<PAGE>
Filed Pursuant to Rule 424b(2)
Registration No. 333-71297
PROSPECTUS SUPPLEMENT
(To Prospectus Dated February 10, 1999)
10,000,000 Trust Preferred Securities
Duke Capital Financing Trust III
8 3/8% Trust Preferred Securities
(Liquidation amount $25 per Preferred Security)
Fully and unconditionally guaranteed, as described herein, by
Duke Capital Corporation
a subsidiary of Duke Energy Corporation
---------------
A brief description of the 8 3/8% Trust Preferred Securities (the "Preferred
Securities") can be found under "Summary of Offering" in this Prospectus
Supplement.
---------------
Application has been made to list the Preferred Securities on the New York
Stock Exchange. If approved, Duke Capital Corporation expects that the
Preferred Securities will begin trading within 30 days after they are first
issued.
---------------
Investing in the Preferred Securities involves risks. See "Risk Factors"
beginning on page S-8.
---------------
<TABLE>
<CAPTION>
Underwriting
Discounts
Price to and Proceeds to
Public Commissions Trust
------------ ------------ ------------
<S> <C> <C> <C>
Per Preferred Security.................. $25 See below $25
Total................................... $250,000,000 See below $250,000,000
</TABLE>
Duke Capital Corporation will pay underwriting commissions of $.7875 per
Preferred Security (or $7,875,000 in the aggregate). The Trust will not pay any
underwriting discounts or commissions. Any accumulated distributions from the
date of original issuance of the Preferred Securities should be added to the
Price to Public.
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities or determined if this Prospectus
Supplement or the accompanying Prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The Underwriters expect to deliver the Preferred Securities to purchasers on or
about August 18, 1999.
---------------
MORGAN STANLEY DEAN WITTER
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SALOMON SMITH BARNEY
August 11, 1999
<PAGE>
You should rely only on the information contained or incorporated by
reference in this Prospectus Supplement and the accompanying Prospectus. We
have not, and the Underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
Underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this Prospectus Supplement and the accompanying
Prospectus is accurate as of the respective dates on the front of those
documents only. Our business, financial condition, results of operations and
prospects may have changed since those dates.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
Prospectus Supplement ----
<S> <C>
Forward-Looking Statements ............................................... S-3
Summary of Offering....................................................... S-4
Risk Factors.............................................................. S-8
Recent Developments....................................................... S-11
Use of Proceeds........................................................... S-13
Duke Capital Financing Trust III.......................................... S-14
Description of the Preferred Securities................................... S-15
Description of the Series C Junior Subordinated Notes..................... S-30
Relationship Among the Preferred Securities, the Series C Junior
Subordinated Notes and the Guarantee..................................... S-34
Material Federal Income Tax Considerations................................ S-36
Underwriting.............................................................. S-39
Validity of the Securities................................................ S-41
Prospectus
Where to Find More Information............................................ 2
Duke Capital Corporation.................................................. 4
The Trusts................................................................ 9
Use of Proceeds........................................................... 10
Description of the Senior Notes........................................... 11
Description of the Junior Subordinated Notes.............................. 23
Description of the Preferred Securities................................... 33
Description of the Guarantees............................................. 34
Accounting Treatment...................................................... 38
Plan of Distribution...................................................... 38
Validity of the Securities................................................ 39
Experts................................................................... 39
</TABLE>
S-2
<PAGE>
FORWARD-LOOKING STATEMENTS
This Prospectus Supplement and the accompanying Prospectus include forward-
looking statements within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934. We caution
investors and prospective investors that there are a number of forward-looking
statements contained or incorporated by reference in this Prospectus Supplement
and the accompanying Prospectus. These forward-looking statements may include
statements about the expected revenues, earnings, capital expenditures,
resolution and impact of litigation, competitive performance, or other
prospects for the business of Duke Capital Corporation (the "Corporation") and
its subsidiaries or their affiliated companies, and include any and all
assumptions that underlie the forward-looking statements and other statements
that are not statements of historical fact. Actual outcomes and results are
likely to differ, and may differ materially, from those projected or implied by
forward-looking statements. Factors that could cause forward-looking statements
to be inaccurate include, but are not limited to:
. state and federal legislative and regulatory initiatives
that affect cost and investment recovery, have an impact
on rate structures, and affect the speed and degree to
which competition enters the natural gas industry;
. industrial, commercial and residential growth in the
service territories of the Corporation's subsidiaries;
. the weather and other natural phenomena;
. the timing and extent of changes in commodity prices,
interest rates and foreign currency exchange rates;
. changes in environmental and other laws and regulations
to which the Corporation and its subsidiaries are
subject or other external factors over which the
Corporation has no control;
. the results of financing efforts, including the
Corporation's ability to obtain financing on favorable
terms, which can be affected by its credit ratings and
by general economic conditions;
. growth in opportunities for the Corporation's
subsidiaries;
. achievement of Year 2000 readiness; and
. the effect of accounting policies issued periodically by
accounting standard-setting bodies.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this Prospectus Supplement and the accompanying Prospectus
might not occur. We undertake no obligation to publicly update or revise any
forward-looking statements or this discussion of some of the factors that could
cause actual results to differ, whether as a result of new information, future
events or otherwise.
S-3
<PAGE>
SUMMARY OF OFFERING
This summary highlights information appearing elsewhere in this Prospectus
Supplement and in the accompanying Prospectus. This summary is not complete and
does not contain all the information you should consider before investing in
the Preferred Securities. You should pay special attention to the Risk Factors
section of this Prospectus Supplement to determine whether an investment in the
Preferred Securities is appropriate for you.
The Corporation............. Duke Capital Corporation, a wholly owned
subsidiary of Duke Energy Corporation, serves as
the parent company to a number of affiliates of
Duke Energy Corporation. Those affiliates are
primarily engaged in the interstate
transportation and storage of natural gas, in
the gathering, processing, marketing and
intrastate transportation and storage of natural
gas, natural gas liquids and crude oil, in
natural gas and electric power marketing, in the
acquisition, development and operation of
independent power production facilities, in risk
management services and in engineering
consulting, construction and other related
energy services. The principal executive offices
of the Corporation are located at 526 South
Church Street, Charlotte, NC 28202 (telephone
(704) 594-6200).
The Trust................... Duke Capital Financing Trust III is a statutory
business trust created solely for the purpose of
issuing Preferred Securities to the public and
Common Securities to the Corporation and
investing the proceeds in an equivalent amount
of the Corporation's Series C Junior
Subordinated Notes due August 31, 2029 (the
"Series C Junior Subordinated Notes").
Preferred Securities 8 3/8% Trust Preferred Securities (the "Preferred
Offered..................... Securities").
Distributions............... Holders of the Preferred Securities are entitled
to receive cumulative cash distributions at the
annual rate of 8 3/8% of the liquidation amount
of $25 per Preferred Security accruing from the
original issue date and payable, unless
deferred, quarterly on February 28, May 31,
August 31 and November 30 of each year (each, a
"Distribution Date"), commencing on November 30,
1999.
Record Dates................ The record date for each Distribution Date will
be the close of business on the 15th calendar
day prior to such Distribution Date.
S-4
<PAGE>
Junior Subordinated Notes... The Trust will use the proceeds from the sale of
the Preferred Securities to purchase from the
Corporation $250,000,000 aggregate principal
amount of Series C Junior Subordinated Notes due
August 31, 2029. The Series C Junior
Subordinated Notes are unsecured subordinated
obligations of the Corporation. Subject to any
deferral, distributions payable on the Preferred
Securities and the Distributions Dates for the
Preferred Securities will correspond to the
interest rate and interest payment dates on the
Series C Junior Subordinated Notes. If the
Corporation does not pay principal or interest
on the Series C Junior Subordinated Notes, no
amounts will be paid on the Preferred
Securities. See "Description of the Preferred
Securities" in this Prospectus Supplement.
Deferral of Distributions... The Corporation has the right to defer payments
of interest on the Series C Junior Subordinated
Notes by extending the interest payment period
on the Series C Junior Subordinated Notes, at
any time and as often as it wishes, for up to 20
consecutive quarters (each, an "Extension
Period"), but not beyond the maturity date of
the Series C Junior Subordinated Notes.
If interest payments on the Series C Junior
Subordinated Notes are deferred, distributions
on the Preferred Securities will also be
deferred. During an Extension Period, holders of
Preferred Securities (or the Series C Junior
Subordinated Notes) will recognize interest
income for federal income tax purposes in
advance of the receipt of the cash payments of
such deferred distributions (or interest) even
if the holder is a cash basis taxpayer. See
"Description of the Series C Junior Subordinated
Notes--Option to Extend Interest Payment Period"
and "Material Federal Income Tax
Considerations--Original Issue Discount."
Deferred interest will bear interest at an
annual rate of 8 3/8%, compounded quarterly, to
the date of payment to the extent permitted by
applicable law.
If interest payments on the Series C Junior
Subordinated Notes are deferred, the Corporation
will not, with certain exceptions, be permitted
during an Extension Period (1) to pay dividends
on, or redeem or otherwise purchase, any of its
capital stock or (2) to pay principal or
interest on, or redeem or otherwise purchase,
any of its debt securities ranking equal in
priority with or subordinate to the Series C
Junior Subordinated Notes.
S-5
<PAGE>
Redemption.................. The Trust will redeem the Preferred Securities
when the Corporation repays the Series C Junior
Subordinated Notes at maturity or upon their
earlier redemption. The Corporation may at its
option redeem the Series C Junior Subordinated
Notes, in whole or in part, from time to time on
or after August 31, 2004. The Corporation may
also redeem the Series C Junior Subordinated
Notes at any time, in whole, within 90 days
following the occurrence of a Special Event (see
below).
Redemption Price............ If the Preferred Securities are redeemed, each
holder of a Preferred Security will be entitled
to receive a liquidation amount of $25 plus
accrued and unpaid distributions to the date of
payment.
Special Event............... A "Special Event" means a Tax Event or an
Investment Company Act Event. A "Tax Event"
means that because of changes in certain tax
laws or regulations or in how they are
interpreted or applied, there is more than an
insubstantial risk that (a) the Trust would be
subject to United States federal income tax with
respect to income accrued or received on the
Series C Junior Subordinated Notes, (b) interest
payable on the Series C Junior Subordinated
Notes would not be deductible by the Corporation
for United States federal income tax purposes or
(c) the Trust would be subject to more than a de
minimis amount of other taxes, duties or other
governmental charges. An "Investment Company Act
Event" means that because of changes in certain
laws or regulations or in how they are
interpreted or applied, there is more than an
insubstantial risk that the Trust is or will be
considered an "investment company" under the
Investment Company Act of 1940. See "Risk
Factors--Special Event Redemption; Distribution
of Series C Junior Subordinated Notes upon
Termination of Trust."
Termination of Trust........
The Corporation will have the right to terminate
the Trust at any time and cause the Property
Trustee to distribute Series C Junior
Subordinated Notes to the holders of the
Preferred Securities in exchange for those
securities. This right is optional and wholly
within the discretion of the Corporation. See
"Description of the Preferred Securities--
Liquidation Distribution upon Dissolution" and
"--Distribution of Series C Junior Subordinated
Notes upon Termination of Trust."
S-6
<PAGE>
Ranking of Series C
Junior Subordinated Notes... The Series C Junior Subordinated Notes will be
subordinate and junior in right of payment to
all indebtedness for borrowed money and other
obligations of the Corporation included in the
definition of Senior Indebtedness.
Guarantee................... The Corporation will guarantee the payment of
distributions and other payments by the Trust on
the Preferred Securities, but only to the extent
the Trust has funds legally and immediately
available to make such distributions (the
"Guarantee").
Ranking of Guarantee........ The Corporation's obligations under the Guarantee
will be subordinate and junior in right of
payment to all other liabilities of the
Corporation (other than similar guarantees) and
will rank equal in priority with the most senior
preferred stock that may be issued by the
Corporation and with such similar guarantees.
Book-Entry Only Issuances... The Preferred Securities will be represented by a
global certificate or certificates that will be
deposited with and registered in the name of The
Depository Trust Company, New York, New York
("DTC") or its nominee. This means that
investors will not receive certificates for
their Preferred Securities.
Listing..................... The Trust has applied to list the Preferred
Securities on the New York Stock Exchange.
The Trustees................ The Chase Manhattan Bank will act as Property
Trustee of the Trust. Two officers of the
Corporation also will act as the Administrative
Trustees of the Trust. Chase Manhattan Bank
Delaware will be the Delaware Trustee of the
Trust. The Chase Manhattan Bank will act as the
Subordinated Indenture Trustee (the trustee
under the Subordinated Note Indenture under
which the Series C Junior Subordinated Notes
will be issued) and will act as the Guarantee
Trustee (the trustee under the Guarantee). The
Property Trustee, Delaware Trustee and
Administrative Trustees are sometimes
collectively referred to in this Prospectus
Supplement as the Securities Trustees.
S-7
<PAGE>
RISK FACTORS
An investment in the Preferred Securities involves a number of risks, some of
which relate to the nature of the Preferred Securities and others of which
relate to the Corporation. You should carefully read and consider the following
risk factors and the other information contained in this Prospectus Supplement
and the accompanying Prospectus, before buying any Preferred Securities.
Ranking of the Series C Junior Subordinated Notes
The obligations of the Corporation under the Series C Junior Subordinated
Notes are subordinate and junior in right of payment to all present and future
Senior Indebtedness of the Corporation. As of June 30, 1999, Senior
Indebtedness of the Corporation totaled approximately $1,950,000,000.
The terms in the Preferred Securities, the Series C Junior Subordinated Notes
and the Guarantee do not limit the Corporation's ability to incur additional
indebtedness, including Senior Indebtedness. See "Description of the
Guarantees" and "Description of the Junior Subordinated Notes--Subordination"
in the accompanying Prospectus.
The Corporation conducts its business through subsidiaries. Accordingly, the
ability of the Corporation to meet its obligations under the Series C Junior
Subordinated Notes will depend on the earnings and cash flows of its
subsidiaries and their ability 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 subsidiary's
liquidation or recapitalization will be subject to the prior claims of the
subsidiary's creditors.
Ranking of the Guarantee
The Corporation's obligations under the Guarantee will rank:
. subordinate and junior in right of payment to all other liabilities of
the Corporation (other than similar guarantees);
. equal in priority with the most senior preferred stock that may be
issued by the Corporation and with such similar guarantees; and
. senior to the Corporation's common stock.
Payments on the Preferred Securities Dependent upon Payments on the Series C
Junior Subordinated Notes; Rights under the Guarantee
Payments made on the Series C Junior Subordinated Notes will be the only
source of funds for payments on the Preferred Securities. If the Corporation
defaults in its payment obligations on the Series C Junior Subordinated Notes,
the Trust will lack available funds for distributions or other payments on the
Preferred Securities. In such event holders of the Preferred Securities will
not be able to rely upon the Guarantee for such distributions or other
payments.
Option to Extend Interest Payment Period
The Corporation has the right under the Subordinated Note Indenture, at any
time, and from time to time, to defer payments of interest on the Series C
Junior Subordinated Notes for a period of
S-8
<PAGE>
up to 20 consecutive quarters (each, an "Extension Period"), but not beyond the
maturity date of the Series C Junior Subordinated Notes.
Deferred installments of interest on the Series C Junior Subordinated Notes
will bear interest at an annual rate of 8 3/8%, compounded quarterly, to the
date of payment to the extent permitted by law. The payment of such deferred
interest, together with any interest thereon, will be passed through to the
holders of the Preferred Securities.
The only restrictions on the Corporation's ability to defer payments of
interest are that during any Extension Period the Corporation may not, with
certain exceptions:
. pay dividends on, or redeem or otherwise purchase, any of its capital
stock; or
. pay principal or interest on, or redeem or otherwise purchase, any debt
securities ranking equal in priority with or subordinate to the Series C
Junior Subordinated Notes.
See "Description of the Preferred Securities--Distributions" and "Description
of the Series C Junior Subordinated Notes--Option to Extend Interest Payment
Period" and "--Certain Covenants."
If the Corporation defers payments of interest, each holder of Preferred
Securities (or Series C Junior Subordinated Notes) will recognize interest
income for federal income tax purposes in advance of the receipt of cash
payment of such deferred distributions (or interest) even if the holder is a
cash basis taxpayer and will not receive cash related to such income if such
holder disposes of its Preferred Securities (or Series C Junior Subordinated
Notes) prior to the record date for the date on which payments of such amounts
are made. See "Material Federal Income Tax Considerations--Original Issue
Discount" and "--Sale of Preferred Securities."
Investors should consult their own tax advisors with respect to the tax
consequences of an investment in the Preferred Securities.
Special Event Redemption; Distribution of Series C Junior Subordinated Notes
upon Termination of Trust
The Corporation will have the option, at any time within 90 days following
the occurrence of a Special Event, to redeem the Series C Junior Subordinated
Notes in whole, with the result that the Preferred Securities will be redeemed.
The Corporation will also have the right at any time to terminate the Trust
and cause the Series C Junior Subordinated Notes to be distributed to the
holders of the Preferred Securities in liquidation of the Trust. See
"Description of the Preferred Securities--Special Event Redemption or
Distribution" and "--Distribution of Series C Junior Subordinated Notes upon
Termination of Trust."
There can be no assurance as to the market price for the Series C Junior
Subordinated Notes that may be distributed in exchange for Preferred Securities
if a termination or liquidation of the Trust occurs. Accordingly, the Series C
Junior Subordinated Notes that the investor may receive on termination and
liquidation of the Trust may trade at a discount to the price that the investor
paid to purchase the Preferred Securities offered hereby. See "Description of
the Preferred Securities--Distribution of Series C Junior Subordinated Notes
upon Termination of Trust."
S-9
<PAGE>
Limited Voting Rights
Holders of Preferred Securities will have limited voting rights. In general,
holders of Preferred Securities will not be entitled to vote to appoint, remove
or replace any of the Securities Trustees, which voting rights are generally
vested in the Corporation as the holder of the Common Securities. If an Event
of Default under the Subordinated Note Indenture with respect to the Series C
Junior Subordinated Notes occurs and is continuing, however, the holders of the
Preferred Securities will have the right to appoint a substitute Property
Trustee or Delaware Trustee. See "Description of the Preferred Securities--
Voting Rights" and "--Events of Default" in this Prospectus Supplement and
"Description of the Junior Subordinated Notes--Events of Default" in the
accompanying Prospectus.
