistant Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, DUKE CAPITAL
FINANCING TRUST II CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT
MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS
REGISTRATION STATEMENT OR AMENDMENT THERETO TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN CHARLOTTE, NORTH CAROLINA, ON THE
8TH DAY OF MAY, 1998.
DUKE CAPITAL FINANCING TRUST II
By: Duke Capital Corporation,
Depositor
/s/ Robert T. Lucas III
By: _________________________________
Robert T. Lucas III
Assistant Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, DUKE CAPITAL
FINANCING TRUST III CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT
IT MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED
THIS REGISTRATION STATEMENT OR AMENDMENT THERETO TO BE SIGNED ON ITS BEHALF BY
THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN CHARLOTTE, NORTH CAROLINA, ON
THE 8TH DAY OF MAY, 1998.
DUKE CAPITAL FINANCING TRUST III
By: Duke Capital Corporation,
Depositor
/s/ Robert T. Lucas III
By: _________________________________
Robert T. Lucas III
Assistant Secretary
II-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S> <C>
1.1 -- Form of Underwriting Agreement relating to Senior Notes.
1.2 -- Form of Underwriting Agreement relating to Junior
Subordinated Notes.
1.3 -- Form of Underwriting Agreement relating to Trust Preferred
Securities.
23.1 -- Consent of Deloitte & Touche LLP.
23.2 -- Consent of KPMG Peat Marwick LLP.
</TABLE>
<PAGE>
Exhibit 1.1
$
DUKE CAPITAL CORPORATION
SERIES % SENIOR NOTES DUE
UNDERWRITING AGREEMENT
----------------------
,
Gentlemen:
1. Introductory. DUKE CAPITAL CORPORATION, a Delaware corporation
("Corporation") proposes to issue and sell $ aggregate principal amount
of Series % Senior Notes due , ("Notes"), to be issued
pursuant to the provisions of a Senior Indenture, dated as of ,
, as may be amended and supplemented by supplemental indentures to the date
hereof (including the supplemental indenture dated as of , ,
relating to the Notes, between the Corporation and The Chase Manhattan Bank (the
"Indenture"), and hereby agrees with the several Underwriters hereinafter named
("Underwriters") as follows:
2. Representations and Warranties of the Corporation. The Corporation
represents and warrants to, and agrees with, the several Underwriters that:
(a) A registration statement (Nos. ), including a prospectus,
relating to the Notes has been filed with the Securities and Exchange
Commission ("Commission") under the Securities Act of 1933 (the "1933
Act"). Such registration statement and any post-effective amendment
thereto, each in the form heretofore delivered to you, and, excluding
exhibits thereto but including all documents incorporated by reference in
the prospectus contained therein, to you for each of the other
Underwriters, have been declared effective by the Commission in such form,
and no stop order suspending the effectiveness of such registration
statement has been issued and no proceeding for that purpose has been
initiated or threatened by the Commission (any preliminary prospectus
included in such registration statement or filed with the Commission
pursuant to Rule 424(a) of the rules and regulations of the Commission
under the 1933 Act being hereinafter called a "Preliminary Prospectus;" the
various parts of such registration statement, including all exhibits
thereto and including the documents incorporated by reference in the
prospectus contained in the registration statement at the time such part of
the registration statement became effective, each as amended at the time
such part of the registration statement became effective, being hereinafter
called the "Registration Statement;" and the final prospectus relating
to the Notes, in the form in which it has most recently been filed, or
transmitted for filing, with the Commission prior to the date of this
Agreement, being hereinafter called the "Prospectus;" and any reference
herein to any Preliminary Prospectus or the Prospectus shall be deemed to
refer to and include the documents incorporated by reference therein, as of
the date of such Preliminary Prospectus or Prospectus, as the case may be;
any reference to any amendment or supplement to any Preliminary Prospectus
or Prospectus shall be deemed to refer to and include any documents filed
after the date of such Preliminary Prospectus or Prospectus, as the case
may be, under the Securities Exchange Act of 1934, as amended (the "1934
Act"), and incorporated by reference in such Preliminary Prospectus or
Prospectus, as the case may be; and any reference to any amendment to the
Registration Statement shall be deemed to refer to and include any annual
report of the Corporation filed pursuant to Section 13(a) or 15(d) of the
1934 Act after the effective date of the Registration Statement that is
incorporated by reference in the Registration Statement).
(b) The Registration Statement conforms and the Prospectus will conform
in all material respects to the requirements of the 1933 Act and the rules
and regulations thereunder ("1933 Act Regulations"), and the Registration
Statement does not and the Prospectus will not include any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, except
that the foregoing does not apply to statements or omissions in any such
document based upon written information furnished to the Corporation by any
Underwriter specifically for use therein.
(c) The documents incorporated by reference in the Prospectus, at the
time they were filed with the Commission, complied in all material respects
with the requirements of the Securities Exchange Act of 1934 (the "1934
Act") and the rules and regulations of the Commission thereunder (the "1934
Act Regulations"), and, when read together with
<PAGE>
the other information in the Prospectus, do not contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and any
documents deemed to be incorporated by reference in the Prospectus will,
when they are filed with the Commission, comply in all material respects
with the requirements of the 1934 Act and the 1934 Act Regulations, and
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they are
made, not misleading.
(d) The compliance by the Corporation with all of the provisions of this
Agreement and the consummation of the transactions herein contemplated will
not conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument to which the
Corporation or any of its Principal Subsidiaries is a party or by which any
of them or their respective property is bound or to which any of their
property or assets is subject, nor will such action result in any violation
of the provisions of the Restated Certificate of Incorporation or By-Laws
of the Corporation or any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over the
Corporation or its Principal Subsidiaries or any of their respective
property; and no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the consummation by the Corporation of the transactions
contemplated by this Agreement, except for the registration under the 1933
Act of the Notes and such consents, approvals, authorizations,
registrations or qualifications as may be required under state securities
or Blue Sky laws in connection with the purchase and distribution of the
Notes by the Underwriters.
(e) Each of PanEnergy Corp, Panhandle Eastern Pipe Line Company, Texas
Eastern Transmission Corporation, Trunkline Gas Company and Algonquin Gas
Transmission Company, each a Delaware corporation (and hereinafter called a
"Principal Subsidiary"), is an indirect wholly-owned subsidiary of the
Corporation.
3. Purchase, Sale and Delivery of Notes. Subject to the terms and conditions
herein set forth, the Corporation agrees to sell to the Underwriters, and the
Underwriters agree, severally and not jointly, to purchase from the Corporation,
at a purchase price of % of the principal amount of the Notes, plus
accrued interest from , to the Closing Date (as hereinafter
defined), the respective principal amount of Notes set forth opposite the names
of the Underwriters in Schedule A hereto plus the respective principal amount of
additional Notes which each such Underwriter may become obligated to purchase
pursuant to the provisions of Section 8 hereof.
Payment of the purchase price for the Notes to be purchased by the
Underwriters shall be made at the offices of Dewey Ballantine LLP, 1301 Avenue
of the Americas, New York, N.Y., or at such other place as shall be mutually
agreed upon by you and the Corporation, at 10:00 A.M., New York City time, on
(unless postponed in accordance with the provisions of Section 8)
or such other time not later than three full business days after such date as
shall be agreed upon by you and the Corporation (the "Closing Date"). Payment
shall be made to the Corporation by wire transfer in immediately available
funds, payable to the order of the Corporation against delivery of the Notes, in
fully registered form, to or upon your order. The Notes shall be delivered in
the form of one or more global notes in aggregate denomination equal to the
aggregate principal amount of the Notes upon original issuance and registered in
the name of Cede & Co., as nominee for The Depository Trust Corporation.
4. Offering by the Underwriters. It is understood that the several
Underwriters propose to offer the Notes for sale to the public as set forth in
the Prospectus.
5. Covenants of the Corporation. The Corporation covenants and agrees with
the several Underwriters that:
(a) The Corporation will advise you promptly of any amendment or
supplementation of the Registration Statement or the Prospectus and of the
institution by the Commission of any stop order proceedings in respect of
the Registration Statement, and will use its best efforts to prevent the
issuance of any such stop order and to obtain as soon as possible its
lifting, if issued.
(b) If at any time when a prospectus relating to the Notes is required
to be delivered under the 1933 Act any event occurs as a result of which
the Prospectus as then amended or supplemented would include an untrue
statement of a material fact, or omit to state any material fact necessary
to make the statements therein, in the light of the
2
<PAGE>
circumstances under which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus to comply with the 1933 Act,
the Corporation promptly will prepare and file with the Commission an
amendment, supplement or an appropriate document pursuant to Section 13 or
14 of the 1934 Act which will correct such statement or omission or which
will effect such compliance.
(c) The Corporation, during the period when a prospectus relating to
the Notes is required to be delivered under the 1933 Act, will file
promptly all documents required to be filed with the Commission pursuant to
Section 13 or 14 of the 1934 Act.
(d) The Corporation will make generally available to its security
holders, in each case as soon as practicable but not later than 60 days
after the close of the period covered thereby, earnings statements (in form
complying with the provisions of Section 11(a) of the 1933 Act, which need
not be certified by independent certified public accountants unless
required by the 1933 Act) covering (i) a twelve-month period beginning not
later than the first day of the Corporation's fiscal quarter next following
the effective date of the Registration Statement and (ii) a twelve-month
period beginning not later than the first day of the Corporation's fiscal
quarter next following the date of this Agreement.
(e) The Corporation will furnish to you, without charge, copies of the
Registration Statement ( of which will be signed and will include all
exhibits other than those incorporated by reference), the Prospectus, and
all amendments and supplements to such documents, in each case as soon as
available and in such quantities as you reasonably request.
(f) The Corporation will arrange or cooperate in arrangements for the
qualification of the Notes for sale under the laws of such jurisdictions as
you designate and will continue such qualifications in effect so long as
required for the distribution; provided, however, that the Corporation
shall not be required to qualify as a foreign corporation or to file any
general consents to service of process under the laws of any state where it
is not now so subject.
(g) The Corporation will not, during the period beginning from the date
hereof and continuing to and including the date fifteen days after the date
hereof, sell, offer to sell, grant any option for the sale of, or otherwise
dispose of any Notes, any security convertible into or exchangeable for the
Notes or any debt security substantially similar to the Notes (except for
the Notes issued pursuant to this Agreement), without your prior written
consent.
(h) The Corporation will pay all expenses incident to the performance
of its obligations under this Agreement including (i) the printing and
filing of the Registration Statement and the printing of this Agreement and
the Blue Sky Survey, (ii) the issuance and delivery of the Notes as
specified herein, (iii) the fees and disbursements of counsel for the
Underwriters in connection with the qualification of the Notes under the
securities laws of any jurisdiction in accordance with the provisions of
Section 5(f) and in connection with the preparation of the Blue Sky Survey,
such fees not to exceed $5,000, (iv) the printing and delivery to the
Underwriters, in quantities
3
<PAGE>
as hereinabove referred to, of copies of the Registration Statement and any
amendments thereto, and of the Prospectus and any amendments or supplements
thereto, (v) any fees charged by independent rating agencies for rating the
Notes (vi) any fees and expenses in connection with the listing of the
Notes on the New York Stock Exchange, (vii) any filing fee required by the
National Association of Securities Dealers, Inc. and (viii) the costs of
any depository arrangements for the Notes with DTC or any successor
depository.
