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Filed Pursuant to Rule 424(b)(1)
Registration No. 333-50653
PROSPECTUS
DOMINION RESOURCES CAPITAL TRUST I
OFFER TO EXCHANGE ITS 7.83% CAPITAL SECURITIES WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 FOR ANY AND ALL OF ITS OUTSTANDING 7.83%
CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY) FULLY AND UNCONDITIONALLY
GUARANTEED, AS DESCRIBED HEREIN, BY DOMINION RESOURCES, INC.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME ON JUNE 8, 1998, UNLESS EXTENDED.
Dominion Resources Capital Trust I, a trust created under the laws of the
State of Delaware (the "Trust"), hereby offers, upon the terms and subject to
the conditions set forth in this Prospectus (as the same may be amended or
supplemented from time to time, the "Prospectus") and in the accompanying
Letter of Transmittal (which together constitute the "Exchange Offer"), to
exchange up to $250,000,000 aggregate Liquidation Amount of its 7.83% Capital
Securities (the "New Capital Securities") which have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement (as defined under "Available Information") of which
this Prospectus constitutes a part, for a like aggregate Liquidation Amount of
its outstanding 7.83% Capital Securities (the "Old Capital Securities"), of
which $250,000,000 aggregate Liquidation Amount is outstanding. Pursuant to
the Exchange Offer, Dominion Resources, Inc., a Virginia corporation (the
"Company" or "Dominion Resources"), will exchange its guarantee of the payment
of Distributions and payments on liquidation or redemption of the Old Capital
Securities and various undertakings in respect of the Old Capital Securities
(the "Old Guarantee") for a like guarantee of the New Capital Securities and
various undertakings in respect of the New Capital Securities (the "New
Guarantee") and all of its 7.83% Junior Subordinated Deferrable Interest
Debentures (the "Old Junior Subordinated Debentures") for a like aggregate
principal amount of its 7.83% Junior Subordinated Deferrable Interest
Debentures (the "New Junior Subordinated Debentures"), which New Guarantee and
New Junior Subordinated Debentures also have been registered under the
Securities Act. The Old Capital Securities, the Old Guarantee, Old Junior
Subordinated Debentures are collectively referred to herein as the "Old
Securities" and the New Capital Securities, the New Guarantee and the New
Junior Subordinated Debentures are collectively referred to herein as the "New
Securities."
The forms and terms of the New Securities are identical in all material
respects to the respective forms and terms of the Old Securities, except that
(i) the New Securities have been registered under the Securities Act and,
therefore, will not be subject to certain restrictions on transfer applicable
to the Old Securities, (ii) the New Capital Securities will not provide for
any increase in the Distribution rate thereon and (iii) the New Junior
Subordinated Debentures will not provide for any increase in the interest rate
thereon. See "Description of Securities" and "Description of Old Securities."
The New Capital Securities are being offered for exchange, and the New
Guarantee and New Junior Subordinated Debentures will be exchanged in order to
satisfy certain obligations of the Company and the Trust under three
Registration Rights Agreements, each dated as of December 8, 1997
(collectively, the "Registration Rights Agreement"), among the Company, the
Trust and the Initial Purchasers (as defined herein). In the event that the
Exchange Offer is consummated, any Old Capital Securities that remain
outstanding and the New Capital Securities issued in the Exchange Offer will
vote together as a single class for purposes of determining whether holders of
the requisite percentage in outstanding Liquidation Amount thereof have taken
certain actions or exercised certain rights under the Amended and Restated
Trust Agreement of the Trust (the "Trust Agreement"). In the event the
Exchange Offer is consummated, (i) the New Guarantee will apply to any Old
Capital Securities that remain outstanding and to any New Capital Securities
issued in the Exchange Offer, (ii) the Old Junior Subordinated Debentures will
be retired and canceled and (iii) the New Junior Subordinated Debentures will
be issued to The Chase Manhattan Bank, as Property Trustee under the Trust.
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SEE "RISK FACTORS" COMMENCING ON PAGE 16 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED BY HOLDERS WHO TENDER OLD CAPITAL SECURITIES IN THE EXCHANGE
OFFER.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is May 8, 1998.
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Old Capital Securities may be tendered for exchange on or prior to 5:00
p.m., New York City time, on June 8, 1998 (such time on such date being
hereinafter called the "Expiration Date"), unless the Exchange Offer is
extended by the Company and the Trust (in which case the term "Expiration
Date" shall mean the latest date and time to which the Exchange Offer is
extended). Tenders of Old Capital Securities may be withdrawn at any time on
or prior to the Expiration Date. The Exchange Offer is not conditioned upon
any minimum Liquidation Amount of Old Capital Securities being tendered for
exchange. However, the Exchange Offer is subject to certain conditions which
may be waived by the Company and the Trust in their sole discretion and to the
terms and provisions of the Registration Rights Agreement. Old Capital
Securities may be tendered for exchange in whole or in part having a
Liquidation Amount of not less than $100,000 (100 Old Capital Securities) or
any integral multiple of $1,000 Liquidation Amount (1 Old Capital Security) in
excess thereof. The Company has agreed to pay all expenses of the Exchange
Offer. See "The Exchange Offer--Fees and Expenses." Each New Capital Security
will accumulate Distributions from the most recent Distribution Date (as
defined in "Description of Securities--Description of Capital Securities--
Distributions") on the Old Capital Securities surrendered in exchange for such
New Capital Securities or, if no Distributions have been paid or provided for
on such Old Capital Securities, from December 8, 1997. As a result, holders of
Old Capital Securities that are accepted for exchange will not receive
accumulated Distributions on such Old Capital Securities for any period from
and after the most recent Distribution Date on such Old Capital Securities or,
if no Distributions have been paid or provided for on such Old Capital
Securities, from and after December 8, 1997 , and such holders will be deemed
to have waived the right to receive any Distributions on such Old Capital
Securities. This Prospectus, together with the Letter of Transmittal, is being
sent to all registered holders of Old Capital Securities as of May 8, 1998.
Neither the Company nor the Trust will receive any cash or other proceeds
from the issuance of the New Capital Securities offered hereby. No dealer-
manager is being used in connection with this Exchange Offer. See "Use of
Proceeds From Sale of Old Capital Securities" and "Plan of Distribution."
As the context may require, unless expressly stated otherwise, (i) "Capital
Securities" means the Old Capital Securities and, in the event the Exchange
Offer is consummated, the New Capital Securities, (ii) "Junior Subordinated
Debentures" means the Old Junior Subordinated Debentures and, in the event the
Exchange Offer is consummated, the New Junior Subordinated Debentures, (iii)
"Guarantee" means the Old Guarantee and, in the event the Exchange Offer is
consummated, the New Guarantee and (iv) "Securities" means the Old Securities
and, in the event the Exchange Offer is consummated, the New Securities. In
addition, as used herein, (i) the "Indenture" means the Junior Subordinated
Indenture dated as of December 1, 1997, as amended and supplemented from time
to time, between the Company and The Chase Manhattan Bank, as trustee (the
"Debenture Trustee"), (ii) the "Trust Agreement" means the Amended and
Restated Trust Agreement dated as of December 8, 1997 relating to the Trust
among the Company, as Depositor, The Chase Manhattan Bank, as Property Trustee
(the "Property Trustee"), Chase Manhattan Bank Delaware, as Delaware Trustee
(the "Delaware Trustee"), the Administrative Trustees named therein (the
"Administrative Trustees" and, collectively with the Property Trustee and
Delaware Trustee, the "Issuer Trustees") and the holders, from time to time,
of the Capital Securities, (iii) the "Guarantee Agreement" means the Capital
Securities Guarantee Agreement dated as of December 8, 1997 (the "Old
Guarantee Agreement") between the Company and The Chase Manhattan Bank, as
trustee (the "Guarantee Trustee"), and, in the event the Exchange Offer is
consummated, the Capital Securities Guarantee Agreement to be entered into
between the Company and the Guarantee Trustee (the "New Guarantee Agreement")
relating to the Old Guarantee and the New Guarantee, respectively, and (iv)
the "Expense Agreement" means the Agreement as to Expenses and Liabilities
dated as of December 8, 1997 between the Company and the Trust.
The Capital Securities represent undivided beneficial interests in the
assets of the Trust. Dominion Resources is the owner of all of the common
securities of the Trust (the "Common Securities" and, collectively with the
Capital Securities, the "Trust Securities"). The Chase Manhattan Bank is the
Property Trustee. The Trust exists for the purpose of issuing the Trust
Securities and investing the proceeds thereof in the Junior Subordinated
Debentures. The Junior Subordinated Debentures mature on December 1, 2027 (the
"Stated
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Maturity"). The Capital Securities have a preference under certain
circumstances with respect to cash distributions and amounts payable on
liquidation, redemption or otherwise over the Common Securities. See
"Description of Securities--Description of Capital Securities--Subordination
of Common Securities."
Holders of Capital Securities are entitled to receive preferential
cumulative cash distributions and the holder of the Common Securities is
entitled to receive cumulative cash distributions arising from the payment of
interest on the Junior Subordinated Debentures accumulating from December 8,
1997 and payable semi-annually in arrears on the 1st day of June and December
of each year, commencing June 1, 1998, at the annual rate of 7.83% of the
Liquidation Amount of $1,000 per Capital Security and at the annual rate of
7.83% of the Liquidation Amount of $1,000 per Common Security
("Distributions"). The Company has the right to defer payments of interest on
the Junior Subordinated Debentures at any time or from time to time for a
period not exceeding 10 consecutive semi-annual periods with respect to each
deferral period (each, an "Extension Period"), provided that no Extension
Period may end on a date other than an Interest Payment Date or extend beyond
the Stated Maturity. At any time following the termination of any Extension
Period and the payment of all amounts then due, the Company may elect to begin
a new Extension Period, subject to the foregoing requirements. If interest
payments on the Junior Subordinated Debentures are so deferred, Distributions
on the Capital Securities and on the Common Securities will also be deferred
and the Company will not be permitted, subject to certain exceptions described
herein, to declare or pay any cash distributions with respect to the Company's
capital stock (which includes common and preferred stock) or to make any
payment with respect to debt securities of the Company that rank on a parity
with or junior to the Junior Subordinated Debentures. During an Extension
Period, interest on the Junior Subordinated Debentures will continue to accrue
(and the amount of Distributions to which holders of the Capital Securities
are entitled will accumulate) at the rate of 7.83% per annum, compounded semi-
annually, and holders of Capital Securities will be required to accrue
interest income for United States federal income tax purposes. See
"Description of Securities--Description of Junior Subordinated Debentures--
Option to Defer Interest Payments" and "Certain Federal Income Tax
Consequences--Interest Income and Original Issue Discount."
The Company has, through the Guarantee, the Guarantee Agreement, the Trust
Agreement, the Junior Subordinated Debentures, the Indenture and the Expense
Agreement, taken together, fully, irrevocably and unconditionally guaranteed
on a subordinated basis all of the Trust's obligations under the Capital
Securities. See "Relationship Among the Capital Securities, the Junior
Subordinated Debentures and the Guarantee--Full and Unconditional Guarantee."
The Guarantee of the Company guarantees the payment of Distributions and
payments on liquidation or redemption of the Capital Securities, but only in
each case to the extent of funds held by the Trust on hand legally available
therefor, as described herein. See "Description of Securities--Description of
Guarantee." If the Company does not make interest payments on the Junior
Subordinated Debentures held by the Trust, the Trust will have insufficient
funds to pay Distributions on the Capital Securities. The Guarantee does not
cover payment of Distributions when the Trust does not have sufficient funds
on hand legally available therefor to pay such Distributions. In the event of
a Debenture Event of Default (as defined in "Description of Securities--
Description of Junior Subordinated Debentures--Debenture Events of Default")
under the Indenture, a holder of Capital Securities may institute a legal
proceeding directly against the Company to enforce payment of such
Distributions to such holder. See "Description of Securities--Description of
Junior Subordinated Debentures--Enforcement of Certain Rights By Holders of
Capital Securities." The obligations of the Company under the Guarantee and
the Junior Subordinated Debentures are unsecured and are subordinate and
junior in right of payment to all Senior Indebtedness (as defined in
"Description of Securities--Description of Junior Subordinated Debentures--
Subordination") of the Company. Senior Indebtedness of the Company includes
existing and future senior debt, senior subordinated debt and subordinated
debt of the Company. As of December 31, 1997, there was approximately $423.2
million of Senior Indebtedness of the Company outstanding. Additionally,
because the Company is a holding company that conducts all of its operations
through its subsidiaries, the claims of the Property Trustee as the holder of
the Junior Subordinated Debentures on behalf of the Trust and the Guarantee
will be effectively subordinated to the claims of the creditors of the
Company's subsidiaries. As of December 31, 1997, the Company's subsidiaries
had $8.76 billion of outstanding debt and
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Virginia Elective and Power Company, the Company's largest subsidiary had
6,890,140 outstanding shares of preferred stock ($100 per share liquidation
preference).
The Capital Securities are subject to mandatory redemption in whole but not
in part (i) at the Stated Maturity upon repayment of the Junior Subordinated
Debentures at a redemption price equal to the principal amount of, plus
accrued interest on, the Junior Subordinated Debentures (the "Maturity
Redemption Price"), (ii) contemporaneously with the optional prepayment by the
Company of the Junior Subordinated Debentures upon the occurrence and
continuation of a Tax Event or an Investment Company Event (each as defined in
"Risk Factors--Tax Event or Investment Company Event Redemption") (A) prior to
December 1, 2007, at the Event Redemption Price (which is equal to the Event
Prepayment Price (as defined below) (the "Event Redemption Price") and (B)
thereafter, at the Optional Redemption Price and (iii) in the case of the
optional prepayment of the Junior Subordinated Debentures on or after December
1, 2007, the Optional Redemption Price. The Maturity Redemption Price, the
Event Redemption Price and the Optional Redemption Price may be referred to
herein as the "Redemption Price." See "Description of Securities--Description
of Capital Securities--Redemption." The Junior Subordinated Debentures are
prepayable prior to the Stated Maturity at the option of the Company (i) on or
after December 1, 2007, in whole or in part, at any time at a prepayment price
(the "Optional Prepayment Price") equal to 103.915% of the principal amount
thereof at December 1, 2007, declining ratably on each December 1 thereafter
to 100% on or after December 1, 2017 plus, accrued interest thereon to the
date of prepayment or (ii) at any time, in whole but not in part, upon the
occurrence and continuation of a Tax Event or an Investment Company Event at
the Event Prepayment Price equal to the greater of (a) 100% of the principal
amount thereof or (b) as determined by the Quotation Agent (as defined in
"Description of Securities--Description of Junior Subordinated Debentures--Tax
Event or Investment Company Event Prepayment"), the sum of the present value
of 100% of the principal amount that would be payable on January 1, 2027,
together with the present values of scheduled payments of interest from the
prepayment date to January 1, 2028, in each case, discounted to the prepayment
date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-
day months) at the Adjusted Treasury Rate (as defined in "Description of
Securities--Description of Junior Subordinated Debentures--Tax Event or
Investment Company Event Prepayment"), plus, in each case, accrued interest
thereon to but excluding the date of prepayment. The Event Prepayment Price
may also be referred to herein as the "Prepayment Price." See "Description of
Securities--Description of Junior Subordinated Debentures" and "--Tax Event or
Investment Company Event Prepayment."
The Company has the right to terminate the Trust at any time and, after
satisfaction of liabilities to creditors of the Trust as required by
applicable laws, cause the Junior Subordinated Debentures to be distributed to
the holders of the Capital Securities in liquidation of the Trust subject to
the Company having received an opinion of counsel to the effect that such
distribution will not be a taxable event to holders of Capital Securities. See
"Description of Securities--Capital Securities--Liquidation of the Trust and
Distribution of Junior Subordinated Debentures."
The Old Capital Securities are eligible for trading in the Private
Offerings, Resales and Trading through Automated Linkage ("PORTAL") Market of
the National Association of Securities Dealers Inc. ("NASD"). The Company does
not intend to apply for listing of the Old Capital Securities on any
securities exchange or for inclusion of the New Capital Securities on any
automated quotation system.
Any Old Capital Securities not tendered and accepted in the Exchange Offer
will remain outstanding and will be entitled to the same rights and will be
subject to the same limitations applicable thereto under the Trust Agreement
(except for those rights which terminate upon consummation of the Exchange
Offer). Following consummation of the Exchange Offer, the holders of any Old
Capital Securities that remain outstanding will continue to be subject to all
of the existing restrictions upon transfer thereof and neither the Company nor
the Trust will have any further obligation to such holders (other than under
certain limited circumstances) to provide for registration under the
Securities Act of the Old Capital Securities held by them. To the extent that
Old Capital Securities are tendered and accepted in the Exchange Offer, a
holder's ability to sell untendered Old Capital Securities could be adversely
affected. See "Risk Factors--Consequences of a Failure to Exchange Old Capital
Securities."
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THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OLD CAPITAL SECURITIES ARE URGED TO READ THIS
PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING
WHETHER TO TENDER THEIR OLD CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER.
THE NEW CAPITAL SECURITIES WILL BE ISSUED, AND MAY BE TRANSFERRED, ONLY IN
BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000 (100 NEW CAPITAL
SECURITIES). ANY TRANSFER, SALE OR OTHER DISPOSITION OF NEW CAPITAL SECURITIES
IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000 SHALL BE DEEMED
TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH TRANSFEREE SHALL BE
DEEMED NOT TO BE THE HOLDER OF SUCH NEW CAPITAL SECURITIES FOR ANY PURPOSE,
INCLUDING BUT NOT LIMITED TO THE RECEIPT OF DISTRIBUTIONS ON SUCH NEW CAPITAL
SECURITIES, AND SUCH TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER
IN SUCH NEW CAPITAL SECURITIES.
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AVAILABLE INFORMATION
The Company files annual, quarterly and special reports, proxy statements
and other information with the SEC. Its SEC filings are available to the
public over the Internet at the SEC's web site at http://www.sec.gov. You may
also read and copy any document the Company files at the SEC's public
reference rooms in Washington, D.C., New York, New York and Chicago, Illinois.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms.
No separate financial statements of the Trust have been included in this
Offering Memorandum. The Company and the Trust do not consider that such
financial statements would be material to holders of the Capital Securities
because the Trust is a newly formed special purpose entity, has no operating
history or independent operations and is not engaged in and does not propose
to engage in any activity other than holding as trust assets the Junior
Subordinated Debentures and issuing the Trust Securities. See "Dominion
Resources Capital Trust I", "Description of Capital Securities", "Description
of Junior Subordinated Debentures" and "Description of Guarantee". In
addition, the Company does not expect that the Trust will file reports under
the Exchange Act with the SEC.
In connection therewith, the Company represents the following:
(i) the Capital Securities will be presented on the consolidated balance
sheets of the Company as a separate line item entitled "Company-obligated
Mandatorily Redeemable Preferred Capital Securities of Subsidiary Trust
holding solely the Company's Securities";
(ii) a footnote to the consolidated financial statements of the Company
will disclose that the sole asset of the Trust is $257,732,000 aggregate
principal amount of the Company's 7.83% Junior Subordinated Deferrable
Interest Debentures due December 1, 2027; and
(iii) it will include in an audited footnote to the consolidated
financial statements of the Company disclosure that (x) the Trust is wholly
owned; (y) the sole asset of the Trust is $257,732,000 aggregate principal
amount of the Company's 7.83% Junior Subordinated Deferrable Interest
Debentures due December 1, 2027; and (z) the back-up guarantees, in the
aggregate, provide a full and unconditional guarantee of the Trust's
obligations under the Capital Securities.
This Prospectus constitutes a part of a registration statement on Form S-4
(the "Registration Statement") filed by the Company and the Trust with the SEC
under the Securities Act. This Prospectus does not contain all the information
set forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the SEC, and reference is hereby
made to the Registration Statement and to the exhibits relating thereto for
further information with respect to the Company and the New Securities. Any
statements contained herein concerning the provisions of any document are not
necessarily complete, and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement or otherwise
filed with the SEC. Each such statement is qualified in its entirety by such
reference.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows the Company to "incorporate by reference" the information it
files with them, which means that the Company can disclose important
information to you be referring you to those documents. The information
incorporated by reference is an important part of this Offering Memorandum,
and information that the Company files later with the SEC will automatically
update and supersede this information. The Company incorporates by reference
the documents listed below and any future filings made with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
until the sale of all of these securities is complete.
. Annual Report on Form 10-K for the year ended December 31, 1997.
This Prospectus incorporates documents by reference which are not included
in this Prospectus. These documents are available upon request from Dominion
Resources, Inc., 901 East Byrd Street - Suite 1700, Richmond, Virginia 23219-
6111, telephone: (804) 775-5700, Attention: Corporate Secretary. In order to
ensure timely delivery of the documents, any request should be made by June 1,
1998.
