<PAGE>
PROSPECTUS SUPPLEMENT FILED PURSUANT TO RULE 424(b)(2)
(To Prospectus dated May 13, 1998) REGISTRATION NO. 333-49077
$400,000,000
Duke Capital Corporation
a subsidiary of Duke Energy Corporation
$250,000,000 SERIES A 6 1/4% SENIOR NOTES DUE 2005
$150,000,000 SERIES B 6 3/4% SENIOR NOTES DUE 2018
----------------
Interest payable January 15 and July 15
----------------
THE SERIES A 6 1/4% SENIOR NOTES DUE 2005 WILL MATURE ON JULY 15, 2005 (THE
"SERIES A SENIOR NOTES"), AND THE SERIES B 6 3/4% SENIOR NOTES DUE 2018 WILL
MATURE ON JULY 15, 2018 (THE "SERIES B SENIOR NOTES") (COLLECTIVELY, THE
"SENIOR NOTES"). THE SERIES A SENIOR NOTES AND THE SERIES B SENIOR NOTES
WILL BE REDEEMABLE, IN WHOLE OR FROM TIME TO TIME IN PART, AT THE OPTION
OF THE CORPORATION AT ANY TIME AT A REDEMPTION PRICE EQUAL TO THE GREATER
OF (I) 100% OF THEIR PRINCIPAL AMOUNT AND (II) THE SUM OF THE PRESENT
VALUES OF THE REMAINING SCHEDULED PAYMENTS OF PRINCIPAL AND INTEREST
THEREON (EXCLUSIVE OF INTEREST ACCRUED TO THE DATE OF REDEMPTION)
DISCOUNTED TO THE DATE OF REDEMPTION ON A SEMI-ANNUAL BASIS (ASSUMING
A 360-DAY YEAR CONSISTING OF TWELVE 30-DAY MONTHS) AT THE TREASURY
RATE (AS DEFINED HEREIN) PLUS 10 BASIS POINTS FOR THE SERIES A
SENIOR NOTES AND 20 BASIS POINTS FOR THE SERIES B SENIOR NOTES,
PLUS, IN EITHER CASE, ACCRUED AND UNPAID INTEREST ON THE
PRINCIPAL AMOUNT BEING REDEEMED TO THE DATE OF REDEMPTION. EACH
SERIES OF SENIOR NOTES INITIALLY WILL BE REPRESENTED BY ONE OR
MORE GLOBAL DEBT SECURITIES REGISTERED IN THE NAME OF A
NOMINEE OF THE DEPOSITORY TRUST COMPANY, AS DEPOSITARY
("DTC"). BENEFICIAL INTERESTS IN THE GLOBAL DEBT 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 IN THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS,
SENIOR NOTES IN CERTIFICATED FORM WILL NOT BE ISSUED IN
EXCHANGE FOR A GLOBAL SECURITY. SEE "DESCRIPTION OF
THE OFFERED 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. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
----------------
SERIES A SENIOR NOTES--PRICE 99.608% AND ACCRUED INTEREST, IF ANY
SERIES B SENIOR NOTES--PRICE 99.338% AND ACCRUED INTEREST, IF ANY
----------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC (1) COMMISSIONS (2) CORPORATION (1)(3)
------------ --------------- ------------------
<S> <C> <C> <C>
Per Series A Senior Note........ 99.608% .625% 98.983%
Total........................... $249,020,000 $1,562,500 $247,457,500
Per Series B Senior Note........ 99.338% .875% 98.463%
Total........................... $149,007,000 $1,312,500 $147,694,500
</TABLE>
- --------
(1) Plus accrued interest, if any, from July 20, 1998.
(2) The Corporation has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(3) Before deducting expenses payable by the Corporation estimated at
$250,000.
----------------
The Senior Notes are offered, subject to prior sale, when, as and if
accepted by the Underwriters and subject to their right to reject any order in
whole or in part. It is expected that delivery of the Senior Notes will be
made on or about July 20, 1998 through the book-entry facilities of DTC
against payment therefor in immediately available funds.