6. Conditions of the Obligations of the Underwriters. The obligations of
the several Underwriters to purchase and pay for the Notes will be subject to
the accuracy of the representations and warranties on the part of the
Corporation herein, to the accuracy of the statements of officers of the
Corporation made pursuant to the provisions hereof, to the performance by the
Corporation of its obligations hereunder and to the following additional
conditions precedent:
(a) Prior to the Closing Date, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or, to the
knowledge of the Corporation or you, shall be threatened by the Commission.
(b) Prior to the Closing Date, the rating assigned by Moody's Investors
Service, Inc. or Standard & Poor's Ratings Services to any debt
securities of the Corporation as of the date of this Agreement shall not
have been lowered.
(c) Since the respective most recent dates as of which information is
given in the Prospectus and up to the Closing Date, there shall not have
been any material adverse change in the condition of the Corporation,
financial or otherwise, except as reflected in or contemplated by the
Prospectus, and, since such dates and up to the Closing Date, there shall
not have been any material transaction entered into by the Corporation
other than transactions contemplated by the Prospectus and transactions in
the ordinary course of business.
(d) You shall have received an opinion or opinions of Dewey Ballantine
LLP, counsel to the Corporation, dated the Closing Date, to the effect
that:
(i) The Corporation has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus.
(ii) Each of the Principal Subsidiaries has been duly incorporated
and is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation, with power and authority
(corporate and other) to own its properties and conduct its business
as described in the Prospectus.
(iii) The Indenture has been duly authorized, executed and
delivered by the Corporation and duly qualified under the Trust
Indenture Act of 1939 and, assuming the due authorization, execution
and delivery thereof by The Chase Manhattan Bank, as Trustee,
constitutes a valid and legally binding instrument of the Corporation,
enforceable against the Corporation in accordance with its terms,
subject to the qualifications that the enforceability of the
Corporation's obligations under the Indenture may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally and by
general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
4
<PAGE>
(iv) The Notes have been duly authorized and executed by the
Corporation and, when authenticated by The Chase Manhattan Bank, as
Trustee, in the manner provided in the Indenture and delivered against
payment therefor, will constitute valid and legally binding
obligations of the Corporation enforceable against the Corporation in
accordance with their terms, subject to the qualifications that the
enforceability of the Corporation's obligations under the Notes may be
limited by bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights
generally and by general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at
law).
(v) The Registration Statement has become effective under the 1933
Act, and, to the best of the knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or are
pending or threatened under the 1933 Act.
(vi) This Agreement has been duly authorized, executed and
delivered by the Corporation.
(vii) The performance by the Corporation of this Agreement will not
contravene any of the provisions of the Certificate of Incorporation
or By-Laws of the Corporation.
(viii) The Corporation is not a holding company under the Public
Utility Holding Company Act of 1935, as amended.
(ix) No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body is
required for the issue and sale of the Notes or the consummation by
the Corporation of the transactions contemplated by this Agreement or
the Indenture, except such as have been obtained under the 1933 Act
and the Trust Indenture Act and such consents, approvals,
authorizations, orders, registrations or qualifications as may be
required under state securities or Blue Sky laws in connection with
the purchase and distribution of the Notes by the Underwriters.
(x) The Registration Statement as of the date of effectiveness
under the 1933 Act and the Prospectus as of the date it was filed
with, or transmitted for filing to, the Commission complied as to form
in all material respects with the requirements of the 1933 Act and the
1933 Act Regulations; and nothing has come to their attention that
would lead them to believe that the Registration Statement as of the
date of effectiveness under the 1933 Act (or if an amendment to such
Registration Statement or an annual report on Form 10-K has been filed
by the Corporation with the Commission subsequent to the effectiveness
of the Registration Statement, then at the time of the most recent
such filing) contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that the
Prospectus as of the date it was filed with, or transmitted for filing
to, the Commission and at the Closing Date contained or contains an
untrue statement of a material fact or
5
<PAGE>
omitted or omits to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which
they were made, not misleading. Such opinion may state that such
counsel do not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the
Registration Statement and Prospectus except as otherwise expressly
provided in such opinion and do not express any opinion or belief as
to the financial statements or other financial data contained in the
Registration Statement and the Prospectus or as to the statement of
the eligibility and qualification of the Trustee.
(xi) The statements made in the Prospectus under the captions
"Description of the Senior Notes" and "Description of the Series
% Senior Notes", insofar as they purport to summarize provisions of
documents specifically referred to therein, fairly present the
information called for with respect thereto by Form S-3.
In rendering the foregoing opinion or opinions, Dewey Ballantine LLP may
state that such opinion or opinions are limited to the Federal laws of the
United States, the laws of the State of New York and the General Corporation Law
of the State of Delaware, and that they are expressing no opinion as to the
effect of the laws of any other jurisdiction. In addition, such counsel may
state that they have relied as to certain matters on information obtained from
public officials, officers of the Corporation and other sources believed by them
to be responsible and that the signatures on all documents examined by them are
genuine, assumptions which such counsel have not independently verified.
(e) You shall have received an opinion, dated the Closing Date,
of Robert S. Lilien, Esq., to the effect that:
(i) Each of the Corporation and the Principal Subsidiaries is duly
qualified to do business in each jurisdiction in which the ownership
or leasing of its property or the conduct of its business requires
such qualification, except where the failure to so qualify,
considering all such cases in the aggregate, does not have a material
adverse effect on the business, properties, financial position or
results of operations of the Corporation and its subsidiaries taken as
a whole.
(ii) The descriptions in the Registration Statement and the
Prospectus of legal or governmental proceedings are accurate and
fairly present the information required to be shown, and such counsel
does not know of any litigation or any legal or governmental
proceeding instituted or threatened against the Corporation or any of
its subsidiaries or any of their respective properties that would be
required to be disclosed in the Prospectus and is not so disclosed.
Such counsel shall also state that nothing has come to his attention
that has caused him to believe that the Registration Statement as of the date of
effectiveness under the 1933 Act and the Prospectus as of the date it was filed
with, or transmitted for filing to, the Commission, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
that the Prospectus as of the date it was filed with, or transmitted for filing
to, the Commission and at the Closing Date, contained or contains any untrue
statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Such counsel may also state that he
does not assume any responsibility for the accuracy, completeness or fairness of
the statements contained in the Registration Statement and the Prospectus and
does not express any opinion or belief as to the financial statements or other
financial data contained in the Registration Statement and the Prospectus.
In rendering the foregoing opinion, such counsel may rely, to the extent
recited therein, upon opinions of local counsel. Such counsel may also state
that he has relied as to certain factual matters on information obtained from
public officials, officers of the Corporation and other sources believed by him
to be responsible.
(f) You shall have received the opinion or opinions of Sullivan &
Cromwell, counsel for the Underwriters, dated the Closing Date, with
respect to the incorporation of the Corporation, the validity of the Notes,
the Registration Statement and the Prospectus, as amended or supplemented,
and other related matters as you may require, and the Corporation shall
have furnished to such counsel such documents as they request for the
purpose of enabling them to pass upon such matters.
(g) On or after the date hereof, there shall not have occurred any of
the following: (i) a suspension in trading in securities generally or of
the securities of Duke Energy Corporation or the Corporation on the New
York Stock Exchange; or (ii) a general moratorium on commercial banking
activities in New York declared by either Federal or New York State
authorities; or (iii) the outbreak of hostilities involving the United
States or the declaration by the United States of a national emergency or
war if the effect of any such event specified in this clause (g) in your
judgment makes it impracticable or inadvisable to proceed with the public
offering or the delivery of the Preferred Securities being delivered at the
Closing Date on the terms and in the manner contemplated in the Prospectus.
(h) You shall have received a certificate of the Chairman of the Board
and President or any Vice President and a principal financial or accounting
officer of the Corporation, dated the Closing Date, in which such officers,
to the best of their knowledge after reasonable investigation, shall state
that the representations and warranties of the Corporation in this
Agreement are true and correct, that the Corporation has complied with all
agreements and satisfied all conditions on its part to be performed or
satisfied at or prior to the Closing Date, that the conditions specified in
Section 6(b) and Section 6(c) have been satisfied, and that no stop order
suspending the effectiveness of the Registration Statement has been issued
and no proceedings for that purpose have been instituted or are threatened
by the Commission.
(i) On the date of this Agreement, you shall have received letters
dated the date hereof, in form and substance satisfactory to you, from the
Corporation's independent public accountants, containing statements and
information of the type ordinarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements and
certain financial information contained in or incorporated by reference
into the Prospectus.
(j) At the Closing Date you shall have received from the Corporation's
independent public accountants letters, dated the Closing Date, to the
effect that such accountants reaffirm the statements made in the letters
furnished pursuant to paragraph (i) of this Section 6, except that the
specified date referred to shall be a date not more than three business
days prior to the Closing Date.
The Corporation will furnish you with such conformed copies of such opinions,
certificates, letters and documents as you reasonably request.
7. Indemnification. (a) The Corporation agrees to indemnify and hold
harmless each Underwriter and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the 1933 Act, as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever arising out of any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement (or any
amendment thereto), or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the
statements therein not misleading or arising out of any untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the prospectus constituting a part of the Registration
Statement in the form in which it became effective or the Prospectus (or
any amendment or supplement thereto) or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, unless such statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with written
information furnished to the Corporation by any Underwriter through you
expressly for use in the Registration Statement (or any amendment thereto)
or such Preliminary Prospectus, such prospectus, or the Prospectus (or any
amendment or supplement thereto);
6
<PAGE>
(ii) against any and all loss, liability, claim, damage and
expense whatsoever to the extent of the aggregate amount paid in settlement
of any litigation, commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission or any such alleged untrue
statement or omission, if such settlement is effected with the written
consent of the Corporation; and
(iii) against any and all expense whatsoever reasonably incurred
in investigating, preparing or defending against any litigation, commenced
or threatened, or any claim whatsoever based upon any such untrue statement
or omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under (i) or (ii) above.