As used herein, the terms "Prospectus" and "herein" mean this Prospectus,
including the documents incorporated or deemed to be incorporated herein by
reference, as the same may be amended, supplemented or otherwise modified from
time to time. Statements contained in this Prospectus as to the contents of
any contract or other document referred to herein do not purport to be
complete, and where reference is made to the particular provisions of such
contract or other document, such provisions are qualified in all respects by
reference to all of the provisions of such contract or other document.
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SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus or incorporated by reference
herein.
DOMINION RESOURCES CAPITAL TRUST I
The Trust is a statutory Delaware business trust, created on October 31, 1997
by the filing of a certificate of trust with the Delaware Secretary of State
and the concurrent execution of an initial trust agreement. The Trust will be
governed by the Trust Agreement executed by the Company, as Depositor, The
Chase Manhattan Bank, as Property Trustee, Chase Manhattan Bank Delaware, as
Delaware Trustee, and the Administrative Trustees named therein. The Trust's
business and affairs are conducted by the Issuer Trustees: The Chase Manhattan
Bank, as Property Trustee, Chase Manhattan Bank Delaware, as Delaware Trustee,
and two individual Administrative Trustees who are officers of the Company or
an affiliate. The Trust exists for the exclusive purposes of (i) issuing and
selling the Trust Securities and Exchange Capital Securities, (ii) using the
proceeds from the sale of the Trust Securities to acquire the Junior
Subordinated Debentures issued by the Company, (iii) making Distributions, (iv)
exchanging the Old Junior Subordinated Debentures for Exchange Debentures
pursuant to the Exchange Offer and (v) engaging in only those other activities
necessary, advisable or incidental thereto (such as registering the transfer of
the Capital Securities). Accordingly, the Junior Subordinated Debentures will
be the sole assets of the Trust, and payments by the Company under the Junior
Subordinated Debentures and the Expense Agreement will provide the sole revenue
of the Trust. All of the Common Securities will be owned by the Company.
The principal executive office of the Trust is c/o Dominion Resources, Inc.,
901 East Byrd Street, Suite 1700, Richmond, Virginia 23219-6111, and its
telephone number is (804) 775-5700.
DOMINION RESOURCES, INC.
Dominion Resources, Inc. is a holding company headquartered in Richmond,
Virginia. Its principal operating subsidiaries are:
. Virginia Electric and Power Company, principally an electric utility
serving two million residences and businesses in a 30,000-square-mile
region from northern Virginia to northeastern North Carolina. It owns
and operates nuclear, coal, natural gas, oil and hydroelectric power
stations;
. Dominion Energy, Inc., an independent power and natural gas subsidiary.
It has ownership and operating interests in 28 generating facilities in
six U.S. states, Argentina, Belize, Bolivia and Peru. This company has
about 649 billion cubic feet of proven natural gas reserves throughout
several major regions of the United States and western Canada;
. Dominion Capital, Inc., a financial services and real estate subsidiary,
with commercial, mortgage and consumer lending entities, a full-service
commercial real estate company, a 50% limited partnership interest in a
hydroelectric station in Louisiana, and a variety of debt and equity
investments; and
. East Midlands Electricity plc, principally an electric power
distribution and supply company serving 2.3 million homes and businesses
in the East Midlands region of the United Kingdom.
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THE EXCHANGE OFFER
The Exchange Offer.......... Up to $250,000,000 aggregate Liquidation Amount
of New Capital Securities are being offered in
exchange for a like aggregate Liquidation Amount
of Old Capital Securities. Old Capital Securities
may be tendered for exchange in whole or in part
having a Liquidation Amount of not less than
$100,000 (100 Old Capital Securities) or any
integral multiple of $1,000 Liquidation Amount
(One Old Capital Security) in excess thereof. The
Company and the Trust are making the Exchange
Offer in order to satisfy their obligations under
the Registration Rights Agreement relating to the
Old Securities. For a description of the
procedures for tendering Old Capital Securities,
see "The Exchange Offer--Procedures for Tendering
Old Capital Securities."
Expiration Date............. 5:00 p.m., New York City time, on June 8, 1998
(such time on such date being hereinafter called
the "Expiration Date") unless the Exchange Offer
is extended by the Company and the Trust (in
which case the term "Expiration Date" shall mean
the latest date and time to which the Exchange
Offer is extended). See "The Exchange Offer--
Expiration Date; Extensions; Amendments."
Conditions of the Exchange
Offer....................... The Exchange Offer is subject to certain
conditions which may be waived by the Company and
the Trust in their sole discretion and to the
terms and conditions of the Registration Rights
Agreements. The Exchange Offer is not conditioned
upon any minimum Liquidation Amount of Old
Capital Securities being tendered for exchange.
See "The Exchange Offer--Conditions of the
Exchange Offer."
The Company and the Trust expressly reserve the
right in their sole and absolute discretion,
subject to applicable law, at any time and from
time to time, (i) to delay the acceptance of the
Old Capital Securities for exchange, (ii) to
terminate the Exchange Offer (whether or not any
Old Capital Securities have been accepted for
exchange) if the Company or the Trust determines,
in its sole and absolute discretion, that any of
the conditions referred to under "The Exchange
Offer--Conditions of the Exchange Offer" have
occurred or exist or have not been satisfied,
(iii) to extend the Expiration Date and retain
all Old Capital Securities tendered pursuant to
the Exchange Offer, subject, however, to the
right of holders of Old Capital Securities to
withdraw their tendered Old Capital Securities,
and (iv) to waive any condition or otherwise
amend the terms of the Exchange Offer in any
respect. See "The Exchange Offer--Expiration
Date; Extensions; Amendments."
Procedures for Tendering
Old Capital Securities..... Brokers, dealers, commercial banks, trust
companies and other nominees who hold Old Capital
Securities through The Depository Trust Company
("DTC") may effect tenders by book-entry transfer
in accordance with DTC's Automated Tender Offer
Program ("ATOP"). Holders of such Old Capital
Securities registered in the
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name of a broker, dealer, commercial bank, trust
company or other nominee are urged to contact
such person promptly if they wish to tender Old
Capital Securities. In order for Old Capital
Securities to be tendered by a means other than
by book-entry transfer, a Letter of Transmittal
must be completed and signed in accordance with
the instructions contained therein. The Letter of
Transmittal and any other documents required by
the Letter of Transmittal must be delivered to
the Exchange Agent by mail, facsimile, hand
delivery or overnight carrier and either such Old
Capital Securities must be delivered to the
Exchange Agent or specified procedures for
guaranteed delivery must be complied with. See
"The Exchange Offer--Procedures for Tendering Old
Capital Securities."
Letters of Transmittal, certificates for Old
Capital Securities and any other documents
required by the Letter of Transmittal should not
be delivered to the Company or the Trust. Such
documents should only be delivered to the
Exchange Agent. Questions regarding how to tender
and requests for information should be directed
to the Exchange Agent. See "The Exchange Offer--
Exchange Agent."
Withdrawal Rights........... Tenders of Old Capital Securities may be
withdrawn at any time on or prior to the
Expiration Date by delivering a written notice of
such withdrawal to the Exchange Agent in
conformity with certain procedures set forth
below under "The Exchange Offer--Withdrawal
Rights."
Resales of New Capital
Securities.................. Based on certain interpretations by the SEC staff
as set forth in the no action letters issued to
third parties, the Company and the Trust believe
that New Capital Securities issued pursuant to
the Exchange Offer in exchange for Old Capital
Securities may be offered for resale, resold and
otherwise transferred by a holder thereof (other
than a holder who (i) is a broker-dealer (ii)
participated in the distribution of the Old
Capital Securities or (iii) is an affiliate of
the Company or the Trust) without further
compliance with the registration and prospectus
delivery requirements of the Securities Act,
provided that such New Capital Securities are
acquired in the ordinary course of such holder's
business and that such holder is not
participating, and has no arrangement or
understanding with any person to participate, in
a distribution (within the meaning of the
Securities Act) of such New Capital Securities.
In the event that the Company's belief is
inaccurate, holders of Exchange Notes who
transfer Exchange Notes in violation of the
prospectus delivery provisions of the Securities
Act and without an exemption from registration
thereunder may incur liability under the
Securities Act. The Company does not assume or
indemnify holders against such liability. The
Company has not sought and does not intend to
seek, its own no-action letter, and there can be
no assurance that the SEC staff would make a
similar determination with respect to the
Exchange Offer. Any holder of Old Capital
Securities who is an "affiliate" of the Company
or the Trust, who participated in distribution of
Old Capital Securities, who intends to
participate in
9
<PAGE>
the Exchange Offer for the purpose of
distributing the New Capital Securities, or who
is a broker-dealer who purchased the Old Capital
Securities from the Trust to resell pursuant to
Rule 144A under the Securities Act ("Rule 144A")
or any other available exemption under the
Securities Act, (a) will not be able to rely on
the interpretations of the SEC staff set forth in
the above-mentioned interpretive letters, (b)
will not be permitted or entitled to tender such
Old Capital Securities in the Exchange Offer and
(c) must comply with the registration and
prospectus delivery requirements of the
Securities Act in connection with any sale or
other transfer of such Old Capital Securities
unless such sale is made pursuant to an exemption
from such requirements. In addition, if any
broker-dealer holds Old Capital Securities
acquired for its own account as a result of
market-making or other trading activities and
exchanges such Old Capital Securities for New
Capital Securities, then such broker-dealer must
deliver a prospectus meeting the requirements of
the Securities Act in connection with any resales
of such New Capital Securities. See "The Exchange
Offer--Resales of the New Capital Securities."
The Company and the Trust believe that broker-
dealers who acquired Old Capital Securities for
their own accounts as a result of market-making
activities or other trading activities
("Participating Broker-Dealers") may fulfill
their prospectus delivery requirements with
respect to the New Capital Securities received
upon exchange of such Old Capital Securities
(other than Old Capital Securities which
represent an unsold allotment from the original
sale of the Old Capital Securities) with this
Prospectus, as it may be amended or supplemented
from time to time. This Prospectus may be used by
a Participating Broker-Dealer during the 90-day
period referred to below in connection with
resales of New Capital Securities received in
exchange for Old Capital Securities where such
Old Capital Securities were acquired by such
Participating Broker-Dealer for its own account
as a result of market-making or other trading
activities. Subject to certain provisions set
forth in the Registration Rights Agreement and to
the limitations described under "The Exchange
Offer--Resale of New Capital Securities," the
Company and the Trust have agreed that this
Prospectus, as it may be amended or supplemented
from time to time, may be used by a Participating
Broker-Dealer in connection with resales of such
New Capital Securities for a period ending 90
days after the Expiration Date or, if earlier,
when all such New Capital Securities have been
disposed of by such Participating Broker-Dealer.
See "Plan of Distribution" and "The Exchange
Offer--Resales of New Capital Securities. "
In that regard, each Participating Broker-Dealer
who surrenders Old Capital Securities pursuant to
the Exchange Offer will be deemed to have agreed,
by execution of the Letter of Transmittal or
delivery of an Agent's Message (as defined under
"The Exchange Offer--Acceptance For Exchange and
Issuance of New Capital Securities") in lieu
thereof, that, upon receipt of notice from the
Company or the
10
<PAGE>
Trust of the occurrence of any event or the
discovery of any fact which makes any statement
contained or incorporated by reference in this
Prospectus untrue in any material respect or
which causes this Prospectus to omit to state a
material fact necessary in order to make the
statements contained or incorporated by reference
herein, in light of the circumstances under which
they were made, not misleading or of the
occurrence of certain other events specified in
the Registration Rights Agreement, such
Participating Broker-Dealer will suspend the sale
of New Capital Securities (or the New Guarantee
or the New Junior Subordinated Debentures, as
applicable) pursuant to this Prospectus until the
Company or the Trust has amended or supplemented
this Prospectus to correct such misstatement or
omission and has furnished copies of the amended
or supplemented Prospectus to such Participating
Broker-Dealer or the Company or the Trust has
given notice that the sale of the New Capital
Securities (or the New Guarantee or the New
Junior Subordinated Debentures, as applicable)
may be resumed, as the case may be. See "The
Exchange Offer--Resales of New Capital
Securities."
Consequences of Failure to
Exchange.................... Holder of Old Capital Securities who do not
exchange their Old Capital Securities for New
Capital Securities pursuant to the Exchange Offer
will continue to be subject to the restrictions
on transfer of such Old Capital Securities as set
forth in the legend thereon. In general, the Old
Capital Securities may not be offered or sold,
unless registered under the Securities Act,
except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act
and applicable state securities laws. The Company
does not currently anticipate that it will
register the Old Capital Securities under the
Securities Act.
Exchange Agent.............. The exchange agent with respect to the Exchange
Offer is The Chase Manhattan Bank (the "Exchange
Agent"). The addresses and telephone and
facsimile numbers of the Exchange Agent are set
forth in "The Exchange Offer--Exchange Agent" and
in the Letter of Transmittal.
Use of Proceeds............. Neither the Company nor the Trust will receive
any cash or other proceeds from the issuance of
the New Capital Securities offered hereby. See
"Use of Proceeds From Sale of Old Capital
Securities."
Certain United States
Federal Income Tax
Considerations; ERISA
Considerations............. Holders of Old Capital Securities should review
the information set forth under "Certain United
States Federal Income Tax Considerations" and
"ERISA Considerations" prior to tendering Old
Capital Securities in the Exchange Offer.
11
<PAGE>
THE NEW CAPITAL SECURITIES
Securities Offered.......... $250,000,000 aggregate Liquidation Amount of the
Trust's 7.83% New Capital Securities which have
been registered under the Securities Act
(Liquidation Amount $1,000 per New Capital
Security). The New Capital Securities will be,
and the Old Capital Securities were, issued under
the Trust Agreement. The New Capital Securities
and any Old Capital Securities that remain
outstanding after consummation of the Exchange
Offer will constitute a single series of Capital
Securities under the Trust Agreement and,
accordingly, will vote together as a single class
for purposes of determining whether holders of
the requisite percentage in outstanding
Liquidation Amount thereof have taken certain
actions or exercised certain rights under the
Trust Agreement. See "Description of Securities--
Description of Capital Securities--General." The
forms and terms of the New Capital Securities are
identical in all material respects to the
respective forms and terms of the Old Capital
Securities, except that (i) the New Securities
have been registered under the Securities Act
and, therefore, are not subject to certain
restrictions on transfer applicable to the Old
Securities, (ii) the New Capital Securities will
not provide for any increase in the Distribution
rate thereon and (iii) the New Junior
Subordinated Debentures will not provide for any
increase in the interest rate thereon.
Distribution Dates.......... June 1 and December 1 of each year, commencing
June 1, 1998.
Extension Periods........... Distributions on Capital Securities will be
deferred for the duration of any Extension Period
elected by the Company with respect to the
payment of interest on the New Junior
Subordinated Debentures. No Extension Period will
exceed 10 consecutive semi-annual periods or
extend beyond the Stated Maturity. See
"Description of Securities--Description of Junior
Subordinated Debentures--Option to Defer Interest
Payments Period" and "Certain Federal Income Tax
Consequences--Interest Income and Original Issue
Discount."
Ranking..................... The New Capital Securities rank on a parity, and
payments thereon will be made pro rata, with the
Old Capital Securities and the Common Securities
except as described under "Description of
Securities--Description of Capital Securities--
Subordination of Common Securities." The New
Junior Subordinated Debentures will rank pari
passu with the Old Junior Subordinated Debentures
and all other Junior Subordinated Debentures to
be issued by the Company which will be issued and
sold (if at all) to other trusts to be
established by the Company (if any), and will be
unsecured and subordinate and junior in right of
payment to the extent and in the manner set forth
in the Indenture to all Senior Indebtedness (as
defined herein). Senior Indebtedness of the
Company includes existing and future senior debt,
senior subordinated debt and subordinated debt of
the Company. As of December 31, 1997, there was
approximately $423.2 million of Senior
Indebtedness of the
12
<PAGE>
Company outstanding. See "Description of
Securities--Description of Junior Subordinated
Debentures." The Guarantee constitutes an
unsecured obligation of the Company and will rank
subordinate and junior in right of payment to the
extent and in the manner set forth in the
Guarantee Agreement to all Senior Indebtedness.
See "Description of Guarantee." Additionally,
because the Company is a holding company that
conducts all of its operations through its
subsidiaries, the claims of the Property Trustee
as the holder of the Junior Subordinated
Debentures on behalf of the Trust and the claims
of the Guarantee Trustee as the holder of the
Guarantee on behalf of the Trust and the
Guarantee--will be effectively subordinated to
the claims of the creditors of the Company's
subsidiaries. As of December 31, 1997, the
Company's subsidiaries had $8.76 billion of
outstanding debt and Virginia Electric and Power
Company, the Company's largest subsidiary, had
6,890,140 outstanding shares of preferred stock
($100 per share liquidation preference).
Redemption.................. The Capital Securities are subject to mandatory
redemption (i) in whole but not in part at the
Stated Maturity upon repayment of the Junior
Subordinated Debentures, (ii) in whole but not in
part, contemporaneously with the optional
prepayment by the Company of the Junior
Subordinated Debentures upon the occurrence and
continuation of a Tax Event or an Investment
Company Event, and (iii) in whole or in part at
any time on or after December 1, 2007
contemporaneously with the optional prepayment by
the Company of the Junior Subordinated
Debentures, in each case at the applicable
Redemption Price. See "Description of
Securities--Description of Capital Securities--
Redemption."
Rating...................... The Capital Securities have been rated "BBB+" by
Standard & Poor's Ratings Services, "baa1" by
Moody's Investors Services, Inc. and "BBB" by
Fitch Investors Services, Inc. The ratings have
been obtained with the understanding that the
assigning rating organization will continue to
monitor the credit ratings of the Company and the
Trust and will make future adjustments to the
extent warranted. A security ratings is not a
recommendation to buy, sell or hold securities.
It only reflects the views of the assigning
rating organization and may be subject to
revision or withdrawal at any time by the
assigning rating organization.
Transfer Restrictions....... The New Capital Securities will be issued, and
may be transferred, only in blocks having a
Liquidation Amount of not less than $100,000 (100
New Capital Securities). See "Description of
Securities--Description of Capital Securities--
Restrictions on Transfer." Any transfer, sale or
other disposition of Capital Securities in a
block having a Liquidation Amount of less than
$100,000 shall be deemed to be void and of no
legal effect whatsoever.
13
<PAGE>
Absence of Market for the
Capital Securities......... The New Capital Securities will be a new issue of
securities for which there currently is no
market. Accordingly, no assurance can be given
that an active public or other market will
develop for the New Capital Securities or as to
the liquidity of or the trading market for the
New Capital Securities. The Company and the Trust
currently do not intend to apply for listing of
the New Capital Securities on any securities
exchange or for quotation through the National
Association of Securities Dealers Automated
System.
For additional information regarding the New Securities, see "Description of
Securities" and "Certain Federal Income Tax Consequences."
14
<PAGE>
DOMINION RESOURCES, INC.
SELECTED FINANCIAL INFORMATION
This summary of financial information for the years 1993-1997 was taken from
and should be read along with the audited financial statements contained in our
most recent Annual Report on Form 10-K.
<TABLE>
<CAPTION>
YEARS
--------------------------------------------
1997(*) 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Operating revenues and income
(millions)...................... $7,677.6 $4,854.0 $4,633.1 $4,491.1 $4,433.9
Operating expenses (millions).... 6,200.6 3,744.2 3,606.7 3,452.9 3,306.6
Operating income (millions)...... 1,477.0 1,109.8 1,026.4 1,038.2 1,127.3
Net income (millions)............ 399.2 472.1 425.0 478.2 516.6
Earnings per common share........ 2.15 2.65 2.45 2.81 3.12
Average common shares outstanding
(millions)...................... 185.2 178.3 173.8 170.3 165.7
</TABLE>
- --------
(*) Reflects the acquisition of East Midlands Electricity plc in early 1997 and
the effect of a one-time windfall profits tax levied on East Midlands in
the third quarter.
OTHER SELECTED DATA
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Assets (millions)....... $20,192.7 $14,896.4 $13,903.3 $13,562.2 $13,349.5
Capitalization
(millions)............. 13,270.8 10,272.6 9,914.9 9,786.3 9,474.9
Capitalization ratios
(percent):
Long-term debt and
capital lease
obligations(*)....... 54% 44% 44% 45% 44%
Preferred securities
of subsidiary
trusts............... 3% 1 1 -- --
Preferred stock....... 5% 7 7 8 9
Common equity......... 38% 48 48 47 47
--------- --------- --------- --------- ---------
100% 100% 100% 100% 100%
========= ========= ========= ========= =========
</TABLE>
- --------
(*) Excludes nonrecourse financing of nonutility subsidiaries and short-term
debt.
15
<PAGE>
RISK FACTORS
Holders tendering Old Capital Securities in the Exchange Offer should
carefully review the information contained elsewhere in this Prospectus and
should particularly consider the matters set forth below.