Trading Characteristics of Preferred Securities
The Preferred Securities are expected to be listed on the New York Stock
Exchange, subject to official notice of issuance. The Preferred Securities are
expected to trade at a price that takes into account the value, if any, of
accrued but unpaid distributions; thus, purchasers will not pay and sellers
will not receive accrued and unpaid interest with respect to the Preferred
Securities that is not included in the trading price of the Preferred
Securities. If a Preferred Security is disposed of prior to the occurrence of
an Extension Period, any portion of the amount received that is attributable to
accrued interest will be treated as interest income to a U.S. holder for tax
purposes and will not be treated as part of the amount realized for purposes of
determining gain or loss on the disposition of the Preferred Security. If an
Extension Period occurs, interest on the Series C Junior Subordinated Notes
will be included in the gross income of U.S. holders of Preferred Securities as
it accrues rather than when it is paid. If an Extension Period occurs, a holder
who disposes of his Preferred Securities between record dates for payments of
distributions would be required to include accrued but unpaid interest on the
Series C Junior Subordinated Notes through the date of disposition in income as
original issue discount, and to add such amount to his adjusted tax basis in
his pro rata share of the related Series C Junior Subordinated Notes deemed
disposed of. To the extent the selling price is less than the holder's adjusted
tax basis, a holder generally will recognize a capital loss. Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for United States federal income tax purposes. See "Material Federal Income Tax
Considerations--Original Issue Discount" and "--Sale of Preferred Securities."
There has been no public market for the Preferred Securities prior to this
offering, and there can be no assurance that an active public market for the
Preferred Securities will develop. If an active trading market for the
Preferred Securities does develop, there can be no assurance that it will be
sustained after this offering. See "Plan of Distribution" in the accompanying
Prospectus.
Investment in Trust Involves Risks Parallel to Those of Investment in
Corporation
As with an investment in the Corporation, an investment in the Trust involves
risks associated with operating conditions, competitive factors, economic
conditions, industry conditions and equity market conditions.
Consequences of Highly Leveraged Transaction
The Subordinated Note Indenture does not contain provisions that afford
holders of the Series C Junior Subordinated Notes protection in the event of a
highly leveraged transaction involving the Corporation.
S-10
<PAGE>
RECENT DEVELOPMENTS
Recent Financial Data
The following financial data is qualified in its entirety by the financial
statements included in the documents incorporated by reference in this
Prospectus Supplement. See "Where to Find More Information" in the accompanying
Prospectus.
Selected Consolidated Financial Information
(millions)
<TABLE>
<CAPTION>
Six Months
Ended Twelve Months Ended
June 30, December 31,
------------------ -------------------
1999 1998 1998
------- ------- ----
(unaudited)
<S> <C> <C> <C>
Income Statement Data
Operating Revenues..................... $ 6,735 $ 5,988 $13,059
Operating Expenses..................... 6,271 5,522 12,023
------- ------- -------
Operating Income...................... 464 466 1,036
Other Income, Net...................... 50 56 101
------- ------- -------
Earnings Before Interest and Taxes..... 514 522 1,137
Interest Expense....................... 115 113 237
Income Before Extraordinary Item....... 233 255 519
Net Income............................. 893(1) 247 511
- --------
</TABLE>
(1) Reflects a one-time after-tax extraordinary gain of approximately $660
million attributable to the sale of certain pipeline operations on March
29, 1999.
Balance Sheet Data
Property, Plant and Equipment, Net..... $ 8,052 $ 6,267 $ 7,154
Total Assets........................... 16,562 12,449 13,856
Short-term Debt........................ 18 57 29
Long-term Debt, including current
portion............................... 3,171 2,730 3,142
Trust Preferred Securities............. 580 242 580
Stockholder's Equity................... 5,008 3,616 4,073
Financial Ratios
(unaudited)
Six Months
Ended Twelve Months Ended
June 30, December 31,
------------------ -------------------
1999 1998 1998
------- ------- -------
Ratio of Earnings to Fixed Charges..... 3.6 4.2 4.2
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.
S-11
<PAGE>
Completion of Midwest Pipelines Disposition
The sale to CMS Energy Corporation of Panhandle Eastern Pipe Line Company,
Trunkline Gas Company and the storage properties related to those systems,
along with Trunkline LNG Company, referred to under "Duke Capital Corporation--
Energy Transmission" in the accompanying Prospectus, was completed on March 29,
1999.
Completion of Acquisition of Natural Gas Business in Western United States
The acquisition of the natural gas gathering, processing, fractionation and
natural gas liquids pipeline business of Union Pacific Resources, as well as
that corporation's natural gas and natural gas liquids marketing activities,
referred to under "Duke Capital Corporation--Energy Services" in the
accompanying Prospectus was completed on March 31, 1999.
Acquisition of Power Generation Facilities in Latin America
The Corporation, through its wholly owned subsidiary, Duke Energy
International, LLC, a unit of the Corporation's Global Asset Development
business segment, recently acquired, or entered into agreements to acquire,
approximately 3,800 megawatts of power generation facilities in Latin America
for a total cost of approximately $1.2 billion.
On August 4, 1999, the Corporation acquired approximately 71% of the voting
stock of, and approximately 40% of the economic interest in, Companhia de
Geracao de Energia Eletrica Paranapanema ("Paranapanema"), the eleventh largest
generating company in Brazil. The acquisition was the result of the
Corporation's winning bid of approximately $690 million in the on-going
privatization of Brazil's electric utilities. As required by the bid proposal,
the Corporation committed to increase Paranapanema's generating capacity by 15%
within eight years. Located in the state of Sao Paolo, Paranapanema has a total
installed capacity of 2,307 megawatts and includes eight hydroelectric
generating facilities along the Paranapanema River. Over 90% of Paranapanema's
generation will remain under contract to four distribution companies through
2002, after which the contracts will be phased out over a four-year period, and
the generation will become available for the spot market or bilateral contracts
as the contracts are phased out.
The Corporation was the successful bidder on July 30, 1999 in a privatization
of (1) an 80% ownership interest in the generating company, Generadora
Acajutla, S.A. de C.V. ("Acajutla"), and (2) a 97% ownership interest in the
generating company, Generadora Salvadorena, S.A. de C.V., each currently owned
by El Salvador. The bid was $125 million for a controlling interest in
facilities which currently provide 275 megawatts of thermal power generation.
The transaction is expected to close in September 1999. The Corporation plans
to modernize and expand Acajutla, adding 155 megawatts of capacity by
converting the existing assets to a gas-fired combined cycle technology at an
expected cost of $75 million. The Corporation anticipates that the existing
interconnection with Guatemala and the planned interconnection with Honduras,
currently scheduled for completion in 2001, will provide opportunities for
cross-border trading and marketing in Central America.
The Corporation entered into an agreement on August 2, 1999 to acquire the
hydroelectric, natural gas and diesel power generation businesses of Dominion
Resources, Inc. in four countries in South America for $405 million. The
transaction is expected to close before the end of 1999 after
S-12
<PAGE>
receipt of government consents and approvals. The businesses being acquired
have a gross generation capacity totaling approximately 1,200 megawatts and
include the following:
Argentina: 54% of the 98-megawatt, natural gas-fired Alto Valle
power facility; and 98% of the 450-megawatt Cerros
Colorados hydroelectric facility;
Bolivia: 50% controlling interest in the 126-megawatt Empresa
Electrica Corani hydroelectric business;
Peru: 30% joint controlling ownership interest in Empresa de
Generacion Electrica NorPeru S.A., with current capacity of
423 megawatts, principally hydroelectric power, with some
thermal generation capacity;
Belize: 95% of the 25-megawatt Mollejon hydroelectric facility.
Upon completion of all three transactions, the Corporation's portfolio of
Latin American and Asia-Pacific assets will include operations and ownership
interests in approximately 6,700 megawatts of power generation, approximately
1,800 miles of natural gas pipeline and 245 miles of electric transmission,
located in Argentina, Australia, Belize, Bolivia, Brazil, Chile, Ecuador, El
Salvador, Indonesia, New Zealand and Peru.
Construction of Power Generation Facilities in the United States
The Corporation, through its wholly owned subsidiary, Duke Energy North
America LLC, a unit of the Corporation's Global Asset Development business
segment, has announced its intention to construct two new energy facilities in
the United States: The Madison Generating Station, a 640-megawatt, gas-fired
merchant peaking station in Butler County, Ohio and the Vermillion Generating
Station, a 640-megawatt, gas-fired merchant peaking station in Vermillion
County, Indiana. Duke/Fluor Daniel will serve as the construction contractor
for the facilities, a Duke Energy pipeline will deliver the natural gas supply
and Duke Energy Trading and Marketing LLC will provide energy management
services and market the output of the facilities. The Madison Generating
Station is estimated to cost approximately $250 million and is expected to
begin commercial operation by late 2000. The Vermillion Generation Station is
estimated to cost approximately $260 million and is expected to begin
commercial operation by late 2000.
USE OF PROCEEDS
The Trust will invest the proceeds that it receives from the sale of the
Preferred Securities in the Series C Junior Subordinated Notes. The Corporation
will use the net proceeds that it receives from such investment to reduce
short-term indebtedness.
S-13
<PAGE>
DUKE CAPITAL FINANCING TRUST III
The Trust is a statutory business trust created under Delaware law pursuant
to the filing of a certificate of trust with the Delaware Secretary of State on
January 29, 1998. The Trust's business is defined in a trust agreement,
executed by the Corporation, as depositor, and the Delaware Trustee. That trust
agreement will be amended and restated in its entirety on the date of original
issuance of the Preferred Securities in substantially the form filed as an
exhibit to the Registration Statement of which this Prospectus Supplement and
the accompanying Prospectus form a part (the "Trust Agreement"). The Trust
Agreement will be qualified as an indenture under the Trust Indenture Act of
1939.
The Trust exists for the exclusive purposes of issuing and selling the
Preferred Securities and the Common Securities (collectively, the "Trust
Securities") representing undivided beneficial interests in the assets of the
Trust, investing the gross proceeds of the Trust Securities in the Series C
Junior Subordinated Notes, and engaging in only those other activities as are
necessary, appropriate, convenient or incidental to those purposes. The Trust
has a term of approximately 35 years from its creation, but may terminate
earlier as provided in the Trust Agreement.
Upon the issuance of the Preferred Securities, the purchasers of the
Preferred Securities will own all the Preferred Securities, which will have an
aggregate liquidation amount equal to approximately 97% of the total capital of
the Trust. The Corporation will acquire all the Common Securities, which will
have an aggregate liquidation amount equal to approximately 3% of the total
capital of the Trust. The Common Securities will rank equal in priority with,
and payments will be made on the Common Securities pro rata with, the Preferred
Securities, except that upon the occurrence and continuance of an Event of
Default under the Subordinated Note Indenture with respect to the Series C
Junior Subordinated Notes, the rights of the holders of Common Securities to
payments in respect of distributions and payments upon liquidation, redemption
and otherwise will be subordinated to the rights of the holders of the
Preferred Securities.
The Securities Trustees will conduct the Trust's business and affairs. The
Securities Trustees will be appointed by the Corporation as the holder of the
Common Securities. Two officers of the Corporation initially will serve as
Administrative Trustees. The Chase Manhattan Bank will serve as Property
Trustee and will hold legal title to the Series C Junior Subordinated Notes on
behalf of the Trust and the holders of the Trust Securities. Chase Manhattan
Bank Delaware will serve as Delaware Trustee. In certain circumstances, the
holders of a majority in liquidation amount of the Preferred Securities will be
entitled to appoint a substitute Property Trustee or Delaware Trustee. See
"Description of the Preferred Securities--Events of Default."
The Property Trustee will hold legal title to the Series C Junior
Subordinated Notes for the benefit of the Trust and the holders of the Trust
Securities and will have the power, with certain exceptions, to exercise all
rights, powers and privileges under the Subordinated Note Indenture as the
holder of the Series C Junior Subordinated Notes. To the extent payments in
respect of the Series C Junior Subordinated Notes are made to the Property
Trustee, the Property Trustee will make payments of distributions and payments
on liquidation, redemption and otherwise to the holders of the Trust
Securities. The Corporation, as the holder of all the Common Securities, will
have the right to appoint, remove or replace any of the Securities Trustees,
subject to the right of the holders of a majority in
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liquidation amount of the Preferred Securities to appoint a substitute Property
Trustee or Delaware Trustee under certain circumstances. See "Description of
the Preferred Securities--Events of Default."
The Series C Junior Subordinated Notes will constitute substantially all of
the assets of the Trust. Other assets that may constitute "Trust Property" (as
that term is defined in the Trust Agreement) include any cash on deposit in, or
owing to, the payment account as established under the Trust Agreement, as well
as any other property or assets held by the Property Trustee pursuant to the
Trust Agreement. In addition, the Trust may, from time to time, receive cash
from the Corporation pursuant to the Agreement as to Expenses and Liabilities
between the Corporation and the Trust.
The rights of the holders of the Preferred Securities, including economic
rights, rights to information and voting rights, are as set forth in the Trust
Agreement, the Delaware Business Trust Act and the Trust Indenture Act of 1939.
See "Description of the Preferred Securities."
The Trust's office address in the State of Delaware is c/o Chase Manhattan
Bank Delaware, 1201 Market Street, Wilmington, Delaware 19801. The principal
place of business of the Trust will be c/o Duke Capital Corporation, 526 South
Church Street, Charlotte, North Carolina 28202 (telephone (704) 594-6200).
DESCRIPTION OF THE PREFERRED SECURITIES
The Trust will issue the Preferred Securities pursuant to the terms of the
Trust Agreement. The Trust Agreement will be qualified as an indenture under
the Trust Indenture Act of 1939. The Property Trustee will act as the indenture
trustee with respect to the Trust Agreement, as well as the Guarantee, for
purposes of compliance with the provisions of such Act. The terms of the
Preferred Securities will include those stated in the Trust Agreement and in
the Delaware Business Trust Act, and those made part of the Trust Agreement by
the Trust Indenture Act of 1939.
The following summary of the principal terms and provisions of the Preferred
Securities does not purport to be complete and is subject to, and qualified in
its entirety by reference to, the Trust Agreement, the form of which is filed
as an exhibit to the Registration Statement of which this Prospectus Supplement
and the accompanying Prospectus are a part, as well as the Trust Indenture Act
of 1939.
General
The Trust Agreement authorizes the Administrative Trustees to issue the
Preferred Securities and the Common Securities on behalf of the Trust. The
Preferred Securities represent preferred undivided beneficial interests in the
assets of the Trust. The Common Securities represent common undivided
beneficial interests in the assets of the Trust. The Trust Agreement does not
permit the Trust to issue any securities other than the Preferred Securities
and the Common Securities or to incur any indebtedness for borrowed money.
Pursuant to the Trust Agreement, the Property Trustee will own and hold the
Series C Junior Subordinated Notes for the benefit of the Trust and the holders
of the Trust Securities.
The Corporation will own all the Common Securities. The Common Securities
will rank equal in priority with the Preferred Securities, and payments will be
made on the Common Securities on a
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pro rata basis with the Preferred Securities, except that the rights of the
holders of the Common Securities to receive payment of periodic distributions
and payments upon liquidation, redemption and otherwise will be subordinated to
the rights of the holders of the Preferred Securities upon the occurrence of an
Event of Default under the Subordinated Note Indenture with respect to the
Series C Junior Subordinated Notes.
The Corporation has guaranteed on a subordinated basis payment of
distributions out of money held by the Trust and payments upon redemption of
the Preferred Securities or liquidation of the Trust, as and to the extent
described under "Description of the Guarantees" in the accompanying Prospectus.
The Guarantee does not cover payment of distributions or amounts payable upon
redemption of the Preferred Securities or otherwise in respect of the Preferred
Securities when the Trust does not have legally and immediately available funds
sufficient to make such distributions or payments. In such event, the holders
of a majority in aggregate liquidation amount of the Preferred Securities may
direct the Property Trustee to enforce the Property Trustee's rights under the
Series C Junior Subordinated Notes. In addition, a holder of Preferred
Securities may institute a legal proceeding directly against the Corporation,
without first instituting a legal proceeding against the Property Trustee or
any other person or entity, for enforcement of payment to that holder of
principal of or interest on the Series C Junior Subordinated Notes having a
principal amount equal to the aggregate liquidation amount of the Preferred
Securities of that holder on or after the due dates specified or provided for
in the Series C Junior Subordinated Notes. These mechanisms and obligations,
together with the Corporation's obligations under the Agreement as to Expenses
and Liabilities between the Corporation and the Trust, provide a full and
unconditional guarantee, subject to certain subordination provisions, by the
Corporation of the payments due on the Preferred Securities.
Distributions
Distributions on the Preferred Securities will be fixed at an annual rate of
8 3/8% and will accrue from the date of original issuance of the Preferred
Securities. Except in the event of an Extension Period, distributions on the
Preferred Securities will be payable quarterly in arrears on February 28, May
31, August 31 and November 30 of each year, commencing on November 30, 1999. If
distributions are to be made on the Preferred Securities on a date that is not
a Business Day, the distributions payable on that date will be paid on the next
day that is a Business Day (and without any interest or other payment in
respect of any such delay), except that, if such Business Day falls in the next
calendar year, the payment will be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on the date the
payment was originally payable. A "Business Day" means any day other than a
Saturday or Sunday, a day on which banks in New York City are authorized or
obligated by law or executive order to remain closed or a day on which the
principal corporate trust office of the Property Trustee or the Subordinated
Indenture Trustee is closed for business.
Distributions payable on any Distribution Date will be payable to holders of
record on the record date for that Distribution Date. The record date for a
Distribution Date is the close of business on the fifteenth calendar day
preceding that Distribution Date. Subject to any applicable laws and
regulations and the provisions of the Trust Agreement, each such payment will
be made as described under "--Book-Entry Only Issuance--DTC" below. The amount
of distributions payable for any period will be computed on the basis of a 360-
day year of twelve 30-day months.
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The Corporation has the right under the Subordinated Note Indenture to defer
payments of interest on the Series C Junior Subordinated Notes by extending the
interest payment period from time to time on the Series C Junior Subordinated
Notes, which, if exercised, would defer quarterly distributions on the
Preferred Securities during any such extended interest payment period. Deferred
installments of interest on the Series C Junior Subordinated Notes will bear
interest at an annual rate of 8 3/8%, compounded quarterly, to the date of
payment to the extent permitted by applicable law. During an Extension Period,
the Corporation will have the right to make partial payments of interest on any
interest payment date on the Series C Junior Subordinated Notes. If
distributions are deferred, the deferred distributions and accrued interest
thereon will be paid, if funds are legally available for such payments, to
holders of record of the Preferred Securities as they appear on the books and
records of the Trust on the record date next following the termination of that
Extension Period. See "Description of the Series C Junior Subordinated Notes--
Interest" and "--Option to Extend Interest Payment Period."