In no case shall the Corporation be liable under this indemnity agreement
with respect to any claim made against any Underwriter or any such controlling
person unless the Corporation shall be notified in writing of the nature of the
claim within a reasonable time after the assertion thereof, but failure so to
notify the Corporation shall not relieve it from any liability which it may have
otherwise than on account of this indemnity agreement. The Corporation shall be
entitled to participate at its own expense in the defense, or, if it so elects,
within a reasonable time after receipt of such notice, to assume the defense of
any suit brought to enforce any such claim, but if it so elects to assume the
defense, such defense shall be conducted by counsel chosen by it and approved by
the Underwriter or Underwriters or controlling person or persons, or defendant
or defendants in any suit so brought, which approval shall not be unreasonably
withheld. In any such suit, any Underwriter or any such controlling person shall
have the right to employ its own counsel, but the fees and expenses of such
counsel shall be at the expense of such Underwriter or such controlling person
unless (i) the Corporation and such Underwriter shall have mutually agreed to
the employment of such counsel, or (ii) the named parties to any such action
(including any impleaded parties) include both such Underwriter or such
controlling person and the Corporation and such Underwriter or such controlling
person shall have been advised by such counsel that a conflict of interest
between the Corporation and such Underwriter or such controlling person may
arise and for this reason it is not desirable for the same counsel to represent
both the indemnifying party and also the indemnified party (it being understood,
however, that the Corporation shall not, in connection with any one such action
or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys for all such Underwriters and all such controlling persons, which firm
shall be designated in writing by you). The Corporation agrees to notify you
within a reasonable time of the assertion of any claim against it, any of its
officers or directors or any person who controls the Corporation within the
meaning of Section 15 of the 1933 Act, in connection with the sale of the Notes.
(b) Each Underwriter severally agrees that it will indemnify and hold
harmless the Corporation, its directors and each of the officers of the
Corporation who signed the Registration Statement and each person, if any, who
controls the Corporation within the meaning of Section 15 of the 1933 Act to the
same extent as the indemnity contained in subsection (a) of this Section, but
only with respect to statements or omissions made in the Registration Statement
(or any amendment thereto) or any Preliminary Prospectus, such prospectus or the
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Corporation by such
Underwriter through you expressly for use in the Registration Statement (or any
amendment thereto), such Preliminary Prospectus, such prospectus or the
Prospectus (or any amendment or supplement thereto). In case any action shall be
brought against the Corporation or any person so indemnified based on the
Registration Statement (or any amendment thereto) or such Preliminary
Prospectus, such prospectus or the Prospectus (or any amendment or supplement
thereto) and in respect of which indemnity may be sought against any
Underwriter, such Underwriter shall have the rights and duties given to the
Corporation, and the Corporation and each person so indemnified shall have the
rights and duties given to the Underwriters, by the provisions of subsection (a)
of this Section.
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<PAGE>
8. Default by One or More of the Underwriters. (a) If any Underwriter
shall default in its obligation to purchase the Notes which it has agreed to
purchase hereunder on the Closing Date, you may in your discretion arrange for
you or another party or other parties to purchase such Notes on the terms
contained herein. If within thirty-six hours after such default by any
Underwriter you do not arrange for the purchase of such Notes, then the
Corporation shall be entitled to a further period of thirty-six hours within
which to procure another party or other parties satisfactory to you to purchase
such Notes on such terms. In the event that, within the respective prescribed
periods, you notify the Corporation that you have so arranged for the purchase
of such Notes, or the Corporation notifies you that it has so arranged for the
purchase of such Notes, you or the Corporation shall have the right to postpone
such Closing Date for a period of not more than seven days, in order to effect
whatever changes may thereby be made necessary in the Registration Statement or
the Prospectus, or in any other documents or arrangements, and the Corporation
agrees to file promptly any amendments to the Registration Statement or the
Prospectus which may be required. The term "Underwriter" as used in this
Agreement shall include any person substituted under this Section with like
effect as if such person had originally been a party to this Agreement with
respect to such Notes.
(b) If, after giving effect to any arrangements for the purchase of the
Notes of a defaulting Underwriter or Underwriters by you or the Corporation as
provided in subsection (a) above, the aggregate amount of such Notes which
remains unpurchased does not exceed one-eleventh of the aggregate amount of all
the Notes to be purchased at such Closing Date, then the Corporation shall have
the right to require each non-defaulting Underwriter to purchase the amount of
Notes which such Underwriter agreed to purchase hereunder at such Closing Date
and, in addition, to require each non-defaulting Underwriter to purchase its pro
rata share (based on the amount of Notes which such Underwriter agreed to
purchase hereunder) of the Notes of such defaulting Underwriter or Underwriters
for which such arrangements have not been made; but nothing herein shall
relieve a defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Notes of a defaulting Underwriter or Underwriters by you or the Corporation as
provided in subsection (a) above, the aggregate amount of such Notes which
remains unpurchased exceeds one-eleventh of the aggregate amount of all the
Notes to be purchased at such Closing Date, or if the Corporation shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Notes of a defaulting Underwriter or Underwriters, then
this Agreement shall thereupon terminate, without liability on the part of any
non-defaulting Underwriter or the Corporation, except for the expenses to be
borne by the Corporation as provided in Section 5(h) hereof and the indemnity
agreement in Section 7 hereof; but nothing herein shall relieve a defaulting
Underwriter from liability for its default.
8
<PAGE>
9. Representations and Indemnities to Survive Delivery. The respective
indemnities, agreements, representations, warranties and other statements of the
Corporation or its officers and of the several Underwriters set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation, or statement as to the results thereof, made by or on behalf
of any Underwriter or the Corporation, or any of its officers or directors or
any controlling person, and will survive delivery of and payment for the Notes.
10. Reliance on Your Acts. In all dealings hereunder, you shall act on
behalf of each of the Underwriters, and the parties hereto shall be entitled to
act and rely upon any statement, request, notice or agreement on behalf of any
Underwriter made or given by you.
11. Notices. All communications hereunder will be in writing and, if sent
to the Underwriters, will be mailed, delivered or telecopied and confirmed to
you as the representatives in care of at ,
attention of or, if sent to the Corporation, will be
mailed, delivered or telecopied and confirmed to it at 422 South Church Street,
Charlotte, N.C. 28202, telephone number (704) 382-5159, attention of Richard J.
Osborne, Vice President and Chief Financial Officer; provided, however, that any
notice to an Underwriter pursuant to Section 7(a) hereof shall be delivered or
sent by mail or telecopy to such Underwriter at its address or telecopy number
set forth in its Underwriters' Questionnaire or telex constituting such
Questionnaire, which address or telecopy number will be supplied to the
Corporation by you. Any such communications shall take effect upon receipt
thereof.
12. Business Day. As used herein, the term "business day" shall mean any
day when the Commission's office in Washington, D.C. is open for business.
13. Successors. This Agreement shall inure to the benefit of and be binding
upon the Underwriters and the Corporation and their respective successors.
Nothing expressed or mentioned in this Agreement is intended or shall be
construed to give any person, firm or corporation, other than the parties hereto
and their respective successors and the controlling persons and the officers and
directors referred to in Section 7, and their respective successors, heirs and
legal representatives any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained; this Agreement and
all conditions and
9
<PAGE>
provisions hereof being intended to be and being for the sole and exclusive
benefit of the parties hereto and their respective successors and said
controlling persons, officers and directors and their respective successors,
heirs and legal representatives, and for the benefit of no other person, firm or
corporation. No purchaser of Notes from any Underwriter shall be deemed to be a
successor or assign by reason merely of such purchase.
14. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
15. Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.
If the foregoing is in accordance with your understanding, kindly sign and
return to us two counterparts hereof, and upon your acceptance on behalf of each
of the Underwriters, this letter and such acceptance will become a binding
agreement between the Corporation, on the one hand, and each of the
Underwriters, on the other hand, in accordance with its terms. It is understood
that your acceptance of this letter on behalf of each of the Underwriters is
pursuant to the authority set forth in a form of Agreement Among Underwriters,
the form of which shall be submitted to the Corporation for examination, but
without warranty on your part as to the authority of the signers thereof.
Very truly yours,
DUKE CAPITAL CORPORATION
By:
--------------------------------------
The foregoing Underwriting Agreement is hereby
confirmed and accepted as of the date first
above written.
By:
-------------------------------
10
<PAGE>
SCHEDULE A
Principal Amount
of Notes to be
Underwriter Purchased
------------------- ----------------
----------------
Total........................................... $
================
<PAGE>
Exhibit 1.2
$
DUKE CAPITAL CORPORATION
SERIES % JUNIOR SUBORDINATED NOTES DUE ,
UNDERWRITING AGREEMENT
----------------------
,
Gentlemen:
1. Introductory. DUKE CAPITAL CORPORATION, a Delaware corporation
("Corporation"), proposes to issue and sell $ aggregate principal
amount of Series % Junior Subordinated Notes due ,
("Notes"), to be issued pursuant to the provisions of a Subordinated Indenture,
dated as of , , as may be amended and supplemented by
supplemental indentures to the date hereof (including the supplemental indenture
dated as of , , relating to the Notes, between the Corporation
and The Chase Manhattan Bank (the "Indenture"), and hereby agrees with the
several Underwriters hereinafter named ("Underwriters") as follows:
2. Representations and Warranties of the Corporation. The Corporation
represents and warrants to, and agrees with, the several Underwriters that:
(a) A registration statement (Nos. ), including a prospectus,
relating to the Notes has been filed with the Securities and Exchange
Commission ("Commission") under the Securities Act of 1933 (the "1933
Act"). Such registration statement and any post-effective amendment
thereto, each in the form heretofore delivered to you, and, excluding
exhibits thereto but including all documents incorporated by reference in
the prospectus contained therein, to you for each of the other
Underwriters, have been declared effective by the Commission in such form,
and no stop order suspending the effectiveness of such registration
statement has been issued and no proceeding for that purpose has been
initiated or threatened by the Commission (any preliminary prospectus
included in such registration statement or filed with the Commission
pursuant to Rule 424(a) of the rules and regulations of the Commission
under the 1933 Act being hereinafter called a "Preliminary Prospectus;" the
various parts of such registration statement, including all exhibits
thereto and including the documents incorporated by reference in the
prospectus contained in the registration statement at the time such part of
the registration statement became effective, each as amended at the time
such part of the registration statement became effective, being hereinafter
called the "Registration Statement;" and the final prospectus relating to
the Notes, in the form in which it has most recently been filed, or
transmitted for filing, with the Commission prior to the date of this
Agreement, being hereinafter called the "Prospectus;" and any reference
herein to any Preliminary Prospectus or the Prospectus shall be deemed to
refer to and include the documents incorporated by reference therein, as of
the date of such Preliminary Prospectus or Prospectus, as the case may be;
any reference to any amendment or supplement to any Preliminary Prospectus
or Prospectus shall be deemed to refer to and include any documents filed
after the date of such Preliminary Prospectus or Prospectus, as the case
may be, under the Securities Exchange Act of 1934, as amended (the "1934
Act"), and incorporated by reference in such Preliminary Prospectus or
Prospectus, as the case may be; and any reference to any amendment to the
Registration Statement shall be deemed to refer to and include any annual
report of the Corporation filed pursuant to Section 13(a) or 15(d) of the
1934 Act after the effective date of the Registration Statement that is
incorporated by reference in the Registration Statement).
(b) The Registration Statement conforms and the Prospectus will conform
in all material respects to the requirements of the 1933 Act and the rules
and regulations thereunder ("1933 Act Regulations"), and the Registration
Statement does not and the Prospectus will not include any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, except
that the foregoing does not apply to statements or omissions in any such
document based upon written information furnished to the Corporation by any
Underwriter specifically for use therein.