----------------
MORGAN STANLEY DEAN WITTER
CITICORP SECURITIES, INC.
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
July 15, 1998
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICES OF THE SECURITIES.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR, AND PURCHASE, SECURITIES IN THE OPEN MARKET. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS
IN CONNECTION 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 BY ANY
UNDERWRITER, DEALER OR AGENT. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE SECURITIES OFFERED BY THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY JURISDICTION MADE TO ANY PERSON TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER OR
THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE CORPORATION SINCE THE DATE HEREOF OR
THEREOF, OR THAT THE INFORMATION HEREUNDER OR THEREIN IS CORRECT AS OF ANY
DATE SUBSEQUENT TO THE DATE HEREOF OR THEREOF.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<S> <C>
Summary of Offering........................................................ S-3
Incorporation by Reference................................................. S-4
Financial Ratios........................................................... S-4
Description of the Offered Senior Notes.................................... S-4
Underwriting............................................................... S-8
Legal Matters.............................................................. S-9
Glossary................................................................... S-10
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>
S-2
<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 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.
Securities Offered.......... The Corporation is offering $250,000,000
aggregate principal amount of its Series A
Senior Notes and $150,000,000 aggregate
principal amount of its Series B Senior
Notes.
Interest Payment Dates...... Interest on the Senior Notes will be payable
semi-annually on January 15 and July 15 of
each year, commencing January 15, 1999.
Record Date................. The regular record date for each Interest
Payment Date will be the close of business
on the 15th calendar day prior to such
Interest Payment Date.
Ranking..................... The Senior Notes will be direct, unsecured
and unsubordinated obligations of the
Corporation ranking pari passu in right of
payment with all other unsecured and
unsubordinated debt of the Corporation and
senior in right of payment to all existing
and future subordinated debt of the
Corporation. The Senior Note Indenture
contains no restrictions on the amount of
additional indebtedness that may be incurred
thereunder by the Corporation. 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.
Redemption.................. The Senior Notes will be redeemable, in whole
or from time to time in part, at the option
of the Corporation at any time at the
applicable redemption price (determined as
described herein), plus accrued and unpaid
interest on the principal amount being
redeemed to the date of redemption.
S-3
<PAGE>
INCORPORATION BY REFERENCE
The Quarterly Report on Form 10-Q of the Corporation filed on May 20, 1998,
setting forth unaudited consolidated financial information for the first
quarter of 1998 is incorporated by reference herein.
FINANCIAL RATIOS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED TWELVE MONTHS ENDED
MARCH 31, DECEMBER 31,
-------------- ------------------------
1998 1997 1997 1996 1995 1994 1993
------ ------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges (1)... 4.7 5.2 3.7 3.6 3.2 2.7 2.1
</TABLE>
- --------
(1) For purposes of this ratio (i) earnings consist 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.
DESCRIPTION OF THE OFFERED SENIOR NOTES
Set forth below is a description of the specific terms of the Series A
Senior Notes and the Series B 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 A Senior Notes will be limited to $250,000,000 in aggregate
principal amount and will mature on July 15, 2005. The Series B Senior Notes
will be limited to $150,000,000 in aggregate principal amount and will mature
on July 15, 2018. The Senior Notes will bear interest at the respective rates
per annum set forth on the cover page of this Prospectus Supplement from the
date of issue, or the most recent Interest Payment Date to which interest has
been paid or provided for, and will be payable semi-annually on January 15 and
July 15 of each year, commencing January 15, 1999, to the persons in whose
names the Senior Notes are registered on the Record Date. Interest 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 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.
The Senior Notes are not subject to any sinking fund provision.
Payment of principal of, premium, if any, and interest on the Senior Notes
will be paid in immediately available funds to DTC, or its nominee, as the
case may be, as the registered owner and holder of the Senior Notes, as long
as the Senior Notes are represented by one or more global securities and DTC
serves as securities depositary therefor.