Distributions on the Preferred Securities must be paid on the applicable
Distribution Dates to the extent that the Trust has funds legally and
immediately available for the payment of those distributions. The Trust's funds
available for distribution to the holders of the Preferred Securities will be
limited to payments received under the Series C Junior Subordinated Notes. See
"Description of the Series C Junior Subordinated Notes."
Redemption
The Preferred Securities are subject to mandatory redemption upon repayment
of the Series C Junior Subordinated Notes at maturity or upon their earlier
redemption. The Series C Junior Subordinated Notes will mature on August 31,
2029. The Corporation may at its option redeem the Series C Junior Subordinated
Notes, in whole or in part, at any time on or after August 31, 2004. The
Corporation may also redeem the Series C Junior Subordinated Notes at any time,
in whole, within 90 days following the occurrence of a Special Event. In each
case the Redemption Price will be equal to 100% of the principal amount of the
Series C Junior Subordinated Notes to be redeemed plus accrued but unpaid
interest (including any Additional Interest as defined below) to the redemption
date.
When the Corporation repays the Series C Junior Subordinated Notes, whether
at maturity or upon redemption, the proceeds from that payment will
simultaneously be applied to redeem a like liquidation amount of Trust
Securities upon not less than 30 nor more than 60 days' notice at the
Redemption Price. If a partial redemption of the Series C Junior Subordinated
Notes would result in the delisting of the Preferred Securities, the
Corporation may redeem the Series C Junior Subordinated Notes only in whole.
See "Description of the Series C Junior Subordinated Notes--Optional
Redemption."
If fewer than all the outstanding Preferred Securities are to be redeemed,
the Preferred Securities to be redeemed will be selected as described under
"--Book-Entry Only Issuance--DTC." If the Preferred Securities are no longer in
book-entry only form, the Preferred Securities to be redeemed will be selected
by such method as the Property Trustee deems fair and appropriate and which may
provide for the selection for redemption of portions (equal to $25 or integral
multiples of $25) of the aggregate liquidation amount of Preferred Securities
of a denomination larger than $25. Before
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undertaking the redemption of the Preferred Securities on a basis other than
pro rata, however, the Property Trustee is required to receive an opinion of
counsel that the status of the Trust as a grantor trust for United States
federal income tax purposes would not be adversely affected.
The Redemption Price for each Preferred Security will equal the liquidation
amount of $25 plus accrued and unpaid distributions on the Preferred Security
to the date of payment.
Special Event Redemption or Distribution
The Corporation will have the option to redeem all the Series C Junior
Subordinated Notes within 90 days after the occurrence of a Special Event, thus
causing the redemption of the Preferred Securities in whole. A Special Event is
either a Tax Event or an Investment Company Act Event.
A "Tax Event" means that the Administrative Trustees and the Corporation have
received an opinion of counsel experienced in such matters (which may be
counsel to the Corporation) to the effect that, as a result of (1) any
amendment to, or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein or (2) any amendment to, or
change in, an interpretation or application of such laws or regulations, there
is more than an insubstantial risk that (a) the Trust would be subject to
United States federal income tax with respect to income accrued or received on
the Series C Junior Subordinated Notes, (b) interest payable on the Series C
Junior Subordinated Notes would not be deductible by the Corporation for United
States federal income tax purposes or (c) the Trust would be subject to more
than a de minimis amount of other taxes, duties or other governmental charges,
which change or amendment becomes effective on or after the date of original
issuance of the Preferred Securities.
An "Investment Company Act Event" means that the Administrative Trustees and
the Corporation have received an opinion of counsel experienced in such matters
(which may be counsel to the Corporation) to the effect that, as a result of
the occurrence of a change in law or regulation or a written change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority on or after the date of
original issuance of the Preferred Securities, there is more than an
insubstantial risk that the Trust is or will be considered an "investment
company" under the Investment Company Act of 1940, which change becomes
effective on or after the date of original issuance of the Preferred
Securities.
Distribution of Series C Junior Subordinated Notes upon Termination of Trust
The Corporation will have the right to terminate the Trust at any time and,
after satisfaction of liabilities to the Trust's creditors, cause Series C
Junior Subordinated Notes to be distributed to the holders of the Preferred
Securities in liquidation of the Trust. See "--Liquidation Distribution upon
Dissolution." This right is optional and wholly within the discretion of the
Corporation. Circumstances under which the Corporation may determine to
exercise this right could include the occurrence of an Investment Company Act
Event or a Tax Event, adverse tax consequences to the Corporation or the Trust
that are not within the definition of a Tax Event because they do not result
from an amendment or change described in such definition, and changes in the
accounting requirements applicable to the Preferred Securities. See "Accounting
Treatment" in the accompanying Prospectus.
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If Series C Junior Subordinated Notes are distributed to the holders of the
Preferred Securities, the Corporation will use its best efforts to have the
Series C Junior Subordinated Notes listed on the New York Stock Exchange or
other exchange on which the Preferred Securities are then listed.
After the date for any distribution of Series C Junior Subordinated Notes
upon termination of the Trust:
. the Preferred Securities and the Guarantee will no longer be deemed to
be outstanding;
. the securities depositary or its nominee, as the record holder of the
Preferred Securities, will receive a registered global certificate or
certificates representing the Series C Junior Subordinated Notes to be
delivered upon the distribution; and
. any certificates representing Preferred Securities not held by the
securities depositary or its nominee will be deemed to represent Series
C Junior Subordinated Notes having an aggregate principal amount equal
to the aggregate liquidation amount of such Preferred Securities, an
interest rate identical to the rate at which cumulative cash dividends
are payable on such Preferred Securities, and accrued and unpaid
interest equal to accrued and unpaid distributions on such Preferred
Securities, until the certificates are presented to the Corporation or
its agent for transfer or reissuance.
There can be no assurance as to the market prices for the Preferred
Securities or the Series C Junior Subordinated Notes that may be distributed in
exchange for the Preferred Securities if a termination and liquidation of the
Trust occurs. Accordingly, the Preferred Securities that an investor may
purchase, or the Series C Junior Subordinated Notes that the investor may
receive on termination and liquidation of the Trust, may trade at a discount to
the price that the investor paid to purchase the Preferred Securities.
Redemption Procedures
If fewer than all the Trust Securities are to be redeemed, then the aggregate
liquidation amount of the Trust Securities to be redeemed will be allocated 97%
to the Preferred Securities and 3% to the Common Securities.
The Preferred Securities redeemed on any redemption date will be redeemed at
the Redemption Price with the proceeds from the contemporaneous redemption of
the Series C Junior Subordinated Notes. The Redemption Price of Preferred
Securities will be deemed payable on each redemption date only to the extent
that the Trust has funds legally and immediately available for payment of such
Redemption Price.
If the Preferred Securities are in book-entry only form and the Property
Trustee gives a notice of redemption with respect to Preferred Securities
(which notice will be irrevocable), then, by 2:00 p.m., New York City time, on
the redemption date, subject to the immediately preceding paragraph, the
Property Trustee will irrevocably deposit with the securities depositary
sufficient funds to pay the applicable Redemption Price. See "--Book-Entry Only
Issuance--DTC" below. If the Preferred Securities are not in book-entry only
form, the Property Trustee, subject to the immediately preceding paragraph,
will irrevocably deposit with the paying agent funds sufficient to pay the
applicable Redemption Price and will give the paying agent irrevocable
instructions to pay the Redemption Price
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to the holders of the Preferred Securities upon surrender of their Preferred
Securities certificates. If notice of redemption has been given and funds
deposited as required, then immediately prior to the close of business on the
date of the deposit, distributions will cease to accrue and all rights of
holders of Preferred Securities called for redemption will cease, except the
right of the holders of those Preferred Securities to receive the Redemption
Price, but without interest on such Redemption Price. If the redemption date
for the redemption of Preferred Securities is not a Business Day, the
Redemption Price payable on that date will be paid on the next day that is a
Business Day (and without any interest or other payment in respect of any such
delay), except that, if such Business Day falls in the next calendar year, the
payment will be made on the immediately preceding Business Day. If payment of
the Redemption Price for Preferred Securities is improperly withheld or refused
and not paid either by the Trust or by the Corporation under the Guarantee,
distributions on those Preferred Securities will continue to accrue at the then
applicable rate, from the redemption date originally established by the Trust
for those Preferred Securities to the date the Redemption Price is actually
paid. See "--Events of Default" below, "Relationship Among the Preferred
Securities, the Series C Junior Subordinated Notes and the Guarantee" in this
Prospectus Supplement and "Description of the Guarantees--Events of Default" in
the accompanying Prospectus.
Subject to the foregoing and to applicable law (including, without
limitation, United States federal securities laws), the Corporation or any of
its affiliates may, at any time and from time to time, purchase outstanding
Preferred Securities by tender, in the open market or by private agreement.
Book-Entry Only Issuance--DTC
DTC will act as the initial securities depositary for the Preferred
Securities. The Preferred Securities will be issued only as fully registered
securities registered in the name of Cede & Co., DTC's nominee. One or more
fully registered global Preferred Securities certificates will be issued,
representing in the aggregate the total number of Preferred Securities, and
will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. 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, the American Stock Exchange 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.
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Purchases of Preferred Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Securities on DTC's records. The ownership interest of each actual purchaser of
Preferred Securities ("Beneficial Owner") is in turn to be recorded on the
Direct and Indirect Participants' records. Beneficial Owners will not receive
written confirmation from DTC of their purchases, but Beneficial Owners are
expected to receive written confirmations providing details of the transactions,
as well as periodic statements of their holdings, from the Direct or Indirect
Participants through which the Beneficial Owners purchased Preferred Securities.
Transfers of ownership interests in the Preferred Securities are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing
their ownership interests in Preferred Securities, except in the event that use
of the book-entry system for the Preferred Securities is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Preferred
Securities. DTC's records reflect only the identity of the Direct Participants
to whose accounts such Preferred Securities are credited, which may or may not
be the Beneficial Owners. The Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants,
by Direct Participants to Indirect Participants, and by Direct Participants and
Indirect Participants to Beneficial Owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Redemption notices shall be sent to DTC. If less than all the Preferred
Securities are being redeemed, DTC will reduce the amount of the interest of
each Direct Participant in the Preferred Securities in accordance with its
procedures.
Although voting with respect to the Preferred Securities is limited, in those
cases where a vote is required, neither DTC nor Cede & Co. will itself consent
or vote with respect to Preferred Securities. Under its usual procedures, DTC
would mail an Omnibus Proxy to the Trust as soon as possible after the record
date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to
those Direct Participants to whose accounts the Preferred Securities are
credited on the record date (identified in a listing attached to the Omnibus
Proxy).
Distributions, redemption proceeds and other payments in respect of the
Preferred Securities will be made to DTC. DTC's practice is to credit Direct
Participants' accounts on the relevant payment date in accordance with their
respective holdings shown on DTC's records unless DTC has reason to believe
that it will not receive payments on such payment date. Payments by
Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the account of
customers registered in "street name," and will be the responsibility of such
Participant and not of DTC, the Trust, any trustee or the Corporation, subject
to any statutory or regulatory requirements as may be in effect from time to
time. Payment of distributions, redemption proceeds and other amounts to DTC is
the responsibility of the Trust, disbursement of such payments to Direct
Participants is the responsibility of DTC, and disbursement of such payments to
the Beneficial Owners is the responsibility of Direct and Indirect
Participants.
Except as provided herein, a Beneficial Owner in a global Preferred Security
will not be entitled to receive physical delivery of Preferred Securities.
Accordingly, each Beneficial Owner must rely on the
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procedures of DTC to exercise any rights under the Preferred Securities. The
laws of some jurisdictions require that certain purchasers of securities take
physical delivery of securities in definitive form. Such laws may impair the
ability to transfer beneficial interests in a global Preferred Security.
DTC may discontinue providing its services as securities depositary with
respect to the Preferred Securities at any time by giving reasonable notice to
the Trust. Under such circumstances, in the event that a successor securities
depositary is not obtained within 90 days, Preferred Securities certificates
will be printed and delivered to the holders of record. Additionally, the
Corporation may decide to discontinue use of the system of book-entry transfers
through DTC (or a successor depositary) with respect to the Preferred
Securities. In that event, certificates for the Preferred Securities will be
printed and delivered to the holders of record.
The management of DTC is aware that some computer applications, systems and
the like for processing data ("Systems") that are dependent upon calendar
dates, including dates before, on, and after January 1, 2000, may encounter
"Year 2000 problems." DTC has informed Direct Participants and Indirect
Participants and other members of the financial community (the "Industry") that
it has developed and is implementing a program so that its Systems, as the same
relate to the timely payment of distributions (including principal and interest
payments) to securityholders, book-entry deliveries, and settlement of trades
within DTC ("Depositary Services"), continue to function appropriately. This
program includes a technical assessment and a remediation plan, each of which
is complete. Additionally, DTC's plan includes a testing phase, which is
expected to be completed within appropriate time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including, but not limited to, issuers and their agents, as
well as DTC's Direct Participants and Indirect Participants, third party
vendors from whom DTC licenses software and hardware, and third party vendors
on whom DTC relies for information or the provision of services, including
telecommunication and electrical utility service providers, among others. DTC
has informed the Industry that it is contacting (and will continue to contact)
third party vendors from whom DTC acquires services to: (1) impress upon them
the importance of such services being Year 2000 compliant; and (2) determine
the extent of their efforts for Year 2000 remediation (and, as appropriate,
testing) of their services. In addition, DTC is in the process of developing
such contingency plans as it deems appropriate.
According to DTC, the information in the preceding two paragraphs with
respect to DTC has been provided to the Industry for informational purposes
only and is not intended to serve as a representation, warranty, or contract
modification of any kind.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Corporation and the Trust believe to be
reliable, but the Corporation and the Trust take no responsibility for the
accuracy of such information. The Trust has no responsibility for the
performance by DTC or its Participants of their obligations as described in
this Prospectus Supplement and the accompanying Prospectus or under the rules
and procedures governing their respective operations.
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Liquidation Distribution upon Dissolution
Pursuant to the Trust Agreement, the Trust will terminate on August 31, 2034,
or earlier upon:
. the occurrence of a Bankruptcy Event (as defined in the Trust Agreement)
in respect of the Corporation, dissolution or liquidation of the
Corporation, or dissolution of the Trust pursuant to a judicial decree;
. the delivery of written direction to the Property Trustee by the
Corporation, as depositor, at any time (which written direction is
optional and wholly within the discretion of the Corporation, as
depositor) to terminate the Trust and distribute the Series C Junior
Subordinated Notes to the holders of the Preferred Securities and the
Common Securities in liquidation of the Trust; or
. the payment at maturity or redemption of all the Series C Junior
Subordinated Notes, and the consequent payment of the Trust Securities.
If an early termination occurs upon the occurrence of a Bankruptcy Event in
respect of the Corporation, dissolution or liquidation of the Corporation or
dissolution of the Trust pursuant to a judicial decree or upon the delivery of
the written direction to the Property Trustee that is described in the
preceding paragraph, then the Trust will be liquidated, and the Property
Trustee will distribute to each holder of Trust Securities, after the
satisfaction of liabilities to creditors of the Trust, a like principal amount
of Series C Junior Subordinated Notes, unless in the case of the occurrence of
a Bankruptcy Event in respect of the Corporation, dissolution or liquidation of
the Corporation or dissolution of the Trust pursuant to a judicial decree, the
Administrative Trustees determine such distribution not to be practical, in
which event such holders will be entitled to receive, out of the assets of the
Trust available for distribution to holders of the Trust Securities, after
satisfaction of liabilities to creditors, an amount equal to the aggregate of
the liquidation amount of $25 per Trust Security plus accrued and unpaid
distributions on such Trust Securities to the date of payment (such amount
being the "Liquidation Distribution"). If the Liquidation Distribution can only
be partially paid because the Trust has insufficient assets available to pay
the aggregate Liquidation Distribution in full, then, subject to the following
sentence, the amounts payable by the Trust on the Trust Securities will be paid
on a pro rata basis. The holder of the Common Securities will be entitled to
receive payments upon any such dissolution pro rata with the holders of the
Preferred Securities, except that the Preferred Securities will have a
preference over the Common Securities if an Event of Default under the
Subordinated Note Indenture with respect to the Series C Junior Subordinated
Notes has occurred and is continuing.
Events of Default
Any one of the following events constitutes an "Event of Default" under the
Trust Agreement (whatever the reason for such Event of Default, and whether it
be voluntary or involuntary or be effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body):
. the occurrence of an Event of Default under the Subordinated Note
Indenture with respect to the Series C Junior Subordinated Notes (see
"Description of the Junior Subordinated Notes--Events of Default" in the
accompanying Prospectus);
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. default by the Trust in the payment of any distribution when it becomes
due and payable, and the continuation of such default for a period of 30
days;
. default by the Trust in the payment of any Redemption Price of any
Preferred Security or Common Security when it becomes due and payable;
. default in the performance, or breach, of any covenant or warranty of
the Securities Trustees in the Trust Agreement (other than a covenant or
warranty a default in the performance of which or the breach of which is
dealt with in one of the two immediately preceding Events of Default
under the Trust Agreement), and continuance of such default or breach
for a period of 60 days after there has been given, by registered or
certified mail, to the Securities Trustees by the holders of at least
25% in liquidation amount of the outstanding Preferred Securities a
written notice specifying the default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default" under the
Trust Agreement, unless holders in liquidation amount of outstanding
Preferred Securities not less than the liquidation amount of outstanding
Preferred Securities the holders of which gave such notice, agree in
writing to an extension of such period prior to its expiration;
provided, however, that the holders of such liquidation amount of
outstanding Preferred Securities will be deemed to have agreed to an
extension of such period if corrective action is initiated by the
Securities Trustees within such period and is being diligently pursued;
or
. the occurrence of certain events of bankruptcy or insolvency with
respect to the Trust.
Within 90 days after a default occurs under the Trust Agreement, the Property
Trustee will transmit notice of any such default known to the Property Trustee
to the holders of Trust Securities, the Administrative Trustees and the
Corporation, unless the default has been cured or waived. For this purpose, the
term "default" means any event which is, or after notice or lapse of time or
both would become, an Event of Default under the Trust Agreement.
If an Event of Default under the Subordinated Note Indenture with respect to
the Series C Junior Subordinated Notes occurs and is continuing, then pursuant
to the Trust Agreement:
. the holders of Preferred Securities will rely on the enforcement by the
Property Trustee of its rights against the Corporation as the holder of
the Series C Junior Subordinated Notes; and
. the holders of a majority in aggregate liquidation amount of the
Preferred Securities will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the
Property Trustee or to direct the exercise of any trust or power
conferred upon the Property Trustee under the Trust Agreement, including
the right to direct the Property Trustee to exercise the remedies
available to it as a holder of the Series C Junior Subordinated Notes.