(c) The documents incorporated by reference in the Prospectus, at the
time they were filed with the Commission, complied in all material respects
with the requirements of the Securities Exchange Act of 1934 (the "1934
Act") and the rules and regulations of the Commission thereunder (the "1934
Act Regulations"), and, when read together with
<PAGE>
the other information in the Prospectus, do not contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and any
documents deemed to be incorporated by reference in the Prospectus will,
when they are filed with the Commission, comply in all material respects
with the requirements of the 1934 Act and the 1934 Act Regulations, and
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they are
made, not misleading.
(d) The compliance by the Corporation with all of the provisions of
this Agreement and the consummation of the transactions herein contemplated
will not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Corporation or any of its Principal Subsidiaries is a party or by
which any of them or their respective property is bound or to which any of
their property or assets is subject, nor will such action result in any
violation of the provisions of the Restated Certificate of Incorporation or
By-Laws of the Corporation or any statute or any order, rule or regulation
of any court or governmental agency or body having jurisdiction over the
Corporation or its Principal Subsidiaries or any of their respective
property; and no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the consummation by the Corporation of the transactions
contemplated by this Agreement, except for the registration under the 1933
Act of the Notes and such consents, approvals, authorizations,
registrations or qualifications as may be required under state securities
or Blue Sky laws in connection with the purchase and distribution of the
Notes by the Underwriters.
(e) Each of PanEnergy Corp, Panhandle Eastern Pipe Line Company, Texas
Eastern Transmission Corporation, Trunkline Gas Company and Algonquin Gas
Transmission Company, each a Delaware corporation (and hereinafter
called a "Principal Subsidiary"), is an indirect wholly-owned subsidiary of
the Corporation.
3. Purchase, Sale and Delivery of Notes. Subject to the terms and conditions
herein set forth, the Corporation agrees to sell to the Underwriters, and the
Underwriters agree, severally and not jointly, to purchase from the Corporation,
at a purchase price of % of the principal amount of the Notes, plus
accrued interest from , to the Closing Date (as hereinafter
defined), the respective principal amount of Notes set forth opposite the names
of the Underwriters in Schedule A hereto plus the respective principal amount of
additional Notes which each such Underwriter may become obligated to purchase
pursuant to the provisions of Section 8 hereof.
Payment of the purchase price for the Notes to be purchased by the
Underwriters shall be made at the offices of Dewey Ballantine LLP, 1301 Avenue
of the Americas, New York, N.Y., or at such other place as shall be mutually
agreed upon by you and the Corporation, at 10:00 A.M., New York City time, on
(unless postponed in accordance with the provisions of Section 8)
or such other time not later than three full business days after such date as
shall be agreed upon by you and the Corporation (the "Closing Date"). Payment
shall be made to the Corporation by wire transfer in immediately available
funds, payable to the order of the Corporation against delivery of the Notes, in
fully registered form, to or upon your order. The Notes shall be delivered in
the form of one or more global notes in aggregate denomination equal to the
aggregate principal amount of the Notes upon original issuance and registered in
the name of Cede & Co., as nominee for The Depository Trust Corporation.
4. Offering by the Underwriters. It is understood that the several
Underwriters propose to offer the Notes for sale to the public as set forth in
the Prospectus.
5. Covenants of the Corporation. The Corporation covenants and agrees with
the several Underwriters that:
(a) The Corporation will advise you promptly of any amendment or
supplementation of the Registration Statement or the Prospectus and of the
institution by the Commission of any stop order proceedings in respect of
the Registration Statement, and will use its best efforts to prevent the
issuance of any such stop order and to obtain as soon as possible its
lifting, if issued.
(b) If at any time when a prospectus relating to the Notes is required
to be delivered under the 1933 Act any event occurs as a result of which
the Prospectus as then amended or supplemented would include an untrue
statement of a material fact, or omit to state any material fact necessary
to make the statements therein, in the light of the
2
<PAGE>
circumstances under which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus to comply with the 1933 Act,
the Corporation promptly will prepare and file with the Commission an
amendment, supplement or an appropriate document pursuant to Section 13 or
14 of the 1934 Act which will correct such statement or omission or which
will effect such compliance.
(c) The Corporation, during the period when a prospectus relating to
the Notes is required to be delivered under the 1933 Act, will file
promptly all documents required to be filed with the Commission pursuant to
Section 13 or 14 of the 1934 Act.
(d) The Corporation will make generally available to its security
holders, in each case as soon as practicable but not later than 60 days
after the close of the period covered thereby, earnings statements (in form
complying with the provisions of Section 11(a) of the 1933 Act, which need
not be certified by independent certified public accountants unless
required by the 1933 Act) covering (i) a twelve-month period beginning not
later than the first day of the Corporation's fiscal quarter next following
the effective date of the Registration Statement and (ii) a twelve-month
period beginning not later than the first day of the Corporation's fiscal
quarter next following the date of this Agreement.
(e) The Corporation will furnish to you, without charge, copies of the
Registration Statement ( of which will be signed and will include all
exhibits other than those incorporated by reference), the Prospectus, and
all amendments and supplements to such documents, in each case as soon as
available and in such quantities as you reasonably request.
(f) The Corporation will arrange or cooperate in arrangements for the
qualification of the Notes for sale under the laws of such jurisdictions as
you designate and will continue such qualifications in effect so long as
required for the distribution; provided, however, that the Corporation
shall not be required to qualify as a foreign corporation or to file any
general consents to service of process under the laws of any state where it
is not now so subject.
(g) The Corporation will not, during the period beginning from the date
hereof and continuing to and including the date fifteen days after the date
hereof, sell, offer to sell, grant any option for the sale of, or otherwise
dispose of any Notes, any security convertible into or exchangeable for the
Notes or any debt security substantially similar to the Notes (except for
the Notes issued pursuant to this Agreement), without your prior written
consent.
(h) The Corporation will pay all expenses incident to the performance of
its obligations under this Agreement including (i) the printing and filing
of the Registration Statement and the printing of this Agreement and the
Blue Sky Survey, (ii) the issuance and delivery of the Notes as specified
herein, (iii) the fees and disbursements of counsel for the Underwriters in
connection with the qualification of the Notes under the securities laws of
any jurisdiction in accordance with the provisions of Section 5(f) and in
connection with the preparation of the Blue Sky Survey, such fees not to
exceed $5,000, (iv) the printing and delivery to the Underwriters, in
quantities
3
<PAGE>
as hereinabove referred to, of copies of the Registration Statement and any
amendments thereto, and of the Prospectus and any amendments or supplements
thereto, (v) any fees charged by independent rating agencies for rating the
Notes, (vi) any fees and expenses in connection with the listing of the
Notes on the New York Stock Exchange, (vii) any filing fee required by the
National Association of Securities Dealers, Inc. and (viii) the costs of
any depository arrangements for the Notes with DTC or any successor
depository.
6. Conditions of the Obligations of the Underwriters. The obligations of
the several Underwriters to purchase and pay for the Notes will be subject to
the accuracy of the representations and warranties on the part of the
Corporation herein, to the accuracy of the statements of officers of the
Corporation made pursuant to the provisions hereof, to the performance by the
Corporation of its obligations hereunder and to the following additional
conditions precedent:
(a) Prior to the Closing Date, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or, to the
knowledge of the Corporation or you, shall be threatened by the Commission.
(b) Prior to the Closing Date, the rating assigned by Moody's Investors
Service, Inc. or Standard & Poor's Ratings Services to any debt securities
of the Corporation as of the date of this Agreement shall not have been
lowered.
(c) Since the respective most recent dates as of which information is
given in the Prospectus and up to the Closing Date, there shall not have
been any material adverse change in the condition of the Corporation,
financial or otherwise, except as reflected in or contemplated by the
Prospectus, and, since such dates and up to the Closing Date, there shall
not have been any material transaction entered into by the Corporation
other than transactions contemplated by the Prospectus and transactions in
the ordinary course of business.
(d) You shall have received an opinion or opinions of Dewey Ballantine
LLP, counsel to the Corporation, dated the Closing Date, to the effect
that:
(i) The Corporation has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus.
(ii) Each of the Principal Subsidiaries has been duly incorporated
and is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation, with power and authority
(corporate and other) to own its properties and conduct its business
as described in the Prospectus.
(iii) The Indenture has been duly authorized, executed and
delivered by the Corporation and duly qualified under the Trust
Indenture Act of 1939 and, assuming the due authorization, execution
and delivery thereof by The Chase Manhattan Bank, as Trustee,
constitutes a valid and legally binding instrument of the Corporation
enforceable against the Corporation in accordance with its terms,
subject to the qualifications that the enforceability of the
Corporation's obligations under the Indenture may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally and by
general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
4
<PAGE>
(iv) The Notes have been duly authorized and executed by the
Corporation and, when authenticated by The Chase Manhattan Bank, as
Trustee, in the manner provided in the Indenture and delivered against
payment therefor, will constitute valid and legally binding
obligations of the Corporation, enforceable against the Corporation in
accordance with their terms, subject to the qualifications that the
enforceability of the Corporation's obligations under the Notes may be
limited by bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights
generally and by general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at
law).
(v) The Registration Statement has become effective under the 1933
Act, and, to the best of the knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or are
pending or threatened under the 1933 Act.
(vi) This Agreement has been duly authorized, executed and
delivered by the Corporation.
(vii) The performance by the Corporation of this Agreement will not
contravene any of the provisions of the Certificate of Incorporation
or By-Laws of the Corporation.
(viii) The Corporation is not a holding company under the Public
Utility Holding Company Act of 1935, as amended.
(ix) No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body is
required for the issue and sale of the Notes or the consummation by
the Corporation of the transactions contemplated by this Agreement or
the Indenture, except such as have been obtained under the 1933 Act
and the Trust Indenture Act and such consents, approvals,
authorizations, orders, registrations or qualifications as may be
required under state securities or Blue Sky laws in connection with
the purchase and distribution of the Notes by the Underwriters.
(x) The Registration Statement as of the date of effectiveness
under the 1933 Act and the Prospectus as of the date it was filed
with, or transmitted for filing to, the Commission complied as to form
in all material respects with the requirements of the 1933 Act and the
1933 Act Regulations; and nothing has come to their attention that
would lead them to believe that the Registration Statement as of the
date of effectiveness under the 1933 Act (or if an amendment to such
Registration Statement or an annual report on Form 10-K has been filed
by the Corporation with the Commission subsequent to the effectiveness
of the Registration Statement, then at the time of the most recent
such filing) contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that the
Prospectus as of the date it was filed with, or transmitted for filing
to, the Commission and at the Closing Date contained or contains an
untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements
5
<PAGE>
therein, in the light of the circumstances under which they were made,
not misleading. Such opinion may state that such counsel do not assume
any responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement and Prospectus
except as otherwise expressly provided in such opinion and do not
express any opinion or belief as to the financial statements or other
financial data contained in the Registration Statement and the
Prospectus or as to the statement of the eligibility and qualification
of the Trustee.
(xi) The statements made in the Prospectus under the captions
"Description of the Junior Subordinated Notes" and "Description of the
Series Junior Subordinated Notes", insofar as they purport to
summarize provisions of documents specifically referred to therein,
fairly present the information called for with respect thereto by Form
S-3.