RANKING OF OBLIGATIONS UNDER THE GUARANTEE AND THE JUNIOR SUBORDINATED
DEBENTURES
The Company's obligations under the Junior Subordinated Debentures are
unsecured and rank subordinate and junior in right of payment to all present
and future Senior Indebtedness (as defined in the Indenture and described
under "Description of the Junior Subordinated Debentures--Subordination") of
the Company. The Company's obligations under the Guarantee are unsecured and
rank subordinate and junior in right of payment to all of the Senior
Indebtedness of the Company and pari passu with the Company's obligations
under the Junior Subordinated Debentures. At December 31, 1997, the
outstanding Senior Indebtedness of the Company was $423.2 million. Neither the
Indenture, the Guarantee nor the Trust Agreement places any limitation on the
amount of secured or unsecured debt that the Company may incur, including
through the issuance of other securities that are pari passu or senior to the
Capital Securities, the Junior Subordinated Debentures and the Guarantee. See
"Description of Guarantee--Status of the Guarantee" and "Description of Junior
Subordinated Debentures--Subordination." Because the Company is a holding
company that conducts all of its operations through its subsidiaries, the
claims of the Trust--as the holder of the Junior Subordinated Indentures and
the Guarantee--will be effectively subordinated to the claims of creditors of
the Company's subsidiaries, including trade creditors, debtholders, secured
creditors, taxing authorities, guarantee holders and any preferred
stockholders. As of December 31, 1997, the Company's subsidiaries had $8.76
billion of outstanding debt. Virginia Electric and Power Company, the
Company's largest subsidiary, had 6,890,140 outstanding shares of preferred
stock ($100 per share liquidation preference). The right of the Company to
participate in any distribution of assets of any subsidiary upon liquidation
or reorganization or otherwise (and thus the ability of holders of the Capital
Securities to benefit indirectly from such distribution) is subject to the
prior claims of creditors of that subsidiary. The Junior Subordinated
Debentures will be effectively subordinated to all existing and future
liabilities of the Company's subsidiaries, and holders of Junior subordinated
Debentures should look only to the assets of the Company for payments on the
Junior Subordinated Debentures. See "Dominion Resources, Inc."
The ability of the Trust to pay amounts due on the Capital Securities is
solely dependent upon the Company making payments on the Junior Subordinated
Debentures as and when required. The Company's ability to service its
indebtedness, including the Junior Subordinated Debentures, and to perform
under the Guarantee, is dependent upon the ability of the Company's
subsidiaries to make payments to the Company in the form of dividends and
other distributions. The payment of dividends or other distributions by the
Company's subsidiaries is dependent upon the earnings of those subsidiaries.
Earnings of the Company's subsidiaries are subject to various business and
regulatory considerations as more fully described in the Company's SEC
filings.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES
So long as no Debenture Event of Default has occurred or is continuing, the
Company has the right under the Indenture to defer the payment of interest on
the Junior Subordinated Debentures at any time or from time to time for a
period not exceeding 10 consecutive semi-annual periods. During any Extension
Period, the Company has the right to make partial interest payments. No
Extension Period may extend beyond the Stated Maturity of the Junior
Subordinated Debentures. As a consequence of any such deferral, semi-annual
Distributions on the Capital Securities by the Trust will be deferred during
any Extension Period. Distributions to which holders of the Capital Securities
are entitled will accumulate additional Distributions thereon ("Additional
Distributions") equal to any Additional Interest received by the Trust in
respect of the Junior Subordinated Debentures.
During any such Extension Period, the Company may not, and may not permit
any subsidiary of the Company to (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of the Company's capital stock or (ii) make any payment
of principal,
16
<PAGE>
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Company (including Other Debentures) that rank pari passu
with or junior to the Junior Subordinated Debentures or make any guarantee
payments with respect to any guarantee by the Company of the debt securities
of any subsidiary of the Company (including Other Guarantees) if such
guarantee ranks pari passu with or junior to the Junior Subordinated
Debentures (other than (a) dividends or distributions in common stock of the
Company, (b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the issuance of capital
stock under any such plan in the future, or the redemption or repurchase of
any such rights pursuant thereto, (c) payments under the Guarantee and (d)
purchases of common stock related to the issuance of common stock or rights
under any of the Company's benefit plans for its directors, officers,
employees, consultants or advisers). Prior to the termination of any such
Extension Period, the Company may further extend such Extension Period,
provided that such extension does not cause such Extension Period to exceed 10
consecutive semi-annual periods or to extend beyond the Stated Maturity. At
any time following the termination of any Extension Period and the payment of
all amounts then due, the Company may elect to begin a new Extension Period,
subject to the above requirements. There is no limit on the number of times
that the Company may elect to begin an Extension Period. See "Description of
Securities--Description of Capital Securities--Distributions" and "Description
of Securities--Description of Junior Subordinated Debentures--Option to Defer
Interest Payments."
If an Extension Period occurs, a holder of Capital Securities will continue
to accrue income for United States federal income tax purposes (in the form of
original issue discount) in respect of interest allowable to its pro rata
share of the Junior Subordinated Debentures held by the Trust. As a result, a
holder of Capital Securities will include such income in gross income for
United States federal income tax purposes in advance of the receipt of cash,
and will not receive the cash related to such income from the Trust if the
holder disposes of the Capital Securities prior to the record date for the
payment of Distributions. See "Certain Federal Income Tax Consequences--
Interest Income and Original Issue Discount" and "--Sales or Redemptions of
Capital Securities."
The Company has no present intention of exercising its right to defer
interest payments. However, should the Company elect to exercise such right in
the future, the market price of the Capital Securities is likely to be
affected. A holder that disposes of any Capital Securities during an Extension
Period, therefore, might not receive the same return on its investment as a
holder that continues to hold its Capital Securities. In addition, as a result
of the existence of the Company's right to defer interest payments, the market
price of the Capital Securities (which represent preferred beneficial
interests in the assets of the Trust) may be more volatile than the market
prices of other securities on which original issue discount accrues that are
not subject to such deferrals.
TAX EVENT OR INVESTMENT COMPANY EVENT REDEMPTION
Upon the occurrence and continuation of a Tax Event or an Investment Company
Event, the Company has the right to prepay the Junior Subordinated Debentures
in whole (but not in part) within 90 days of the occurrence of such Tax Event
or Investment Company Event and therefore cause a mandatory redemption of all
Capital Securities at the Event Redemption Price. See "Description of
Securities--Description of Capital Securities--Redemption."
A "Tax Event" means the receipt by the Company and the Trust of an opinion
of counsel, who shall not be an officer or employee of the Company or its
affiliates, to the effect that, as a result of any amendment to, or change
(including any announced prospective change) in, the laws (or any regulations
thereunder) of the United States or any other relevant political subdivision
or taxing authority, or as a result of any official administrative
pronouncement or judicial decision interpreting or applying such laws or
regulations, which amendment or change is effective or which pronouncement or
decision is announced on or after December 8, 1997, there is more than an
insubstantial risk that (i) the Trust is, or will be within 90 days after the
date of such opinion, subject to United States federal income tax with respect
to income received or accrued on the Junior Subordinated Debentures, (ii)
interest payable by the Company on the Junior Subordinated Debentures is not,
or within 90 days after the date of such opinion, will not be, deductible by
the Company, in whole or in part, for
17
<PAGE>
United States federal income tax purposes or (iii) the Trust is, or will be
within 90 days after the date of such opinion, subject to more than a de
minimis amount of other taxes, duties or other governmental charges.
See "--Possible Tax Law Changes Affecting the Capital Securities" for a
discussion of certain legislative proposals that, if adopted, could give rise
to a Tax Event, which may permit the Company to cause a redemption of all
Capital Securities prior to December 1, 2027.
An "Investment Company Event" means the receipt by the Trust of an opinion
of counsel experienced in such matters to the effect that, as a result of the
occurrence of a change in law or regulation or change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority (a "Change in 1940 Act Law"), the Trust is or
will be considered an investment company that is required to be registered
under the Investment Company Act of 1940, as amended, which Change in 1940 Act
Law becomes effective on or after December 8, 1997.
EXCHANGE OF JUNIOR SUBORDINATED DEBENTURES FOR CAPITAL SECURITIES
The Company has the right to terminate the Trust at any time and, after
satisfaction of liabilities to creditors as required by law, cause the Junior
Subordinated Debentures to be distributed to the holders of the Capital
Securities in liquidation of the Trust. The exercise of such right is subject
to the Company having received an opinion of counsel to the effect that such
distribution will not be a taxable event to holders of Capital Securities. See
"Description of Securities--Description of Capital Securities--Liquidation of
the Trust and Distribution of Junior Subordinated Debentures."
MARKET PRICES
There can be no assurance as to the market prices for Capital Securities or
Junior Subordinated Debentures that may be distributed in exchange for Capital
Securities if a liquidation of the Trust occurs. Accordingly, the Capital
Securities that an investor may purchase in this Offering or in the secondary
market, or the Junior Subordinated Debentures that a holder of Capital
Securities may receive in liquidation of the Trust, may trade at a discount
from the price that the investor paid to purchase the Capital Securities.
Because holders of Capital Securities may receive Junior Subordinated
Debentures on termination of the Trust and because Distributions are otherwise
limited to payments on the Junior Subordinated Debentures, prospective
purchasers of New Capital Securities are also making an investment decision
with regard to the Junior Subordinated Debentures and should carefully review
all the information relating the Junior Subordinated Debentures contained in
this Prospectus. See "Description of the Junior Subordinated Debentures."
RIGHTS UNDER THE GUARANTEE
The Chase Manhattan Bank acts as the Guarantee Trustee and will hold the New
Guarantee for the benefit of the holders of all Capital Securities. The Chase
Manhattan Bank also acts as Debenture Trustee for the Junior Subordinated
Debentures and as Property Trustee under the Trust Agreement and its affiliate
Chase Manhattan Bank Delaware acts as Delaware Trustee under the Trust
Agreement. The Guarantee guarantees to the holders of the Capital Securities
the following payments, to the extent not paid by the Trust: (i) any
accumulated and unpaid Distributions required to be paid on the Capital
Securities, to the extent the Trust has funds legally available therefor at
such time, (ii) the redemption price with respect to Capital Securities called
for redemption, to the extent the Trust has funds available therefor at such
time and (iii) upon a voluntary or involuntary termination, dissolution,
winding-up or liquidation of the Trust (unless the Junior Subordinated
Debentures are distributed to holders of the Capital Securities), the lesser
of (a) the aggregate of the Liquidation Amount and accumulated and unpaid
Distributions on the Capital Securities to the date of payment, to the extent
the Trust has funds on hand available therefor at such time, and (b) the
amount of assets of the Trust remaining available for distribution to holders
of the Capital Securities.
The holders of a majority in aggregate Liquidation Amount of the Capital
Securities have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Guarantee Trustee in
18
<PAGE>
respect of the Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under the Guarantee. Any holder of the
Capital Securities may institute a legal proceeding directly against the
Company to enforce its rights under the Guarantee without first instituting a
legal proceeding against the Trust, the Guarantee Trustee or any other person
or entity. If the Company were to default on its obligation to pay amounts
payable under the Junior Subordinated Debentures, the Trust would lack funds
for the payment of Distributions or amounts payable on redemption of the
Capital Securities or otherwise, and, in such event, holders of the Capital
Securities would not be able to rely upon the Guarantee for payment of such
amounts. Instead, in the event a Debenture Event of Default shall have
occurred and continues due to the Company's failure to pay interest on or
principal of the Junior Subordinated Debentures when such payment is due and
payable (thereby preventing the Trust from making Distributions, then a holder
of Capital Securities may institute a suit directly against the Company for
enforcement of payment to such holder of the principal of or interest on such
Junior Subordinated Debentures having a principal amount equal to the
aggregate Liquidation Amount of the Capital Securities of such holder (a
"Direct Action"). Notwithstanding any payments made to a holder of Capital
Securities by the Company in connection with a Direct Action, the Company
shall remain obligated to pay the principal of and interest on the Junior
Subordinated Debentures, and the Company shall be subrogated to the rights of
the holder of such Capital Securities with respect to payments on the Capital
Securities to the extent of any payments made by the Company to such holder in
any Direct Action. Except as described under the Indenture and the Trust
Agreement, and as described in this Prospectus, holders of Capital Securities
will not be able to exercise directly any other remedy available to the
holders of the Junior Subordinated Debentures or assert directly any other
rights in respect of the Junior Subordinated Debentures. See "Description of
Securities--Description of Junior Subordinated Debentures--Enforcement of
Certain Rights by Holders of Capital Securities," "Description of Securities--
Description of Junior Subordinated Debentures--Debenture Events of Default"
and "Description of Securities--Description of Guarantee." The Trust Agreement
provides that each holder of Capital Securities by acceptance thereof agrees
to the provisions of the Guarantee Agreement and the Indenture.
LIMITED VOTING RIGHTS
Holders of Capital Securities will generally have limited voting rights
relating only to the modification of the Capital Securities and the exercise
of the Trust's rights as holder of Junior Subordinated Debentures. Holders of
Capital Securities will have limited authority to vote to appoint, remove or
replace the Property Trustee or the Delaware Trustee. The Issuer Trustees and
the Company may amend the Trust Agreement without the consent of holders of
Capital Securities to ensure that the Trust will be classified for United
States federal income tax purposes as a grantor trust even if such action
adversely affects the interests of such holders. See "Description of Capital
Securities--Voting Rights; Amendment of the Trust Agreement" and "Description
of Securities--Description of Capital Securities--Removal of Issuer Trustees;
Appointment of Successors."
TRADING PRICE TAX CONSEQUENCES
The Capital Securities may trade at a price that does not fully reflect the
value of accrued but unpaid interest with respect to the underlying Junior
Subordinated Debentures. A holder which uses the accrual method of accounting
for tax purposes (and a cash method holder, if the Junior Subordinated
Debentures are deemed to have been issued with OID) and who disposes of its
Capital Securities between record dates for payments of distributions will be
required to include accrued but unpaid interest on the Junior Subordinated
Debentures through the date of disposition in income as ordinary income (i.e.,
interest or, possibly, OID), and to add such amount to its adjusted tax basis
in its share of the underlying Junior Subordinated Debentures deemed disposed
of. To the extent the selling price is less than the holder's adjusted tax
basis (which will include all accrued but unpaid interest), a holder will
recognize a capital loss. Subject to certain limited exceptions, capital
losses cannot be applied to offset ordinary income for United States federal
income tax purposes. See "Certain Federal Income Tax Consequences--Interest
Income and Original Issue Discount" and "--Sales of Capital Securities."
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<PAGE>
CONSEQUENCES OF A FAILURE TO EXCHANGE OLD CAPITAL SECURITIES
The Old Capital Securities have not been registered under the Securities Act
or any state securities laws and, therefore, may not be offered, sold or
otherwise transferred except in compliance with the registration requirements
of the Securities Act and any other applicable securities laws, or pursuant to
an exemption therefrom or in a transaction not subject thereto, and in each
case in compliance with certain other conditions and restrictions. Old Capital
Securities which remain outstanding after consummation of the Exchange Offer
will continue to bear a legend reflecting such restrictions on transfer. In
addition, upon consummation of the Exchange Offer, holders of Old Capital
Securities which remain outstanding will not be entitled to any rights to have
such Old Capital Securities registered under the Securities Act or to any
similar rights under the Registration Rights Agreement (subject to certain
limited exceptions). The Company and the Trust do not intend to register under
the Securities Act any Old Capital Securities which remain outstanding after
consummation of the Exchange Offer (subject to such limited exceptions, if
applicable).
To the extent that Old Capital Securities are tendered and accepted in the
Exchange Offer, a holder's ability to sell untendered Old Capital Securities
could be adversely affected. In addition, although the Old Capital Securities
have been designated for trading in the Private Offerings, Resale and Trading
through Automatic Linkages ("PORTAL") market, to the extent that Old Capital
Securities are tendered and accepted in connection with the Exchange Offer,
any trading market for Old Capital Securities which remain outstanding after
the Exchange Offer could be adversely affected.
The New Capital Securities and any Old Capital Securities which remain
outstanding after consummation of the Exchange Offer will constitute a single
series of Capital Securities under the Trust Agreement and, accordingly, will
vote together as a single class for purposes of determining whether holders of
the requisite percentage in outstanding Liquidation Amount thereof have taken
certain actions or exercised certain rights under the Trust Agreement.
The Old Capital Securities provide that, if a registration statement
relating to the Exchange Offer has not been filed on or by May 7, 1998 and
declared effective on or by June 6, 1998 the Distribution rate borne by the
Old Capital Securities will increase by 0.25% per annum commencing on June 7,
1998, until the Exchange Offer is consummated. See "Description of Old Capital
Securities." Following consummation of the Exchange Offer, neither the Old
Capital Securities nor the New Capital Securities will be entitled to any
increase in the Distribution rate thereon.
ABSENCE OF PUBLIC MARKET
The Old Capital Securities were issued to, and the Company believes are
currently owned by, a relatively small number of beneficial owners. The Old
Capital Securities have not been registered under the Securities Act and will
continue to be subject to restrictions on transferability to the extent that
they are not exchanged for New Capital Securities. Although the New Capital
Securities will generally be permitted to be resold or otherwise transferred
by the holders (who are not affiliates of the Company or the Trust) without
compliance with the registration requirements under the Securities Act, they
will constitute a new issue of securities with no established trading market.
Capital Securities may be transferred by the holders thereof only in blocks
having a Liquidation Amount of not less than $100,000 (100 Capital
Securities). There is no existing market for the Capital Securities and there
can be no assurance as to (i) the liquidity of any markets that may
development for the Capital Securities and, any issued New Capital Securities,
(ii) the ability of the holders to sell their Capital Securities and any
issued New Capital Securities, or (iii) at what price holders of the Capital
Securities and any issued New Capital Securities will be able to sell their
respective securities. If an active public market does not develop, the market
price and liquidity of the New Capital Securities may be adversely affected.
If a public trading market develops for the New Capital Securities, future
trading prices of such securities will depend on many factors, including,
among other things, prevailing interest rates, results of operations and
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the market for similar securities. Depending on prevailing interest rates, the
market for similar securities and other factors, including the financial
condition of the Company, the New Capital Securities may trade at a discount
from their issue price.
Notwithstanding the registration of the New Capital Securities in the
Exchange Offer, holders who are "affiliates" (as defined under Rule 405 of the
Securities Act) of the Company or the Trust may publicly offer for sale or
resell the New Capital Securities only in compliance with the provisions of
Rule 144 under the Securities Act.
Each broker-dealer that receives New Capital Securities for its own account
in exchange for Old Capital Securities, where such Old Capital Securities were
acquired by such broker-dealer as a result of market-making activities or
other trading activities, must acknowledge that it will deliver a prospectus
in connection with any resale of such New Capital Securities. See "Plan of
Distribution."
EXCHANGE OFFER PROCEDURES
Subject to the conditions set forth under "The Exchange Offer--Conditions of
the Exchange Offer," delivery of New Capital Securities in exchange for Old
Capital Securities tendered and accepted for exchange pursuant to the Exchange
Offer will be made only after timely receipt by the Exchange Agent of (i)
certificates for Old Capital Securities or a book-entry confirmation of a
book-entry transfer of Old Capital Securities into the Exchange Agent's
account at DTC, including an Agent's Message (as defined under "The Exchange
Offer--Acceptance for Exchange and Issuance of New Capital Securities") if the
tendering holder does not deliver a Letter of Transmittal, (ii) a completed
and signed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message in lieu of the Letter of Transmittal, and (iii) any other documents
required by the Letter of Transmittal. Therefore, holders of Old Capital
Securities desiring to tender such Old Capital Securities in exchange for New
Capital Securities should allow sufficient time to ensure timely delivery.
Neither the Company nor the Trust is under a duty to give notification of
defects or irregularities with respect to the tenders of Old Capital
Securities for exchange.
POSSIBLE TAX LAW CHANGES AFFECTING THE CAPITAL SECURITIES
Under current law, the Company will be able to deduct interest on the Junior
Subordinated Debentures and stated interest will be taxable to a United States
Person as ordinary income at the time paid or accrued. However, on February 6,
1997, as part of the Clinton Administration's Fiscal 1998 Budget Proposal, the
Treasury Department proposed legislation (the "Clinton Proposal") which would
have, among other things, generally denied corporate issuers a federal income
tax deduction for interest in respect of debt obligations, such as the Junior
Subordinated Debentures, issued on or after the date of "first committee
action" with respect the Clinton Proposal (i) if such debt obligations had a
maximum term in excess of 15 years and were not shown as indebtedness on the
issuer's applicable consolidated balance sheet or (ii) if such debt
obligations had a maximum weighted average maturity of more than 40 years. The
Clinton Proposal was not enacted and, under current law, the Company is able
to deduct interest on the Junior Subordinated Debentures. There can be no
assurance, however, that legislation similar to the Clinton Proposal or future
legislative proposals, future regulations or official administrative
pronouncements, or future judicial decisions will not affect the ability of
the Company to deduct interest on the Junior Subordinated Debentures. Such a
change could give rise to a Tax Event, which
may permit the Company to cause a redemption of the Capital Securities before,
as well as after, December 1, 2007. See "Description of Capital Securities--
Redemption" and "Certain Federal Income Tax Consequences--Possible Tax Law
Changes."