If the Property Trustee fails to enforce its rights under the Series C Junior
Subordinated Notes, a holder of Preferred Securities may, to the extent
permitted by applicable law and as provided in the Trust Agreement, institute a
legal proceeding against the Corporation to enforce its rights under the Trust
Agreement without first instituting any legal proceeding against the Property
Trustee or any other person or entity, including the Trust. Notwithstanding the
foregoing, a holder of Preferred Securities may institute a legal proceeding
directly against the Corporation, without first instituting a legal proceeding
against the Property Trustee or any other person or entity, for enforcement of
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payment to such holder of principal of or interest on the Series C Junior
Subordinated Notes having a principal amount equal to the aggregate liquidation
amount of the Preferred Securities of such holder on or after the due dates
specified in the Series C Junior Subordinated Notes. See "Relationship Among
the Preferred Securities, the Series C Junior Subordinated Notes and the
Guarantee" in this Prospectus Supplement and "Description of the Guarantees--
Events of Default" in the accompanying Prospectus.
Unless an Event of Default under the Subordinated Note Indenture with respect
to the Series C Junior Subordinated Notes has occurred and is continuing, the
holder of the Common Securities may remove the Securities Trustees at any time.
If such an Event of Default has occurred and is continuing, the holders of a
majority in liquidation amount of the Preferred Securities may remove the
Property Trustee and the Delaware Trustee by act of such holders delivered to
the appropriate Securities Trustee (in its individual capacity and on behalf of
the Trust). No resignation or removal of any Securities Trustee and no
appointment of a successor will be effective until the successor Trustee
accepts its appointment in accordance with the Trust Agreement.
If an Event of Default under the Subordinated Note Indenture with respect to
the Series C Junior Subordinated Notes has occurred and is continuing, the
holders of Preferred Securities will have a preference over the holders of
Common Securities upon dissolution of the Trust as described above. See
"--Liquidation Distribution upon Dissolution."
Voting Rights
Except as described in "--Amendment of the Trust Agreement" in this
Prospectus Supplement, in "Description of the Guarantees--Amendments and
Assignment" in the accompanying Prospectus and in the immediately succeeding
paragraphs, and except as otherwise required by law and the Trust Agreement,
the holders of the Preferred Securities will have no voting rights.
So long as the Property Trustee holds any Series C Junior Subordinated Notes,
the Securities Trustees will not:
. direct the time, method and place of conducting any proceeding for any
remedy available to the Subordinated Indenture Trustee, or executing any
trust or power conferred on the Subordinated Indenture Trustee with
respect to the Series C Junior Subordinated Notes;
. consent to waive any past default which is waivable under Section 513 of
the Subordinated Note Indenture;
. exercise any right to rescind or annul a declaration that the principal
of all the Series C Junior Subordinated Notes will be due and payable;
or
. consent to any amendment, modification or termination of the
Subordinated Note Indenture or the Series C Junior Subordinated Notes,
where such consent is required, or to any other action, as the holder of
the Series C Junior Subordinated Notes, under the Subordinated Note
Indenture,
without, in each case, obtaining the prior approval of the holders of at least
66 2/3% in liquidation amount of the outstanding Preferred Securities, except
that where a consent under the Subordinated Note Indenture requires the consent
of each holder of Series C Junior Subordinated Notes affected,
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the Securities Trustees will not give such consent without the prior consent of
each such holder of Preferred Securities. The Securities Trustees will not
revoke any action that a vote of the holders of the Preferred Securities has
previously authorized or approved, except pursuant to a subsequent vote of such
holders.
The Property Trustee will notify all holders of the Preferred Securities of
any notice of default that it receives from the Subordinated Indenture Trustee
with respect to the Series C Junior Subordinated Notes.
If any proposed amendment to the Trust Agreement provides for, or the
Securities Trustees otherwise propose to effect, (1) any action that would
adversely affect the powers, preferences or special rights of the Preferred
Securities, whether by way of amendment to the Trust Agreement or otherwise, or
(2) the dissolution, winding-up or termination of the Trust, other than
pursuant to the Trust Agreement, then the holders of outstanding Preferred
Securities will be entitled to vote as a class on such amendment or proposal.
The approval of the holders of at least 66 2/3% in liquidation amount of the
outstanding Preferred Securities will be required in order for such amendment
or proposal to be effective.
Holders of Preferred Securities may give any required approval at a separate
meeting of holders of Preferred Securities convened for that purpose or may
give any required approval by written consent. The Administrative Trustees will
cause a notice of any meeting at which holders of Preferred Securities are
entitled to vote to be given to each holder of record of Preferred Securities
in the manner set forth in the Trust Agreement.
Any Preferred Securities that the Corporation, the Administrative Trustees or
any affiliate of the Corporation or any Administrative Trustee owns, whether of
record or beneficially, will be treated as if those Preferred Securities were
not outstanding for purposes of such vote or consent.
Co-Property Trustees and Separate Property Trustee
At any time or times, for the purpose of meeting the legal requirements of
the Trust Indenture Act of 1939 or of any jurisdiction in which any part of the
Trust Property may be located, the holder of the Common Securities and the
Property Trustee will have power to appoint one or more persons approved by the
Property Trustee either to act as co-property trustee, jointly with the
Property Trustee, of all or any part of the Trust Property, or to act as
separate trustee of any such property, in either case with such powers as may
be provided in the instrument of appointment, and to vest in such person or
persons in such capacity, any property, title, right or power deemed necessary
or desirable, subject to the provisions of the Trust Agreement. Upon the
written request of the Property Trustee, the Corporation, as depositor, will
join with the Property Trustee in the execution, delivery and performance of
all instruments and agreements necessary or proper for the appointment. If the
Corporation, as depositor, does not join in the appointment within 15 days
after it receives a request to do so, or in case an Event of Default under the
Subordinated Note Indenture with respect to the Series C Junior Subordinated
Notes has occurred and is continuing, the Property Trustee alone will have
power to make the appointment.
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Amendment of the Trust Agreement
The Corporation and the Securities Trustees may amend the Trust Agreement
from time to time without the consent of the holders of the Trust Securities:
. to cure any ambiguity, correct or supplement any provision which may be
inconsistent with any other provision of the Trust Agreement, or to make
any other provisions with respect to matters or questions arising under
the Trust Agreement, which shall not be inconsistent with the other
provisions of the Trust Agreement; provided that the amendment does not
adversely affect in any material respect the interests of any holder of
Trust Securities; or
. to modify, eliminate or add to any provisions of the Trust Agreement to
such extent as shall be necessary to ensure that the Trust will not be
classified as other than a grantor trust for United States federal
income tax purposes.
Except as provided in the next paragraph, other amendments to the Trust
Agreement may be made if (1) the holders of 66 2/3% in aggregate liquidation
amount of the Trust Securities then outstanding approve any such amendment and
(2) the Securities Trustees receive an opinion of counsel to the effect that
such amendment will not affect the Trust's status as a grantor trust or the
Trust's exemption from the Investment Company Act of 1940.
The consent of each affected holder of Trust Securities will be required,
however, to amend the Trust Agreement to:
. change the amount or timing of any distribution (or any payment upon
redemption) on the Trust Securities or otherwise adversely affect the
amount of any distribution (or any payment upon redemption) required to
be made in respect of the Trust Securities as of a specified date;
. restrict the right of a holder of Trust Securities to institute suit for
the enforcement of any such payment on or after such date;
. change the purpose of the Trust;
. authorize the issuance of any additional beneficial interests in the
Trust; or
. change the consent required to amend the Trust Agreement.
Mergers, Consolidations or Amalgamations
The Trust may not consolidate, amalgamate, merge with or into any corporation
or other entity, or be replaced by, or convey, transfer or lease its properties
and assets substantially as an entirety to any corporation or other entity,
except as described below. The Trust may, at the request of the Corporation,
with the consent of the Administrative Trustees and without the consent of the
holders of the Trust Securities, consolidate, amalgamate, merge with or into,
or be replaced by a trust organized as such under the laws of any state;
provided that:
. the successor entity either (1) expressly assumes all the Trust's
obligations with respect to the Trust Securities or (2) substitutes for
the Preferred Securities and the Common Securities other securities
having substantially the same terms as the Trust Securities (the
"Successor Securities") so long as the Successor Securities rank the
same as the Trust Securities rank in priority with respect to
distributions and payments upon liquidation, redemption and otherwise;
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. the Corporation expressly appoints a trustee of such successor entity
possessing the same powers and duties as the Property Trustee as the
holder of the Series C Junior Subordinated Notes;
. the Preferred Securities or any Successor Securities are listed, or any
Successor Securities will be listed upon notification of issuance, on
any national securities exchange or other organization on which the
Preferred Securities are then listed;
. the consolidation, amalgamation, merger or replacement does not cause
the Preferred Securities (including any Successor Securities) to be
downgraded by any nationally recognized statistical rating organization;
. the consolidation, amalgamation, merger or replacement does not
adversely affect the rights, preferences and privileges of the holders
of the Trust Securities (including any Successor Securities) in any
material respect;
. the successor entity has a purpose substantially identical to that of
the Trust;
. prior to the consolidation, amalgamation, merger or replacement, the
Corporation and the Property Trustee have received an opinion of counsel
to the effect that (1) the consolidation, amalgamation, merger or
replacement does not adversely affect the rights, preferences and
privileges of the holders of the Trust Securities (including any
Successor Securities) in any material respect, and (2) following the
consolidation, amalgamation, merger or replacement, neither the Trust
nor the successor entity will be required to register as an "investment
company" under the Investment Company Act of 1940; and
. the Corporation owns all the common securities of the successor entity
and guarantees the obligations of the successor entity with respect to
the Successor Securities at least to the extent provided by the
Guarantee.
Notwithstanding the foregoing, the Trust shall not, except with the consent of
holders of 100% in liquidation amount of the Trust Securities, consolidate,
amalgamate, merge with or into, or be replaced by any other entity or permit
any other entity to consolidate, amalgamate, merge with or into, or replace it
if such consolidation, amalgamation, merger or replacement would cause the
Trust or the successor entity to be classified as other than a grantor trust
for United States federal income tax purposes.
Any corporation or other entity into which the Property Trustee, the Delaware
Trustee or any Administrative Trustee that is not a natural person may be
merged or converted or with which it may be consolidated, or any corporation or
other entity resulting from any merger, conversion or consolidation to which
any Securities Trustee is a party, or any corporation or other entity
succeeding to all or substantially all the corporate trust business of any
Securities Trustee, will be the successor of such Securities Trustee under the
Trust Agreement; provided that such corporation or other entity is otherwise
qualified and eligible.
Payment and Paying Agent
So long as DTC is acting as securities depositary for the Preferred
Securities, payments on the Preferred Securities will be made to DTC, which
will credit the relevant accounts at DTC on the applicable Distribution Dates.
If the Preferred Securities are no longer held by DTC, such payments
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will be made by check mailed to the address of the holder entitled to the
payment as such address appears in the Security Register (as defined in the
Trust Agreement). The paying agent will initially be the Property Trustee. The
paying agent will be permitted to resign as paying agent upon 30 days' written
notice to the Administrative Trustees and the Corporation. Upon such
resignation, the Administrative Trustees will appoint a successor to act as
paying agent.
Registrar and Transfer Agent
It is anticipated that the Property Trustee, or one of its affiliates, will
act as registrar and transfer agent for the Preferred Securities.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of the Trust, but upon payment in respect of any tax or
other governmental charges which may be imposed in relation to it.
The registrar and transfer agent for the Preferred Securities will not be
required to register or cause to be registered any transfer of Preferred
Securities that have been called for redemption.
Information Concerning the Property Trustee
Prior to the occurrence of an Event of Default under the Trust Agreement, the
Property Trustee undertakes to perform only those duties as are specifically
set forth in the Trust Agreement and, after default, will exercise the same
degree of care as a prudent individual would exercise in the conduct of his or
her own affairs. Subject to such provisions, the Property Trustee is under no
obligation to exercise any of the powers vested in it by the Trust Agreement at
the request of any holder of Preferred Securities, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which the
Property Trustee might incur as a result.
The Chase Manhattan Bank, which is the Property Trustee, also serves as
Subordinated Indenture Trustee and as Guarantee Trustee. The Chase Manhattan
Bank also serves as Trustee under the Corporation's Senior Note Indenture. The
Corporation and certain of its affiliates maintain deposit accounts and banking
relationships with The Chase Manhattan Bank. The Chase Manhattan Bank serves as
trustee under other indentures pursuant to which securities of the Corporation
and certain of its affiliates are outstanding.
Governing Law
The Trust Agreement and the Trust Securities will be governed by the internal
laws of the State of Delaware, except that New York law will govern the
immunities and standard of care of the Property Trustee.
Miscellaneous
The Trust Agreement authorizes and directs the Administrative Trustees to
operate the Trust so that the Trust will not be deemed to be an "investment
company" required to be registered under the Investment Company Act of 1940 or
taxed as other than a grantor trust for United States federal income tax
purposes. The Trust Agreement also authorizes and directs the Administrative
Trustees to
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operate the Trust so that the Series C Junior Subordinated Notes will be
treated as indebtedness of the Corporation for United States federal income tax
purposes. In such connection, the Administrative Trustees and the Corporation
are authorized to take any action that is not inconsistent with applicable law,
the Trust's certificate of trust or the Trust Agreement, that the
Administrative Trustees and the Corporation determine in their discretion to be
necessary or desirable for such purposes, as long as the action does not
materially and adversely affect the interests of the holders of the Preferred
Securities.
DESCRIPTION OF THE SERIES C JUNIOR SUBORDINATED NOTES
A description of the terms of the Series C Junior Subordinated Notes is set
forth below. This description supplements, and should be read together with,
the description of the general terms and provisions of the Junior Subordinated
Notes set forth in the accompanying Prospectus under "Description of the Junior
Subordinated Notes." The following description does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, the
description in the accompanying Prospectus and the Subordinated Note Indenture.
Certain capitalized terms used in this description are defined in the
Subordinated Note Indenture.
General
The Corporation will issue the Series C Junior Subordinated Notes as a series
of Junior Subordinated Notes under the Subordinated Note Indenture. The Series
C Junior Subordinated Notes will be limited in aggregate principal amount to
$257,731,975, which is the aggregate liquidation amount of the Trust
Securities.
The entire principal amount of the Series C Junior Subordinated Notes will
mature and become due and payable, together with any accrued and unpaid
interest thereon (including any Additional Interest (as defined under
"--Additional Interest" below)), on August 31, 2029. The Series C Junior
Subordinated Notes are not subject to any sinking fund provision.
The interest rate and interest and other payment dates of the Series C Junior
Subordinated Notes will correspond to those of the Preferred Securities as
described in this Prospectus Supplement.
The Series C Junior Subordinated Notes will rank equal in priority with the
other series of Junior Subordinated Notes issued under the Subordinated Note
Indenture.
Optional Redemption
The Corporation will have the right to redeem the Series C Junior
Subordinated Notes, in whole or in part, without premium, from time to time, on
or after August 31, 2004, or at any time, in whole, within 90 days after a
Special Event (as described in "Description of the Preferred Securities--
Special Event Redemption or Distribution") occurs, upon not less than 30 nor
more than 60 days' notice, at a Redemption Price equal to 100% of the principal
amount to be redeemed plus any accrued and unpaid interest (including any
Additional Interest) to the redemption date. If a partial redemption of the
Series C Junior Subordinated Notes would result in the delisting of the
Preferred Securities, the Corporation may redeem the Series C Junior
Subordinated Notes only in whole.
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Interest
Each Series C Junior Subordinated Note will bear interest at an annual rate
of 8 3/8% from the date of original issuance, payable, unless deferred,
quarterly in arrears on February 28, May 31, August 31 and November 30 of each
year, commencing on November 30, 1999. Such interest will be payable to the
person in whose name such Series C Junior Subordinated Note is registered at
the close of business on the fifteenth calendar day prior to such interest
payment date, except that interest payable on the stated maturity of principal
of the Series C Junior Subordinated Notes or on a redemption date will be paid
to the person to whom principal is payable. The amount of interest payable will
be computed on the basis of a 360-day year of twelve 30-day months. If any date
on which interest is payable on the Series C Junior Subordinated Notes is not a
Business Day, the interest payable on such date will be paid on the next day
that is a Business Day (and without any interest or other payment in respect of
any such delay), except that, if such Business Day falls in the next calendar
year, such interest will be paid on the immediately preceding Business Day, in
each case with the same force and effect as if made on the date the payment was
originally payable.
Option to Extend Interest Payment Period
The Corporation will have the right at any time, and from time to time, to
defer payments of interest on the Series C Junior Subordinated Notes by
extending the interest payment period for up to 20 consecutive quarters, but
not beyond the maturity date. When an Extension Period has terminated, the
Corporation will pay all interest then accrued and unpaid (including any
Additional Interest) on the next interest payment date. Prior to the
termination of any Extension Period, the Corporation may further defer payments
of interest by extending the interest payment period, except that such
Extension Period, together with all such previous and further extensions
thereof, may not exceed 20 consecutive quarters. During an Extension Period,
the Corporation will have the right to make partial payments of interest on any
interest payment date. Upon the termination of any Extension Period and the
payment of all amounts then due, the Corporation may select a new Extension
Period, subject to the previously mentioned requirements. The Corporation has
no present intention of exercising its right to defer payments of interest by
extending the interest payment period on the Series C Junior Subordinated
Notes.
The Corporation will give the holder or holders of the Series C Junior
Subordinated Notes and the Subordinated Indenture Trustee notice of its
selection or extension of an Extension Period at least one Business Day prior
to the earlier of:
. the record date relating to the interest payment date on which the
Extension Period is to commence or relating to the interest payment date
on which an Extension Period that is being extended would otherwise
terminate; or
. the date the Corporation or the Trust is required to give notice to the
New York Stock Exchange or other applicable self-regulatory organization
of the record date or the date such distributions are payable.
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Additional Interest
"Additional Interest" with respect to the Series C Junior Subordinated Notes
is defined in the Subordinated Note Indenture as (1) such additional amounts as
may be required so that the net amounts received and retained by a holder of
Series C Junior Subordinated Notes (if the holder is the Trust) after paying
taxes, duties, assessments or governmental charges of whatever nature (other
than withholding taxes) imposed by the United States or any other taxing
authority will not be less than the amounts the holder would have received had
no such taxes, duties, assessments or other governmental charges been imposed;
and (2) such interest as shall accrue on interest due and not paid on an
interest payment date, accruing at an annual rate of 8 3/8% from the applicable
interest payment date to the date of payment, compounded quarterly, on each
interest payment date, to the extent permitted by applicable law.