In rendering the foregoing opinion or opinions, Dewey Ballantine LLP may
state that such opinion or opinions are limited to the Federal laws of the
United States, the laws of the State of New York and the General Corporation Law
of the State of Delaware, and that they are expressing no opinion as to the
effect of the laws of any other jurisdiction. In addition, such counsel may
state that they have relied as to certain matters on information obtained from
public officials, officers of the Corporation and other sources believed by them
to be responsible and that the signatures on all documents examined by them are
genuine, assumptions which such counsel have not independently verified.
(e) You shall have received an opinion, dated the Closing Date, of
Robert S. Lilien, Esq., to the effect that:
(i) Each of the Corporation and the Principal Subsidiaries is duly
qualified to do business in each jurisdiction in which the ownership
or leasing of its property or the conduct of its business requires
such qualification, except where the failure to so qualify,
considering all such cases in the aggregate, does not have a material
adverse effect on the business, properties, financial position or
results of operations of the Corporation and its subsidiaries taken as
a whole.
(ii) The descriptions in the Registration Statement and the
Prospectus of legal or governmental proceedings are accurate and
fairly present the information required to be shown, and such counsel
does not know of any litigation or any legal or governmental
proceeding instituted or threatened against the Corporation or any of
its subsidiaries or any of their respective properties that would be
required to be disclosed in the Prospectus and is not so disclosed.
Such counsel shall also state that nothing has come to his attention
that has caused him to believe that the Registration Statement as of the date of
effectiveness under the 1933 Act and the Prospectus as of the date it was filed
with, or transmitted for filing to, the Commission, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
that the Prospectus as of the date it was filed with, or transmitted for filing
to, the Commission and at the Closing Date, contained or contains any untrue
statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Such counsel may also state that he
does not assume any responsibility for the accuracy, completeness or fairness of
the statements contained in the Registration Statement and the Prospectus and
does not express any opinion or belief as to the financial statements or other
financial data contained in the Registration Statement and the Prospectus.
In rendering the foregoing opinion, such counsel may rely, to the extent
recited therein, upon opinions of local counsel. Such counsel may also state
that he has relied as to certain factual matters on information obtained from
public officials, officers of the Corporation and other sources believed by him
to be responsible.
(f) You shall have received the opinion or opinions of Sullivan &
Cromwell, counsel for the Underwriters, dated the Closing Date, with
respect to the incorporation of the Corporation, the validity of the Notes,
the Registration Statement and the Prospectus, as amended or supplemented,
and other related matters as you may require, and the Corporation shall
have furnished to such counsel such documents as they request for the
purpose of enabling them to pass upon such matters.
(g) On or after the date hereof, there shall not have occurred any of
the following: (i) a suspension in trading in securities generally or of
the securities of Duke Energy Corporation or the Corporation on the New
York Stock Exchange; or (ii) a general moratorium on commercial banking
activities in New York declared by either Federal or New York State
authorities; or (iii) the outbreak of hostilities involving the United
States or the declaration by the United States of a national emergency or
war if the effect of any such event specified in this clause (g) in your
judgment makes it impracticable or inadvisable to proceed with the public
offering or the delivery of the Preferred Securities being delivered at the
Closing Date on the terms and in the manner contemplated in the Prospectus.
(h) You shall have received a certificate of the Chairman of the Board
and President or any Vice President and a principal financial or accounting
officer of the Corporation, dated the Closing Date, in which such officers,
to the best of their knowledge after reasonable investigation, shall state
that the representations and warranties of the Corporation in this
Agreement are true and correct, that the Corporation has complied with all
agreements and satisfied all conditions on its part to be performed or
satisfied at or prior to the Closing Date, that the conditions specified in
Section 6(b) and Section 6(c) have been satisfied, and that no stop order
suspending the effectiveness of the Registration Statement has been issued
and no proceedings for that purpose have been instituted or are threatened
by the Commission.
(i) On the date of this Agreement, you shall have received letters
dated the date hereof, in form and substance satisfactory to you, from the
Corporation's independent public accountants, containing statements and
information of the type ordinarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements and
certain financial information contained in or incorporated by reference
into the Prospectus.
(j) At the Closing Date you shall have received from the Corporation's
independent public accountants letters, dated the Closing Date, to the
effect that such accountants reaffirm the statements made in the letters
furnished pursuant to paragraph (i) of this Section 6, except that the
specified date referred to shall be a date not more than three business
days prior to the Closing Date.
The Corporation will furnish you with such conformed copies of such opinions,
certificates, letters and documents as you reasonably request.
7. Indemnification. (a) The Corporation agrees to indemnify and hold
harmless each Underwriter and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the 1933 Act, as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever arising out of any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement (or any
amendment thereto), or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the
statements therein not misleading or arising out of any untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the prospectus constituting a part of the Registration
Statement in the form in which it became effective or the Prospectus (or
any amendment or supplement thereto) or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, unless such statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with written
information furnished to the Corporation by any Underwriter through you
expressly for use in the Registration Statement (or any amendment thereto)
or such Preliminary Prospectus, such prospectus, or the Prospectus (or any
amendment or supplement thereto);
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<PAGE>
(ii) against any and all loss, liability, claim, damage and expense
whatsoever to the extent of the aggregate amount paid in settlement of
any litigation, commenced or threatened, or of any claim whatsoever based
upon any such untrue statement or omission or any such alleged untrue
statement or omission, if such settlement is effected with the written
consent of the Corporation; and
(iii) against any and all expense whatsoever reasonably incurred in
investigating, preparing or defending against any litigation, commenced
or threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission,
to the extent that any such expense is not paid under (i) or (ii) above.
In no case shall the Corporation be liable under this indemnity agreement
with respect to any claim made against any Underwriter or any such controlling
person unless the Corporation shall be notified in writing of the nature of the
claim within a reasonable time after the assertion thereof, but failure so to
notify the Corporation shall not relieve it from any liability which it may have
otherwise than on account of this indemnity agreement. The Corporation shall be
entitled to participate at its own expense in the defense, or, if it so elects,
within a reasonable time after receipt of such notice, to assume the defense of
any suit brought to enforce any such claim, but if it so elects to assume the
defense, such defense shall be conducted by counsel chosen by it and approved by
the Underwriter or Underwriters or controlling person or persons, or defendant
or defendants in any suit so brought, which approval shall not be unreasonably
withheld. In any such suit, any Underwriter or any such controlling person shall
have the right to employ its own counsel, but the fees and expenses of such
counsel shall be at the expense of such Underwriter or such controlling person
unless (i) the Corporation and such Underwriter shall have mutually agreed to
the employment of such counsel, or (ii) the named parties to any such action
(including any impleaded parties) include both such Underwriter or such
controlling person and the Corporation and such Underwriter or such controlling
person shall have been advised by such counsel that a conflict of interest
between the Corporation and such Underwriter or such controlling person may
arise and for this reason it is not desirable for the same counsel to represent
both the indemnifying party and also the indemnified party (it being understood,
however, that the Corporation shall not, in connection with any one such action
or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys for all such Underwriters and all such controlling persons, which firm
shall be designated in writing by you). The Corporation agrees to notify you
within a reasonable time of the assertion of any claim against it, any of its
officers or directors or any person who controls the Corporation within the
meaning of Section 15 of the 1933 Act, in connection with the sale of the Notes.
(b) Each Underwriter severally agrees that it will indemnify and hold
harmless the Corporation, its directors and each of the officers of the
Corporation who signed the Registration Statement and each person, if any, who
controls the Corporation within the meaning of Section 15 of the 1933 Act to the
same extent as the indemnity contained in subsection (a) of this Section, but
only with respect to statements or omissions made in the Registration Statement
(or any amendment thereto) or any Preliminary Prospectus, such prospectus or the
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Corporation by such
Underwriter through you expressly for use in the Registration Statement (or any
amendment thereto), such Preliminary Prospectus, such prospectus or the
Prospectus (or any amendment or supplement thereto). In case any action shall be
brought against the Corporation or any person so indemnified based on the
Registration Statement (or any amendment thereto) or such Preliminary
Prospectus, such prospectus or the Prospectus (or any amendment or supplement
thereto) and in respect of which indemnity may be sought against any
Underwriter, such Underwriter shall have the rights and duties given to the
Corporation, and the Corporation and each person so indemnified shall have the
rights and duties given to the Underwriters, by the provisions of subsection (a)
of this Section.
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<PAGE>
8. Default by One or More of the Underwriters. (a) If any Underwriter
shall default in its obligation to purchase the Notes which it has agreed to
purchase hereunder on the Closing Date, you may in your discretion arrange for
you or another party or other parties to purchase such Notes on the terms
contained herein. If within thirty-six hours after such default by any
Underwriter you do not arrange for the purchase of such Notes, then the
Corporation shall be entitled to a further period of thirty-six hours within
which to procure another party or other parties satisfactory to you to purchase
such Notes on such terms. In the event that, within the respective prescribed
periods, you notify the Corporation that you have so arranged for the purchase
of such Notes, or the Corporation notifies you that it has so arranged for the
purchase of such Notes, you or the Corporation shall have the right to postpone
such Closing Date for a period of not more than seven days, in order to effect
whatever changes may thereby be made necessary in the Registration Statement or
the Prospectus, or in any other documents or arrangements, and the Corporation
agrees to file promptly any amendments to the Registration Statement or the
Prospectus which may be required. The term "Underwriter" as used in this
Agreement shall include any person substituted under this Section with like
effect as if such person had originally been a party to this Agreement with
respect to such Notes.
(b) If, after giving effect to any arrangements for the purchase of the Notes
of a defaulting Underwriter or Underwriters by you or the Corporation as
provided in subsection (a) above, the aggregate amount of such Notes which
remains unpurchased does not exceed one-eleventh of the aggregate amount of all
the Notes to be purchased at such Closing Date, then the Corporation shall have
the right to require each non-defaulting Underwriter to purchase the amount of
Notes which such Underwriter agreed to purchase hereunder at such Closing Date
and, in addition, to require each non-defaulting Underwriter to purchase its pro
rata share (based on the amount of Notes which such Underwriter agreed to
purchase hereunder) of the Notes of such defaulting Underwriter or Underwriters
for which such arrangements have not been made; but nothing herein shall relieve
a defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the Notes
of a defaulting Underwriter or Underwriters by you or the Corporation as
provided in subsection (a) above, the aggregate amount of such Notes which
remains unpurchased exceeds one-eleventh of the aggregate amount of all the
Notes to be purchased at such Closing Date, or if the Corporation shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Notes of a defaulting Underwriter or Underwriters, then
this Agreement shall thereupon terminate, without liability on the part of any
non-defaulting Underwriter or the Corporation, except for the expenses to be
borne by the Corporation as provided in Section 5(h) hereof and the indemnity
agreement in Section 7 hereof; but nothing herein shall relieve a defaulting
Underwriter from liability for its default.
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<PAGE>
9. Representations and Indemnities to Survive Delivery. The respective
indemnities, agreements, representations, warranties and other statements of the
Corporation or its officers and of the several Underwriters set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation, or statement as to the results thereof, made by or on behalf
of any Underwriter or the Corporation, or any of its officers or directors or
any controlling person, and will survive delivery of and payment for the Notes.