REDEMPTION AT THE OPTION OF THE CORPORATION
The Series A Senior Notes and the Series B Senior Notes will be redeemable,
in whole or from time to time in part, at the option of the Corporation on any
date (a "Redemption Date"), at a Redemption Price equal to the greater of (i)
100% of their principal amount and (ii) the sum of the present values of the
remaining scheduled payments of principal and interest thereon (exclusive of
interest accrued to such Redemption Date) discounted to such Redemption Date
on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day
months) at the Treasury Rate plus 10 basis points for the Series A Senior
Notes and 20 basis points for the Series B Senior Notes, plus, in either case,
accrued and unpaid interest on the principal amount being redeemed to such
Redemption Date; provided that installments of interest on Senior Notes which
are due and payable on an Interest
S-4
<PAGE>
Payment Date falling on or prior to the relevant Redemption Date shall be
payable to the holders of such Senior Notes, registered as such on the Record
Date relevant to such Interest Payment Date according to their terms and the
provisions of the Senior Note Indenture.
"Treasury Rate" means, with respect to any Redemption Date for the Senior
Notes, (i) the yield, under the heading which represents the average for the
immediately preceding week, appearing in the most recently published
statistical release designated "H.15(519)" or any successor publication which
is published weekly by the Board of Governors of the Federal Reserve System
and which establishes yields on actively traded United States Treasury
securities adjusted to constant maturity under the caption "Treasury Constant
Maturities," for the maturity corresponding to the Comparable Treasury Issue
(if no maturity is within three months before or after the Stated Maturity,
yields for the two published maturities most closely corresponding to the
Comparable Treasury Issue shall be determined and the Treasury Rate shall be
interpolated or extrapolated from such yields on a straight-line basis,
rounding to the nearest month) or (ii) if such release (or any successor
release) is not published during the week preceding the calculation date or
does not contain such yields, the rate per annum equal to the semi-annual
equivalent yield to maturity of the Comparable Treasury Issue, calculated
using a price for the Comparable Treasury Issue (expressed as a percentage of
its principal amount) equal to the Comparable Treasury Price for such
Redemption Date. The Treasury Rate shall be calculated on the third Business
Day preceding the Redemption Date.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Independent Investment Banker as having a maturity comparable
to the remaining term of the Senior Notes to be redeemed that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of such Senior Notes.
"Independent Investment Banker" means Morgan Stanley & Co. Incorporated and
any successor firm or, if such firm is unwilling or unable to select the
Comparable Treasury Issue, an independent investment banking institution of
national standing appointed by the Senior Indenture Trustee after consultation
with the Corporation.
"Comparable Treasury Price" means with respect to any Redemption Date for
the Senior Notes (i) the average of five Reference Treasury Dealer Quotations
for such Redemption Date, after excluding the highest and lowest such
Reference Treasury Dealer Quotations, or (ii) if the Senior Indenture Trustee
obtains fewer than five such Reference Treasury Dealer Quotations, the average
of all such quotations.
"Reference Treasury Dealer" means each of Morgan Stanley & Co. Incorporated,
Citicorp Securities, Inc., Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner
& Smith Incorporated and J.P. Morgan Securities Inc. and their respective
successors; provided, however, that if any of the foregoing shall cease to be
a primary U.S. Government securities dealer in New York City (a "Primary
Treasury Dealer"), the Corporation will substitute therefor another Primary
Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any Redemption Date, the average, as determined by the
Senior Indenture Trustee, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal
amount) quoted in writing to the Senior Indenture Trustee by such Reference
Treasury Dealer at 5:00 p.m., New York City time, on the third Business Day
preceding such Redemption Date.
REDEMPTION PROCEDURES
Notice of any redemption by the Corporation will be mailed at least 30 days
but not more than 60 days before any Redemption Date to each registered holder
of Senior Notes to be redeemed. If less than all the Senior Notes of a series
are to be redeemed at the option of the Corporation, the Senior Indenture
Trustee shall select, in such manner as it shall deem fair and appropriate,
the Senior Notes to be redeemed in whole or in part.