Certain Covenants
The Corporation covenants in the Subordinated Note Indenture, for the benefit
of the holders of Series C Junior Subordinated Notes and the holders of the
Preferred Securities, that, (1) if the Corporation has given notice of its
election to extend an interest payment period for the Series C Junior
Subordinated Notes and such extension is continuing or (2) if an Event of
Default under the Subordinated Note Indenture with respect to the Series C
Junior Subordinated Notes has occurred and is continuing, (x) the Corporation
will not declare or pay any dividend or make any distributions with respect to,
or redeem, purchase, acquire or make a liquidation payment with respect to, any
of its capital stock, and (y) the Corporation will not make any payment of
interest, principal or premium, if any, on or repay, repurchase or redeem any
debt securities (including guarantees other than the Guarantee) issued by the
Corporation which rank equal in priority with or junior to the Series C Junior
Subordinated Notes. These covenants, however, shall not restrict (1) any of the
actions described in the preceding sentence resulting from any reclassification
of the Corporation's capital stock or the exchange or conversion of one class
or series of the Corporation's capital stock for another class or series of the
Corporation's capital stock or (2) dividends or distributions in capital stock
of the Corporation.
The Corporation also covenants in the Subordinated Note Indenture that, for
so long as the Trust Securities remain outstanding, the Corporation will (1)
directly or indirectly maintain 100% ownership of the Common Securities of the
Trust (provided, however, that any successor of the Corporation permitted under
the Subordinated Note Indenture may succeed to the Corporation's ownership of
the Common Securities) and (2) use its reasonable efforts to cause the Trust
(x) to remain a statutory business trust, except in connection with the
distribution of Series C Junior Subordinated Notes to the holders of Trust
Securities in liquidation of such Trust, the redemption of all the Trust
Securities of the Trust, or certain mergers, consolidations or amalgamations,
each as permitted by the Trust Agreement, and (y) to otherwise continue to be
classified as a grantor trust for United States federal income tax purposes.
Book-Entry and Issuance
The Series C Junior Subordinated Notes are expected to be issued in the form
of one or more global certificates registered in the name of the securities
depositary or its nominee if distributed to
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holders of Trust Securities in connection with the voluntary or involuntary
dissolution, winding-up or liquidation of the Trust. In such event, the
procedures applicable to the transfer and payment of the Series C Junior
Subordinated Notes are expected to be substantially similar to those described
with respect to the Preferred Securities in "Description of the Preferred
Securities--Book-Entry Only Issuance--DTC."
Denominations
The Series C Junior Subordinated Notes will be issuable in registered form
without coupons in denominations of $25 or any integral multiples of $25.
Defeasance
The Series C Junior Subordinated Notes will be subject to Defeasance as
described in the Subordinated Note Indenture. See "Description of the Junior
Subordinated Notes--Defeasance and Covenant Defeasance" in the accompanying
Prospectus.
Under current United States federal income tax laws, Defeasance would be
treated as an exchange of the relevant Series C Junior Subordinated Notes in
which holders of such Series C Junior Subordinated Notes might recognize gain
or loss. In addition, the amount, timing and character of amounts that holders
would be required thereafter 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 United States federal income tax laws.
The Series C Junior Subordinated Notes will not be subject to Covenant
Defeasance as described in the Subordinated Note Indenture. See "Description of
the Junior Subordinated Notes--Defeasance and Covenant Defeasance" in the
accompanying Prospectus.
Miscellaneous
The Corporation will have the right at all times to assign any of its rights
or obligations under the Subordinated Note Indenture with respect to the Series
C Junior Subordinated Notes to one of its direct or indirect wholly owned
subsidiaries; provided that the Corporation will remain primarily liable for
the performance of all such obligations in the event of any such assignment.
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RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE SERIES C JUNIOR SUBORDINATED NOTES AND THE GUARANTEE
As long as payments of interest and other payments on the Series C Junior
Subordinated Notes are made when due, those payments will be sufficient to
cover distributions and payments due on the Trust Securities primarily because:
. the aggregate principal amount of Series C Junior Subordinated Notes
will be equal to the aggregate liquidation amount of the Trust
Securities;
. the interest rate and interest and other payment dates on the Series C
Junior Subordinated Notes will correspond to the distribution rate and
distribution and other payment dates for the Preferred Securities;
. the Corporation will pay for all costs and expenses of the Trust
pursuant to the Agreement as to Expenses and Liabilities between the
Corporation and the Trust; and
. the Trust Agreement provides that the Securities Trustees will not cause or
permit the Trust to, among other things, engage in any activity that is not
consistent with the purposes of the Trust.
The Corporation will guarantee payments of distributions and other payments
due on the Preferred Securities (in each case to the extent funds are legally
and immediately available therefor) as and to the extent set forth under
"Description of the Guarantees" in the accompanying Prospectus. If the
Corporation does not make the required payments on the Series C Junior
Subordinated Notes, it is not expected that the Trust will have sufficient
funds to make the related distributions on the Preferred Securities. The
Guarantee is a guarantee from the time of its issuance, but does not apply to
any payment of distributions unless and until the Trust has sufficient funds
legally and immediately available for the payment of such distributions.
If an Event of Default under the Subordinated Note Indenture with respect to
the Series C Junior Subordinated Notes occurs and is continuing, then:
. the holders of Preferred Securities will rely on the enforcement by the
Property Trustee of its rights against the Corporation as the holder of
the Series C Junior Subordinated Notes; and
. the holders of a majority in aggregate liquidation amount of the
Preferred Securities will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the
Property Trustee or to direct the exercise of any trust or power
conferred upon the Property Trustee under the Trust Agreement, including
the right to direct the Property Trustee to exercise the remedies
available to it as a holder of the Series C Junior Subordinated Notes.
If the Property Trustee fails to enforce its rights under the Series C Junior
Subordinated Notes, a holder of Preferred Securities may, to the extent
permitted by applicable law and as provided in the Trust Agreement, institute a
legal proceeding against the Corporation to enforce its rights under the Trust
Agreement without first instituting any legal proceeding against the Property
Trustee or any other person or entity, including the Trust. Notwithstanding the
foregoing, a holder of Preferred Securities may institute a legal proceeding
directly against the Corporation, without first instituting a legal proceeding
against the Property Trustee or any other person or entity, for enforcement of
payment to such holder of principal of or interest on the Series C Junior
Subordinated Notes having a
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principal amount equal to the aggregate liquidation amount of the Preferred
Securities of such holder on or after the due dates specified in the Series C
Junior Subordinated Notes. The Trust Agreement also provides a mechanism
whereby the holders of Preferred Securities may appoint a substitute Property
Trustee if an Event of Default under the Subordinated Note Indenture with
respect to the Series C Junior Subordinated Notes occurs and is continuing.
If the Corporation fails to make payments under the Guarantee, the Guarantee
provides a mechanism whereby the holders of the Preferred Securities may direct
the Guarantee Trustee to enforce its rights under the Guarantee. In addition,
any holder of Preferred Securities may institute a legal proceeding directly
against the Corporation to enforce its rights under the Guarantee without first
instituting a legal proceeding against the Guarantee Trustee or any other
person or entity.
The Guarantee, the Subordinated Note Indenture, the Series C Junior
Subordinated Notes, the Trust Agreement and the Agreement as to Expenses and
Liabilities between the Corporation and the Trust, as described above, provide
a full and unconditional guarantee, subject to certain subordination
provisions, by the Corporation of the payments due on the Preferred Securities.
The holders of Preferred Securities will be entitled to receive, out of
assets legally available for distribution to holders, the Liquidation
Distribution in cash upon any voluntary or involuntary dissolution, winding-up
or termination of the Trust unless the Series C Junior Subordinated Notes are
distributed in connection therewith. See "Description of the Preferred
Securities--Liquidation Distribution upon Dissolution." Upon any voluntary or
involuntary liquidation or bankruptcy of the Corporation, the Property Trustee,
as holder of the Series C Junior Subordinated Notes, would be a subordinated
creditor of the Corporation, subordinated in right of payment to all Senior
Indebtedness, but entitled to receive payment in full of principal and interest
before the shareholder of the Corporation receives payments or distributions.
Because the Corporation is guarantor under the Guarantee and has agreed to pay
for all costs, expenses and liabilities of the Trust (other than the Trust's
obligations to holders of the Preferred Securities) under the Agreement as to
Expenses and Liabilities between the Corporation and the Trust, the positions
of a holder of Preferred Securities and a holder of Series C Junior
Subordinated Notes relative to other creditors and the shareholder of the
Corporation in the event of liquidation or bankruptcy of the Corporation would
be substantially the same.
A default or event of default under any Senior Indebtedness would not
constitute a default or an Event of Default under the Subordinated Note
Indenture with respect to the Series C Junior Subordinated Notes. However, in
the event of a default with respect to Senior Indebtedness or the acceleration
of Senior Indebtedness, the subordination provisions of the Series C Junior
Subordinated Notes provide that no payments may be made in respect of the
Series C Junior Subordinated Notes:
. until such Senior Indebtedness has been paid in full (in the case of any
payment by, or distribution of assets of, the Corporation to creditors
upon any dissolution, winding-up, liquidation or reorganization of the
Corporation); or
. until all amounts due on such Senior Indebtedness have been paid (in the
case of a payment default thereunder (beyond any period of grace) or the
acceleration of the maturity of such Senior Indebtedness because of a
default with respect to such Senior Indebtedness).
S-35
<PAGE>
Failure to make required payments on the Series C Junior Subordinated Notes
would (with the lapse of time, in the case of defaults in the payment of
interest) constitute an Event of Default under the Subordinated Note Indenture
with respect to the Series C Junior Subordinated Notes, except that failure to
make interest payments on the Series C Junior Subordinated Notes will not be
such an Event of Default during an Extension Period.
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
The following is the opinion of Dewey Ballantine LLP, counsel to the
Corporation and the Trust, as to the material United States income tax
consequences of the purchase, ownership and disposition of the Preferred
Securities, insofar as it relates to matters of law and legal conclusions. This
discussion deals only with Preferred Securities held as capital assets within
the meaning of the Internal Revenue Code of 1986, as amended to the date hereof
(the "Code"), by Holders (as defined herein) that acquire Preferred Securities
on their original issue at their original offering price. Moreover, it does not
include all of the tax consequences that may be important to a Holder in light
of the Holder's particular circumstances or to Holders subject to special
rules, such as certain financial institutions, real estate investment trusts,
regulated investment companies, insurance companies, tax-exempt organizations,
dealers in securities or currencies, traders in securities that elect to mark
to market, individual retirement and certain tax deferred accounts, and persons
who engage in a straddle or a hedge relating to a Preferred Security.
Prospective investors should consult their own tax advisors with regard to the
application of the tax considerations discussed below to their particular
situations as well as the application of any state, local or other tax laws.
This discussion is based on laws, existing and proposed regulations, and
applicable judicial and administrative determinations, all of which are subject
to change at any time, and any such changes may be retroactively applied in a
manner that could adversely affect Holders. As used herein, the term "Holder"
means a beneficial owner of a Preferred Security that for United States federal
income tax purposes is (1) a citizen or resident of the United States, (2) a
corporation, partnership or other entity created or organized in or under the
laws of the United States or of any political subdivision thereof, (3) an
estate the income of which is subject to United States federal income taxation
regardless of its source or (4) a trust if (a) a court within the United States
is able to exercise primary supervision over the administration of the trust
and (b) one or more U.S. persons have the authority to control all substantial
decisions of the trust. The following discussion does not address any tax
consequences that apply specifically to nonresident aliens or foreign entities.
Treatment of the Trust and Preferred Securities for Federal Income Tax Purposes
The Trust will be treated as a "grantor trust" and not as an association
taxable as a corporation for federal income tax purposes. Thus, for federal
income tax purposes, each Holder will be treated as the beneficial owner of a
pro rata undivided interest in the Series C Junior Subordinated Notes and,
consequently, will be required to include in income the Holder's pro rata share
of the entire income from the Series C Junior Subordinated Notes. Each Holder
generally will determine its net income or loss with respect to the Trust in
accordance with its own method of accounting, although income arising from
original issue discount, if any, must be taken into account under the accrual
method of accounting even if the Holder otherwise would use the cash receipts
and disbursements method.
S-36
<PAGE>
Original Issue Discount
Under applicable income tax regulations, the Corporation believes that the
Series C Junior Subordinated Notes will not be treated as issued with original
issue discount. It should be noted that these regulations have not yet been
addressed in any rulings or other interpretations by the Internal Revenue
Service. Accordingly, it is possible that the Internal Revenue Service could
take a position contrary to the interpretations described herein. Should the
Corporation exercise its option to defer payments of interest, the Series C
Junior Subordinated Notes would at that time be treated as issued with original
issue discount, and all the stated interest payments on the Series C Junior
Subordinated Notes would thereafter be treated as original issue discount for
so long as they remained outstanding. As a result, all Holders would, in
effect, be required to accrue interest income even if such Holders are on a
cash method of accounting. Consequently, in the event that the payment of
interest is deferred, a Holder could be required to include original issue
discount in income on an economic accrual basis, notwithstanding that the
Corporation will not make any interest payments during such period on the
Series C Junior Subordinated Notes.
Because income on the Preferred Securities will constitute interest or
original issue discount, corporate Holders will not be entitled to a dividends-
received deduction with respect to any income recognized with respect to the
Preferred Securities.
Sale of Preferred Securities
Upon the sale, retirement (including redemption) or other taxable disposition
of all or part of a Preferred Security, a Holder thereof will recognize gain or
loss equal to the difference between the amount realized on such sale,
retirement or other disposition and such Holder's adjusted tax basis in the
Preferred Security or part thereof. If the Holder disposes of a Preferred
Security prior to the occurrence of an Extension Period, any portion of the
amount received that is attributable to accrued interest will be treated as
interest income to the Holder and will not be treated as part of the amount
realized for purposes of determining gain or loss on the disposition of the
Preferred Security. Any recognized gain or loss will be capital gain or loss,
and such capital gain or loss will be long-term if the holding period for the
Preferred Security is more than one year at the time of sale, retirement or
other disposition. In the case of a Holder that is an individual, estate or
trust, "net capital gain," i.e., the excess of net long-term capital gain over
net short-term capital loss, is generally subject to a reduced rate of federal
income tax. A Holder's adjusted tax basis in a Preferred Security acquired by
purchase will generally equal the cost of such Preferred Security to the
Holder, increased by the amount of any related accrued original issue discount
included in taxable income by the Holder and reduced by any prior payments on
the Series C Junior Subordinated Notes distributed with respect to the
Preferred Security. The redemption of only part of a Preferred Security will
require an allocation of the Holder's pro rata share of the adjusted issue
price of the related Series C Junior Subordinated Notes between the portion of
the Series C Junior Subordinated Notes redeemed and the portion retained by the
Holder in order to determine gain or loss.
Receipt of Series C Junior Subordinated Notes upon Liquidation of the Trust
As described under "Description of the Preferred Securities--Distribution of
Series C Junior Subordinated Notes upon Termination of Trust," Series C Junior
Subordinated Notes may be distributed to Holders in exchange for the Preferred
Securities and in liquidation of the Trust. Such a distribution would be
treated as a non-taxable event to each Holder, and each Holder would receive
S-37
<PAGE>
an aggregate tax basis in the Holder's Series C Junior Subordinated Notes equal
to the Holder's aggregate tax basis in its Preferred Securities. A Holder's
holding period with respect to the Series C Junior Subordinated Notes so
received in liquidation of the Trust would include the period for which the
Preferred Securities were held by such Holder.
If, however, the Trust is characterized for United States federal income tax
purposes as an association taxable as a corporation at the time of its
dissolution, the distribution of the Series C Junior Subordinated Notes would
constitute a taxable event to Holders of Preferred Securities, and a Holder's
holding period in Series C Junior Subordinated Notes would begin on the date
such Series C Junior Subordinated Notes were received.
Defeasance
The Series C Junior Subordinated Notes will be subject to Defeasance. See
"Description of the Junior Subordinated Notes--Defeasance and Covenant
Defeasance" in the accompanying Prospectus. Under current United States federal
income tax laws, Defeasance would be treated as an exchange of the relevant
Series C Junior Subordinated Notes in which holders of such Series C Junior
Subordinated Notes might recognize gain or loss. In addition, the amount,
timing and character of amounts that holders would be required thereafter to
include in income might be different from that which would be includible in the
absence of such Defeasance.
Information Reporting to Holders
Income on the Preferred Securities will be reported to Holders on Form 1099,
which form should be mailed to Holders of Preferred Securities by January 31
following each calendar year.
Backup Withholding
A Holder may be subject to "backup withholding" under certain circumstances.
Backup withholding applies to a Holder if the Holder, among other things, (1)
fails to furnish his social security number or other taxpayer identification
number ("TIN") to the payor responsible for backup withholding (for example,
the Holder's securities broker), (2) furnishes such payor an incorrect TIN, (3)
fails to provide such payor with a certified statement, signed under penalties
of perjury, that the TIN provided to the payor is correct and that the Holder
is not subject to backup withholding or (4) fails to report properly interest
and dividends on his tax return. Backup withholding, however, does not apply to
payments made to certain exempt recipients, such as corporations and tax-exempt
organizations. The backup withholding rate is 31% of "reportable payments,"
which generally will include distributions of interest and principal payments
on the Series C Junior Subordinated Notes and payment of the proceeds from the
disposition of Preferred Securities. Any amount withheld from a Holder under
the backup withholding rules will be allowed as a refund or a credit against
such Holder's United States federal income tax liability, provided the required
information is furnished to the Internal Revenue Service.
The federal income tax discussion set forth above may not be applicable to a
holder, depending upon a holder's particular situation, and therefore each
holder should consult his tax advisor with respect to the tax consequences of
the ownership and disposition of Preferred Securities, including the tax
consequences under state, local, foreign and other tax laws and the possible
effects of changes in federal or other tax law.
S-38
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
dated August 11, 1999 (the "Underwriting Agreement"), the Trust has agreed, and
the Corporation has agreed to cause the Trust, to sell to the Underwriters
named below, and the Underwriters, for whom Morgan Stanley & Co. Incorporated,
Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated,
PaineWebber Incorporated, Prudential Securities Incorporated and Salomon Smith
Barney Inc. are acting as representatives (the "Representatives"), have
severally agreed to purchase the number of Preferred Securities set forth
opposite their respective names below. In the Underwriting Agreement, the
Underwriters have agreed, subject to the terms and conditions set forth
therein, to purchase all of the Preferred Securities offered hereby if any of
the Preferred Securities are purchased.