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DOMINION RESOURCES, INC.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for each of the periods indicated is
as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1997* 1996 1995 1994 1993
----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges.............. 1.97 2.71 2.55 2.77 2.92
</TABLE>
- --------
(*) Net income for the twelve months ended December 31, 1997 includes the one
time charge of $156.6 million for the windfall profits tax levied by the
United Kingdom government. Excluding this charge from the calculation
above results in a ratio of earnings to fixed charges for the twelve
months ended December 31, 1997 of 2.24x.
These computations include the Company and its subsidiaries, and 50% or less
equity companies. For these ratios, "earnings" is determined by adding "total
fixed charges" (excluding interest capitalized), income taxes, minority common
stockholders equity in net income and amortization of interest capitalized to
income from continuing operations after eliminating equity in undistributed
earnings and adding back losses of companies in which at least 20% but less
than 50% equity is owned. For this purpose, "total fixed charges" consists of
(1) interest on all indebtedness and amortization of debt discount and
expense, (2) interest capitalized and (3) an interest factor attributable to
rentals.
USE OF PROCEEDS FROM THE SALE OF THE OLD CAPITAL SECURITIES
Neither the Company nor the Trust will receive any cash or other proceeds
from the issuance of the New Capital Securities offered hereby. In
consideration for issuing the New Capital Securities in exchange for Old
Capital Securities as described in this Prospectus, the Trust will receive Old
Capital Securities in like Liquidation Amount. The Old Capital Securities
surrendered in exchange for the New Capital Securities will be retired and
canceled.
The proceeds to the Trust from the offering of the Old Capital Securities
(without giving effect to expenses payable by the Company) were $250,000,000.
All of the proceeds from the sale of the Old Capital Securities were invested
by the Trust in the Junior Subordinated Debentures. The Company used the net
proceeds from the sale of the Junior Subordinated Debentures for general
corporate purposes including the repayment of debt.
DOMINION RESOURCES CAPITAL TRUST I
Dominion Resources Capital Trust I is a statutory business trust, created
under Delaware law pursuant to the filing of a certificate of trust with the
Delaware Secretary of State, which is governed by the Trust Agreement. The
Trust exists for the exclusive purposes of (i) issuing and selling the Trust
Securities and New Capital Securities, (ii) using the proceeds from the sale
of Common Securities and the Old Capital Securities to acquire the Old Junior
Subordinated Debentures issued by the Company, (iii) making Distributions,
(iv) exchanging the Old Junior Subordinated Debentures for New Junior
Subordinated Debentures in the Exchange Offer pursuant to the Indenture and
(v) engaging in only those other activities necessary, advisable or incidental
thereto (such as registering the transfer of Capital Securities). Accordingly,
the Junior Subordinated Debentures are the sole assets of the Trust and
payments by the Company under the Junior Subordinated Debentures and the
Expense Agreement will be the sole revenue of the Trust. All of the Common
Securities are owned by the Company. The Common Securities rank pari passu,
and payments are made thereon pro rata, with the Capital Securities except
that upon the occurrence and continuance of an event of default under the
Trust Agreement resulting from a Debenture Event of Default, the rights of the
Company as holder of the Common Securities to payment in respect of
Distributions and payments upon liquidation, redemption or otherwise will be
subordinated to the rights of the
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<PAGE>
holders of the Capital Securities. See "Description of Securities--Description
of Capital Securities--Subordination of Common Securities." The Company owns
Common Securities in an aggregate liquidation amount equal to 3% of the
outstanding Capital Securities.
The Trust has a term of approximately 31 years, but may terminate earlier as
provided in the Trust Agreement. The Trust's business and affairs are
conducted by its trustees, each appointed by the Company as holder of the
Common Securities. Under the Trust Agreement, the trustees for the Trust are
The Chase Manhattan Bank, as the Property Trustee, Chase Manhattan Bank
Delaware, as the Delaware Trustee, and two Administrative Trustees who are
officers of the Company or an Affiliate. The Chase Manhattan Bank also acts as
trustee under the Indenture and the Old Guarantee Agreement and will act as
trustee under the New Guarantee Agreement. See "Description of Securities--
Description of Guarantee" and "Description of Securities--Description of
Junior Subordinated Debentures." The holder of the Common Securities of the
Trust, or the holders of a majority in Liquidation Amount of Capital
Securities if a Debenture Event of Default has occurred under the Trust
Agreement and is continuing, are entitled to appoint, remove or replace the
Property Trustee and/or the Delaware Trustee. In no event do the holders of
the Capital Securities have the right to vote to appoint, remove or replace
the Administrative Trustees; such voting rights are vested exclusively in the
holder of the Common Securities. The duties and obligations of each Issuer
Trustee are governed by the Trust Agreement. The Company pays all fees and
expenses related to the Trust, the offering of the Old Capital Securities and
this Exchange Offer and will pay, directly or indirectly, all ongoing costs,
expenses and liabilities of the Trust.
Pursuant to the Expense Agreement, the Company has irrevocably and
unconditionally guaranteed to each person or entity to whom the Trust becomes
indebted or liable, the full payment of any costs, expenses or liabilities of
the Trust, other than obligations of the Trust to pay to the holders of any
Capital Securities or the amounts due such holders pursuant to the terms of
the Capital Securities. The principal executive office of the Trust is c/o
Dominion Resources, Inc. 901 E. Byrd Street-Suite 1700, Richmond VA 23219-
6111.
DOMINION RESOURCES, INC.
Dominion Resources, Inc. is a holding company headquartered in Richmond,
Virginia. Its principal operating subsidiaries are:
. Virginia Electric and Power Company, principally an electric utility
serving two million residences and businesses in a 30,000-square-mile
region from northern Virginia to northeastern North Carolina. It owns
and operates nuclear, coal, natural gas, oil and hydroelectric power
stations;
. Dominion Energy, Inc., an independent power and natural gas subsidiary.
It has ownership and operating interests in 28 generating facilities in
six U.S. states, Argentina, Belize, Bolivia and Peru. This company has
about 649 billion cubic feet of proven natural gas reserves throughout
several major regions of the United States and Western Canada;
. Dominion Capital, Inc., a financial services and real estate subsidiary,
with commercial, mortgage and consumer lending entities, a full-service
commercial real estate company, 50% limited partnership interest in a
hydroelectric station in Louisiana, and a variety of debt and equity
investments; and
. East Midlands Electricity plc, principally an electric power
distribution and supply company serving 2.3 million homes and businesses
in the East Midlands region of the United Kingdom.
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<PAGE>
ACCOUNTING TREATMENT FOR THE TRUST
For financial reporting purposes, the Trust is treated as a subsidiary of
the Company and, accordingly, the accounts of the Trust are included in the
consolidated financial statements of the Company. The Capital Securities will
be presented as a separate line item in the consolidated balance sheet of the
Company and appropriate disclosures about the Capital Securities, the
Guarantee and the Junior Subordinated Debentures will be included in the notes
to the consolidated financial statements. For financial reporting purposes,
the Company will record Distributions payable on the Capital Securities as a
charge in the consolidated statement of income.
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
In connection with the sale of the Old Capital Securities, the Company and
the Trust entered into the Registration Rights Agreements with the Initial
Purchasers, pursuant to which the Company and the Trust agreed to file and to
use their reasonable best efforts to cause to become effective with the
Commission a registration statement with respect to the exchange of the Old
Capital Securities for capital securities with terms identical in all material
respects to the terms of the Old Capital Securities. A copy of the
Registration Rights Agreement has been filed as an Exhibit to the Registration
Statement of which this Prospectus is a part.
The Exchange Offer is being made to satisfy the contractual obligations of
the Company and the Trust under the Registration Rights Agreement. The forms
and terms of the New Capital Securities are identical in all material respect
to the forms and terms of the Old Capital Securities, except that the New
Capital Securities have been registered under the Securities Act and therefore
will not be subject to certain restrictions on transfer applicable to the Old
Capital Securities and will not provide for any increase in the Distribution
rate thereon. In that regard, the Old Capital Securities provide, among other
things, that, if a registration statement relating to the Exchange Offer has
not been filed on or by May 7, 1998 and declared effective on or by June 6,
1998 the Distribution rate borne by the Old Capital Securities commencing on
June 7, 1998, will increase by 0.25% per annum until the Exchange Offer is
consummated. Upon consummation of the Exchange Offer, holders of Old Capital
Securities will not be entitled to any increase in the Distribution rate
thereon or any further registration rights under the Registration Rights
Agreement, except under limited circumstances. See "Risk Factors--Consequences
of a Failure to Exchange Old Capital Securities" and "Description of Old
Capital Securities."
The Exchange Offer is not being made to, nor will the Trust or the Company
accept tenders for exchange from, holders of Old Capital Securities in any
jurisdiction in which the Exchange Offer or the acceptance thereof would not
be in compliance with the securities or blue sky laws of such jurisdiction.
Unless the context requires otherwise, the term "holder" with respect to the
Exchange Offer means any person in whose name the Old Capital Securities are
registered on the books of the Trust or any other person who has obtained a
properly completed bond power from the registered holder, or any person who
beneficially owns Old Capital Securities which are held of record by DTC who
desires to deliver such Old Capital Securities by book-entry transfer into the
Exchange Agent's account at DTC, or any person who beneficially owns Old
Capital Securities which are held of record by a nominee other than DTC (or
its nominee).
Pursuant to the Exchange Offer, the Company will exchange as soon as
practicable after the date hereof, the Old Guarantee for the New Guarantee and
all of the Old Junior Subordinated Debentures, of which $257,732,000 aggregate
principal amount is outstanding, for a like aggregate principal amount of the
New Junior Subordinated Debentures. The New Guarantee and New Junior
Subordinated Debentures have been registered under the Securities Act.
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<PAGE>
TERMS OF THE EXCHANGE OFFER
The Trust hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal, to
exchange up to $250,000,000 aggregate Liquidation Amount of New Capital
Securities for a like aggregate Liquidation Amount of Old Capital Securities
properly tendered on or prior to the Expiration Date and not properly
withdrawn in accordance with the procedures described below. The Trust will
issue, promptly after the Expiration Date, an aggregate Liquidation Amount of
up to $250,000,000 of New Capital Securities in exchange for a like aggregate
Liquidation Amount of outstanding Old Capital Securities tendered and accepted
in connection with the Exchange Offer. Holders may tender their Old Capital
Securities for exchange in whole or in part having a Liquidation Amount of not
less than $100,000 (100 Old Capital Securities) or any integral multiple of
$1,000 (one Old Capital Security) in excess thereof.
The Exchange Offer is not conditioned upon any minimum Liquidation Amount of
Old Capital Securities being tendered. As of the date of this Prospectus,
$250,000,000 aggregate Liquidation Amount of Old Capital Securities is
outstanding.
Holders of Old Capital Securities do not have any appraisal or dissenters'
rights in connection with the Exchange Offer. Old Capital Securities which are
not tendered for or are tendered but not accepted in connection with the
Exchange Offer will remain outstanding and remain entitled to the benefits of
the Trust Agreement, but will not be entitled to any further registration
rights under the Registration Rights Agreement, except under limited
circumstances. See "Risk Factors--Consequences of a Failure to Exchange Old
Capital Securities" and "Description of Old Securities."
If any tendered Old Capital Securities are not accepted for exchange because
of an invalid tender, the occurrence of certain other events set forth herein
or otherwise, certificates for any such unaccepted Old Capital Securities will
be returned, without expense, to the tendering holder thereof promptly after
the Expiration Date.
Holders who tender Old Capital Securities in connection with the Exchange
Offer will not be required to pay brokerage commissions or fees or transfer
taxes with respect to the exchange of Old Capital Securities in connection
with the Exchange Offer, except under those circumstances described in the
Letter of Transmittal. The Company will pay all charges and expenses, other
than certain applicable taxes described below, in connection with the Exchange
Offer. See "--Fees and Expenses."
NEITHER THE BOARD OF DIRECTORS OF THE COMPANY NOR THE TRUSTEES OF THE TRUST
MAKES ANY RECOMMENDATION TO HOLDERS OF OLD CAPITAL SECURITIES AS TO WHETHER TO
TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION OF THEIR OLD CAPITAL
SECURITIES PURSUANT TO THE EXCHANGE OFFER. IN ADDITION, NO ONE HAS BEEN
AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF OLD CAPITAL SECURITIES
MUST MAKE THEIR OWN DECISION WHETHER TO TENDER PURSUANT TO THE EXCHANGE OFFER
AND, IF SO, THE AGGREGATE LIQUIDATION AMOUNT OF OLD CAPITAL SECURITIES TO
TENDER AFTER READING THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL AND
CONSULTING WITH THEIR ADVISERS, IF ANY, BASED ON THEIR OWN FINANCIAL POSITION
AND REQUIREMENTS.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" means 5:00 p.m., New York City time, on June 8,
1998 unless the Exchange Offer is extended by the Company and the Trust (in
which case the term "Expiration Date" shall mean the latest date and time to
which the Exchange Offer is extended).
The Company and the Trust expressly reserve the right in their sole and
absolute discretion, subject to applicable law, at any time and from time to
time, (i) to delay the acceptance of the Old Capital Securities for exchange,
(ii) to terminate the Exchange Offer (whether or not any Old Capital
Securities have been accepted for exchange) if the Company or the Trust
determines, in its sole and absolute discretion, that any of the
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<PAGE>
conditions referred to under "--Conditions to the Exchange Offer" has occurred
or exist or has not been satisfied, (iii) to extend the Expiration Date and
retain all Old Capital Securities tendered pursuant to the Exchange Offer,
subject, however, to the right of holders of Old Capital Securities to
withdraw their tendered Old Capital Securities as described under "--
Withdrawal Rights," and (iv) to waive any condition or otherwise amend the
terms of the Exchange Offer in any respect. If the Exchange Offer is amended
in a manner determined by the Company and the Trust to constitute a material
change, or if the Company and the Trust waive a material condition of the
Exchange Offer, the Company and the Trust will promptly disclose such
amendment by means of a prospectus supplement that will be distributed to the
registered holders of the Old Capital Securities, and the Company and the
Trust will extend the Exchange Offer to the extent required by Rule 14e-1
under the Exchange Act.
Any such delay in acceptance, extension, termination or amendment will be
followed promptly by oral (promptly confirmed in writing) or written notice
thereof to the Exchange Agent and by making a public announcement thereof, and
such announcement in the case of an extension will be made no later than 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date. Without limiting the manner in which the Company
and the Trust may choose to make any public announcement and subject to
applicable law, the Company and the Trust shall have no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
issuing a release to an appropriate news agency.
ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF NEW CAPITAL SECURITIES
Upon the terms and subject to the conditions of the Exchange Offer, the
Trust will exchange New Capital Securities for Old Capital Securities validly
tendered and not withdrawn (pursuant to the withdrawal rights described under
"--Withdrawal Rights") promptly after the Expiration Date.
Subject to the conditions set forth under "--Conditions to the Exchange
Offer," delivery of New Capital Securities in exchange for Old Capital
Securities tendered and accepted for exchange pursuant to the Exchange Offer
will be made only after timely receipt by the Exchange Agent of (i)
certificates for Old Capital Securities or a book-entry confirmation of a
book-entry transfer of Old Capital Securities into the Exchange Agent's
account at DTC, including an Agent's Message if the tendering holder does not
deliver a Letter of Transmittal, (ii) a completed and signed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees,
or, in the case of a book-entry transfer, an Agent's Message in lieu of the
Letter of Transmittal, and (iii) any other documents required by the Letter of
Transmittal. Accordingly, the delivery of New Capital Securities might not be
made to all tendering holders at the same time, and will depend upon when
certificates for Old Capital Securities, book-entry confirmations with respect
to Old Capital Securities and other required documents are received by the
Exchange Agent.
The term "book-entry confirmation" means a timely confirmation of a book-
entry transfer of Old Capital Securities into the Exchange Agent's account at
DTC. See "--Procedures for Tendering Old Capital Securities--Book-Entry
Transfer." The term "Agent's Message" means a message, transmitted by DTC to
and received by the Exchange Agent and forming a part of a book-entry
confirmation, which states that DTC has received an express acknowledgment
from the tendering participant, which acknowledgment states that such
participant has received and agrees to be bound by the Letter of Transmittal
and that the Trust and the Company may enforce such Letter of Transmittal
against such participant.
Subject to the terms and conditions of the Exchange Offer, the Company and
the Trust will be deemed to have accepted for exchange, and thereby exchanged,
Old Capital Securities validly tendered and not withdrawn as, if and when the
Trust gives oral (promptly confirmed in writing) or written notice to the
Exchange Agent of the Company's and the Trust's acceptance of such Old Capital
Securities for exchange pursuant to the Exchange Offer. The Exchange Agent
will act as agent for the Company and the Trust for the purpose of receiving
tenders of Old Capital Securities, Letters of Transmittal and related
documents, and as agent for tendering holders for the purpose of receiving Old
Capital Securities, Letters of Transmittal and related documents and
transmitting New Capital Securities which will not be held in global form by
DTC or a nominee of DTC to validly tendering
26
<PAGE>
holders. Such exchange will be made promptly after the Expiration Date. If for
any reason whatsoever, acceptance for exchange or the exchange of any Old
Capital Securities tendered pursuant to the Exchange Offer is delayed (whether
before or after the Company's and the Trust's acceptance for exchange of Old
Capital Securities) or the Company and the Trust extend the Exchange Offer or
are unable to accept for exchange or exchange Old Capital Securities tendered
pursuant to the Exchange Offer, then, without prejudice to the Company's and
the Trust's rights set forth herein, the Exchange Agent may, nevertheless, on
behalf of the Company and the Trust and subject to Rule 14e-1(c) under the
Exchange Act, retain tendered Old Capital Securities and such Old Capital
Securities may not be withdrawn except to the extent tendering holders are
entitled to withdrawal rights as described under "--Withdrawal Rights."
Pursuant to an Agent's Message or a Letter of Transmittal, a holder of Old
Capital Securities will represent, warrant and agree in the Agent's Message or
Letter of Transmittal that it has full power and authority to tender,
exchange, sell, assign and transfer Old Capital Securities, that the Trust
will acquire good, marketable and unencumbered title to the tendered Old
Capital Securities, free and clear of all liens, restrictions, charges and
encumbrances, and the Old Capital Securities tendered for exchange are not
subject to any adverse claims or proxies. The holder also will warrant and
agree that it will, upon request, execute and deliver any additional documents
deemed by the Trust or the Exchange Agent to be necessary or desirable to
complete the exchange, sale, assignment, and transfer of the Old Capital
Securities tendered pursuant to the Exchange Offer.
PROCEDURES FOR TENDERING OLD CAPITAL SECURITIES
Valid Tender. Except as set forth below, in order for Old Capital Securities
to be validly tendered by book-entry transfer, an Agent's Message must be
transmitted by DTC to the Exchange Agent or a completed and signed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees,
and in either case any other documents required by the Letter of Transmittal,
must be delivered to the Exchange Agent by mail, facsimile, hand delivery or
overnight carrier at one of the Exchange Agent's addresses set forth under "--
Exchange Agent" on or prior to the Expiration Date and either (i) such Old
Capital Securities must be tendered pursuant to the procedures for book-entry
transfer set forth below or (ii) the guaranteed delivery procedures set forth
below must be complied with.
Except as set forth below, in order for Old Capital Securities to be validly
tendered by a means other than by book-entry transfer, a completed and signed
Letter of Transmittal (or facsimile thereof), with any required signature
guarantees, and any other documents required by the Letter of Transmittal,
must be delivered to the Exchange Agent by mail, facsimile, hand delivery or
overnight carrier at one of the Exchange Agent's addresses set forth under "--
Exchange Agent" on or prior to the Expiration Date and either (i) such Old
Capital Securities must be delivered to the Exchange Agent on or prior to the
Expiration Date or (ii) the guaranteed delivery procedures set forth below
must be complied with.
If less than all Old Capital Securities are tendered, a tendering holder
should fill in the amount of Old Capital Securities being tendered in the
appropriate box on the Letter of Transmittal. The entire amount of Old Capital
Securities delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise indicated.
THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. IF DELIVERY IS TO BE BY MAIL, THE USE OF REGISTERED MAIL,
RETURN RECEIPT REQUESTED, PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE
IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE
TIMELY DELIVERY.