If the Senior Indenture Trustee gives a notice of redemption in respect of
Senior Notes of a series (which notice will be irrevocable), then, in
accordance with arrangements with the securities depositary, on the Redemption
Date, the Senior Indenture Trustee will irrevocably deposit with the
securities depositary, so long as such Senior Notes are in book-entry only
form, sufficient funds to pay the Redemption Price. See "--Book-Entry Only
Issuance--The Depository Trust Company" below. If such Senior Notes are no
longer in book-entry only form, the Senior Indenture Trustee will irrevocably
deposit with the Paying Agent funds sufficient to pay the
S-5
<PAGE>
applicable Redemption Price and will give the Paying Agent irrevocable
instructions to pay the Redemption Price to the holders thereof upon surrender
of their Senior Notes 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, interest will cease to accrue and all
rights of holders of such Senior Notes so called for redemption will cease,
except the right of the holders of such Senior Notes to receive the Redemption
Price, but without interest on such Redemption Price. In the event that any
date fixed for redemption of Senior Notes 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). Unless the Corporation defaults in
payment of the Redemption Price, on and after any Redemption Date interest
will cease to accrue on the Senior Notes or portions thereof called for
redemption. See "Description of the Senior Notes--Events of Default" in the
accompanying Prospectus.
DENOMINATIONS
The Senior Notes will be issuable in denominations of $1,000 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 of 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 Senior Notes in which holders of such
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.
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 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 Senior Notes. The Senior Notes will be issued only as fully
registered securities registered in the name of Cede & Co., DTC's nominee.
Fully registered global Senior Note certificates will be issued, representing
in the aggregate the total principal amount of 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.
S-6
<PAGE>
Purchases of Senior Notes within the DTC system must be made by or through
Direct Participants, which will receive a credit for the Senior Notes on DTC's
records. The ownership interest of each actual purchaser of 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 Senior Notes.
Transfers of ownership interests in the 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 Senior Notes, except in the event that use of the book-
entry system for the Senior Notes is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Senior Notes.
DTC's records reflect only the identity of the Direct Participants to whose
accounts such 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.
Redemption notices will be sent to DTC. If less than all of the Senior Notes
of a series are being redeemed, DTC will reduce the amount of interest of each
Direct Participant in the Senior Notes being redeemed in accordance with its
procedures.
Although voting with respect to the 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 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 Senior Notes are credited on the
record date (identified in a listing attached to the Omnibus Proxy).
Payments on the Senior Notes will be made to DTC or its nominee. 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
Senior Note will not be entitled to receive physical delivery of Senior Notes.
Accordingly, each Beneficial Owner must rely on the procedures of DTC to
exercise any rights under the 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 Senior Note.
DTC may discontinue providing its services as securities depositary with
respect to the 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, 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 Senior
Notes. In that event, certificates for the 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-7
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in the Underwriting
Agreement dated July 15, 1998, the Underwriters named below have severally
agreed to purchase and the Corporation has agreed to sell to them, severally,
the respective principal amounts of Senior Notes set forth opposite their
respective names below at the public offering prices set forth on the cover
page of this Prospectus Supplement less underwriting discounts and
commissions.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF PRINCIPAL AMOUNT OF
NAME SERIES A SENIOR NOTES SERIES B SENIOR NOTES
---- --------------------- ---------------------
<S> <C> <C>
Morgan Stanley & Co. Incorpo-
rated ....................... $100,000,000 $ 60,000,000
Citicorp Securities, Inc. .... 37,500,000 22,500,000
Goldman, Sachs & Co. ......... 37,500,000 22,500,000
Merrill Lynch, Pierce, Fenner
& Smith
Incorporated ........ 37,500,000 22,500,000
J.P. Morgan Securities Inc. .. 37,500,000 22,500,000
------------ ------------
Total..................... $250,000,000 $150,000,000
============ ============
</TABLE>
The Underwriters are committed to take and pay for all of the Senior Notes,
if any are taken. 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.