10. Reliance on Your Acts. In all dealings hereunder, you shall act on
behalf of each of the Underwriters, and the parties hereto shall be entitled to
act and rely upon any statement, request, notice or agreement on behalf of any
Underwriter made or given by you.
11. Notices. All communications hereunder will be in writing and, if sent
to the Underwriters, will be mailed, delivered or telecopied and confirmed to
you as the representatives in care of at ,
attention of or, if sent to the Corporation, will be
mailed, delivered or telecopied and confirmed to it at 422 South Church Street,
Charlotte, N.C. 28202, telephone number (704) 382-5159, attention of Richard J.
Osborne, Vice President and Chief Financial Officer; provided, however, that
any notice to an Underwriter pursuant to Section 7(a) hereof shall be delivered
or sent by mail or telecopy to such Underwriter at its address or telecopy
number set forth in its Underwriters' Questionnaire or telex constituting such
Questionnaire, which address or telecopy number will be supplied to the
Corporation by you. Any such communications shall take effect upon receipt
thereof.
12. Business Day. As used herein, the term "business day" shall mean any
day when the Commission's office in Washington, D.C. is open for business.
13. Successors. This Agreement shall inure to the benefit of and be
binding upon the Underwriters and the Corporation and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
parties hereto and their respective successors and the controlling persons and
the officers and directors referred to in Section 7, and their respective
successors, heirs and legal representatives any legal or equitable right, remedy
or claim under or in respect of this
9
<PAGE>
Agreement or any provision herein contained; this Agreement and all conditions
and provisions hereof being intended to be and being for the sole and exclusive
benefit of the parties hereto and their respective successors and said
controlling persons, officers and directors and their respective successors,
heirs and legal representatives, and for the benefit of no other person, firm or
corporation. No purchaser of Notes from any Underwriter shall be deemed to be a
successor or assign by reason merely of such purchase.
14. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
15. Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.
If the foregoing is in accordance with your understanding, kindly sign and
return to us two counterparts hereof, and upon your acceptance on behalf of each
of the Underwriters, this letter and such acceptance will become a binding
agreement between the Corporation, on the one hand, and the each of the
Underwriters, on the other hand, in accordance with its terms. It is understood
that your acceptance of this letter on behalf of each of the Underwriters is
pursuant to the authority set forth in a form of Agreement Among Underwriters,
the form of which shall be submitted to the Corporation for examination, but
without warranty on your part as to the authority of the signers thereof.
Very truly yours,
DUKE CAPITAL CORPORATION
By:
----------------------------------------
The foregoing Underwriting Agreement is
hereby confirmed and accepted as of the
date first above written.
By:
-----------------------------
10
<PAGE>
SCHEDULE A
Principal Amount
of Notes to be
Underwriter Purchased
----------- ----------------
----------------
Total.................................................. $
================
<PAGE>
EXHIBIT 1.3
DUKE CAPITAL FINANCING TRUST [ ]
% Trust Preferred Securities
(Liquidation Amount $ Per Preferred Security)
UNDERWRITING AGREEMENT
,
Gentlemen:
1. Introductory. DUKE CAPITAL FINANCING TRUST [ ], a Delaware statutory
------------
business trust (the "Trust"), and DUKE CAPITAL CORPORATION, a Delaware
corporation (the "Corporation"), propose that the Trust issue and sell to the
Underwriters named in Schedule A hereto (the "Underwriters") %
Trust Preferred Securities (liquidation amount $ per preferred security),
representing preferred undivided beneficial interests in the assets of the Trust
(the "Preferred Securities"), guaranteed by the Corporation as to the payment of
distributions and payments upon liquidation or redemption, to the extent set
forth in the Guarantee Agreement between the Corporation and The Chase Manhattan
Bank, as trustee thereunder (the "Guarantee Trustee"), to be dated as of the
Closing Date (as defined in Section 3 hereof) (the "Guarantee"), and the Trust
and the Corporation hereby agree with you as hereinafter set forth in this
Agreement.
The entire proceeds from the sale of the Preferred Securities will be
combined with the entire proceeds from the sale by the Trust to the Corporation
of its common securities, representing common undivided beneficial interests in
the assets of the Trust (the "Common
<PAGE>
Securities"), and will be used by the Trust to purchase the Series % Junior
Subordinated Notes due , (the "Notes") to be issued by the
Corporation. The Preferred Securities and the Common Securities will be issued,
pursuant to the Amended and Restated Trust Agreement, dated as of ,
(the "Trust Agreement"), among the Corporation, as Depositor, and the trustees
named therein, including The Chase Manhattan Bank, as property trustee (the
"Property Trustee") and Chase Manhattan Bank Delaware, as Delaware trustee (the
"Delaware Trustee"). The Notes will be issued pursuant to a Subordinated
Indenture, dated as of , (the "Original Indenture"), between the
Corporation and The Chase Manhattan Bank, as Trustee (the "Indenture Trustee"),
as supplemented by a Supplemental Indenture, dated as of , (the
"Supplemental Indenture," and together with the Original Indenture as
theretofore amended or supplemented, the "Indenture").
2. Representations and Warranties of the Trust and the Corporation. The
---------------------------------------------------------------
Trust and the Corporation, jointly and severally, represent and warrant to, and
agree with, the several Underwriters that:
(a) A registration statement (Nos. ), including a prospectus,
relating to the Preferred Securities, the Guarantee and the Notes has been
filed with the Securities and Exchange Commission ("Commission") under the
Securities Act of 1933 (the "1933 Act"). Such registration statement and
any post-effective amendment thereto, each in the form heretofore delivered
to you, and, excluding exhibits thereto but including all documents
incorporated by reference in the prospectus contained therein, to you for
each of the other Underwriters, have been declared effective by the
Commission in such form, and no stop order suspending the effectiveness of
such registration statement has been issued and no proceeding for that
purpose has been initiated or threatened by the Commission (any preliminary
prospectus included in such registration statement or filed with the
Commission pursuant to Rule 424(a) of the rules and regulations of the
Commission under the 1933 Act being hereinafter called a "Preliminary
Prospectus;" the various parts of such registration statement, including
all exhibits thereto and including the documents incorporated by reference
in the prospectus contained in the registration statement at the time such
part of the registration statement became effective, each as amended at the
time such part of the registration statement became effective, being
hereinafter called the "Registration Statement"; and the final prospectus
relating to the Preferred Securities, the Guarantee and the Notes,
in the form in which it has most recently been filed, or transmitted for
filing, with the Commission prior to the date of this Agreement, being
hereinafter called the "Prospectus"; and any reference herein to any
Preliminary Prospectus or the Prospectus shall be deemed to refer to and
include the documents incorporated by reference therein, as of the date of
such Preliminary Prospectus or Prospectus, as the case may be; any
reference to any amendment or supplement to any Preliminary Prospectus or
Prospectus shall be deemed to refer to and include any documents filed
after the date of such Preliminary Prospectus or Prospectus, as the case
may be, under the Securities Exchange Act of 1934, as amended (the "1934
Act"), and incorporated by reference in such Preliminary Prospectus or
Prospectus, as the case may be; and any reference to any
2
<PAGE>
amendment to the Registration Statement shall be deemed to refer to and
include any annual report of the Corporation filed pursuant to Section
13(a) or 15(d) of the 1934 Act after the effective date of the Registration
Statement that is incorporated by reference in the Registration Statement).
(b) The Registration Statement conforms and the Prospectus will
conform in all material respects to the requirements of the 1933 Act and
the rules and regulations thereunder ("1933 Act Regulations"), and the
Registration Statement does not and the Prospectus will not include any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading, except that the foregoing does not apply to statements or
omissions in any such document based upon written information furnished to
the Trust or the Corporation by any Underwriter specifically for use
therein.
(c) The documents incorporated by reference in the Prospectus,
at the time they were filed with the Commission, conformed in all material
respects to the requirements of the 1934 Act and the rules and regulations
of the Commission thereunder (the "1934 Act Regulations"), and, when read
together with the other information in the Prospectus, do not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading, and any documents deemed to be incorporated by reference in
the Prospectus will, when they are filed with the Commission, comply in all
material respects with the requirements of the 1934 Act and the 1934 Act
Regulations, and will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which
they are made, not misleading.
(d) The compliance by the Corporation with all of the provisions of
this Agreement and the consummation of the transactions herein contemplated
will not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Corporation or any of its Principal Subsidiaries is a party or by
which any of them or their respective property is bound or to which any of
their property or assets is subject, nor will such action result in any
violation of the provisions of the Restated Certificate of Incorporation or
By-Laws of the Corporation or any statute or any order, rule or regulation
of any court or governmental agency or body having jurisdiction over the
Corporation or its Principal Subsidiaries or any of their respective
property; and no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the consummation by the Corporation of the transactions
contemplated by this Agreement, except for the registration under the 1933
Act of the Preferred Securities, the Guarantee and the Notes and such
consents, approvals, authorizations, registrations or qualifications as may
be required under state securities or Blue Sky laws in connection with the
purchase and distribution of the Preferred Securities by the Underwriters.
(e) Each of PanEnergy Corp, Panhandle Eastern Pipe Line Company, Texas
Eastern Transmission Corporation, Trunkline Gas Company and Algonquin Gas
Transmission Company, each a Delaware corporation (and hereinafter
called a "Principal Subsidiary"), is an indirect wholly-owned subsidiary of
the Corporation.
3
<PAGE>
3. Purchase, Sale and Delivery of Preferred Securities. Subject to the
---------------------------------------------------
terms and conditions herein set forth, the Trust agrees to sell to each of the
Underwriters and each of the Underwriters agrees, severally and not jointly, to
purchase from the Trust at a purchase price of $ per Preferred Security,
the number of Preferred Securities set forth opposite the name of such
Underwriter in Schedule A hereto, plus the respective principal amount of
additional Preferred Securities which each such Underwriter may become obligated
to purchase pursuant to the provisions of Section 8 hereof.
As compensation to the Underwriters for their commitments hereunder, and in
view of the fact that the proceeds of the sale of the Preferred Securities will
be used by the Trust to purchase the Notes of the Corporation, the Corporation
hereby agrees to pay at the Closing Date (as defined below) to ,
for the accounts of the several Underwriters, a commission equal to $
per share for the Preferred Securities.
The Preferred Securities to be purchased by the Underwriters hereunder will
be represented by a global certificate or certificates in book-entry form which
will be deposited by or on behalf of the Trust with The Depository Trust Company
("DTC") or its designated custodian and registered in the name of Cede & Co., as
nominee of DTC. The Trust will deliver the Preferred Securities to ,
for the respective accounts of the Underwriters, against payment by or on
behalf of such Underwriters of the purchase price therefor by wire transfer of
immediately available funds to the Trust, by causing DTC to credit the Preferred
Securities to the account of at DTC. The time and date of
such delivery and payment (the "Closing Date") shall be 10:00 a.m., New York
City time, on , (unless postponed in accordance with the
provisions of Section 8), or at such other time and date as you, the Trust and
the Corporation may agree upon in writing at the office of Dewey Ballantine,
1301 Avenue of the Americas, New York, New York 10019, or at such other place as
you, the Trust and the Corporation may determine. It is understood that each
Underwriter has authorized , for its account, to accept
delivery of, receipt for, and make payment of the purchase price, for the
Preferred Securities which it has agreed to purchase.