Book-Entry Transfer. The Exchange Agent and DTC have confirmed that any
Participant (as defined in "Description of Securities--Description of Capital
Securities--Form, Denomination, Book-Entry Procedures
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and Transfer--Depositary Procedures") in DTC's book-entry transfer facility
system may utilize DTC's ATOP procedures to tender Old Capital Securities. The
Exchange Agent will establish an account with respect to the Old Capital
Securities at DTC for purposes of the Exchange Offer within two business days
after the date of this Prospectus. Any Participant may make a book-entry
delivery of the Old Capital Securities by causing DTC to transfer such Old
Capital Securities into the Exchange Agent's account at DTC in accordance with
DTC's ATOP procedures for transfer. However, although delivery of Old Capital
Securities may be effected through book-entry transfer into the Exchange
Agent's account at DTC, an Agent's Message or a completed and signed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees and
any other documents required by the Letter of Transmittal, must in any case be
delivered to and received by the Exchange Agent at one of its addresses set
forth under "--Exchange Agent" on or prior to the Expiration Date, or the
guaranteed delivery procedure set forth below must be complied with.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
Signature Guarantees. Certificates for Old Capital Securities need not be
endorsed and signature guarantees on a Letter of Transmittal are unnecessary
unless (a) a certificate for the Old Capital Securities is registered in a
name other than that of the person surrendering the certificate or (b) such
registered holder completes the box entitled "Special Issuance Instructions"
or "Special Delivery Instructions" in the Letter of Transmittal. In the case
of (a) or (b) above, such certificates for Old Capital Securities must be duly
endorsed or accompanied by a properly executed bond power, with the
endorsement or signature on the bond power and on the Letter of Transmittal
guaranteed by a firm or other entity identified in Rule 17Ad-15 under the
Exchange Act as an "eligible guarantor institution," including (as such terms
are defined therein): (i) a bank; (ii) a broker, dealer, municipal securities
broker or dealer or government securities broker or dealer; (iii) a credit
union; (iv) a national securities exchange, registered securities association
or clearing agency; or (v) a savings association that is a participant in a
Securities Transfer Association (an "Eligible Institution"), unless
surrendered on behalf of such Eligible Institution. See Instructions 4 and 7
to the Letter of Transmittal.
Guaranteed Delivery. If a holder desires to tender Old Capital Securities
pursuant to the Exchange Offer and the certificates for such Old Capital
Securities are not immediately available or time will not permit all required
documents to reach the Exchange Agent on or before the Expiration Date, or the
procedures for book-entry transfer cannot be completed on a timely basis, such
Old Capital Securities may nevertheless be tendered, provided that all of the
following guaranteed delivery procedures are complied with:
(i) such tenders are made by or through an Eligible Institution;
(ii) a completed and signed Notice of Guaranteed Delivery, substantially
in the form accompanying the Letter of Transmittal, is delivered to the
Exchange Agent, as provided below, on or prior to Expiration Date; and
(iii) the certificates (or a book-entry confirmation) representing all
tendered Old Capital Securities, in proper form for transfer, together with
a completed and signed Letter of Transmittal (or facsimile thereof) or, in
the case of a book-entry transfer, an Agent's Message in lieu of the Letter
of Transmittal, with any required signature guarantees and any other
documents required by the Letter of Transmittal, are received by the
Exchange Agent within five New York Stock Exchange trading days after the
date of execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or transmitted
by facsimile or mail to the Exchange Agent and must include a guarantee by an
Eligible Institution in the form set forth in such notice.
The Company's and the Trust's acceptance for exchange of Old Capital
Securities tendered pursuant to any of the procedures described above will
constitute a binding agreement between the tendering holder, the Company and
the Trust upon the terms and subject to the conditions of the Exchange Offer.
Determination of Validity. All questions as to the form of documents,
validity, eligibility (including time of receipt) and acceptance for exchange
of any tendered Old Capital Securities will be determined by the Company
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and the Trust, in their sole discretion, whose determination shall be final
and binding on all parties. The Company and the Trust reserve the absolute
right, in their sole and absolute discretion, to reject any and all tenders
determined by them not to be in proper form or the acceptance of which, or
exchange for, may, in the view of counsel to the Company and the Trust, be
unlawful. The Company and the Trust also reserve the absolute right, subject
to applicable law, to waive any of the conditions of the Exchange Offer as set
forth under "--Conditions to the Exchange Offer" or any condition, defect or
irregularity in any tender of Old Capital Securities of any particular holder
whether or not similar conditions, defects or irregularities are waived in the
case of other holders.
The Company's and the Trust's interpretation of the terms and conditions of
the Exchange Offer (including the Letter of Transmittal and the instructions
thereto) will be final and binding on all parties. No tender of Old Capital
Securities will be deemed to have been validly made until all irregularities
with respect to such tender have been cured or waived. Neither the Company,
the Trust, any affiliates or assigns of the Company or the Trust, the Exchange
Agent nor any other person shall be under any duty to give any notification of
any defects or irregularities in tenders or incur any liability for failure to
give any such notification.
If any Letter of Transmittal, endorsement, bond power, power of attorney or
any other document required by the Letter of Transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing and, unless waived by the Company
and the Trust, proper evidence satisfactory to the Company and the Trust, in
their sole discretion, of such person's authority to so act must be submitted.
A beneficial owner of Old Capital Securities that are held by or registered
in the name of a broker, dealer, commercial bank, trust company or other
nominee or custodian is urged to contact such entity promptly if such
beneficial holder wishes to participate in the Exchange Offer.
RESALES OF NEW CAPITAL SECURITIES
The Trust is making the Exchange Offer for the Capital Securities in
reliance on the position of the SEC staff as set forth in certain interpretive
letters addressed to third parties in other transactions. However, neither the
Company nor the Trust sought its own interpretive letter and there can be no
assurance that the SEC Staff would make a similar determination with respect
to the Exchange Offer as it has in such interpretive letters to third parties.
Based on these interpretations by the SEC Staff, and subject to the two
immediately following sentences, the Company and the Trust believe that New
Capital Securities issued pursuant to this Exchange Offer in exchange for Old
Capital Securities may be offered for resale, resold and otherwise transferred
by a holder thereof (other than a holder who is a broker-dealer) without
further compliance with the registration and prospectus delivery requirements
of the Securities Act, provided that such New Capital Securities are acquired
in the ordinary course of such holder's business and that such holder is not
participating, and has no arrangement or understanding with any person to
participate, in a distribution (within the meaning of the Securities Act) of
such New Capital Securities. However, any holder of Old Capital Securities who
is an "affiliate" of the Company or the Trust or who intends to participate in
the Exchange Offer for the purpose of distributing New Capital Securities, or
any broker-dealer who purchased Old Capital Securities from the Trust to
resell pursuant to Rule 144A or any other available exemption under the
Securities Act, (a) will not be able to rely on the interpretations of the
staff of the Division of Corporation Finance of the Commission set forth in
the above-mentioned interpretive letters, (b) will not be permitted or
entitled to tender such Old Capital Securities in the Exchange Offer and (c)
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any sale or other transfer of such Old
Capital Securities unless such sale is made pursuant to an exemption from such
requirements. In addition, as described below, if any broker-dealer holds Old
Capital Securities acquired for its own account as a result of market-making
or other trading activities and exchanges such Old Capital Securities for New
Capital Securities, then such broker-dealer must deliver a prospectus meeting
the requirements of the Securities Act in connection with any resales of such
New Capital Securities.
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Each holder of Old Capital Securities who wishes to exchange Old Capital
Securities for New Capital Securities in the Exchange Offer will be required
to represent that (i) it is not an "affiliate" of the Company or the Trust,
(ii) any New Capital Securities to be received by it are being acquired in the
ordinary course of its business, (iii) it has no arrangement or understanding
with any person to participate in a distribution (within the meaning of the
Securities Act) of such New Capital Securities, and (iv) if such holder is not
a broker-dealer, such holder is not engaged in, and does not intend to engage
in, a distribution (within the meaning of the Securities Act) of such New
Capital Securities. The Letter of Transmittal contains the foregoing
representations.
In addition, the Company and the Trust may require a holder, as a condition
to such holder's eligibility to participate in the Exchange Offer, to furnish
to the Company and the Trust (or an agent thereof) in writing information as
to the number of "beneficial owners" (within the meaning of Rule 13d-3 under
the Exchange Act) on behalf of whom such holder holds the Capital Securities
to be exchanged in the Exchange Offer. Each broker-dealer that receives New
Capital Securities for its own account pursuant to the Exchange Offer must
acknowledge that it acquired the Old Capital Securities for its own account as
the result of market-making activities or other trading activities and must
agree that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Capital Securities.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. Based on the position
taken by the SEC staff in the interpretive letters referred to above, the
Company and the Trust believe that broker-dealers who acquired Old Capital
Securities for their own accounts as a result of market-making activities or
other trading activities ("Participating Broker-Dealers") may fulfill their
prospectus delivery requirements with respect to the New Capital Securities
received upon exchange of such Old Capital Securities (other than Old Capital
Securities which represent an unsold allotment from the original sale of the
Old Capital Securities) with a prospectus meeting the requirements of the
Securities Act, which may be the prospectus prepared for an exchange offer so
long as it contains a description of the plan of distribution with respect to
the resale of such New Capital Securities. Accordingly, this Prospectus, as it
may be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer during the 90-day period referred to below in
connection with resales of New Capital Securities received in exchange for Old
Capital Securities where such Old Capital Securities were acquired by such
Participating Broker-Dealer for its own account as a result of market-making
or other trading activities. Subject to certain provisions set forth in the
Registration Rights Agreement and to the limitations described herein, the
Company and the Trust have agreed that this Prospectus, as it may be amended
or supplemented from time to time, may be used by a Participating Broker-
Dealer in connection with resales of such New Capital Securities for a period
ending 90 days after the Expiration Date or, if earlier, when all such New
Capital Securities have been disposed of by such Participating Broker-Dealer.
See "Plan of Distribution." Any person, including any Participating Broker-
Dealer, who is an "affiliate" of the Company or the Trust may not rely on such
interpretive letters and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction.
In that regard, each Participating Broker-Dealer who surrenders Old Capital
Securities pursuant to the Exchange Offer will be deemed to have agreed, by
execution of the Letter of Transmittal or delivery of any Agent's Message in
lieu thereof, that, upon receipt of notice from the Company or the Trust of
the occurrence of any event or the discovery of any fact which makes any
statement contained or incorporated by reference in this Prospectus untrue in
any material respect or which causes this Prospectus to omit to state a
material fact necessary in order to make the statements contained or
incorporated by reference herein, in light of the circumstances under which
they were made, not misleading or of the occurrence of certain other events
specified in the Registration Rights Agreement, such Participating Broker-
Dealer will suspend the sale of New Capital Securities (or the New Guarantee
or the New Junior Subordinated Debentures, as applicable) pursuant to this
Prospectus until the Company or the Trust has amended or supplemented this
Prospectus to correct such misstatement or omission and has furnished copies
of the amended or supplemented Prospectus to such Participating Broker-Dealer
or the Company or the Trust has given notice that the sale of the New Capital
Securities (or the New Guarantee or the New Junior Subordinated Debentures, as
applicable) may be resumed, as the case may be.
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WITHDRAWAL RIGHTS
As set forth below, tenders of Old Capital Securities may be withdrawn at
any time on or prior to the Expiration Date.
In order for a withdrawal to be effective a written or facsimile
transmission of such notice of withdrawal must be received by the Exchange
Agent at one of its addresses set forth under "--Exchange Agent" on or prior
to the Expiration Date. Any such notice of withdrawal must specify the name of
the person who tendered the Old Capital Securities to be withdrawn, the
aggregate Liquidation Amount of Old Capital Securities to be withdrawn, and
(if certificates for such Old Capital Securities have been tendered) the name
of the registered holder of the Old Capital Securities as set forth on the
certificate for the Old Capital Securities, if different from that of the
person who tendered such Old Capital Securities. If certificates for the Old
Capital Securities have been delivered or otherwise identified to the Exchange
Agent, then prior to the physical release of such certificates for the Old
Capital Securities, the tendering holder must submit the serial numbers shown
on the particular certificates for the Old Capital Securities to be withdrawn
and the signature on the notice of withdrawal must be guaranteed by an
Eligible Institution, except in the case of Old Capital Securities tendered
for the account of an Eligible Institution. If Old Capital Securities have
been tendered pursuant to the procedures for book-entry transfer set forth in
"--Procedures for Tendering Old Capital Securities," the notice of withdrawal
must specify the name and number of the account at DTC to be credited with the
withdrawn Old Capital Securities. Withdrawals of tenders of Old Capital
Securities may not be rescinded. Old Capital Securities properly withdrawn
will not be deemed validly tendered for purposes of the Exchange Offer, but
may be retendered at any subsequent time on or prior to the Expiration Date by
following any of the procedures described above under "--Procedures for
Tendering Old Capital Securities."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company and the
Trust, in their sole discretion, whose determination shall be final and
binding on all parties. Neither the Company, the Trust, any affiliates or
assigns of the Company or the Trust, the Exchange Agent nor any other person
shall be under any duty to give any notification of any irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification. Any Old Capital Securities which have been tendered but which
are withdrawn will be returned to the holder thereof promptly after
withdrawal.
DISTRIBUTIONS ON NEW CAPITAL SECURITIES
Each New Capital Security will accumulate Distributions from the most recent
Distribution Date on the Old Capital Securities surrendered in exchange for
such New Capital Securities or, if no Distributions have been paid or provided
for on such Old Capital Securities, from December 8, 1997. As a result,
holders of Old Capital Securities that are accepted for exchange will not
receive accumulated Distributions on such Old Capital Securities for any
period from and after the most recent Distribution Date on such Old Capital
Securities or, if no Distributions have been paid or provided for on such Old
Capital Securities, from and after December 8, 1997, and such holders will be
deemed to have waived the right to receive any Distributions on such Old
Capital Securities.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, or any extension
of the Exchange Offer, the Company and the Trust will not be required to
accept any Old Capital Securities for exchange or to exchange any New Capital
Securities for any Old Capital Securities, and, as described below, may
terminate the Exchange Offer (whether or not any Old Capital Securities have
been accepted for exchange) or may waive any conditions to or amend the
Exchange Offer, if any of the following conditions have occurred or exists or
have not been satisfied:
(a) there shall occur a change in the current interpretation by the Staff
which permits the New Capital Securities issued pursuant to the Exchange
Offer in exchange for Old Capital Securities to be offered for
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resale, resold and otherwise transferred by holders thereof (other than
broker-dealers and any such holder which is an "affiliate" of the Company
or the Trust within the meaning of Rule 405 under the Securities Act)
without compliance with the registration and prospectus delivery provisions
of the Securities Act provided that such New Capital Securities are
acquired in the ordinary course of such holders' business and such holders
have no arrangement or understanding with any person to participate in the
distribution of such New Capital Securities;
(b) any action or proceeding shall have been instituted or threatened in
any court or by or before any governmental agency or body with respect to
the Exchange Offer which, in the Company's and the Trust's judgment, would
reasonably be expected to impair the ability of the Company or the Trust to
proceed with the Exchange Offer;
(c) any law, statute, rule or regulation shall have been adopted enacted
which, in the Company's and the Trust's judgment, would reasonably be
expected to impair the ability of the Company or the Trust to proceed with
the Exchange Offer;
(d) trading on the New York Stock Exchange or generally in the United
States over-the-counter market shall have been suspended by order of the
Commission or any other governmental authority which, in the Company's and
the Trust's judgment, would reasonably be expected to impair the ability of
the Company or the Trust to proceed with the Exchange Offer;
(e) a stop order shall have been issued by the Commission or any state
securities authority suspending the effectiveness of the Registration
Statement or proceedings shall have been initiated or, to the knowledge of
the Company or the Trust, threatened for that purpose, or any governmental
approval has not been obtained, which approval the Company and the Trust
shall, in their sole discretion, deem necessary for the consummation of the
Exchange Offer as contemplated hereby; or
(f) any change, or any development involving a prospective change, in the
business or financial affairs of the Company or any of its subsidiaries has
occurred which, in the sole judgment of the Company and the Trust, might
materially impair the ability of the Company or the Trust to proceed with
the Exchange Offer.
If the Company and the Trust determine in their sole and absolute discretion
that any of the foregoing events or conditions has occurred or exists or has
not been satisfied, the Company and the Trust may, subject to applicable law,
terminate the Exchange Offer (whether or not any Old Capital Securities have
theretofore been accepted for exchange) or may waive any such condition or
otherwise amend the terms of the Exchange Offer in any respect. If such waiver
or amendment constitutes a material change to the Exchange Offer, the Company
and the Trust will promptly disclose such waiver by means of a prospectus
supplement that will be distributed to the registered holders of the Old
Capital Securities, and the Company and the Trust will extend the Exchange
Offer to the extent required by Rule 14e-1 under the Exchange Act.
EXCHANGE AGENT
The Chase Manhattan Bank has been appointed as Exchange Agent for the
Exchange Offer. Delivery of a Letter of Transmittal and any other documents
required by the Letter of Transmittal, questions, requests for assistance, and
requests for additional copies of this Prospectus or of a Letter of Transmittal
should be directed to the Exchange Agent as follows:
By Registered or Certified Mail: By Overnight Courier or Hand:
The Chase Manhattan Bank The Chase Manhattan Bank
55 Water Street 55 Water Street
Room 234, North Building Room 234, North Building
New York, New York 10041 New York, New York 10041
Attn: Carlos Esteves Attn: Carlos Esteves
To Confirm by Telephone: By Facsimile Transmission:
(212) 638-0828 (212) 638-7380 or 7381
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Delivery to other than the above addresses or facsimile number will not
constitute a valid delivery.
FEES AND EXPENSES
The Company has agreed to pay the Exchange Agent reasonable and customary
fees for its services and will reimburse it for its reasonable out-of-pocket
expenses in connection therewith. The Company will also pay brokerage houses
and other custodians, nominees and fiduciaries the reasonable out-of-pocket
expenses incurred by them in forwarding copies of this Prospectus and related
documents to the beneficial owners of Old Capital Securities, and in handling
or tendering for their customers.
Holders who tender their Old Capital Securities for exchange will not be
obligated to pay any transfer taxes in connection therewith. If, however, New
Capital Securities are to be delivered to, or are to be issued in the name of,
any person other than the registered holder of the Old Capital Securities
tendered, or if a transfer tax is imposed for any reason other than the
exchange of Old Capital Securities in connection with the Exchange Offer, then
the amount of any such transfer taxes (whether imposed on the registered
holder or any other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes
will be billed directly to such tendering holder.
Neither the Company nor the Trust will make any payment to brokers, dealers
or others soliciting acceptances of the Exchange Offer.
DESCRIPTION OF NEW SECURITIES
DESCRIPTION OF CAPITAL SECURITIES
Pursuant to the terms of the Trust Agreement, the Trust has issued Old
Capital Securities and Common Securities and, in the event the Exchange Offer
is consummated, will issue New Capital Securities. The New Capital Securities
will represent undivided beneficial interests in the assets of the Trust and
the holders thereof will be entitled to a preference in certain circumstances
with respect to Distributions and amounts payable on redemption of the Trust
Securities or liquidation of the Trust over the Common Securities. See "--
Subordination of Common Securities." The Trust Agreement has been qualified
under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
The forms and terms of the New Capital Securities are identical in all
material respects to the forms and terms of the Old Capital Securities, except
that the New Capital Securities have been registered under the Securities Act
and therefore are not subject to certain restrictions on transfer applicable
to the Old Capital Securities and will not provide for any increase in the
Distribution rate thereon. Accordingly, as the context may require, unless
expressly stated otherwise, "Capital Securities" means the Old Capital
Securities and, in the event the Exchange Offer is consummated, the New
Capital Securities. This summary of certain provisions of the Capital
Securities, the Common Securities and the Trust Agreement does not purport to
be complete and is subject to, and is qualified in its entirety by reference
to, all the provisions of the Trust Agreement, including the definitions
therein of certain terms.
The Capital Securities (including the Old Capital Securities and the New
Capital Securities) are limited to $250,000,000 aggregate Liquidation Amount
at any one time outstanding. The Capital Securities rank pari passu, and
payments are made thereon pro rata, with the Common Securities except as
described under "--Subordination of Common Securities." The New Capital
Securities and any Old Capital Securities that remain outstanding after
consummation of the Exchange Offer will constitute a single series of Capital
Securities under the Trust Agreement and, accordingly, will vote together as a
single class for purposes of determining whether holders of the requisite
percentage in outstanding Liquidation Amount thereof have taken certain
actions or exercised certain rights under the Trust Agreement. Legal title to
the Old Junior Subordinated Debentures is (and legal title to the New Junior
Subordinated Debentures will be) held by the Property Trustee in trust for the
benefit of the holders of Capital Securities and Common Securities. The New
Guarantee to be executed by the
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Company for the benefit of the holders of Capital Securities will be a
guarantee on a subordinated basis but will not guarantee payment of
Distributions or amounts payable on redemption of Capital Securities or on
liquidation of the Trust when the Trust does not have funds on hand legally
available to make such payments. See "Description of Guarantee."