<TABLE>
<CAPTION>
Number of
Name Preferred Securities
---- --------------------
<S> <C>
Morgan Stanley & Co. Incorporated.................. 1,331,675
Goldman, Sachs & Co. .............................. 1,331,665
Merrill Lynch, Pierce, Fenner & Smith
Incorporated ............................. 1,331,665
PaineWebber Incorporated .......................... 1,331,665
Prudential Securities Incorporated ................ 1,331,665
Salomon Smith Barney Inc. ......................... 1,331,665
ABN AMRO Incorporated.............................. 60,000
Bear, Stearns & Co. Inc............................ 60,000
J.C. Bradford & Co................................. 60,000
CIBC World Markets Corp............................ 60,000
Dain Rauscher Wessels,
a division of Dain Rauscher Incorporated........ 60,000
Deutsche Bank Securities Inc....................... 60,000
Donaldson, Lufkin & Jenrette Securities
Corporation....................................... 60,000
A.G. Edwards & Sons, Inc........................... 60,000
EVEREN Securities, Inc............................. 60,000
Legg Mason Wood Walker, Incorporated............... 60,000
SG Cowen Securities Corporation.................... 60,000
Wachovia Securities, Inc........................... 60,000
Warburg Dillon Read LLC............................ 60,000
Advest, Inc........................................ 30,000
Robert W. Baird & Co. Incorporated................. 30,000
Banc of America Securities LLC..................... 30,000
Banc One Capital Markets, Inc...................... 30,000
BB&T Capital Markets
A Division of Scott & Stringfellow.............. 30,000
Blaylock & Partners, L.P........................... 30,000
Crowell, Weedon & Co............................... 30,000
Davenport & Company LLC............................ 30,000
Doley Securities, Inc.............................. 30,000
Fahnestock & Co. Inc............................... 30,000
Ferris, Baker Watts, Incorporated.................. 30,000
Fifth Third Securities, Inc........................ 30,000
First Albany Corporation........................... 30,000
Fleet Securities, Inc.............................. 30,000
</TABLE>
S-39
<PAGE>
<TABLE>
<CAPTION>
Number of
Name Preferred Securities
---- --------------------
<S> <C>
Gibraltar Securities Co............................. 30,000
Gruntal & Co., L.L.C................................ 30,000
J.J.B. Hilliard, W.L. Lyons, Inc.................... 30,000
Janney Montgomery Scott Inc......................... 30,000
McDonald Investments Inc., A Keycorp Company........ 30,000
Mesirow Financial, Inc.............................. 30,000
Morgan Keegan & Company, Inc........................ 30,000
Muriel Siebert & Co., Inc........................... 30,000
Olde Discount Corporation........................... 30,000
Parker/Hunter Incorporated.......................... 30,000
Pershing/Division of Donaldson, Lufkin & Jenrette... 30,000
Pryor, McClendon, Counts & Co., Inc................. 30,000
Ragen MacKenzie Incorporated........................ 30,000
Raymond James & Associates, Inc..................... 30,000
The Robinson-Humphrey Company, LLC.................. 30,000
Roney & Co.......................................... 30,000
Charles Schwab & Co., Inc........................... 30,000
Southwest Securities, Inc........................... 30,000
Stephens Inc........................................ 30,000
Sterne, Agee & Leach, Inc........................... 30,000
Stifel, Nicolaus & Company, Incorporated............ 30,000
Sutro & Co. Incorporated............................ 30,000
TD Securities (USA) Inc............................. 30,000
Tucker Anthony Incorporated......................... 30,000
U.S. Bancorp Piper Jaffray Inc...................... 30,000
Utendahl Capital Partners, L.P...................... 30,000
Wedbush Morgan Securities........................... 30,000
----------
Total............................................. 10,000,000
==========
</TABLE>
The Underwriters have advised the Corporation and the Trust that they propose
to offer the Preferred Securities in part directly to the public at the price
to the public, as set forth on the cover page of this Prospectus Supplement,
and in part to certain securities dealers at such price less a concession not
in excess of $0.50 per Preferred Security. The Underwriters may allow, and such
dealers may reallow, a concession not in excess of $0.45 per Preferred Security
to certain other dealers. After the Preferred Securities are released for sale
to the public, the offering price and other selling terms may from time to time
be varied by the Underwriters named on the cover page hereof.
The Preferred Securities are expected to be approved for listing on the New
York Stock Exchange, subject to official notice of issuance. Trading of the
Preferred Securities on the New York Stock Exchange is expected to commence
within a 30-day period after the initial delivery of the Preferred Securities.
The Representatives have advised the Corporation and the Trust that they intend
to make a market in the Preferred Securities prior to the commencement of
trading on the New York Stock Exchange. The Representatives will have no
obligation to make a market in the Preferred Securities, however, and may cease
market making activities, if commenced, at any time.
Prior to this offering, there has been no public market for the Preferred
Securities. In order to meet one of the requirements for listing the Preferred
Securities on the New York Stock Exchange, the Underwriters will undertake to
sell lots of 100 or more Preferred Securities to a minimum of 400 beneficial
holders.
S-40
<PAGE>
In order to facilitate the offering of the Preferred Securities, the
Underwriters may engage in transactions that stabilize, maintain or otherwise
affect the price of the Preferred Securities. Specifically, the Underwriters
may over-allot in connection with this offering, creating short positions in
the securities for their own account. In addition, to cover over-allotments or
to stabilize the price of the Preferred Securities, the Underwriters may bid
for, and purchase, Preferred Securities in the open market. Finally, the
Underwriters may reclaim selling concessions allowed to an underwriter or
dealer for distributing Preferred Securities in this offering, if the
Underwriters repurchase previously distributed Preferred Securities in
transactions that cover syndicate short positions, in stabilization
transactions or otherwise. Any of these activities may stabilize or maintain
the market price of the Preferred Securities above independent market levels.
The Underwriters are not required to engage in these activities, and may end
any of these activities at any time.
The Corporation and the Trust have agreed, during the period beginning on the
date of the Underwriting Agreement and continuing to and including the date
fifteen days after the date thereof, not to sell, offer to sell, grant any
option for the sale of, or otherwise dispose of any Preferred Securities, any
security convertible into or exchangeable into or exercisable for Preferred
Securities or the Series C Junior Subordinated Notes or any debt securities
substantially similar to the Series C Junior Subordinated Notes or equity
securities substantially similar to the Preferred Securities (except for the
Series C Junior Subordinated Notes and the Preferred Securities issued pursuant
to the Underwriting Agreement), without the prior written consent of the
Representatives.
The Corporation estimates that its expenses in connection with this
offering, excluding underwriting discounts and commissions, will be
approximately $400,000.
The Corporation and the Trust have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act.
Certain of the Underwriters and their affiliates engage in transactions with,
and, from time to time, have performed services for, the Corporation and its
affiliates in the ordinary course of business.
VALIDITY OF THE SECURITIES
Richards, Layton & Finger, P.A., Wilmington, Delaware, special Delaware
counsel to the Corporation and the Trust, will pass upon certain matters of
Delaware law relating to the validity of the Preferred Securities on behalf of
the Corporation and the Trust. Dewey Ballantine LLP, New York, New York, will
pass upon the validity of the Series C Junior Subordinated Notes, the Guarantee
and certain related matters as well as certain matters relating to United
States federal income tax considerations on behalf of the Corporation. Sullivan
& Cromwell, New York, New York, will pass upon the validity of the Series C
Junior Subordinated Notes and the Guarantee for the Underwriters.
S-41
<PAGE>
PROSPECTUS
$1,000,000,000
Duke Capital Corporation
a subsidiary of Duke Energy Corporation
Senior Notes
Junior Subordinated Notes
----------------
Duke Capital Financing Trust III
Duke Capital Financing Trust IV
Duke Capital Financing Trust V
Trust Preferred Securities
Fully and unconditionally guaranteed, as described herein, by
Duke Capital Corporation
a subsidiary of Duke Energy Corporation
----------------
This Prospectus contains summaries of the general terms of these securities. We
will provide the specific terms of these securities in supplements to this
Prospectus. You should read this Prospectus and the supplements carefully
before you invest.
If we decide to list any of these securities on a national securities exchange
upon issuance, the supplements to this Prospectus will identify the exchange
and state when we expect trading to begin.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this Prospectus. Any representation to the contrary is
a criminal offense.
We may offer these securities through underwriters, agents or dealers or
directly to institutional investors. The supplements will provide the specific
terms of the plan of distribution. "Plan of Distribution" below also provides
more information on this topic.
The date of this Prospectus is February 10, 1999.
<PAGE>
WHERE TO FIND MORE INFORMATION
The Corporation and Duke Capital Financing Trust III, Duke Capital
Financing Trust IV and Duke Capital Financing Trust V (each, a "Trust") have
filed a registration statement on Form S-3 (the "Registration Statement") with
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933. This Prospectus is part of the Registration Statement, but the
Registration Statement also contains additional information and exhibits. As
used in this Prospectus, the term "Registration Statement" includes any
amendments and exhibits thereto.
The Corporation has also filed a registration statement on Form 10 (the
"Form 10") with the Commission for the registration of its common stock,
without par value, under the Securities Exchange Act of 1934. As a result, the
Corporation is subject to the informational requirements of such Act, and
files annual, quarterly and current reports, proxy statements and other
information with the Commission.
You may read and copy the Registration Statement, the Form 10 and the
reports and other information that the Corporation files with the Commission
at the Commission's public reference rooms at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You may also read and copy materials at 500 West
Madison Street, Suite 1400, Chicago, Ill. 60661 and at Seven World Trade
Center, Suite 1300, New York, N.Y. 10048. Copies of such materials can also be
obtained at prescribed rates from the public reference rooms of the Commission
at its principal office at 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the Commission's toll-free telephone number at 1-800-SEC-0330 if
you need further information about the operation of the Commission's public
reference rooms. The Corporation's filings with the Commission are also
available from the Commission's Web site at http://www.sec.gov.
The Commission allows the Corporation to "incorporate by reference" the
information in documents that it files with the Commission. This means that
the Corporation can disclose important information to you by referring you to
those documents. The information incorporated by reference is considered to be
part of this Prospectus and should be read with the same care. Later
information that the Corporation files with the Commission will automatically
update and supersede that information.
The following documents are incorporated in and made a part of this
Prospectus by reference:
. the Form 10;
. the Corporation's quarterly reports on Form 10-Q for the quarters ended
March 31, 1998, June 30, 1998 and September 30, 1998; and
. the Corporation's current reports on Form 8-K dated November 5, 1998,
December 1, 1998 and January 26, 1999.
Any future documents that the Corporation files with the Commission under
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 will
also be incorporated by reference into this Prospectus until the offering of
these securities has been completed.
You should rely only on the information contained or incorporated by
reference in this Prospectus. We have not authorized any other person to
provide you with different information. If anyone provides you with different
or inconsistent information, you should not rely on it. We are not making an
offer to sell these securities in any jurisdiction where the offer or sale is
not permitted.
2
<PAGE>
You should assume that the information appearing in this Prospectus is accurate
as of the date hereof only. Our business, financial condition, results of
operations and prospects may have changed since that date.
The Corporation will provide without charge to each person (including any
beneficial owner) to whom this Prospectus is delivered, upon written or oral
request, a copy of any documents incorporated by reference in this Prospectus
(other than the exhibits to such documents unless those exhibits are
specifically incorporated by reference). You should direct your request 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, 22,000-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.
[Graphic depicting delivery markets throughout the Mid-Atlantic, New England and
Midwest states]
The Corporation, through its wholly owned subsidiaries, PanEnergy and Texas
Eastern Corporation, entered into a stock purchase agreement with CMS Energy
Corporation ("CMS Energy") dated October 31, 1998, pursuant to which Panhandle
Eastern Pipe Line Company, Trunkline Gas Company and the storage properties
related to those systems (collectively, the "PEPL
4
<PAGE>
Companies"), along with Trunkline LNG Company, would be sold to CMS Energy. The
sales price of $2.2 billion involves a cash payment of $1.9 billion and
existing debt of Panhandle Eastern Pipe Line Company of approximately $300
million. While certain assets and liabilities will be retained, such as the
Houston office building, certain environmental, legal and tax liabilities, and
substantially all intercompany balances, management is of the opinion that
these assets and liabilities will not have a material adverse effect on the
consolidated results of operations or financial position of the Corporation.
The sale would result in an after-tax gain of approximately $700 million and is
contingent upon completion of due diligence and receipt of clearances under the
Hart-Scott-Rodino Act. The closing of the transaction is expected to take place
during the first quarter of 1999.
Total assets of the PEPL Companies and Trunkline LNG Company were $1.3
billion at September 30, 1998. Combined operating results of the PEPL Companies
and Trunkline LNG Company, excluding intercompany transactions, were as
follows:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------
1998 1997
---------- ----------
(Dollars in Millions)
<S> <C> <C>
Operating Revenues................................... $ 323.1 $ 354.7
Operating Expenses................................... 204.1 221.5
---------- ----------
Operating Income................................... 119.0 133.2
Other Income, Net.................................... 10.2 11.4
---------- ----------
EBIT............................................... $ 129.2 $ 144.6
</TABLE>
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.
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.
5
<PAGE>
The scope of the activities of Energy Services is shown below.
[GRAPHICS DEPICTING THE ACTIVITIES OF ENERGY SERVICES]
As part of its strategic plan to expand its nonregulated business, the
Corporation, through its wholly owned subsidiary, Duke Energy Field Services
Inc., agreed on November 20, 1998 to purchase the natural gas gathering,
processing, fractionation and natural gas liquids ("NGL") pipeline business of
UPFuels, a unit of Union Pacific Resources ("UPR"), as well as UPR's natural
gas and NGL marketing activities for $1.35 billion. The Corporation believes
that the assets being acquired, combined with its existing assets, would make
the Corporation the nation's largest producer of NGLs. The purchase also would
make the Corporation one of the largest gatherers of natural gas and one of the
largest marketers of natural gas and NGLs in the United States. Under the
purchase agreement, much of UPR's production in the United States would be
gathered and processed by the Corporation for a minimum of 10 years and UPR
would dedicate for five years most of its natural gas and NGL production to the
Corporation for marketing. The purchase is contingent on receiving clearances
under the Hart-Scott-Rodino Act. The transaction is expected to close at the
end of the first quarter of 1999.
6
<PAGE>
According to UPR, EBITD of the UPFuels assets was approximately $156 million
for the fiscal year ended December 31, 1997 and approximately $124 million for
the nine months ended September 30, 1998.
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.
[GRAPHIC DEPICTING THE ACTIVITIES OF CRESCENT RESOURCES AND DUKENET]
The principal executive offices of the Corporation are located at 422 South
Church Street, Charlotte, North Carolina 28202, telephone (704) 594-6200.
7
<PAGE>
The following financial information is qualified in its entirety by the
financial statements included in the documents incorporated by reference in
this Prospectus. See "Where to Find More Information."
Selected Consolidated Financial Information
(Millions)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
----------------- ---------------------------
1998 1997(1) 1997(1) 1996(1) 1995(1)
-------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Income Statement Data
Operating Revenues............... $9,868.5 $8,406.8 $11,914.8 $7,816.1 $5,187.7
Operating Expenses............... 9,138.9 7,788.2 11,079.0 6,946.8 4,393.9
-------- -------- --------- -------- --------
Operating Income................ 729.6 618.6 835.8 869.3 793.8
Other Income, Net................ 71.8 37.3 36.7 20.1 18.0
-------- -------- --------- -------- --------
Earnings Before Interest and
Taxes........................... 801.4 655.9 872.5 889.4 811.8
Interest Expense................. 180.3 158.2 214.2 232.1 239.5
Income Before Extraordinary
Item............................ 371.1 285.3 380.3 399.0 348.1
Net Income....................... 363.1 285.3 380.3 382.3 348.1
</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> <C> <C>
Balance Sheet Data
Property, Plant and Equipment,
Net .......................... $ 7,013.0 $ 5,962.5 $ 6,065.2 $5,800.7 $5,429.1
Total Assets................... 13,082.9 10,907.2 11,096.8 9,751.7 8,225.8
Short-term Debt ............... 416.9 243.4 137.7 359.1 150.0
Long-term Debt, including
current portion............... 3,052.6 2,538.0 2,941.3 2,203.3 2,401.9
</TABLE>
Financial Ratios
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
------------------ ---------------------------------------
1998 1997(1) 1997(1) 1996(1) 1995(1) 1994(1) 1993(1)
------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to
Fixed Charges.......... 4.0 3.8 3.7 3.6 3.2 2.7 2.1
</TABLE>
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.
- --------
(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, 1993.
8
<PAGE>
THE TRUSTS
Each Trust is a statutory business trust formed under Delaware law through
the filing of a certificate of trust with the Delaware Secretary of State. That
filing occurred on January 29, 1998 with respect to Duke Capital Financing
Trust III and on September 25, 1998 with respect to Duke Capital Financing
Trust IV and Duke Capital Financing Trust V.
Each Trust's business is defined in a trust agreement executed by the
Corporation, as depositor, and Chase Manhattan Bank Delaware. 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 is a part (the "Trust Agreement"). Each Trust Agreement
will be qualified as an indenture under the Trust Indenture Act of 1939.
Each Trust exists for the exclusive purposes of (1) issuing its preferred
securities (the "Preferred Securities") and its common securities (the "Common
Securities") representing undivided beneficial interests in the assets of that
Trust and (2) investing the gross proceeds of the Preferred Securities and the
Common Securities in a related series of the Corporation's Junior Subordinated
Notes (the "Junior Subordinated Notes"). Each Trust may engage in only those
other activities as are necessary, appropriate, convenient or incidental to
these purposes. The Preferred Securities and the Common Securities together are
sometimes called the "Trust Securities" in this Prospectus.
Each Trust's business and affairs will be conducted by its trustees. The
Corporation, as the holder of the Common Securities, will appoint the trustees
of each Trust. The trustee of each Trust will consist of: 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 that
Trust for purposes of compliance with the provisions of the Trust Indenture Act
of 1939.
Reference is made to the Prospectus Supplement relating to the Preferred
Securities of a given Trust for further information concerning that Trust.
No separate financial statements of any Trust are included in this
Prospectus. 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 Securities
Exchange Act of 1934 with the Commission.
The principal place of business of each Trust will be c/o Duke Capital
Corporation, 422 South Church Street, Charlotte, North Carolina 28202,
telephone (704) 594-6200.
9
<PAGE>
USE OF PROCEEDS
Each Trust will invest the proceeds that it receives from the sale of the
Preferred Securities in Junior Subordinated Notes. Unless the applicable
Prospectus Supplement states otherwise, the Corporation will use the net
proceeds that it receives from such investment and any proceeds that it
receives from the sale of its senior notes (the "Senior Notes") or other sales
of the Junior Subordinated Notes for general corporate purposes, including
capital expenditures, working capital, debt repayments and advances to
affiliates.