The Underwriters propose to offer the Senior Notes to the public at the
public offering prices set forth on the cover page of this Prospectus
Supplement and to certain dealers at such price less a concession not in
excess of .375% of the principal amount in the case of the Series A Senior
Notes and .50% of the principal amount in the case of the Series B Senior
Notes. The Underwriters may allow, and such dealers may reallow, a concession
to certain other dealers not in excess of .25% of the principal amount in the
case of the Series A Senior Notes and .25% of the principal amount in the case
of the Series B Senior Notes. After the initial public offering of the Senior
Notes, the respective public offering prices and such concessions may be
changed.
The Corporation does not intend to apply for listing of the Senior Notes on
any national securities exchange but has been advised by the Underwriters that
they presently intend to make a market in the Senior Notes as permitted by
applicable laws and regulations. The Underwriters are not obligated, however,
to make a market in the Senior Notes and any such market making may be
discontinued at any time at the sole discretion of the Underwriters.
Accordingly, no assurance can be given as to the liquidity of, or trading
markets for, the Senior Notes.
In order to facilitate the offering of the Senior Notes, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
prices of the Senior Notes. Specifically, the Underwriters may over-allot in
connection with the offering, creating a short position in the Senior Notes
for their own account. In addition, to cover allotments or to stabilize the
price of the Senior Notes, the Underwriters may bid for, and purchase, the
Senior Notes in the open market. Finally, the underwriting syndicate may
reclaim selling concessions allowed to an underwriter or dealer for
distributing the Senior Notes in the offering if the syndicate repurchases
previously distributed Senior Notes in transactions to cover syndicate short
positions, in stabilization transactions or otherwise. Any of these activities
may stabilize or maintain market prices of the Senior Notes above independent
market levels. The Underwriters are not required to engage in these activities
and, if any of such activities are commenced, they may end without notice at
any time.
The Corporation has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the 1933 Act.
Certain of the Underwriters or their affiliates engage in investment banking
and/or commercial banking transactions with, and, from time to time, have
performed services for, the Corporation and its affiliates in the ordinary
course of business.
S-8
<PAGE>
LEGAL MATTERS
The validity of the Senior Notes offered hereby 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 offered hereby will
be passed upon for the Underwriters by Sullivan & Cromwell, New York, New
York.
S-9
<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 A Senior Notes.
Interest Payment Dates..... January 15 and July 15 of each year, commencing
January 15, 1999.
Record Date................ The close of business on the 15th calendar day
prior to the relevant Interest Payment Date.
Redemption Price........... The greater of (i) 100% of the principal amount
of the Series A Senior Notes and the Series B
Senior Notes to be redeemed and (ii) the sum of
the present values of the remaining scheduled
payments of principal and interest thereon
(exclusive of interest accrued to the date of
redemption) discounted to the date of redemption
on a semi-annual basis (assuming a 360-day year
consisting of twelve 30-day months) at the
Treasury Rate plus 10 basis points for the Series
A Senior Notes and 20 basis points for the Series
B Senior Notes, plus, in either case, accrued and
unpaid interest on the principal amount being
redeemed to the date of redemption.
Senior Note Indenture...... The indenture pursuant to which the Senior Notes
will be issued.
Senior Indenture Trustee... The trustee under the Senior Note Indenture;
initially, The Chase Manhattan Bank.
Senior Notes............... The Series A 6 1/4% Senior Notes Due 2005 and the
Series B 6 3/4% Senior Notes Due 2018 of the
Corporation.
S-10
<PAGE>
PROSPECTUS
$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 13, 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.
[MAP of United States]
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.
[MAP]
[MAP]
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.
[MAP]
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 consist 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
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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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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.
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Duke Capital(SM)
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