DISTRIBUTIONS
Distributions on the New Capital Securities are cumulative, accumulate from
December 8, 1997 and are payable semi-annually in arrears at the annual rate
of 7.83% of the Liquidation Amount on June 1 and December 1 of each year,
commencing June 1, 1998, to the holders of the Capital Securities on the
relevant record dates. The record dates are the immediately preceding May 15
and November 15, respectively. The amount of Distributions payable for any
period is computed on the basis of a 360-day year of twelve 30-day months. In
the event that any date on which Distributions are payable on the Capital
Securities is not a Business Day (as defined below), payment of the
Distribution payable on such date will be made on the next succeeding day that
is a Business Day (and without any interest or other payment in respect to any
such delay), in each case with the same force and effect as if made on such
date (each date on which Distributions are payable in accordance with the
foregoing, a "Distribution Date"). A "Business Day" means any day which is not
a Saturday or Sunday and which is neither a legal holiday nor a day on which
banking institutions in The City of New York are authorized or required by law
or executive order to close or a day on which the principal corporate trust
office of the Property Trustee or the Debenture Trustee is closed for
business.
So long as no Debenture Event of Default has occurred and is continuing, the
Company has the right under the Indenture to defer the payment of interest on
the Junior Subordinated Debentures at any time or from time to time for a
period not exceeding 10 consecutive semi-annual periods, during which
Extension Period the Company has the right to make partial interest payments.
No Extension Period may end or extend beyond the Stated Maturity. If and to
the extent that interest payments on the Junior Subordinated Deventures are
deferred, semi-annual Distributions on the Capital Securities by the Trust
will be deferred during any such Extension Period. Distributions to which
holders of the Capital Securities are entitled will accumulate Additional
Distributions equal to any Additional Interest received by the Trust in
respect of the Junior Subordinated Debentures. The term "Distributions" as
used herein shall include any such Additional Distributions, Special
Distributions and Additional Tax Sums, if applicable.
During any such Extension Period, the Company may not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Company's capital stock or
(ii) make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company that rank pari passu
with or junior to the Junior Subordinated Debentures or make any guarantee
payments with respect to any guarantee by the Company of the debt securities
of any subsidiary of the Company (including Other Guarantees) if such
guarantee ranks pari passu with or junior to the Junior Subordinated
Debentures (other than (a) dividends or distributions in common stock of the
Company, (b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the issuance of stock under
any such plan, or the redemption or repurchase of any such rights pursuant
thereto, (c) payments under the Guarantee and (d) purchases of common stock
related to the issuance of common stock or rights under any of the Company's
benefit plans for its directors, officers, employees, consultants or
advisors).
Prior to the termination of any such Extension Period, the Company may
further extend such Extension Period, provided that such extension does not
cause such Extension Period to exceed 10 consecutive semi-annual periods or to
extend beyond the Stated Maturity. Upon termination of any such Extension
Period and the payment of all amounts then due, and subject to the foregoing
limitations, the Company may elect to begin a new Extension Period. The
Company must give the Property Trustee, the Debenture Trustee and the
Administrative Trustees notice of its election of any such Extension Period at
least five Business Days prior to the earlier of (i) the date the
Distributions on the Capital Securities would have been payable except for the
election to begin such Extension Period or (ii) the date the Administrative
Trustees are required to give notice to any securities
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exchange or automated quotation system or to holders of Capital Securities of
the record date or the date such Distributions are payable but in any event
not less than five Business Days prior to such record date. There is no
limitation on the number of times that the Company may elect to begin an
Extension Period. See "Description of Junior Subordinated Debentures--Option
to Defer Interest Payments Period" and "Certain Federal Income Tax
Consequences--Interest Income and Original Issue Discount."
The revenue of the Trust available for distribution to holders of the
Capital Securities will be limited to payments under the Junior Subordinated
Debentures. See "Description of Junior Subordinated Debentures--General." If
the Company does not make interest payments on the Junior Subordinated
Debentures, the Property Trustee will not have funds legally available to pay
Distributions on the Capital Securities. The payment of Distributions (if and
to the extent the Trust has funds legally available for the payment of such
Distributions) is guaranteed by the Company on a subordinated basis as set
forth under "Description of Guarantee."
REDEMPTION
Upon the repayment in full at the Stated Maturity or prepayment in whole
(but not in part) of the Junior Subordinated Debentures, the proceeds from
such repayment or prepayment shall be applied by the Property Trustee to
redeem a Like Amount of the Trust Securities, upon not less than 20 nor more
than 60 days' notice of a date of redemption (the "Redemption Date"), at the
applicable Redemption Price, which shall be equal to (i) in the case of the
repayment of the Junior Subordinated Debentures at the Stated Maturity, the
Maturity Redemption Price (equal to the principal of, and accrued interest on,
the Junior Subordinated Debentures) or (ii) in the case of the optional
prepayment by the Company in whole but not in part of the Junior Subordinated
Debentures upon the occurrence and continuation of a Tax Event or an
Investment Company Event (A) prior to December 1, 2007 at the Event Redemption
Price (which is equal to the Event Prepayment Price in respect of the Junior
Subordinated Debentures) and (B) thereafter, at the Optional Redemption Price
(equal to the Optional Prepayment Price in respect of the Junior Subordinated
Debentures) (See "Description of Junior Subordinated Debentures--Optional
Prepayment"), and (iii) in the case of Optional Prepayment of the Junior
Subordinated Debentures on or after December 1, 2007, the Optional Redemption
Price (see "Description of Junior Subordinated Debentures--Tax Event or
Investment Company Event Prepayment").
The Company will have the right to prepay the Junior Subordinated Debentures
(i) in whole or in part from time to time on or after December 1, 2007, at the
applicable Optional Prepayment Price, and (ii) at any time, in whole (but not
in part) upon the occurrence of a Tax Event or Investment Company Event (A)
prior to December 1, 2007, at the Event Prepayment Price and (B) thereafter at
the Optional Prepayment Price.
LIQUIDATION OF THE TRUST AND DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES
The Company has the right to terminate the Trust at any time and, after
satisfaction of liabilities to creditors of the Trust as provided by
applicable law, cause the Junior Subordinated Debentures to be distributed to
the holders of the Trust Securities in liquidation of the Trust. Such right is
subject to the Company's having received an opinion of counsel to the effect
that such distribution will not be a taxable event to holders of Capital
Securities for United States federal income tax purposes.
Under current United States federal income tax law and interpretations and
assuming, as expected, the Trust is treated as a grantor trust, a distribution
of the Junior Subordinated Debentures will not be a taxable event to holders
of the Capital Securities. Should there be a change in law, a change in legal
interpretation, a Tax Event or other circumstances, however, the distribution
could be a taxable event to holders of the Capital Securities. See "Certain
Federal Income Tax Consequences--Distribution of Junior Subordinated
Debentures to Holders of Capital Securities."
The Trust shall automatically terminate upon the first to occur of: (i)
certain events of bankruptcy, a receivership of the Company or dissolution or
liquidation of the Company; (ii) the dissolution or liquidation of the
Company; (iii) distribution of a Like Amount of Junior Subordinated Debentures
to the holders of the Trust
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Securities following the exercise of the Company's option to give written
direction to the Property Trustee to terminate the Trust, subject to the
requirement that the Company receive an opinion of counsel to the effect that
such distribution will not be a taxable event to holders of Capital Securities
for United States federal income tax purposes); (iv) redemption of all of the
Trust Securities in connection with the repayment of all Junior Subordinated
Debentures as described above under "--Redemption"; (v) the entry of an order
for the dissolution of the Trust by a court of competent jurisdiction and (vi)
the expiration of the term of the Trust on December 31, 2028.
If a termination occurs as described in clause (i), (ii), (iii) or (v)
above, the Trust shall be liquidated by the Issuer Trustees as expeditiously
as the Issuer Trustees determine to be possible by distributing, after
satisfaction of liabilities to creditors of the Trust as provided by
applicable law, to the holders of the Trust Securities a Like Amount of the
Junior Subordinated Debentures, unless such distribution is determined by the
Property Trustee not to be practicable, in which event such holders will be
entitled to receive out of the liquidation of the assets of the Trust
available for distribution to holders, after satisfaction of liabilities to
creditors of the Trust as provided by applicable law, an amount equal to the
aggregate of the Liquidation Amount plus accumulated and unpaid Distributions
thereon to the date of payment (such amount being the "Liquidation
Distribution"). If such Liquidation Distribution can be paid only in part
because the Trust has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Trust Securities shall be paid on a pro rata basis. The holder(s)
of the Common Securities will be entitled to receive Liquidation Distributions
upon any such liquidation pro rata with the holders of the Capital Securities,
except that if a Debenture Event of Default has occurred and is continuing,
the Capital Securities shall have a priority over the Common Securities. See
"--Subordination of Common Securities."
"Like Amount" means (i) with respect to a redemption of the Trust
Securities, Trust Securities having a Liquidation Amount equal to the
principal amount of Junior Subordinated Debentures to be paid in accordance
with their terms and (ii) with respect to a distribution of Junior
Subordinated Debentures upon the liquidation of the Trust, Junior Subordinated
Debentures having a principal amount equal to the Liquidation Amount of the
Trust Securities of the holder to whom such Junior Subordinated Debentures are
distributed.
If the Company elects not to prepay the Junior Subordinated Debentures prior
to the Stated Maturity and if there is no early dissolution of the Trust, the
Capital Securities will remain outstanding until the repayment of the Junior
Subordinated Debentures at the Stated Maturity.
After any liquidation date is fixed for any distribution of Junior
Subordinated Debentures to holders of the Trust Securities, (i) the Capital
Securities will no longer be deemed to be outstanding, (ii) DTC or its
nominee, as the record holder of the Capital Securities, will receive a
registered global certificate or certificates representing the Junior
Subordinated Debentures to be delivered upon such distribution and (iii) any
certificates representing Capital Securities not held by DTC or its nominee
will be deemed to represent Junior Subordinated Debentures having a principal
amount equal to the Liquidation Amount of such Capital Securities and bearing
accrued and unpaid interest in an amount equal to the accrued and unpaid
Distributions on such Capital Securities until such certificates are presented
to the Administrative Trustees or their agent for cancellation, whereupon the
Company will issue to such holder, and the Debenture Trustee will
authenticate, a certificate representing such Junior Subordinated Debentures.
There can be no assurance as to the market prices for the Capital Securities
or the Junior Subordinated Debentures that may be distributed in exchange for
the Trust Securities if a dissolution and liquidation of the Trust were to
occur. Accordingly, the Capital Securities, or the Junior Subordinated
Debentures that the investor may receive on liquidation of the Trust, may
trade at a discount to the price that the investor initially paid to purchase
the Capital Securities.
REDEMPTION PROCEDURES
Trust Securities shall be redeemed, if at all, at the applicable Redemption
Price with the proceeds from the contemporaneous repayment or prepayment of
the Junior Subordinated Debentures. Redemptions of the Trust
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Securities shall be made and the applicable Redemption Price shall be payable
on the Redemption Date only to the extent that the Trust has funds on hand
legally available for the payment of such applicable Redemption Price. See "--
Subordination of Common Securities."
If the Property Trustee gives a notice of redemption in respect of any
Capital Securities, then, by 11:00 a.m., New York City time, on the Redemption
Date, the Company shall deposit sufficient funds with the Property Trustee to
pay the applicable Redemption Price. If such deposit has been made, then by
12:00 noon, New York City time, on the Redemption Date, to the extent funds
are legally available, with respect to the Capital Securities held in global
form, the Property Trustee will deposit irrevocably with DTC funds sufficient
to pay the applicable Redemption Price and will give DTC irrevocable
instructions and authority to pay the applicable Redemption Price to the
holders of the Capital Securities. See "--Form, Denomination, Book-Entry
Procedures and Transfer" and "--Payment and Paying Agency." With respect to
the Capital Securities held in certificated form, the Property Trustee, to the
extent funds are legally available, will irrevocably deposit with the paying
agent for the Capital Securities funds sufficient to pay the applicable
Redemption Price and will give such paying agent irrevocable instructions and
authority to pay the applicable Redemption Price to the holders thereof upon
surrender of their certificates evidencing the Capital Securities. See "--
Payment and Paying Agency."
Notwithstanding the foregoing, Distributions payable on or prior to the
Redemption Date shall be payable to the holders of such Capital Securities on
the relevant record dates for the related Distribution Dates. If notice of
redemption shall have been given and funds deposited as required, then upon
the date of such deposit, all rights of the holders of the Capital Securities
will cease, except the right of the holders of the Capital Securities to
receive the applicable Redemption Price and any Distribution payable on or
prior to the Redemption Date, but without interest, and the Capital Securities
will cease to be outstanding. In the event that any Redemption Date of Capital
Securities is not a Business Day, then payment of the applicable Redemption
Price payable on such date will be made on the next succeeding day which is a
Business Day (and without any interest or other payment in respect of any such
delay). In the event that payment of the applicable Redemption Price is
improperly withheld or refused and not paid either by the Trust or by the
Company pursuant to the Guarantee as described under "Description of
Guarantee," Distributions on Capital Securities will continue to accumulate at
the then applicable rate, from the Redemption Date originally established by
the Trust to but excluding the date such applicable Redemption Price is
actually paid, in which case the actual payment date will be the date fixed
for redemption for purposes of calculating the applicable Redemption Price.
Subject to applicable law (including, without limitation, United States
federal securities law), the Company or its subsidiaries may at any time and
from time to time purchase outstanding Capital Securities by tender, in the
open market or by private agreement.
Payment of the applicable Redemption Price on, and any distribution of
Junior Subordinated Debentures to holders of, the Trust Securities shall be
made to the applicable recordholders thereof as they appear on the register
therefor on the relevant record date, which shall be a date not more than 45
days nor less than 15 days prior to the Redemption Date or liquidation date,
as applicable.
Notice of any redemption will be mailed at least 20 days but not more than
60 days before the Redemption Date to each holder of Trust Securities at its
registered address. Unless the Company defaults in payment of the applicable
Prepayment Price on, or in the repayment of, the Junior Subordinated
Debentures, on and after the Redemption Date Distributions will cease to
accumulate on the Trust Securities called for redemption.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, the Capital
Securities and Common Securities, as applicable, shall be made pro rata based
on the Liquidation Amounts of the Capital Securities and Common Securities;
provided, however, that if on any Distribution Date or Redemption Date a
Debenture Event of Default shall have occurred and be continuing, no payment
of any Distribution on, or applicable Redemption Price of, any of the Common
Securities, and no other payment on account of the redemption, liquidation or
other
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acquisition of the Common Securities, shall be made unless payment in full in
cash of all accumulated and unpaid Distributions on all of the outstanding
Capital Securities for all Distribution periods terminating on or prior
thereto, or in the case of payment of the applicable Redemption Price the full
amount of such Redemption Price on all outstanding Capital Securities, shall
have been made or provided for, and all funds immediately available to the
Property Trustee shall first be applied to the payment in full in cash of all
Distributions on, or Redemption Price of, the Capital Securities then due and
payable.
In the case of any Event of Default under the Trust Agreement resulting from
a Debenture Event of Default, the Company as holder of the Common Securities
will be deemed to have waived any right to act with respect to any such Event
of Default until the effect of all such Events of Default has been cured,
waived or otherwise eliminated. Until any such Events of Default have been so
cured, waived or otherwise eliminated, the Property Trustee shall act solely
on behalf of the holders of the Capital Securities and not on behalf of the
Company as holder of the Common Securities, and only the holders of the
Capital Securities will have the right to direct the Property Trustee to act
on their behalf.
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an Event of Default under the
Trust Agreement (an "Event of Default") (whatever the reason for such Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) the occurrence of a Debenture Event of Default (see "Description of
Junior Subordinated Debentures--Debenture Events of Default"); or
(ii) default by the Property Trustee in the payment of any Distribution
when it becomes due and payable, and continuation of such default for a
period of 30 days; or
(iii) default by the Property Trustee in the payment of any Redemption
Price of any Trust Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Issuer Trustees in the Trust Agreement
(other than a covenant or warranty a default in the performance of which or
the breach of which is addressed in clause (ii) or (iii) above) and
continuation of such default or breach for a period of 90 days after there
has been given, by registered or certified mail, to the defaulting Issuer
Trustee or Trustees by the holders of at least 25% in aggregate Liquidation
Amount of the outstanding Capital Securities, a written notice specifying
such default or breach and requiring it to be remedied and stating that
such notice is a "Notice of Default" under the Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure to appoint a successor
Property Trustee within 60 days thereof.
Within 10 Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of the Capital Securities, the
Administrative Trustees and the Company, as Depositor, unless such Event of
Default shall have been cured or waived. The Company, as Depositor, and the
Administrative Trustees are required to file annually with the Property
Trustee a certificate as to whether or not they are in compliance with all the
conditions and covenants applicable to them under the Trust Agreement.
If a Debenture Event of Default has occurred and is continuing, the Capital
Securities shall have a preference over the Common Securities upon termination
of the Trust as described above. See "--Liquidation of the Trust and
Distribution of Junior Subordinated Debentures" and "--Subordination of Common
Securities."
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REMOVAL OF ISSUER TRUSTEES; APPOINTMENT OF SUCCESSORS
The holders of a majority in Liquidation Amount of Capital Securities may
remove the Property Trustee or the Delaware Trustee if a Debenture Event of
Default has occurred and is continuing. If the Property Trustee or the
Delaware Trustee is removed at a time when a Debenture Event of Default has
occurred and is continuing, the holders of a majority in Liquidation Amount of
Capital Securities may appoint a successor Property Trustee or Delaware
Trustee. If no Debenture Event of Default has occurred and is continuing at
such time, the Company, as holder of the Common Securities, may remove the
Property Trustee or Delaware Trustee and appoint a successor. If an
Administrative Trustee is removed, resigns or otherwise vacates office, the
Company, as holder of the Common Securities, shall promptly appoint a
successor. In no event will the holders of Capital Securities have the right
to vote to remove the Administrative Trustees, which voting rights are vested
exclusively in the Company, as holder of the Common Securities. If a successor
has not been appointed to fill a vacancy in accordance with the Trust
Agreement, any holder of Trust Securities (who has been a holder for at least
six months), or a resigning Trustee (in the case of the failure to appoint its
successor), may petition a court of competent jurisdiction to appoint a
successor. Any Delaware Trustee must meet the applicable requirements of
Delaware law. Any Property Trustee must be a national or state-chartered bank
and at the time of appointment have securities rated in one of the three
highest rating categories by a nationally recognized statistical rating
organization and have capital and surplus of at least $50,000,000. Each
Administrative Trustee shall be a current officer of the Company. No
resignation or removal of an Issuer Trustee and no appointment of a successor
trustee shall be effective until the acceptance of appointment by the
successor trustee in accordance with the provisions of the Trust Agreement.
MERGER OR CONSOLIDATION OF ISSUER TRUSTEES
Any entity into which the Property Trustee or the Delaware Trustee may be
merged or converted or with which it may be consolidated, or any entity
resulting from any merger, conversion or consolidation to which such Issuer
Trustee shall be a party, or any entity succeeding to all or substantially all
the corporate trust business of such Issuer Trustee, shall be the successor of
such Issuer Trustee under the Trust Agreement, provided such entity shall be
otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUST
The Trust may not merge with or into, consolidate, amalgamate 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 or
pursuant to a liquidation as described above in "--Liquidation of the Trust
and Distribution of Junior Subordinated Debentures." The Trust may, at the
request of the Company, as Depositor, and with the consent of the
Administrative Trustees, but without the consent of the holders of the Capital
Securities, the Property Trustee or the Delaware Trustee, merge with or into,
consolidate, amalgamate or be replaced by or convey, transfer or lease its
properties and assets substantially as an entirety to a trust organized as
such under the laws of any State; provided, however, that (i) such successor
entity either (a) expressly assumes all of the obligations of the Trust with
respect to the Capital Securities or (b) substitutes for the Capital
Securities other securities having substantially the same terms as the Capital
Securities (the "Successor Securities") so long as the Successor Securities
rank the same as the Capital Securities rank in priority with respect to
distributions and payments upon liquidation, redemption and otherwise, (ii)
the Company expressly appoints a trustee of such successor entity possessing
the same powers and duties as the Property Trustee as the holder of the Junior
Subordinated Debentures, (iii) subject to applicable principles of federal
securities laws, the 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 Capital Securities are
then listed, if any, (iv) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not cause the Capital
Securities (including any Successor Securities) to be downgraded by any
nationally recognized statistical rating organization, (v) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does
not adversely affect the rights, preferences and privileges of the holders of
the Capital Securities (including any Successor Securities) in any material
respect, (vi) such successor entity has a purpose substantially identical to
that of the Trust, (vii)
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prior to such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease, the Company has received an opinion from independent
counsel to the Trust experienced in such matters to the effect that (a) such
merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease does not adversely affect the rights, preferences and privileges of the
holders of the Capital Securities (including any Successor Securities) in any
material respect, and (b) following such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, neither the Trust nor such
successor entity will be required to register as an investment company under
the Investment Company Act of 1940, as amended (the "Investment Company Act"),
and (viii) the Company or any permitted successor or assignee owns all of the
common securities of such successor entity and guarantees the obligations of
such successor entity under the Successor Securities at least to the extent
provided by the Guarantee. Notwithstanding the foregoing, the Trust shall not,
except with the consent of holders of 100% in Liquidation Amount of the
Capital Securities, consolidate, amalgamate, merge with or into, or be
replaced by or convey, transfer or lease its properties and assets
substantially as an entirety to any other entity or permit any other entity to
consolidate, amalgamate, merge with or into, or replace it if such
consolidation, amalgamation, merger, replacement, conveyance, transfer or
lease would cause the Trust or the successor entity to be classified as other
than a grantor trust for United States federal income tax purposes. In
addition, the Property Trustee will be required pursuant to the Indenture to
exchange, as a part of the Exchange Offer, the Junior Subordinated Debentures
for the Exchange Debentures, which will have terms identical in all material
respects to the Junior subordinated Debentures except for the transfer
restrictions under the Securities Act and the provision for an increase in the
interest rate thereon under certain circumstances. See "Exchange Offer;
Registration Rights."