10
<PAGE>
DESCRIPTION OF THE SENIOR NOTES
A description of the terms of the Senior Notes is set forth below. This
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 supplemented from time to time (the "Senior
Note Indenture").
The Corporation may issue series of Senior Notes from time to time by
entering into supplemental indentures with the Senior Indenture Trustee. The
Corporation may also issue series of Senior Notes from time to time pursuant to
resolutions of the Corporation's Board of Directors or of a duly authorized
committee thereof.
The Senior Note Indenture, dated as of April 1, 1998, and the form of
supplemental indenture to the Senior Note Indenture are exhibits to the
Registration Statement of which this Prospectus is a part. The terms of each
series of Senior Notes will include those stated in the Senior Note Indenture
for that series and those made a part of the Senior Note Indenture by reference
to the Trust Indenture Act of 1939.
General
The Corporation will issue Senior Notes under the Senior Note Indenture as
one or more series of unsecured senior debt securities. The Senior Notes will
rank equal in priority 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 the Corporation may issue. The Senior Notes of a series need
not be issued at the same time, 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 subsidiary's liquidation
or recapitalization will be subject to the prior claims of the subsidiary's
creditors.
Reference is made to the Prospectus Supplement for a particular series of
Senior Notes for the following terms of that series:
. the title of the series;
. any limit on the aggregate principal amount of the Senior Notes of the
series;
. the date or dates on which the principal of any of such Senior Notes will
be payable or the method for determining such date or dates, 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;
. the rate or rates at which any of such Senior Notes will bear interest,
if any, or the method for determining such rate or rates, and the date or
dates from which any such interest will accrue;
11
<PAGE>
. 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;
. if applicable, whether the Corporation may extend the interest payment
periods and, if so, the terms of any such extension;
. the place or places where principal 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;
. 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 and the terms and
conditions on which any of such Senior Notes may be redeemed or purchased
pursuant to such obligation;
. the terms and conditions, if any, on which the Corporation may at its
option redeem any of such Senior Notes;
. if applicable, the fact that certain terms of the Senior Note Indenture
described below under "Defeasance and Covenant Defeasance" will not apply
to any of such Senior Notes;
. the currency, currencies or currency units in which principal 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 of
those amounts in U.S. dollars for any purpose;
. if the principal or any premium or interest on any of such Senior Notes
is payable, at the election of the Corporation or the holder, 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 those payments will be made, the terms and conditions upon
which the election is to be made and the amount so payable (or the manner
of determining that amount);
. the portion of the principal amount of any of such Senior Notes which
will be payable upon declaration of acceleration of maturity, if other
than the entire principal amount;
. whether any such Senior Notes will be issuable as global securities
("Global Securities") and, if so, the depositary and any provisions for
the transfer or exchange of any such Global Securities, if different from
those described below under "--Global Securities";
. any addition to, deletion from or change in Events of Default or
covenants with respect to any of such Senior Notes;
. any index or formula for determining the amount of principal or any
premium or interest on any of such Senior Notes and the manner of
determining any such amounts;
. if the principal amount payable on the maturity date of any of such
Senior Notes will not be determinable on any one or more dates prior to
the maturity date, the amount which will be deemed to be such principal
amount as of any such date for any purpose, including the principal
amount which will be due and payable upon any maturity other than the
maturity date (or the manner of determining any such amount); and
. any other terms of the Senior Notes.
12
<PAGE>
Unless the applicable Prospectus Supplement states otherwise, the
Corporation will issue the Senior Notes only in fully registered form, without
coupons, and there will be no service charge for any registration of transfer
or exchange of the Senior Notes. The Corporation may, however, require payment
to cover any tax or other governmental charge payable in connection with such
registration of transfer or exchange.
The Corporation may offer and sell Senior Notes, including Original Issue
Discount Senior Notes, at a substantial discount below their principal amount.
The applicable Prospectus Supplement will describe the special United States
federal income tax and other considerations, if any, applicable thereto. In
addition, the applicable Prospectus Supplement may describe 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.
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 may be represented in whole or
in part by one or more Global Securities deposited with or on behalf of one or
more depositaries.
The applicable Prospectus Supplement will describe the terms of any
depositary arrangement. The Corporation anticipates that the following
provisions will apply to all depositary arrangements for Senior Notes
represented by Global Securities.
Unless the applicable Prospectus Supplement states otherwise, Senior Notes
which are to be represented by a Global Security deposited with or on behalf of
a depositary will be represented by a Global Security registered in the name of
that 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.
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
13
<PAGE>
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 registrar and transfer agent 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
Securities Exchange Act of 1934 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 (unless not applicable to the particular
series or unless modified or deleted in a supplemental indenture as stated in
the applicable Prospectus Supplement):
14
<PAGE>
. failure to pay principal of or any premium on any Senior Note of that
series when due;
. 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 will be the date on which the Corporation is
required to make payment following any deferral of interest payments by
the Corporation under the terms of such Senior Notes;
. 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;
. failure to perform any covenant of the Corporation in the Senior Note
Indenture (other than a covenant that is solely for the benefit of other
series), continued for 90 days after the Senior Indenture Trustee or the
holders of at least 33% in principal amount of the outstanding Senior
Notes of that series give written notice of the default (unless the
Senior Indenture Trustee or 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 notice of
default extend that time period) (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 the Corporation has
initiated and is diligently pursuing corrective action);
. certain events in bankruptcy, insolvency or reorganization of the
Corporation; and
. any other Event of Default 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 of
all Senior Notes of that series (or, if any Senior Notes of that series are
Original Issue Discount Senior Notes, the portion of the principal amount
specified in the terms of the series). However, that Event of Default will be
deemed waived at any time after the declaration of acceleration but before a
judgment or decree for payment of the money due has been obtained if:
. the Corporation has paid or deposited with the Senior Indenture Trustee
all overdue interest, the principal and any premium due otherwise than by
such declaration of acceleration and interest thereon, and any interest
on overdue interest (to the extent permitted by applicable law), in each
case with respect to the Senior Notes of such series, and all amounts due
to the Senior Indenture Trustee under the Senior Note Indenture; and
. all Events of Default with respect to that series (other than the
nonpayment of the principal which became due solely by such declaration
of acceleration) have been cured or waived.
The Prospectus Supplement relating to a series of Original Issue Discount
Senior Notes will include the particular provisions relating to acceleration of
a portion of the principal amount of those Senior Notes upon the occurrence and
continuance of an Event of Default.
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, the Senior Indenture Trustee will be under no obligation to exercise
any of its rights or powers under the Senior Note Indenture at the
15
<PAGE>
request or direction of any of the holders unless those holders have offered
reasonable indemnity against the costs, expenses and liabilities which the
Senior Indenture Trustee might incur as a result. Subject to such provisions
for indemnification and to 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 the payment of principal or interest) with respect to that
series if the Senior Indenture Trustee 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 a
proceeding with respect to the Senior Note Indenture or for any remedy under
the Senior Note Indenture unless:
. that 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;
. the holders of a majority in principal amount of the outstanding Senior
Notes of that series have made written request to institute the
proceeding;
. such holder or holders have offered reasonable indemnity to the Senior
Indenture Trustee;
. the Senior Indenture Trustee has failed to institute the proceeding for
60 days after receipt of the notice and offer of indemnity; 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 the written request.
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 that Senior Note on
its maturity date (or, in the case of redemption, the date of redemption) and
to institute suit for the enforcement of any such payment.
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 the certificate, the Corporation is not in default under
the Senior Note Indenture or, if there has been a default, specifying the
default and its status.
Registration and Transfer
If Senior Notes of a series (or series and tenor) are to be redeemed, the
Corporation will not be required to:
. issue, register the transfer of, or exchange any Senior Notes of that
series (or series and tenor) during the 15 days immediately preceding the
date notice is mailed identifying the Senior Notes that are called for
redemption; or
. register the transfer of or exchange any Senior Note selected for
redemption, in whole or in part, except the unredeemed portion of a
Senior Note being redeemed in part.
16
<PAGE>
Denominations
Senior Notes will be issuable in denominations of $1,000 and any integral
multiples of $1,000, unless the applicable Prospectus Supplement states
otherwise.
Payment and Paying Agent
Principal of Senior Notes will be paid only against surrender of the Senior
Notes to the paying agent. Unless the applicable Prospectus Supplement states
otherwise, interest on Senior Notes will be payable, subject to surrender if
applicable, at the office of the paying agent or, at the option of the
Corporation, (1) by wire transfer to an account at a banking institution in the
United States that the person entitled to the interest designates in writing to
the Senior Indenture Trustee at least 16 days prior to the date of payment or
(2) by check mailed to the address of the person entitled to the interest as
such address appears in the security register for such Senior Notes.
Unless the applicable Prospectus Supplement states otherwise, the Senior
Indenture Trustee will act as paying agent for 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. The Corporation may, however,
designate additional paying agents, rescind the designation of any paying
agents or approve a change in the office through which any paying agent acts.
All moneys that the Corporation has paid to a paying agent for payment of
principal of or interest on Senior Notes which remain unclaimed at the end of
two years after such principal or interest has become due and payable will be
repaid to the Corporation at the Corporation's request. Holders will thereafter
look only to the Corporation for such payments.
Modification; Waiver
The Corporation and the Senior Indenture Trustee may, with certain
exceptions, amend or modify the Senior Note Indenture with the consent of the
holders of a majority in aggregate principal amount of the outstanding Senior
Notes of all series of Senior Notes affected by the amendment or modification
(voting as one class). No amendment or modification may, however, without the
consent of the holder of each outstanding Senior Note affected thereby:
. change the stated maturity of the principal of, or any installment of
principal of or interest on, any Senior Note;
. reduce the principal amount of, the rate of interest on, or any premium
payable upon the redemption of any Senior Note;
. reduce the amount of principal of any Senior Note due and payable upon
acceleration of the maturity thereof;
. change the currency of payment of principal of, or any premium or
interest on, any Senior Note;
. impair the right to institute suit for the enforcement of any such
payment on any Senior Note on or after the stated maturity (or date of
redemption);
17
<PAGE>
. 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
. with certain exceptions, modify the foregoing provisions or the sections
of the Senior Note Indenture governing waiver of certain covenants and
past defaults.
In addition, the Corporation and the Senior Indenture Trustee may execute
supplemental indentures to create new series of Senior Notes and for certain
other purposes, without the consent of any holders of Senior Notes.
The holders of a majority in aggregate principal amount of the outstanding
Senior Notes of any series may waive, for that series, the Corporation's
compliance with certain restrictive provisions of the Senior Note Indenture.
The holders of 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
that default for 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 a default
with respect to a covenant or provision which cannot be amended or modified
without the consent of the holder of each outstanding Senior Note affected.
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,
however, 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 the 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, and will
not 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
18
<PAGE>
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 (1) 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;
(2) 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 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
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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; (3) 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;
(4) 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
(a) is secured by a mortgage on all or a portion of the property of such
Person, (b) 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 (c) prohibits secured indebtedness from being incurred
by such Person; (5) 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;
(6) 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
liquefied gas and synthetic gas); (7) 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 of the
Corporation other than theretofore unimproved real property; (8) 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; (9) 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 (1) through (8) 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
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improvements thereon or additions or accessions thereto); or (10) any other
mortgage, lien, pledge, security interest or other encumbrance not excepted by
the foregoing clauses (1) through (9); 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 (10) 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 these
meanings: "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, unless the terms of the particular
series of Senior Notes provides otherwise, that the Corporation may cause
itself to be:
. discharged from its obligations (with certain exceptions) with respect to
any Senior Notes or series of Senior Notes ("Defeasance"); and
. released from its obligations under certain covenants especially
established with respect to any Senior Notes or series of Senior Notes
and from the obligations described above, if applicable, under "Negative
Pledge" with respect to any such Senior Notes ("Covenant Defeasance"),
in each case on and after the date the Corporation satisfies certain conditions
in the Senior Note Indenture. Those conditions include the irrevocable deposit
with the Senior Indenture Trustee, in trust, of money and/or Government
Obligations (as defined in the Senior Note Indenture), which through the
scheduled payment of principal and interest thereon would provide sufficient
moneys to pay the principal of and any premium and interest on those Senior
Notes on the maturity dates of such payments or upon redemption.
The Senior Note Indenture permits Defeasance with respect to any Senior
Notes of a series even if a prior Covenant Defeasance has occurred with respect
to Senior Notes of that series. Following a Defeasance, payment of the Senior
Notes defeased may not be accelerated because of an Event of Default. Following
a Covenant Defeasance, payment of Senior Notes may not be accelerated by
reference to the covenants noted in the definition of Covenant Defeasance
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
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on such Senior Notes, since the required deposit in the defeasance trust would
be based upon scheduled cash flows rather than market value, which would vary
depending upon interest rates and other factors.
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, the amount, timing and character of amounts that holders
would be required thereafter 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 United States federal income tax laws.
Under current United States federal income tax laws, 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, which is the Senior Indenture Trustee, also serves
as the Trustee under the Subordinated Note Indenture of the Corporation and as
Property Trustee and Guarantee Trustee with respect to 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 the
internal laws of the State of New York.
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DESCRIPTION OF THE JUNIOR SUBORDINATED NOTES
A description of the terms of the Junior Subordinated Notes is set forth
below. This 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 supplemented from time to
time (the "Subordinated Note Indenture").
The Corporation may issue series of Subordinated Notes (including series of
Junior Subordinated Notes) from time to time by entering into supplemental
indentures with the Subordinated Indenture Trustee. The Corporation may also
issue series of Subordinated Notes (including series of Junior Subordinated
Notes) from time to time pursuant to resolutions of the Corporation's Board of
Directors or of a duly authorized committee thereof.
The Subordinated Note Indenture, dated as of April 1, 1998, and the form of
supplemental indenture to the Subordinated Note Indenture are exhibits to the
Registration Statement of which this Prospectus is a part. The terms of each
series of Junior Subordinated Notes will include those stated in the
Subordinated Note Indenture for that series and those made a part of the
Subordinated Note Indenture by reference to the Trust Indenture Act of 1939.
General
The Corporation will issue Junior Subordinated Notes under the Subordinated
Note Indenture as one or more series of unsecured subordinated debt securities
(all such series collectively, the "Junior Subordinated Notes" and all series
of Subordinated Notes collectively, the "Subordinated Notes").
The Subordinated Note Indenture does not limit the aggregate principal
amount of Subordinated Notes (including Junior Subordinated Notes) that the
Corporation may issue.
Reference is made to the Prospectus Supplement for a particular series of
Junior Subordinated Notes for the following terms of that series:
. the title of the series;
. any limit on the aggregate principal amount of the Junior Subordinated
Notes of the series;
. the date or dates on which the principal of such Junior Subordinated
Notes will be payable or the method for determining such date or dates,
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;
. the rate or rates at which such Junior Subordinated Notes will bear
interest, if any, or the method for determining the rate or rates, and
the date or dates from which any such interest will accrue;
. the interest payment dates on which any such interest will be payable and
the regular record date, if any, for any interest payable on any interest
payment date;
. if applicable, whether the Corporation may extend the interest payment
periods and, if so, the terms of any such extension;
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. the place or places where principal 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;
. 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 and the terms and
conditions on which such Junior Subordinated Notes may be redeemed or
purchased pursuant to such obligation;
. the terms and conditions, if any, on which the Corporation may at its
option redeem such Junior Subordinated Notes;
. if applicable, the fact that certain terms of the Subordinated Note
Indenture described below under "--Defeasance and Covenant Defeasance"
will not apply to such Junior Subordinated Notes;
. the currency, currencies or currency units in which principal and any
premium and interest on such Junior Subordinated Notes will be payable,
if other than U.S. dollars, and the manner of determining the equivalent
of those amounts in U.S. dollars for any purpose;
. if the principal or any premium or interest on such Junior Subordinated
Notes is payable, at the election of the Corporation or the holder, 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 those payments will be made, the
terms and conditions upon which the election is to be made and the amount
so payable (or the manner of determining that amount);
. the portion of the principal amount of such Junior Subordinated Notes
which will be payable upon declaration of acceleration of maturity, if
other than the entire principal amount;
. whether any such Junior Subordinated Notes will be issuable as global
securities ("Global Securities") and, if so, the depositary and any
provisions for the transfer or exchange of the Global Securities, if
different from those described below under "--Global Securities";
. any addition to, deletion from or change in Events of Default or
covenants with respect to such Junior Subordinated Notes;
. any index or formula for determining the amount of principal or any
premium or interest on such Junior Subordinated Notes and the manner of
determining those amounts;
. if the principal amount payable on the maturity date of such Junior
Subordinated Notes will not be determinable on any one or more dates
prior to the maturity date, the amount which will be deemed to be the
principal amount as of any such date for any purpose, including the
principal amount which will be due and payable upon any maturity other
than the maturity date (or the manner of determining any such amount);
and
. any other terms of the Junior Subordinated Notes.
Unless the applicable Prospectus Supplement states otherwise, the Junior
Subordinated Notes will be issued only in fully registered form, without
coupons, and there will be no service charge for any registration of transfer
or exchange of the Junior Subordinated Notes. The Corporation may, however,
require payment to cover any tax or other governmental charge payable in
connection with such registration of transfer or exchange.
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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
Preferred Securities of that Trust.
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 of the Corporation. In the event, subject to certain
exceptions, (1) 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 (2) that (a) a default (beyond any grace period) has occurred
and is continuing with respect to the payment of principal, interest or any
other monetary amounts due and payable on any Senior Indebtedness or (b) the
maturity of any Senior Indebtedness has been accelerated because of a default
with respect to such Senior Indebtedness, then the holders of all Senior
Indebtedness will be entitled to receive payment, in the case of (1) above, of
all amounts due or to become due upon all Senior Indebtedness and, in the case
of (2) above, of all amounts due on such Senior Indebtedness, or provision will
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: (1) 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, (2) all indebtedness of others of the
kinds described in the preceding clause (1) 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 (3) all renewals,
extensions or refundings of indebtedness of the kinds described in either of
the preceding clauses (1) and (2), 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 equal in right of payment with such
Subordinated Notes. Such Senior Indebtedness will continue to be Senior
Indebtedness and be entitled to the benefits of the subordination provisions 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
subsidiary's liquidation or recapitalization will be subject to the prior
claims of the subsidiary's creditors.
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Certain future series of Subordinated Notes may rank senior to series of
Junior Subordinated Notes and hence would constitute Senior Indebtedness with
respect to those series.
The Subordinated Note Indenture does not limit the amount of Senior
Indebtedness that the Corporation may issue. As of September 30, 1998, Senior
Indebtedness of the Corporation totaled approximately $1,728,797,000.
Global Securities
Some or all of the Subordinated Notes of a series may be represented in
whole or in part by one or more Global Securities deposited with or on behalf
of one or more depositaries.