At the Closing Date, the Corporation will pay, or cause to be paid, the
compensation payable to the Underwriters under this Section 3 by wire transfer
of immediately available funds to , as representative of
and on behalf of the Underwriters.
4. Offering by the Underwriters. It is understood that the several
----------------------------
Underwriters propose to offer the Preferred Securities for sale to the public as
set forth in the Prospectus.
5. Covenants of the Trust and the Corporation. The Trust and the
------------------------------------------
Corporation, jointly and severally, covenant and agree with the several
Underwriters that:
(a) The Trust and the Corporation will advise you promptly of any
amendment or supplementation of the Registration Statement or the
Prospectus and of the institution
4
<PAGE>
by the Commission of any stop order proceedings in respect of the
Registration Statement, and will use their best efforts to prevent the
issuance of any such stop order and to obtain as soon as possible its
lifting, if issued.
(b) If at any time when a prospectus relating to the Preferred
Securities, the Guarantee or the Notes is required to be delivered under
the 1933 Act any event occurs as a result of which the Prospectus as then
amended or supplemented would include an untrue statement of a material
fact, or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or if it is necessary at any time to amend the Prospectus to
comply with the 1933 Act, the Trust and the Corporation promptly will
prepare and file with the Commission an amendment, supplement or an
appropriate document pursuant to Section 13 or 14 of the 1934 Act which
will correct such statement or omission or which will effect such
compliance.
(c) The Trust and the Corporation, during the period when a prospectus
relating to the Preferred Securities, the Guarantee or the Notes is
required to be delivered under the 1933 Act, will file promptly all
documents required to be filed with the Commission pursuant to Section 13
or 14 of the 1934 Act.
(d) The Corporation will make generally available to its security
holders, in each case as soon as practicable but not later than 60 days
after the close of the period covered thereby, earnings statements (in form
complying with the provisions of Section 11(a) of the 1933 Act, which need
not be certified by independent certified public accountants unless
required by the 1933 Act) covering (i) a twelve-month period beginning not
later than the first day of the Corporation's fiscal quarter next following
the effective date of the Registration Statement and (ii) a twelve-month
period beginning not later than the first day of the Corporation's fiscal
quarter next following the date of this Agreement.
(e) The Trust and the Corporation will furnish to you, without charge,
copies of the Registration Statement ( of which will be signed and
will include all exhibits other than those incorporated by reference), the
Prospectus, and all amendments and supplements to such documents, in each
case as soon as available and in such quantities as you reasonably request.
(f) The Trust and the Corporation will arrange or cooperate in
arrangements for the qualification of the Preferred Securities, and to the
extent required or advisable, the Guarantee and the Notes for sale under
the laws of such jurisdictions as you designate and will continue such
qualifications in effect so long as required for the distribution;
provided, however, that neither the Trust nor the Corporation shall be
required to qualify as a foreign corporation or to file any general
consents to service of process under the laws of any state where it is not
now so subject.
5
<PAGE>
(g) The Corporation will not, during the period beginning from the
date hereof and continuing to and including the date fifteen days after the
date hereof, sell, offer to sell, grant any option for the sale of, or
otherwise dispose of any Preferred Securities, any security convertible
into or exchangeable for the Preferred Securities or the Notes or any debt
security substantially similar to the Notes or equity securities
substantially similar to the Preferred Securities (except for the Notes and
the Preferred Securities issued pursuant to this Agreement), without your
prior written consent.
(h) The Corporation will pay all expenses incident to the performance
of the obligations of the Trust and the Corporation under this Agreement
including (i) the printing and filing of the Registration Statement and the
printing of this Agreement and the Blue Sky Survey, (ii) the issuance and
delivery of the Preferred Securities, the Guarantee and the Notes as
specified herein, (iii) the fees and disbursements of counsel for the
Underwriters in connection with the qualification of the Preferred
Securities, the Guarantee and the Notes under the securities laws of any
jurisdiction in accordance with the provisions of Section 5(f) and in
connection with the preparation of the Blue Sky Survey, such fees not to
exceed $5,000, (iv) the printing and delivery to the Underwriters, in
quantities as hereinabove referred to, of copies of the Registration
Statement and any amendments thereto, (v) any fees charged by independent
rating agencies for rating the Preferred Securities, (vi) all fees and
expenses of the Trustees, including the Indenture Trustee, Property
Trustee, Guarantee Trustee and Delaware Trustee and the fees and
disbursements of their counsel, (vii) any fees and expenses in
connection with the listing of the Preferred Securities and, if applicable,
the Notes on the New York Stock Exchange, (viii) any filing fee required by
the National Association of Securities Dealers, Inc. and (ix) the costs of
any depository arrangements for the Preferred Securities with DTC or any
successor depository.
6. Conditions of the Obligations of the Underwriters. The obligations of
-------------------------------------------------
the several Underwriters to purchase and pay for the Preferred Securities will
be subject to the accuracy of the representations and warranties on the part of
the Trust or the Corporation herein, to the accuracy of the statements of
trustees or representatives of the Trust and officers of the Corporation made
pursuant to the provisions hereof, to the performance by the Trust and the
Corporation of their obligations hereunder and to the following additional
conditions precedent:
(a) Prior to the Closing Date, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or, to the
knowledge of the Trust, the Corporation or you, shall be threatened by the
Commission.
6
<PAGE>
(b) Prior to the Closing Date, the rating assigned by Moody's
Investors Service, Inc. or Standard & Poor's Ratings Services to any debt
securities of the Corporation as of the date of this Agreement shall not
have been lowered.
(c) Since the respective most recent dates as of which information is
given in the Prospectus and up to the Closing Date, there shall not have
been any material adverse change in the condition of the Trust or the
Corporation, financial or otherwise, except as reflected in or contemplated
by the Prospectus, and, since such dates and up to the Closing Date, there
shall not have been any material transaction entered into by the
Corporation other than transactions contemplated by the Prospectus and
transactions in the ordinary course of business.
(d) You shall have received an opinion or opinions of Dewey Ballantine
LLP, counsel to the Corporation, dated the Closing Date, to the effect
that:
(i) The Corporation has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Delaware, with power and authority (corporate and
other) to own its properties and conduct its business as described
in the Prospectus.
(ii) The Trust Agreement has been duly authorized, executed and
delivered by the Corporation and duly qualified under the Trust
Indenture Act of 1939, and, assuming due authorization, execution
and delivery thereof by The Chase Manhattan Bank, as Trustee,
constitutes a valid and legally binding instrument of the
Corporation, enforceable against the Corporation in accordance with
its terms, subject to the qualifications that the enforceability of
the Corporation's obligations under the Trust Agreement may be
limited by bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights
generally, and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity
or at law).
(iii) The Guarantee Agreement has been duly authorized, executed
and delivered by the Corporation and duly qualified under the Trust
Indenture Act of 1939 and constitutes a valid and legally binding
instrument of the Corporation, enforceable against the Corporation
in accordance with its terms, subject to the qualifications that the
enforceability of the Corporation's obligations under the Guarantee
Agreement may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting
creditors' rights generally and by general
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principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(iv) The Indenture has been duly authorized, executed and
delivered by the Corporation and duly qualified under the Trust
Indenture Act of 1939 and, assuming the due authorization, execution
and delivery thereof by The Chase Manhattan Bank, as Trustee,
constitutes a valid and legally binding instrument of the
Corporation, enforceable against the Corporation in accordance with
its terms, subject to the qualifications that the enforceability of
the Corporation's obligations under the Indenture may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally and by
general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(v) The Notes have been duly authorized and executed by the
Corporation and, when authenticated by The Chase Manhattan Bank, as
Trustee, in the manner provided in the Indenture and delivered
against payment therefor, will constitute valid and legally binding
obligations of the Corporation, enforceable against the Corporation
in accordance with their terms, subject to the qualifications that
the enforceability of the Corporation's obligations under the Notes
may be limited by bankruptcy, insolvency, reorganization, moratorium
and other similar laws relating to or affecting creditors' rights
generally and by general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at
law).
(vi) The Registration Statement has become effective under the
1933 Act, and, to the best of the knowledge of such counsel, no stop
order suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have been instituted
or are pending or threatened under the 1933 Act.
(vii) This Agreement has been duly authorized, executed and
delivered by the Corporation.
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(viii) The performance by the Corporation of this Agreement will
not contravene any of the provisions of the Certificate of
Incorporation or By-Laws of the Corporation.
(ix) The Corporation is not a holding company under the Public
Utility Holding Company Act of 1935, as amended.
(x) No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body is
required for the issue and sale of the Preferred Securities, the
issue of the Guarantee or the issue and sale of the Notes or the
consummation by the Corporation and the Trust of the transactions
contemplated by this Agreement, the Trust Agreement, the Guarantee
or the Indenture, except such as have been obtained under the 1933
Act and the Trust Indenture Act and such consents, approvals,
authorizations, orders, registrations or qualifications as may be
required under state securities or Blue Sky laws in connection with
the purchase and distribution of the Preferred Securities and the
Guarantee by the Underwriters.
(xi) The Registration Statement as of the date of effectiveness
under the 1933 Act and the Prospectus as of the date it was filed
with, or transmitted for filing to, the Commission complied
as to form in all material respects with the requirements of the
1933 Act and the 1933 Act Regulations; and nothing has come to their
attention that would lead them to believe that the Registration
Statement as of the date of effectiveness under the 1933 Act (or if
an amendment to such Registration Statement or an annual report on
Form 10-K has been filed by the Corporation with the Commission
subsequent to the effectiveness of the Registration Statement, then
at the time of the most recent such filing) contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading or that the Prospectus as of the date it was
filed with, or transmitted for filing to, the Commission and at the
Closing Date contained or contains an untrue statement of a material
fact or omitted or omits to state a material fact necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading. Such opinion may state
that such counsel do not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the
Registration Statement and Prospectus except as otherwise expressly
provided in such opinion and do not express any opinion or belief
as to the financial statements or other financial data contained in
the Registration Statement and the Prospectus or as to the statement
of the eligibility and qualification of the Trustee.
(xii) The statements made in the Prospectus under the captions
"Description of the Preferred Securities," "Description of the
Guarantees," "Description of the Series Junior Subordinated
Notes" and "Description of the Junior Subordinated Notes," insofar
as they purport to summarize provisions of documents specifically
referred to therein, fairly present the information called for with
respect thereto by Form S-3, and the statements as to matters of law
and legal conclusions contained in the Prospectus under the caption
"Certain Federal Income Tax Considerations" are correct in all
material respects.