VOTING RIGHTS; AMENDMENT OF THE TRUST AGREEMENT
Except as provided below and under "Description of Guarantee--Amendments and
Assignment" and as otherwise required by law and the Trust Agreement, the
holders of the Capital Securities have no voting rights.
The Trust Agreement may be amended from time to time by the Company, and the
Issuer Trustees, without the consent of the holders of the Trust Securities,
(i) to cure any ambiguity, correct or supplement any provisions in the Trust
Agreement that may be inconsistent with any other provision or to make any
other provision with respect to matters or questions arising under the Trust
Agreement, which shall not be inconsistent with the other provisions of the
Trust Agreement, or (ii) to modify, eliminate or add to any provisions of the
Trust Agreement to such extent as shall be necessary to ensure that the Trust
will be classified for United States federal income tax purposes as a grantor
trust at all times that any Trust Securities are outstanding or to ensure that
the Trust will not be required to register as an "investment company" under
the Investment Company Act provided, however, that in the case of clause (i),
such action shall not adversely affect in any material respect the interests
of any holder of Trust Securities or the Property Trustee or the Delaware
Trustee, and any amendments of the Trust Agreement shall become effective when
notice thereof is given to the holders of the Trust Securities. The Trust
Agreement may be amended by the Issuer Trustees and the Company with (i) the
consent of holders representing not less than a majority (based upon
Liquidation Amounts) of the outstanding Trust Securities and (ii) receipt by
the Issuer Trustees of an opinion of counsel to the effect that such amendment
or the exercise of any power granted to the Issuer Trustees in accordance with
such amendment will not affect the Trust's status as a grantor trust for
United States federal income tax purposes or the Trust's exemption from status
as an "investment company" under the Investment Company Act. The Trust
Agreement may not be amended without the consent of each holder of Trust
Securities to (i) change the amount or timing of any Distribution on the Trust
Securities or otherwise adversely affect the amount of any Distribution
required to be made in respect of the Trust Securities as of a specified date
or (ii) restrict the right of a holder of Trust Securities to institute suit
for the enforcement of any such payment on or after such date.
So long as any Junior Subordinated Debentures are held by the Property
Trustee, the Issuer Trustees shall not (i) direct the time, method and place
of conducting any proceeding for any remedy available to the Debenture Trustee
or executing any trust or power conferred on the Debenture Trustee with
respect to the Junior Subordinated Debentures, (ii) waive any past default
that is waivable under the Indenture, (iii) exercise any right to rescind or
annul a declaration that the principal of all the Junior Subordinated
Debentures shall be due and
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payable or (iv) consent to any amendment, modification or termination of the
Indenture or the Junior Subordinated Debentures, where the consent of the
holders of the Junior Subordinated Debentures shall be required, without, in
each case, obtaining the prior approval of the holders of at least a majority
in Liquidation Amount of all outstanding Capital Securities; provided,
however, that where a consent under the Indenture would require the consent of
each holder of Junior Subordinated Debentures affected thereby, no such
consent shall be given by the Property Trustee without the prior written
consent of each holder of the Capital Securities. The Issuer Trustees shall
not revoke any action previously authorized or approved by a vote of the
holders of the Capital Securities, except by a subsequent vote of such
holders. The Property Trustee shall notify each holder of Capital Securities
of any notice of default with respect to the Junior Subordinated Debentures
unless such default shall have been cured or waived. In addition to obtaining
the foregoing approvals of such holders of the Capital Securities, prior to
taking any of the foregoing actions, the Issuer Trustees shall obtain an
opinion of counsel experienced in such matters to the effect that such action
will not cause the Trust to be classified as an association taxable as a
corporation for United States federal income tax purposes.
Any required approval of holders of Trust Securities may be given at a
meeting of such holders convened for such purpose. Any action that may be
taken by holders of Trust Securities at a meeting may be taken without a
meeting if holders of Trust Securities holding not less than a majority (or
such other proportion as may be required by any express provision of the Trust
Agreement) of outstanding Trust Securities (based upon their Liquidation
Amount) entitled to vote in respect of such action shall consent to the action
in writing. The Property Trustee will cause a notice of any meeting at which
holders of Trust Securities are entitled to vote, or of any matter upon which
action by written consent of such holders is to be taken, to be given to each
holder of record of Trust Securities in the manner set forth in the Trust
Agreement.
No vote or consent of the holders of Capital Securities is required for the
Trust to redeem and cancel the Capital Securities in accordance with the Trust
Agreement.
Notwithstanding that holders of the Capital Securities are entitled to vote
or consent under any of the circumstances described above, any of the Capital
Securities that are owned by the Company, the Issuer Trustees or any affiliate
of the Company or any Issuer Trustee, shall, for purposes of such vote or
consent, be treated as if they were not outstanding.
FORM, DENOMINATION, BOOK-ENTRY PROCEDURES AND TRANSFER
In the event that New Capital Securities are issued in certificated form,
such New Capital Securities will be in blocks having a Liquidation Amount of
not less than $100,000 (100 New Capital Securities) and may be transferred or
exchanged in such blocks in the manner and at the offices described below.
In the event that New Capital Securities are issued in registered, global
form (collectively, the "Global Capital Securities"), the Global Capital
Securities will be deposited upon issuance with the Property Trustee as
custodian for DTC, in New York, New York, and registered in the name of DTC or
its nominee, in each case for credit to an account of a direct or indirect
participant in DTC as described below.
Except as set forth below, Global Capital Securities may be transferred, in
whole and not in part, only to another nominee of DTC or to a successor of DTC
or its nominee. Beneficial interests in Global Capital Securities may not be
exchanged for New Capital Securities in certificated form except in the
limited circumstances described below. See "--Exchange of Book-Entry New
Capital Securities for Certificated New Capital Securities."
DEPOSITARY PROCEDURES
DTC has advised the Trust and the Company that DTC is a limited-purpose
trust company created to hold securities for its participating organizations
(collectively, the "Participants") and to facilitate the clearance and
settlement of transactions in those securities between Participants through
electronic book-entry changes in
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accounts of its Participants. The Participants include securities brokers and
dealers (including the Initial Purchasers), banks, trust companies, clearing
corporations and certain other organizations. Access to DTC's system is also
available to other entities such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own
securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interest and transfer of ownership
interest of each actual purchaser of each security held by or on behalf of DTC
are recorded on the records of the Participants and Indirect Participants.
DTC has also advised the Trust and the Company that, pursuant to procedures
established by it, (i) upon deposit of Global Capital Securities, DTC will
credit the accounts of Participants designated by the Exchange Agent with
portions of the Liquidation Amount of such Global Capital Securities and (ii)
ownership of such interests in such Global Capital Securities will be shown
on, and the transfer of ownership thereof will be effected only through,
records maintained by DTC (with respect to the Participants) or by the
Participants and the Indirect Participants (with respect to other owners of
beneficial interests in the Global Capital Securities).
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN GLOBAL CAPITAL SECURITIES
WILL NOT HAVE NEW CAPITAL SECURITIES REGISTERED IN THEIR NAME, WILL NOT
RECEIVE PHYSICAL DELIVERY OF NEW CAPITAL SECURITIES IN CERTIFICATED FORM AND
WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR HOLDERS THEREOF UNDER THE
TRUST AGREEMENT FOR ANY PURPOSE.
Payments in respect of a Global Capital Security registered in the name of
DTC or its nominee will be payable by the Property Trustee to DTC in its
capacity as the registered holder under the Trust Agreement. Under the terms
of the Trust Agreement, the Property Trustee will treat the persons in whose
names the New Capital Securities, including Global Capital Securities, are
registered as the owners thereof for the purpose of receiving such payments
and for any and all other purposes whatsoever. Consequently, neither the
Property Trustee nor any agent thereof has or will have any responsibility or
liability for (i) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interests in Global Capital Securities, or for maintaining,
supervising or reviewing any of DTC's records or any Participant's or Indirect
Participant's records relating to the beneficial ownership interests in Global
Capital Securities or (ii) any other matter relating to the actions and
practices of DTC or any of its Participants or Indirect Participants. DTC has
advised the Trust and the Company that its current practice, upon receipt of
any payment in respect of securities such as the New Capital Securities, is to
credit the accounts of the relevant Participants with the payment on the
payment date, in amounts proportionate to their respective holdings in
Liquidation Amount of beneficial interests in the relevant security as shown
on the records of DTC unless DTC has reason to believe it will not receive
payment on such payment date. Payments by the Participants and the Indirect
Participants to the beneficial owners of New Capital Securities will be
governed by standing instructions and customary practices and will be the
responsibility of the Participants or the Indirect Participants and will not
be the responsibility of DTC, the Property Trustee or the Trust. Neither the
Trust nor the Property Trustee will be liable for any delay by DTC or any of
its participants in identifying the beneficial owners of the New Capital
Securities, and the Trust and the Property Trustee may conclusively rely on
and will be protected in relying on instructions from DTC or its nominee for
all purposes.
Interests in Global Capital Securities will trade in DTC's Same-Day Funds
Settlement System and secondary market trading activity in such interests will
therefore settle in immediately available funds, subject in all cases to the
rules and procedures of DTC and its participants.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds.
DTC has advised the Trust and the Company that it will take any action
permitted to be taken by a holder of New Capital Securities only at the
direction of one or more Participants to whose account with DTC interests
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in Global Capital Securities are credited and only in respect of such portion
of the aggregate Liquidation Amount of the New Capital Securities as to which
such Participant or Participants has or have given such direction. However, if
there is an Event of Default under the Trust Agreement, DTC reserves the right
to exchange Global Capital Securities for legended New Capital Securities in
certificated form and to distribute such New Capital Securities to its
Participants.
The information in this section concerning DTC and their book-entry systems
has been obtained from sources that the Trust and the Company believe to be
reliable, but neither the Trust nor the Company takes responsibility for the
accuracy thereof.
EXCHANGE OF BOOK-ENTRY NEW CAPITAL SECURITIES FOR CERTIFICATED NEW CAPITAL
SECURITIES
A Global Capital Security is exchangeable for New Capital Securities in
registered certificated form if (i) DTC (x) notifies the Trust that it is
unwilling or unable to continue as Depositary for the Global Capital Security
or (y) has ceased to be a clearing agency registered under the Exchange Act
and the Company fails to appoint a successor Depositary within 90 days, (ii)
the Company in its sole discretion elects to cause the issuance of the New
Capital Securities in certificated form or (iii) there shall have occurred and
be continuing an Event of Default or any event which after notice or lapse of
time or both would be an Event of Default under the Trust Agreement. In
addition, beneficial interests in a Global Capital Security may be exchanged
for certificated New Capital Securities upon request but only at least 20 days
prior written notice given to the Property Trustee by or on behalf of DTC in
accordance with customary procedures. In all cases, certificated New Capital
Securities delivered in exchange for any Global Capital Security or beneficial
interests therein will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the Depositary (in accordance with
its customary procedures).
PAYMENT AND PAYING AGENCY
Payments in respect of Global Capital Securities shall be made to DTC, which
shall credit the relevant accounts at DTC on the applicable Distribution
Dates, or in respect of New Capital Securities that are not held by DTC, such
payments shall be made by check mailed to the address of the holder entitled
thereto as such address shall appear on the register. The paying agent (the
"Paying Agent") shall initially be the Property Trustee and any co-paying
agent chosen by the Property Trustee and acceptable to the Administrative
Trustees and the Company. The Paying Agent shall be permitted to resign as
Paying Agent upon 30 days' written notice to the Property Trustee and the
Company. In the event that the Property Trustee shall no longer be the Paying
Agent, the Administrative Trustees shall appoint a successor (which shall be a
bank or trust company acceptable to the Administrative Trustees and the
Company) to act as Paying Agent.
RESTRICTIONS ON TRANSFER
The New Capital Securities will be issued, and may be transferred only, in
blocks having a Liquidation Amount of not less than $100,000 (100 New Capital
Securities). Any attempted transfer, sale or other disposition of Capital
Securities in a block having a Liquidation Amount of less than $100,000 shall
be deemed to be void and of no legal effect whatsoever. Any such transferee
shall be deemed not to be the holder of such Capital Securities for any
purpose, including but not limited to the receipt of Distributions on such
Capital Securities, and such transferee shall be deemed to have no interest
whatsoever in such Capital Securities.
RATING
The Capital Securities have been rated "BBB+" by Standard & Poor's Ratings
Services, "baa1" by Moody's Investors Services, Inc. and "BBB" by Fitch
Investors Services, Inc. The ratings have been obtained with the understanding
that the assigning rating organization will continue to monitor the credit
ratings of the Company and the Trust and will make future adjustments to the
extent warranted. A security ratings is not a recommendation to buy, sell or
hold securities. It only reflects the views of the assigning rating
organization and may be subject to revision or withdrawal at any time by the
assigning rating organization.
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REGISTRAR AND TRANSFER AGENT
The Property Trustee will act as registrar and transfer agent for the New
Capital Securities. The Property Trustee also acts as registrar and transfer
agent for the Old Capital Securities.
Registration of transfers of the Capital Securities may be effected without
charge by or on behalf of the Trust, but the registrar may require payment of
a sum sufficient to cover any tax or governmental charge that may be imposed
in connection with any transfer or exchange. The Trust will not be required to
register or cause to be registered the transfer of the Capital Securities
after they have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than during the occurrence and continuance of an
Event of Default, undertakes to perform only such duties as are specifically
set forth in the Trust Agreement and, after such Event of Default, must
exercise the same degree of care and skill as a prudent person would exercise
or use in the conduct of his or her own affairs. Subject to this provision,
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 Trust
Securities unless it is offered reasonable indemnity against the costs,
expenses and liabilities that might be incurred thereby. If no Event of
Default has occurred and is continuing and the Property Trustee is required to
decide between alternative causes of action, construe ambiguous or
inconsistent provisions in the Trust Agreement or is unsure of the application
of any provision of the Trust Agreement, and the matter is not one on which
holders of the Capital Securities are entitled under the Trust Agreement to
vote, then the Property Trustee shall take such action as is directed by the
Company and if not so directed, shall take such action as it deems advisable
and in the best interests of the holders of the Trust Securities and will have
no liability except for its own bad faith, negligence or willful misconduct.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Trust in such a way that the Trust will not be
deemed to be an "investment company" required to be registered under the
Investment Company Act or classified as other than a grantor trust for United
States federal income tax purposes and so that the Junior Subordinated
Debentures will be treated as indebtedness of the Company for United States
federal income tax purposes. In this connection, the Company and the
Administrative Trustees are authorized to take any action, not inconsistent
with applicable law, the certificate of trust of the Trust or the Trust
Agreement, that the Company and the Administrative Trustees determine in their
discretion to be necessary or desirable for such purposes, as long as such
action does not materially adversely affect the interests of the holders of
the Trust Securities.
Holders of the Trust Securities have no preemptive or similar rights.
The Trust may not borrow money or issue debt or mortgage or pledge any of
its assets.
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DESCRIPTION OF NEW JUNIOR SUBORDINATED DEBENTURES
The Old Junior Subordinated Debentures were issued and the New Junior
Subordinated Debentures will be issued as a separate series under the
Indenture. The Indenture has been qualified under the Trust Indenture Act. In
the event the Exchange Offer is consummated, the Company will exchange the New
Junior Subordinated Debentures for the Old Junior Subordinated Debentures. The
form and terms of the New Junior Subordinated Debentures are identical in all
material respects to the form and terms of the Old Junior Subordinated
Debentures, except that the New Junior Subordinated Debentures have been
registered under the Securities Act and therefore are not subject to certain
restrictions on transfer applicable to the Old Junior Subordinated Debentures
and will not provide for any increase in the interest rate thereon.
Accordingly, as the context may require, unless expressly stated otherwise,
"Junior Subordinated Debentures" means the Old Junior Subordinated Debentures
and, in the event the Exchange Offer is consummated, the New Junior
Subordinated Debentures. This summary of certain terms and provisions of the
Junior Subordinated Debentures and the Indenture does not purport to be
complete, and where reference is made to particular provisions of the
Indenture, such provisions, including the definitions of certain terms, some
of which are not otherwise defined herein, are qualified in their entirety by
reference to all of the provisions of the Indenture and those terms made a
part of the Indenture by the Trust Indenture Act.
GENERAL
Concurrently with the issuance of the Old Capital Securities, the Trust
invested the proceeds thereof, together with the consideration paid by the
Company for the Common Securities, in the Old Junior Subordinated Debentures.
Pursuant to the Exchange Offer, the Company will exchange the Old Junior
Subordinated Debentures as soon as practicable after the consummation of the
Exchange Offer and the Old Junior Subordinated Debentures will be retired and
canceled.
The Junior Subordinated Debentures bear interest at the annual rate of 7.83%
of the principal amount thereof, payable semi-annually in arrears on June 1
and December 1 of each year (each, an "Interest Payment Date"), commencing
June 1, 1998, to the person in whose name each Junior Subordinated Debenture
is registered, subject to certain exceptions, at the close of business on the
Business Day next preceding such Interest Payment Date. It is anticipated that
until the liquidation, if any, of the Trust, each Junior Subordinated
Debenture will be held in the name of the Property Trustee in trust for the
benefit of the holders of the Trust Securities. The amount of interest payable
for any period will be computed on the basis of a 360-day year of twelve 30-
day months. In the event that any date on which interest is payable on the
Junior Subordinated Debentures is not a Business Day, then payment of the
interest payable on such date will be made on the next succeeding day that is
a Business Day (and without any interest or other payment in respect of any
such delay), in each case with the same force and effect as if made on the
date such payment was originally payable. Accrued interest that is not paid on
the applicable Interest Payment Date will bear additional interest
("Additional Interest") on the amount thereof (to the extent permitted by law)
at the rate per annum of 7.83% thereof, compounded semi-annually. The term
"interest" as used herein shall include semi-annual interest payments,
Additional Interest and Additional Tax Sums (as defined below), as applicable.
DENOMINATIONS, REGISTRATION AND TRANSFER
The New Junior Subordinated Debentures will be represented by one
certificate registered in the name of The Chase Manhattan Bank as Property
Trustee of the Trust. If distributed to holders of Capital Securities in
connection with a Tax Event or an Investment Company Event, the New Junior
Subordinated Debentures may be represented by one or more global certificates
registered in the name of Cede & Co. as the nominee of DTC and one or more New
Junior Subordinated Debentures in certificated form. Beneficial interests in
New Junior Subordinated Debentures in global form will be shown on, and
transfers thereof will be effected only through, records maintained by
participants in DTC. Except as described below, New Junior Subordinated
Debentures in certificated form will not be issued in exchange for the global
certificates.
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A global security shall be exchangeable for New Junior Subordinated
Debentures registered in the names of persons other than Cede & Co. only if
(i) DTC notifies the Company that it is unwilling or unable to continue as a
depositary for such global security and no successor depositary shall have
been appointed, or if at any time DTC ceases to be a "clearing agency"
registered under the Exchange Act, at a time when DTC is required to be so
registered to act as such depositary, (ii) the Company in its sole discretion
determines that such global security shall be so exchangeable or (iii) there
shall have occurred and be continuing a Debenture Event of Default. Any global
security that is exchangeable pursuant to the preceding sentence shall be
exchangeable for certificates registered in such names as DTC shall direct. It
is expected that such instructions will be based upon directions received by
DTC from its Participants with respect to ownership of beneficial interests in
such global security. In the event that New Junior Subordinated Debentures are
issued in certificated form, such New Junior Subordinated Debentures will be
in minimum denominations of $100,000 and integral multiples of $1,000 in
excess thereof and may be transferred or exchanged only in such minimum
denominations and in the manner and at the offices described below.