The applicable Prospectus Supplement will describe the terms of any
depositary arrangement. The Corporation anticipates that the following
provisions will apply to all depositary arrangements for Subordinated Notes
represented by Global Securities.
Unless the applicable Prospectus Supplement states otherwise, Subordinated
Notes which are to be represented by a Global Security deposited with or on
behalf of a depositary will be represented by a Global Security registered in
the name of that 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
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Security representing such Subordinated Notes. None of the Corporation, the
Subordinated Indenture Trustee, any paying agent or the registrar and transfer
agent for such Subordinated Notes will have any responsibility or liability for
any aspect of the records relating to, or payments made on account of,
beneficial ownership interests in a Global Security for such Subordinated Notes
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Corporation expects that a depositary for Subordinated Notes of a
series, upon receipt of any payment of principal or any premium or interest in
respect of a Global Security, will credit immediately participants' accounts
with payment in amounts proportionate to their respective beneficial interests
in the principal amount of such Global Security as shown on the records of such
depositary. The Corporation also expects that payments by participants to
owners of beneficial interests in such Global Security held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers
registered in "street name," and will be the responsibility of such
participants.
A Global Security may not be transferred in whole or in part except by the
depositary for such Global Security to a nominee of such depositary or by a
nominee of such depositary to such depositary or another nominee of such
depositary or by such depositary or any such nominee to a successor depositary
or a nominee of such successor depositary. If a depositary for Subordinated
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 Securities Exchange Act of 1934 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 Events of Default under the Subordinated Note
Indenture with respect to each series of Junior Subordinated Notes (unless not
applicable to the particular series or unless deleted or modified in a
supplemental indenture as stated in the applicable Prospectus Supplement):
. failure to pay principal of or any premium on any Junior Subordinated
Note of that series when due;
. failure to pay any interest on any Junior Subordinated Note of that
series when due, continued for 60 days; provided, however, that the date
on which such payment is due and payable will be the date on which the
Corporation is required to make payment following any deferral of
interest payments by the Corporation under the terms of such Junior
Subordinated Notes;
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. failure to perform any covenant of the Corporation in the Subordinated
Note Indenture (other than a covenant that is solely for the benefit of
other series), continued for 90 days after the Subordinated Indenture
Trustee or the holders of at least 33% in principal amount of the
outstanding Junior Subordinated Notes of that series give written notice
of the default (unless the Subordinated Indenture Trustee or the
Subordinated Indenture Trustee and the holders of a principal amount of
Junior Subordinated Notes of that series not less than the principal
amount of Junior Subordinated Notes the holders of which had given notice
of default extend that time period) (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 the Corporation
has initiated and is diligently pursuing corrective action); and
. certain events in bankruptcy, insolvency or reorganization of the
Corporation.
If an Event of Default with respect to 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 that 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 that
series. However, that Event of Default will be deemed waived at any time after
the declaration of acceleration but before a judgment or decree for payment of
the money due has been obtained if:
. the Corporation has paid or deposited with the Subordinated Indenture
Trustee all overdue interest, the principal of and any premium due
otherwise than by such declaration of acceleration and interest thereon,
and any interest on overdue interest (to the extent permitted by
applicable law), in each case with respect to the Junior Subordinated
Notes of such series, and all amounts due to the Subordinated Indenture
Trustee under the Subordinated Note Indenture; and
. all Events of Default with respect to that 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 that series.
Subject to the provisions of the Subordinated Note Indenture relating to the
duties of the Subordinated Indenture Trustee in case of a continuing Event of
Default, 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 those holders have
offered reasonable indemnity against the costs, expenses and liabilities which
the Subordinated Indenture Trustee might incur as a result. Subject to such
provisions for indemnification and to 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
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exercising any trust or power conferred on the Subordinated Indenture Trustee
with respect to the Subordinated Notes of that series. 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 that series if the Subordinated Indenture Trustee 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 a proceeding with respect to the Subordinated Note Indenture or for
any remedy under the Subordinated Note Indenture unless:
. that holder has previously given the Subordinated Indenture Trustee
written notice of a continuing Event of Default with respect to the
Junior Subordinated Notes of that series;
. the holders of a majority in principal amount of the outstanding Junior
Subordinated Notes of that series have made written request to institute
the proceeding;
. such holder or holders have offered reasonable indemnity to the
Subordinated Indenture Trustee;
. the Subordinated Indenture Trustee has failed to institute the proceeding
for 60 days after receipt of the notice and offer of indemnity; and
. the Subordinated Indenture Trustee has not received from the holders of a
majority in principal amount of the outstanding Junior Subordinated Notes
of that series a direction inconsistent with the written request.
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
that Junior Subordinated Note on its maturity date (or, in the case of
redemption, the date of redemption) 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 the certificate, the Corporation is not in
default under the Subordinated Note Indenture or, if there has been a default,
specifying the default and its status.
Registration and Transfer
If Junior Subordinated Notes of a series are to be redeemed, the Corporation
will not be required to:
. issue, register the transfer of, or exchange any Junior Subordinated
Notes of that series during the 15 days immediately preceding the date
notice is mailed identifying the Junior Subordinated Notes that are
called for redemption; or
. register the transfer of or exchange any Junior Subordinated Note
selected for redemption, in whole or in part, except the unredeemed
portion of any Junior Subordinated Note being redeemed in part.
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Denominations
Junior Subordinated Notes will be issuable in denominations of $1,000 and
any integral multiples of $1,000, unless the applicable Prospectus Supplement
states otherwise.
Payment and Paying Agent
Principal of Junior Subordinated Notes will be paid only against surrender
of the Junior Subordinated Notes to the paying agent. Unless the applicable
Prospectus Supplement states otherwise, interest on Junior Subordinated Notes
will be payable, subject to surrender if applicable, at the office of the
paying agent or, at the option of the Corporation, (1) by wire transfer to an
account at a banking institution in the United States that the person entitled
to the interest designates in writing to the Subordinated Indenture Trustee at
least 16 days prior to the date of payment or (2) by check mailed to the
address of the person entitled to the interest as such address appears in the
security register for such Junior Subordinated Notes.
Unless the applicable Prospectus Supplement states otherwise, the
Subordinated Indenture Trustee will act as paying agent for 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. The Corporation may, however, designate additional paying
agents, rescind the designation of any paying agents or approve a change in the
office through which any paying agent acts.
All moneys that the Corporation has paid to a paying agent for payment of
principal of or interest on Junior Subordinated Notes which remain unclaimed at
the end of two years after such principal or interest has become due and
payable will be repaid to the Corporation at the Corporation's request. Holders
will thereafter look only to the Corporation for such payments.
Modification; Waiver
The Corporation and the Subordinated Indenture Trustee may, with certain
exceptions, amend or modify the Subordinated Note Indenture with the consent of
the holders of a majority in aggregate principal amount of the outstanding
Subordinated Notes of all series of Subordinated Notes affected by the
amendment or modification (voting as one class). No amendment or modification
may, however, without the consent of the holder of each outstanding
Subordinated Note affected thereby:
. change the stated maturity of the principal of, or any installment of
principal of or interest on, any Subordinated Note;
. reduce the principal amount of, the rate of interest on, or any premium
payable upon the redemption of any Subordinated Note;
. reduce the amount of principal of any Subordinated Note due and payable
upon acceleration of the maturity thereof;
. change the currency of payment of principal of, or any premium or
interest on, any Subordinated Note;
. impair the right to institute suit for the enforcement of any such
payment on any Subordinated Note on or after the stated maturity (or date
of redemption);
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. 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
. with certain exceptions, modify the foregoing 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 supplemental indentures to create new series of Subordinated Notes and
for certain other purposes, without the consent of any holders of Subordinated
Notes.
The holders of a majority in aggregate principal amount of the outstanding
Subordinated Notes of any series may waive, for that series, the Corporation's
compliance with certain restrictive provisions of the Subordinated Note
Indenture. The holders of 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 that default for 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 a default with respect to 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.
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.
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, however, 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 an officers' certificate and an opinion of counsel to the Subordinated
Indenture Trustee stating that all conditions precedent in the Subordinated
Note Indenture relating to the 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 the
Subordinated Note 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, unless the terms of the particular
series of Subordinated Notes provides otherwise, that the Corporation may cause
itself to be:
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. discharged from its obligations (with certain exceptions) with respect to
any Subordinated Notes or series of Subordinated Notes ("Defeasance");
and
. released from its obligations under certain covenants especially
established with respect to such series ("Covenant Defeasance"),
in each case on and after the date the Corporation satisfies certain conditions
in the Subordinated Note Indenture. Those conditions include the irrevocable
deposit with the Subordinated Indenture Trustee, in trust, of money and/or
Government Obligations (as defined in the Subordinated Note Indenture) which
through the scheduled payment of principal and interest thereon would provide
sufficient moneys to pay the principal of and any premium and interest on those
Subordinated Notes on the maturity dates of those payments or upon redemption.
The Subordinated Note Indenture permits Defeasance with respect to any
Subordinated Notes of a series even if a prior Covenant Defeasance has occurred
with respect to Subordinated Notes of that series. Following a Defeasance,
payment of the Subordinated Notes defeased may not be accelerated because of an
Event of Default. Following a Covenant Defeasance, payment of Subordinated
Notes may not be accelerated by reference to the covenants noted in the
definition of Covenant Defeasance 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 since the required deposit in
the defeasance trust would be based upon scheduled cash flows rather than
market value, which would vary depending upon interest rates and other factors.
Under current United States federal income tax laws, 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, the amount, timing and character of
amounts that holders would be required thereafter 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 United States federal income tax laws.
Under current United States federal income tax laws, 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 Subordinated Indenture Trustee
The Chase Manhattan Bank, which is the Subordinated Indenture Trustee, also
serves 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 the internal laws of the State
of New York.
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DESCRIPTION OF THE PREFERRED SECURITIES
Each Trust may issue only one series of Preferred Securities. The Trust
Agreement of each Trust will authorize the Administrative Trustees to issue the
Preferred Securities of that Trust on behalf of the 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 are set
forth in the Trust Agreement of that Trust. Reference is made to the Prospectus
Supplement relating to the Preferred Securities of a Trust for specific terms,
including:
. the designation of the Preferred Securities;
. the number of Preferred Securities issued by the Trust;
. the annual distribution rate (or method of determining such rate) for the
Preferred Securities and the date or dates on which distributions are
payable;
. the date or dates, or method of determining the date or dates, from which
distributions on the Preferred Securities will be cumulative;
. the amount or amounts that will be paid out of the assets of the Trust to
the holders of the Preferred Securities upon the voluntary or involuntary
dissolution, winding-up or termination of the Trust;
. the obligation, if any, of the Trust to purchase or redeem the Preferred
Securities and the price or prices at which, the period or periods within
which, and the terms and conditions upon which the Preferred Securities
will be purchased or redeemed, in whole or in part, pursuant to that
obligation;
. any voting rights of the Preferred Securities in addition to those
required by law, including any requirement for approval by the holders of
Preferred Securities as a condition to specified action or amendments to
the Trust Agreement of the Trust;
. 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
. any other relative rights, preferences, privileges, limitations or
restrictions of the Preferred Securities not inconsistent with the Trust
Agreement of the Trust or applicable law.
The Corporation will guarantee all Preferred Securities offered hereby 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 applicable
Prospectus Supplement.
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DESCRIPTION OF THE GUARANTEES
A summary of information about the Guarantees that the Corporation will
execute and deliver for the benefit of the holders of the Preferred Securities
of the respective Trusts from time to time is set forth below. The summary does
not purport to be complete and is subject in all respects to the provisions of,
and is qualified in its entirety by reference to, the Guarantees and the Trust
Indenture Act of 1939. The Corporation has filed the form of the Guarantee as
an exhibit to the Registration Statement of which this Prospectus is a part.
Each Guarantee will be qualified as an indenture under the Trust Indenture
Act of 1939. The Chase Manhattan Bank will act as indenture trustee under each
Guarantee (the "Guarantee Trustee") for purposes of such Act. The terms of each
Guarantee will be those set forth in that Guarantee and those made part of that
Guarantee by such 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
Under each Guarantee, the Corporation will irrevocably and unconditionally
agree, to the extent set forth in the Guarantee, to pay the Guarantee Payments
(as defined below) in full to the holders of the Preferred Securities to which
the Guarantee relates, 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 (the "Guarantee Payments"), will be subject to the
related Guarantee:
. any accrued and unpaid distributions required to be paid on the Preferred
Securities of the Trust, but if and only if and to the extent that the
Trust has funds legally and immediately available therefor;
. the redemption price, including all accrued and unpaid distributions to
the date of redemption, with respect to any Preferred Securities called
for redemption by the Trust, but if and only to the extent the Trust has
funds legally and immediately available therefor; and
. upon a dissolution, winding-up or termination of the Trust (other than in
connection with the distribution of Junior Subordinated Notes to the
holders of Trust Securities of the Trust or the redemption of all of the
Preferred Securities of the Trust), the lesser of (1) the aggregate of
the liquidation amount and all accrued and unpaid distributions on the
Preferred Securities of the Trust to the date of payment, to the extent
the Trust has funds legally and immediately available therefor, and (2)
the amount of assets of the Trust remaining available for distribution to
holders of Preferred Securities of the Trust in liquidation of the Trust.
The Corporation's obligation to make a Guarantee Payment may be satisfied by
the Corporation's directly paying the required amounts to the holders of the
related Preferred Securities or by causing the related Trust to pay such
amounts to those holders.
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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 those Preferred
Securities, but will not apply to the payment of distributions and other
payments on those 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 a Trust, that 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:
. 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 equal in priority or subordinate by their
terms;
. equal in priority with the most senior preferred stock that may be issued
by the Corporation; and
. 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 applicable Guarantee.
Each Guarantee will constitute a guarantee of payment and not of collection
(that is, the guaranteed party may institute a legal proceeding directly
against the guarantor to enforce its rights under the guarantee without first
instituting a legal proceeding against any other person or entity).
Amendments and Assignment
No consent of the holders of Preferred Securities will be required with
respect to any changes in a Guarantee that do not materially and adversely
affect the rights of holders of those Preferred Securities. Other amendments to
a Guarantee may be made only with the prior approval of the holders of not less
than 66 2/3% in liquidation amount of the outstanding Preferred Securities to
which the Guarantee relates. All guarantees and agreements contained in a
Guarantee will bind the successors, assigns, receivers, trustees and
representatives of the Corporation and will 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 the related Preferred Securities;
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. distribution of the related Junior Subordinated Notes to the holders of
those Preferred Securities; or
. 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 Preferred Securities to which the
Guarantee relates must restore payment of any sums paid with respect to those
Preferred Securities or under the Guarantee.
Events of Default
An event of default under a Guarantee will occur upon the failure by the
Corporation to perform any of its payment obligations under that Guarantee.
The holders of a majority in liquidation amount of the Preferred Securities
to which the Guarantee relates have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Guarantee
Trustee in respect of the Guarantee or to direct the exercise of any trust or
power conferred upon the Guarantee Trustee under that Guarantee. Any holder of
the Preferred Securities to which the Guarantee relates may institute a legal
proceeding directly against the Corporation to enforce its rights under the
Guarantee without first instituting a legal proceeding against the Guarantee
Trustee or any other person or entity.
The 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 that series, waive any past event of default and its
consequences.
Information Concerning the Guarantee Trustee
Prior to the occurrence of an event of default with respect to a Guarantee
and after the curing or waiving of all events of default with respect to that
Guarantee, the Guarantee Trustee undertakes to perform only those duties as are
specifically set forth in that Guarantee. In case an event of default has
occurred and has not been cured or waived, the Guarantee Trustee will exercise
the same degree of care as a prudent individual would exercise in the conduct
of his or her own affairs. Subject to these provisions, the Guarantee Trustee
is under no obligation to exercise any of the powers vested in it by a
Guarantee at the request of any holder of the related Preferred Securities,
unless offered reasonable indemnity against the costs, expenses and liabilities
which the Guarantee Trustee might incur as a result.
The Chase Manhattan Bank will be the Guarantee Trustee with respect to each
Guarantee. The Chase Manhattan Bank will also serve as Property Trustee,
Subordinated Indenture Trustee and 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 the internal laws of the State of New
York.
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Agreements as to Expenses and Liabilities
The Corporation will enter into an Agreement as to Expenses and Liabilities
under each Trust Agreement. Each Agreement as to Expenses and Liabilities will
provide that 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 that Trust, other
than obligations of the Trust to pay to the holders of the related Preferred
Securities or other similar interests in that Trust the amounts due such
holders under the terms of those Preferred Securities or similar interests.
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ACCOUNTING TREATMENT
Each Trust will be treated as a subsidiary of the Corporation for financial
reporting purposes. Accordingly, the accounts of the Trusts will be included in
the Corporation's consolidated financial statements. The Preferred Securities
will be presented as a separate line item in the Corporation's consolidated
balance sheets, 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:
. to underwriters for resale to the public or to institutional investors;
. directly to institutional investors; or
. through agents to the public or to institutional investors.
The Prospectus Supplement for each series of Senior Notes, Junior
Subordinated Notes or Preferred Securities will set forth the terms of the
offering of those Senior Notes, Junior Subordinated Notes or Preferred
Securities, including the name or names of any underwriters or agents. The
Prospectus Supplement for each series of Senior Notes, Junior Subordinated
Notes or Preferred Securities will also set forth the purchase price of such
Senior Notes, Junior Subordinated Notes or Preferred Securities, 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 the applicable Prospectus Supplement states otherwise, 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 Securities Act of 1933.
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
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Notes, Junior Subordinated Notes or Preferred Securities are sold for public
offering and sale may make a market in those Senior Notes, Junior Subordinated
Notes or Preferred Securities. However, those 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.
VALIDITY OF THE SECURITIES
Richards, Layton & Finger, P.A., Wilmington, Delaware, special Delaware
counsel to the Corporation and the Trusts, will pass upon certain matters of
Delaware law relating to the validity of the Preferred Securities on behalf of
the Corporation and the Trusts. Dewey Ballantine LLP, New York, New York, will
pass upon the validity of the Senior Notes, the Junior Subordinated Notes and
the Guarantees and certain related matters on behalf of the Corporation.
Sullivan & Cromwell, New York, New York, will pass upon the validity of the
Senior Notes, the Junior Subordinated Notes and the Guarantees for the
underwriters or agents.
EXPERTS
The consolidated financial statements included in the Form 10, which are
incorporated in this Prospectus by reference, have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report which is
incorporated in this Prospectus 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 in this Prospectus and in the Registration
Statement in reliance upon the report of KPMG LLP, independent certified public
accountants, incorporated by reference in this Prospectus, and upon the
authority of said firm as experts in accounting and auditing.
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