In rendering the foregoing opinion or opinions, Dewey Ballantine LLP may
state that such opinion or opinions are limited to the Federal laws of the
United States, the laws of the State of New York and the General Corporation Law
of the State of Delaware, and that they are expressing no opinion as to the
effect of the laws of any other jurisdiction. In addition, such counsel may
state that they have relied as to certain matters on information obtained from
public officials, officers of the Corporation and other sources believed by them
to be responsible and that the signatures on all documents examined by them are
genuine, assumptions which such counsel have not independently verified.
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(e) You shall have received an opinion, dated the Closing Date,
of Robert S. Lilien, Esq., to the effect that:
(i) Each of the Corporation and the Principal Subsidiaries is duly
qualified to do business in each jurisdiction in which the ownership
or leasing of its property or the conduct of its business requires
such qualification, except where the failure to so qualify,
considering all such cases in the aggregate, does not have a material
adverse effect on the business, properties, financial position or
results of operations of the Corporation and its subsidiaries taken as
a whole.
(ii) Such counsel does not know of any litigation or any
legal or governmental proceeding instituted or threatened against the
Corporation or any of its subsidiaries that would be required to be
disclosed in the Prospectus and is not so disclosed.
Such counsel shall also state that nothing has come to his attention
that has caused him to believe that the Registration Statement as of the date of
effectiveness under the 1933 Act and the Prospectus as of the date it was filed
with, or transmitted for filing to, the Commission, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
that the Prospectus as of the date it was filed with, or transmitted for filing
to, the Commission and at the Closing Date, contained or contains any untrue
statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Such counsel may also state that he
does not assume any responsibility for the accuracy, completeness or fairness of
the statements contained in the Registration Statement and the Prospectus and
does not express any opinion or belief as to the financial statements or other
financial data contained in the Registration Statement and the Prospectus.
In rendering the foregoing opinion, such counsel may rely, to the extent
recited therein, upon opinions of local counsel. Such counsel may also state
that he has relied as to certain factual matters on information obtained from
public officials, officers of the Corporation and other sources believed by him
to be responsible.
(f) You shall have received the opinion of Richards, Layton & Finger,
P.A., special Delaware counsel to the Trust, dated the Closing Date, to
the effect that:
(i) The Trust has been duly created and is validly existing in
good standing as a business trust under the Business Trust Act of
the State of Delaware (the "Delaware Business Trust Act"), and all
filings required under the laws of the State of Delaware with
respect to the creation and valid existence of the Trust as a
business trust have been made.
(ii) Under the Delaware Business Trust Act and the Trust
Agreement, the Trust has the business trust power and authority to
own property and conduct its business, all as described in the
Prospectus.
(iii) Under the Delaware Business Trust Act and the Trust
Agreement, the Trust has the business trust power and authority (a)
to execute and deliver this Agreement, (b) to perform its
obligations under this Agreement and (c) to issue and perform its
obligations under the Preferred Securities and the Common
Securities.
(iv) Under the Delaware Business Trust Act and the Trust
Agreement, the execution and delivery by the Trust of this Agreement
and the performance by the Trust of its obligations hereunder and
under the Trust Agreement, have been duly authorized by all
necessary business trust action on the part of the Trust.
(v) The Trust Agreement constitutes a valid and binding
obligation of the Corporation and the trustees named therein,
enforceable against the Corporation and the trustees named therein,
in accordance with its terms, subject, as to enforcement, to the
effect upon the Trust Agreement of (a) bankruptcy, insolvency,
moratorium, receivership, liquidation, fraudulent conveyance or
transfer, reorganization and other similar laws relating to or
affecting the remedies and rights of creditors generally, (b)
principles of equity, including applicable law relating to fiduciary
duties (regardless of whether considered or applied in a proceeding
in equity or at law) and (c) the effect of applicable public policy
on the enforceability of provisions relating to indemnification or
contribution.
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(vi) The Preferred Securities have been duly authorized by the
Trust Agreement and are duly and validly issued and, subject to the
qualifications set forth herein, fully paid and non-assessable
preferred undivided beneficial interests in the assets of the Trust;
the Holders of the Preferred Securities, as beneficial owners of the
Trust (the "Securityholders"), are entitled to the same limitation
of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law
of the State of Delaware; provided, however, that such counsel may
note that the Securityholders may be obligated, pursuant to the
Trust Agreement, to (a) provide indemnity and/or security in
connection with and pay a sum sufficient to cover any taxes or
governmental charges arising from transfers or exchanges of
Preferred Securities certificates and the issuance of replacement
Preferred Securities certificates and (b) provide security and/or
indemnity in connection with requests of or directions to the
Property Trustee (as defined in the Trust Agreement) to exercise its
rights and powers under the Trust Agreement; and under the Delaware
Business Trust Act and the Trust Agreement, the issuance of the
Preferred Securities is not subject to preemptive or other similar
rights.
(vii) The Common Securities have been duly authorized by the
Trust Agreement and are duly and validly issued and fully paid
undivided beneficial interests in the assets of the Trust; and under
the Delaware Business Trust Act and the Trust Agreement, the
issuance of the Common Securities is not subject to preemptive or
other similar rights.
(viii) The issuance and sale by the Trust of the Preferred
Securities and the Common Securities, the execution, delivery and
performance by the Trust of this Agreement, the performance by the
Trust of the Trust Agreement, the consummation by the Trust of the
transactions contemplated herein and therein and the compliance by
the Trust with its obligations hereunder do not violate (a) any of
the provisions of the Certificate of Trust of the Trust or the Trust
Agreement or (b) any applicable Delaware law or Delaware
administrative regulation.
(ix) Assuming that the Trust derives no income from or connected
with sources within the State of Delaware and has no assets,
activities (other than having a Delaware trustee as required by the
Delaware Business Trust Act and the filing of documents with the
Secretary of State of the State of Delaware) or employees in the
State of Delaware, no authorization, approval, consent or order of
any Delaware court or Delaware governmental authority or Delaware
agency is required to be obtained by the Trust solely as a result of
the issuance and sale of the Preferred Securities, the consummation
by the Trust of the transactions contemplated in this Agreement and
the Trust Agreement or the compliance by the Trust of its
obligations hereunder and thereunder.
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(x) Assuming that the Trust derives no income from or connected
with sources within the State of Delaware and has no assets,
activities (other than having a Delaware trustee as required by the
Delaware Business Trust Act and the filing of documents with the
Secretary of State of the State of Delaware) or employees in the
State of Delaware, and assuming that the Trust is treated as a
grantor trust for federal income tax purposes, the Securityholders
(other than those holders of the Preferred Securities who reside or
are domiciled in the State of Delaware) will have no liability for
income taxes imposed by the State of Delaware solely as a result of
their participation in the Trust, and the Trust will not be liable
for any income tax imposed by the State of Delaware.
In rendering the opinion expressed in this paragraph (f), such counsel need
express no opinion concerning the securities laws of the State of Delaware.
(g) You shall have received the opinion or opinions of Sullivan &
Cromwell, counsel for the Underwriters, dated the Closing Date, with
respect to the incorporation of the Corporation, the validity of the Notes,
the Registration Statement and the Prospectus, as amended or supplemented,
and other related matters as you may require, and the Corporation shall
have furnished to such counsel such documents as they request for the
purpose of enabling them to pass upon such matters.
(h) On or after the date hereof, there shall not have occurred any of
the following: (i) a suspension in trading in securities generally or of
the securities of Duke Energy Corporation or the Corporation on the New
York Stock Exchange; or (ii) a general moratorium on commercial banking
activities in New York declared by either Federal or New York State
authorities; or (iii) the outbreak of hostilities involving the United
States or the declaration by the United States of a national emergency or
war if the effect of any such event specified in this clause (h) in your
judgment makes it impracticable or inadvisable to proceed with the public
offering or the delivery of the Preferred Securities being delivered at the
Closing Date on the terms and in the manner contemplated in the Prospectus.
(i) You shall have received a certificate of the Chairman of the
Board and President or any Vice President and a principal financial or
accounting officer of the Corporation and a certificate of a trustee or
authorized representative of the Trust, each dated the Closing Date, in
which such officers or trustee or representative, as the case may be, to
the best of their knowledge after reasonable investigation, shall state
that the representations and warranties of the Corporation and the Trust in
this Agreement are true and correct, that the Corporation and the Trust
have complied with all agreements and satisfied all conditions on their
part to be performed or satisfied at or prior to the Closing Date, that the
conditions specified in Section 6(b) and Section 6(c) have been satisfied,
and that no stop order suspending the effectiveness of the Registration
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Statement has been issued and no proceedings for that purpose have been
instituted or are threatened by the Commission.
(j) On the date of this Agreement, you shall have received a letter
dated the date hereof, in form and substance satisfactory to you, from the
Corporation's independent public accountants, containing statements and
information of the type ordinarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements and
certain financial information contained in or incorporated by reference
into the Prospectus.
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(k) At the Closing Date you shall have received from the Corporation's
independent public accountants a letter, dated the Closing Date, to the
effect that such accountants reaffirm the statements made in the letter
furnished pursuant to paragraph (j) of this Section 6, except that the
specified date referred to shall be a date not more than three business
days prior to the Closing Date.
The Corporation will furnish you with such conformed copies of such
opinions, certificates, letters and documents as you reasonably request.
7. Indemnification. (a) The Trust and the Corporation, jointly and
---------------
severally, agree to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of Section 15 of
the 1933 Act, as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever arising out of any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement (or any
amendment thereto), or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the
statements therein not misleading or arising out of any untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the prospectus constituting a part of the Registration
Statement in the form in which it became effective or the Prospectus (or
any amendment or supplement thereto) or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, unless such statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with written
information furnished to the Trust or the Corporation by any Underwriter
through you expressly for use in the Registration Statement (or any
amendment thereto) or such Preliminary Prospectus, such prospectus, or the
Prospectus (or any amendment or supplement thereto);
(ii) against any and all loss, liability, claim, damage and expense
whatsoever to the extent of the aggregate amount paid in settlement of any
litigation, commenced or threatened, or of any claim whatsoever based upon
any such untrue statement or omission or any such alleged untrue statement
or omission, if such settlement is effected with the written consent of the
Trust and the Corporation; and
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EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
the Registration Statement on Form S-3 (No. 333-49077) of Duke Capital
Corporation of our report dated February 13, 1998 appearing in the Form 10/A of
Duke Capital Corporation and to the reference to us under the heading "Experts"
in the Prospectus which is a part of the Registration Statement.
/s/ Deloitte & Touche LLP
- -------------------------------
Deloitte & Touche LLP
Charlotte, North Carolina
May 8, 1998
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to the
Registration Statement on Form S-3 (No. 333-49077) of Duke Capital Corporation
of our report dated January 16, 1997 on the consolidated balance sheet of
PanEnergy Corp as of December 31, 1996 and the related consolidated statements
of income, common stockholders' equity and cash flows for the years ended
December 31, 1996 and 1995 appearing in the annual report on Form 10-K of
PanEnergy Corp for the year ended December 31, 1996 and to the reference to our
firm under the heading "Experts" in the Prospectus.
/s/ KPMG Peat Marwick LLP
- -------------------------
KPMG Peat Marwick LLP
Houston, Texas
May 8, 1998