Payments on New Junior Subordinated Debentures represented by a global
security will be made to DTC, as the depositary for the New Junior
Subordinated Debentures. In the event New Junior Subordinated Debentures are
issued in certificated form, principal and interest will be payable, the
transfer of the New Junior Subordinated Debentures will be registrable, and
New Junior Subordinated Debentures will be exchangeable for New Junior
Subordinated Debentures of other denominations of a like aggregate principal
amount, at the corporate office of the Debenture Trustee in New York, New
York, or at the offices of any paying agent or transfer agent appointed by the
Company, provided that payment of interest may be made at the option of the
Company by check mailed to the address of the persons entitled thereto or by
wire transfer. In addition, if the New Junior Subordinated Debentures are
registered to a holder other than the Property Trustee or a nominee of DTC,
the record dates will be the immediately preceding November 15 and May 15,
respectively.
For a description of DTC and the terms of the depositary arrangements
relating to payments, transfers, voting rights, redemptions and other notices
and other matters, see "Description of Capital Securities--Form, Denomination,
Book-Entry Procedures and Transfer." If the New Junior Subordinated Debentures
are distributed to the holders of the Trust Securities upon the termination of
the Trust, the form, denomination, book-entry and transfer procedures with
respect to the Capital Securities as described under "Description of Capital
Securities--Form, Denomination, Book-Entry Procedures and Transfer," shall
apply to the New Junior Subordinated Debentures mutatis mutandis.
PAYMENT AND PAYING AGENTS
Payment of principal of (and any premium) and any interest on Junior
Subordinated Debentures will be made at the office of the Debenture Trustee in
The City of New York or at the office of such Paying Agent or Paying Agents as
the Company may designate from time to time, except that at the option of the
Company payment of any interest may be made, except in the case of Junior
Subordinated Debentures in global form, (i) by check mailed to the address of
the Person entitled thereto as such address shall appear in the register for
Junior Subordinated Debentures or (ii) by transfer to an account maintained by
the Person entitled thereto as specified in such register, provided that
proper transfer instructions have been received by the relevant record date.
Payment of any interest on any Junior Subordinated Debenture will be made to
the Person in whose name such Junior Subordinated Debenture is registered at
the close of business on the record date for such interest, except in the case
of defaulted interest. The Company may at any time designate additional Paying
Agents or rescind the designation of any Paying Agent; however, the Company
will at all times be required to maintain a Paying Agent in each place of
payment for the Junior Subordinated Debentures.
Any moneys deposited with the Debenture Trustee or any Paying Agent, or then
held by the Company in trust, for the payment of the principal of (and
premium, if any) or interest on any Junior Subordinated Debenture and
remaining unclaimed for two years after such principal (and premium, if any)
or interest has become due
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and payable shall, at the request of the Company, be repaid to the Company and
the holder of such Junior Subordinated Debenture shall thereafter look, as a
general unsecured creditor, only to the Company for payment thereof.
OPTION TO EXTEND INTEREST PAYMENT DATE
So long as no Debenture Event of Default has occurred and is continuing, the
Company has the right under the Indenture at any time during the term of the
Junior Subordinated Debentures to defer the payment of interest at any time or
from time to time for a period not exceeding 10 consecutive semi-annual
periods with respect to each Extension Period provided that no Extension
Period may end on a date other than an Interest Payment Date or extend beyond
the Stated Maturity or any earlier prepayment date. At the end of such
Extension Period, the Company must pay all interest then accrued and unpaid
(together with interest thereon at the annual rate of 7.83%, compounded semi-
annually, to the extent permitted by applicable law). During an Extension
Period, interest will continue to accrue and holders of Junior Subordinated
Debentures (and holders of the Capital Securities while Capital Securities are
outstanding) will be required to accrue interest income for United States
federal income tax purposes. See "Certain Federal Income Tax Consequences--
Interest Income and Original Issue Discount."
During any such Extension Period, the Company may not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's capital stock or
(ii) make any payment of principal of or interest or premium, if any, on or
repay, repurchase or redeem any debt securities of the Company that rank pari
passu with or junior to the Junior Subordinated Debentures or (iii) make any
guarantee payments with respect to any guarantee by the Company of the debt
securities of any subsidiary of the Company if such guarantee ranks pari passu
with or junior to the Junior Subordinated Debentures (other than (a) dividends
or distributions in common stock of the Company, (b) any declaration of a
dividend in connection with the implementation of a stockholders' rights plan,
the issuance of capital stock under any such plan in the future, or the
redemption or repurchase of any such rights distributed pursuant thereto, (c)
payments under the Guarantee and (d) purchases of common stock related to the
issuance of common stock or rights under any of the Company's benefit plans
for its directors, officers, employees, consultants or advisors). Prior to the
termination of any such Extension Period, the Company may further extend such
Extension Period, provided that such extension does not cause such Extension
Period to exceed 10 consecutive semi-annual periods or to extend beyond the
Stated Maturity or any earlier prepayment date. At any time following the
termination of any Extension Period and the payment of all amounts then due,
the Company may elect to begin a new Extension Period, subject to the
foregoing requirements. No interest shall be due and payable during an
Extension Period, except at the end thereof. The Company must give the
Property Trustee, the Administrative Trustees and the Debenture Trustee notice
of its election of any Extension Period (or an extension thereof) at least
five Business Days prior to the earlier of (i) the next succeeding date the
Distributions on the Capital Securities would have been payable but for the
election to begin or extend such Extension Period or (ii) the date the
Administrative Trustees are required to give notice to any securities exchange
or other applicable self-regulatory organization or to holders of Capital
Securities of the record date or the date such Distributions are payable, but
in any event not fewer than five Business Days prior to such record date. An
Administrative Trustee shall give notice of the Company's election to begin or
extend an Extension Period to the holders of the Capital Securities. There is
no limitation on the number of times that the Company may elect to begin an
Extension Period.
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OPTIONAL PREPAYMENT
The Junior Subordinated Debentures are prepayable, in whole or in part, at
the option of the Company at any time on or after December 1, 2007 (the
"Initial Optional Prepayment Date"), at a prepayment price (the "Optional
Prepayment Price") equal to the percentage of the outstanding principal amount
of the Junior Subordinated Debentures specified below, plus, in each case,
accrued interest thereon to but excluding the date of prepayment if prepaid
during the 12-month period beginning on December 1 of the years indicated
below:
<TABLE>
<S> <C>
2007................................ 103.915%
2008................................ 103.524%
2009................................ 103.132%
2010................................ 102.741%
2011................................ 102.349%
2012................................ 101.958%
2013................................ 101.566%
2014................................ 101.174%
2015................................ 100.783%
2016................................ 100.391%
2017 and thereafter................. 100.000%
</TABLE>
The proceeds of any such prepayment will be used by the Property Trustee to
redeem a Like Amount of Trust Securities.
TAX EVENT OR INVESTMENT COMPANY EVENT PREPAYMENT
If a Tax Event or Investment Company Event shall occur and be continuing,
prior to the Initial Optional Prepayment Date, the Company may, at its option,
prepay the Junior Subordinated Debentures in whole (but not in part) at any
time within 90 days of the occurrence of such Tax Event of an Investment
Company Event at a prepayment price (the "Event Prepayment Price") equal to
the greater of (i) 100% of the principal amount of such Junior Subordinated
Debentures or (ii) as determined by the Quotation Agent (as defined below),
the sum of the present values of the Optional Prepayment Price with respect to
an optional prepayment of such Junior Subordinated Debentures on the Initial
Optional Prepayment Date, together with the present values of scheduled
payments of interest from the prepayment date to the Initial Optional
Prepayment Date (the "Term to Initial Optional Prepayment Date"), in each case
discounted to the prepayment date on a semi-annual basis (consisting of a 360-
day year of twelve 30-day months) at the Adjusted Treasury Rate, plus, in each
case, accrued interest thereon to but excluding the date of prepayment.
However, the Company may, at its option, prepay Junior Subordinated
Debentures, in whole but not in part, as a result of a Tax Event or an
Investment Company Event which occurs on or after the Initial Optional
Prepayment Date, at a prepayment price equal to the Optional Prepayment Price
that would be payable on optional prepayment of the Junior Subordinated
Debentures on the date of prepayment, which includes interest to the date of
prepayment.
Notice of any prepayment will be mailed at least 20 days but not more than
60 days before the redemption date to each holder of Junior Subordinated
Debentures to be prepaid at its registered address. Unless the Company
defaults in payment of the prepayment price, on or after the prepayment date
interest ceases to accrue on such Junior Subordinated Debentures called for
prepayment.
The proceeds of any such prepayment will be used by the Property Trustee to
redeem a Like Amount of Trust Securities.
If the Trust is required to pay any additional taxes, duties or other
governmental charges as a result of a Tax Event, the Company will reimburse
the Trust for such taxes, duties, or charges. The Company will also pay any
Additional Tax Sums on the Junior Subordinated Debentures.
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"Adjusted Treasury Rate" means, with respect to any prepayment date, the
Treasury Rate plus (i) 1.00% if such prepayment date occurs on or before
December 1, 1998 or (ii) 0.50% if such prepayment date occurs after December
1, 1998.
"Treasury Rate" means (i) the yield, under the heading which represents the
average for the immediately prior week, appearing in the most recently
published statistical release designated "H.15(519)" or any successor
publication which is published weekly by the Federal Reserve and which
establishes yields on actively traded United States Treasury securities
adjusted to constant maturity under the caption "Treasury Constant
Maturities," for the maturity corresponding to the Term to Initial Optional
Prepayment Date (if no maturity is within three months before or after the
Term to Initial Optional Prepayment Date, yields for the two published
maturities most closely corresponding to the Term to Initial Optional
Prepayment Date shall be determined and the Treasury Rate shall be
interpolated or extrapolated from such yields on a straight-line basis,
rounding to the nearest month) or (ii) if such release (or any successor
release) is not published during the week preceding the calculation date or
does not contain such yields, the rate per annum equal to the semi-annual
equivalent yield to maturity of the Comparable Treasury Issue, calculated
using a price for the Comparable Treasury Issue (expressed as a percentage of
its principal amount) equal to the Comparable Treasury Price for such
prepayment date. The Treasury Rate shall be calculated on the third Business
Day preceding the prepayment date.
"Comparable Treasury Issue" means with respect to any prepayment date the
United States Treasury security selected by the Quotation Agent as having a
maturity comparable to the Remaining Life that would be used, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the Remaining
Life. If no United States Treasury security has a maturity which is within a
period from three months before to three months after December 1, 2007, the
two most closely corresponding United States Treasury securities shall be used
as the Comparable Treasury Issue, and the Treasury Rate shall be interpolated
or extrapolated on a straight-line basis, rounding to the nearest month using
such securities.
"Quotation Agent" means Morgan Stanley & Co. Incorporated and its
successors.
"Reference Treasury Dealer" means (i) Morgan Stanley & Co. Incorporated,
Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and
J.P. Morgan Securities Inc. and their respective successors; provided,
however, that if any of the foregoing shall cease to be a primary U.S.
Government securities dealer in New York City (a "Primary Treasury Dealer"),
the Company shall substitute therefor another Primary Treasury Dealer; and
(ii) any other Primary Treasury Dealer selected by the Debenture Trustee after
consultation with the Company.
"Comparable Treasury Price" means, with respect to any prepayment date, (A)
the average of five Reference Treasury Dealer Quotations for such prepayment
date, after excluding the highest and lowest such Reference Treasury Dealer
Quotations, or (B) if the Debenture Trustee obtains fewer than three such
Reference Treasury Dealer Quotations, the average of all such Quotations.
"Liquidation Amount" means the stated amount of $1,000 per Capital Security.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any prepayment date, the average, as determined by the
Debenture Trustee, of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) quoted
in writing to the Debenture Trustee by such Reference Treasury Dealer at 5:00
p.m. on the third Business Day preceding such prepayment date.
"Additional Tax Sums" means the additional amounts as may be necessary in
order that the amount of Distributions then due and payable by the Trust on
the outstanding Capital Securities and Common Securities shall not be reduced
as a result of any additional taxes, duties and other governmental charges to
which the Trust has become subject as a result of a Tax Event (but not
including withholding taxes imposed on holders of Trust Securities).
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"Tax Event" means the receipt by the Trust of an opinion of counsel who
shall not be an officer or employee of the Company or its affiliates to the
effect that, as a result of 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 as a result of any official administrative pronouncement or
judicial decision interpreting or applying such laws or regulations, which
amendment or change is effective or which pronouncement or decision is
announced on or after December 8, 1997, there is more than an insubstantial
risk that (i) the Trust is, or will be within 90 days after the date of such
opinion, subject to United States federal income tax with respect to income
received or accrued on the Junior Subordinated Debentures, (ii) interest
payable by the Company on the Junior Subordinated Debentures is not, or within
90 days after the date of such opinion, will not be, deductible by the
Company, in whole or in part, for United States federal income tax purposes or
(iii) the Trust is, or will be within 90 days after the date of such opinion,
subject to more than a de minimis amount of other taxes, duties, assessments
or other governmental charges.
"Investment Company Event" means the receipt by the Trust of an opinion of
counsel experienced in such matters to the effect that, as a result of the
occurrence of a change in law or regulation or change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority (a "Change in 1940 Act Law"), the Trust is or
will be considered an investment company that is required to be registered
under the Investment Company Act of 1940, as amended, which Change in 1940 Act
Law becomes effective on or after December 8, 1997.
RESTRICTIONS ON CERTAIN PAYMENTS
The Company also covenanted that it will not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's capital stock or
(ii) make any payment of principal, interest or premium, if any, on or repay
or repurchase or redeem any debt securities of the Company that rank pari
passu with or junior to the Junior Subordinated Debentures or make any
guarantee payments with respect to any guarantee by the Company of the debt
securities of any subsidiary of the Company (including other Guarantees) if
such guarantee ranks on a parity with or junior to the Junior Subordinated
Debentures (other than (a) dividends or distributions in common stock of the
Company, (b) any declaration of a dividend in connection with the
implementation of a stockholder's rights plan, or the issuance of any capital
stock under any such plan in the future, or the redemption or repurchase of
any such rights pursuant thereto, (c) payments under the Guarantee and (d)
purchases of common stock related to the issuance of common stock or rights
under any of the Company's benefit plans for its directors, officers,
employees consultants or advisers) if at such time (i) there shall have
occurred any event of which the Company has actual knowledge that (a) with the
giving of notice or the lapse of time, or both, would constitute a "Debenture
Event of Default" and (b) in respect of which the Company shall not have taken
reasonable steps to cure, (ii) the Company shall be in default with respect to
its payment of any obligations under the Guarantee or (iii) the Company shall
have given notice of its election of an Extension Period as provided in the
Indenture and shall not have rescinded such notice, or such Extension Period,
or any extension thereof, shall be continuing.
MODIFICATION OF INDENTURE
From time to time, the Company and the Debenture Trustee may, without the
consent of the holders of the Junior Subordinated Debentures, amend, waive or
supplement the Indenture for specified purposes, including, among other
things, curing ambiguities, defects or inconsistencies (provided that any such
action does not materially adversely affect the interest of the holders of the
Junior Subordinated Debentures or the holders of Capital Securities so long as
they remain outstanding) and qualifying, or maintaining the qualification of,
the Indenture under the Trust Indenture Act.
The Indenture contains a provision permitting the Company and the Debenture
Trustee, with the consent of the holders of not less than a majority in
principal amount of the Junior Subordinated Debentures, to modify the rights
of the holders of Junior Subordinated Debentures, provided that no such
modification may (i) change the fixed maturity of any Junior Subordinated
Debentures, or reduce the rate or extend the time of payment of any
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interest thereon or on any overdue principal amount, or reduce the principal
amount thereof, or reduce any amount payable upon any redemption thereof, or
change the currency of payment of principal of or any interest thereon or on
any overdue principal amount, without the consent of the holder of each Junior
Subordinated Debenture so affected, (ii) reduce the aforesaid percentage of
Junior Subordinated Debentures, the holders of which are required to consent
to any such supplemental indenture, without the consent of the holders of all
Junior Subordinated Debentures then outstanding, (iii) modify certain
provisions of the Indenture relating to waiver of compliance with covenants,
waiver of defaults or modification of the Indenture, except to increase the
percentage of holders required for such waiver or modification, without the
consent of the holders of all Junior Subordinated Debentures then outstanding,
or (iv) modify the provisions of the Indenture with respect to the
subordination of outstanding Junior Subordinated Debentures in a manner
adverse to the holders thereof without the consent of the holder of each
Junior Subordinated Debentures so affected; provided further that, so long as
any of the Capital Securities remain outstanding, no such modification may be
made that adversely affects the holders of such Capital Securities in any
material respect, and no termination of the Indenture may occur, and no waiver
of any Event of Default or compliance with any covenant under the Indenture
may be effective, without the prior consent of the holders of at least a
majority of the aggregate Liquidation Amount of such Capital Securities unless
and until the principal of the underlying Junior Subordinated Debentures and
all accrued and unpaid interest thereon have been paid in full and certain
other conditions are satisfied.
In addition, the Company and the Debenture Trustee may execute, without the
consent of any holder of Junior Subordinated Debentures, any supplemental
indenture for the purpose of creating any new series of Junior Subordinated
Debentures.
DEBENTURE EVENTS OF DEFAULT
A Debenture Event of Default with respect to the Junior Subordinated
Debentures is defined in the Indenture as being: (a) default for 30 days in
payment of any installment of interest on the Junior Subordinated Debentures
(subject to the deferral of any due date in the case of an Extension Period);
(b) default in payment of any principal or premium, if any, on Junior
Subordinated Debentures; (c) default by the Company in performance in any
material respect of any of the covenants or agreements (other than covenants
to pay interest, principal and premium, which are subject to the foregoing
clauses (a) and (b)) in the Indenture specifically contained therein for the
benefit of the Junior Subordinated Debentures which shall not have been
remedied for a period of 90 days after written notice to the Company by the
Debenture Trustee or to the Company and the Debenture Trustee by the holders
of not less than 25% in principal amount of the Junior Subordinated Debentures
outstanding; or (d) certain events of bankruptcy, insolvency or reorganization
of the Company.
The Indenture provides that if a Debenture Event of Default under clause
(a), (b) or (c) above shall have occurred and be continuing (but, in the case
of clause (c), only if the Debenture Event of Default is with respect to less
than all Junior Subordinated Debentures outstanding under the Indenture),
either the Debenture Trustee or the holders of not less than 25% in principal
amount of the then outstanding Junior Subordinated Debentures (each series of
Junior Subordinated Debentures voting as a separate class in the case of
clauses (a) and (b) above, and all series voting as one class in the case of
clause (c) above) may declare the principal of all the Junior Subordinated
Debentures, together with any accrued interest, to be immediately due and
payable. Should the Debenture Trustee or holders of such Junior Subordinated
Debentures fail to make such declaration, the holders of at least 25% in
aggregate liquidation amount of the Capital Securities shall have such right.
The Indenture also provides that if a Debenture Event of Default under clause
(c) or (d) above shall have occurred and be continuing (but, in the case of
clause (c), only if the Debenture Event of Default is with respect to all
Junior Subordinated Debentures outstanding under the Indenture), either the
Debenture Trustee or the holders of not less than 25% in principal amount of
the then outstanding Junior Subordinated Debentures (all series voting as one
class) may declare the principal of all the Junior Subordinated Debentures,
together with any accrued interest, to be immediately due and payable. Should
the Debenture Trustee or holders of such Junior Subordinated Debentures fail
to make such declaration, the holders of at least 25% in aggregate liquidation
amount of the Capital Securities shall have such right. Upon certain
conditions, such declaration (including a declaration caused by a default in
the payment of principal or interest, the payment for which has subsequently
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been provided) may be annulled by the holders of at least a majority in
principal amount of the Junior Subordinated Debentures. Should the holders of
the Junior Subordinated Debentures fail to annul such declaration, the holders
of at least a majority in aggregate liquidation amount of the Capital
Securities shall have such right. In addition, past defaults may be waived by
the holders of a majority in principal amount of the Junior Subordinated
Debentures, except a default in the payment of principal of or interest on the
Junior Subordinated Debentures or in respect of a covenant or provision of the
Indenture which cannot be modified or amended without the consent of the
holder of each Junior Subordinated Debenture so affected. Should the holders
of the Junior Subordinated Debentures fail to waive such default, the holders
of a majority in aggregate liquidation amount of the Capital Securities shall
have such right.
The Indenture contains a provision entitling the Debenture Trustee, subject
to the duty of the Debenture Trustee during default to act with the required
standard of care, to be indemnified by the holders of Junior Subordinated
Debentures issued under the Indenture before proceeding to exercise any right
or power under the Indenture at the request of such holders. The Indenture
also provides that the holders of a majority in principal amount of the
outstanding Junior Subordinated Debentures issued thereunder may direct the
time, method and place of conducting any proceeding for any remedy available
to the Debenture Trustee, or exercising any trust or power conferred on the
Debenture Trustee.
The Indenture contains a covenant that the Company will file annually with
the Debenture Trustee a certificate as to the absence of any default or
specifying any default that exists.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF CAPITAL SECURITIES
If a Debenture Event of Default has occurred and is continuing and such
event is attributable to the failure of the Company to pay interest or
principal on the Junior Subordinated Debentures on the date such interest or
principal is otherwise payable, a holder of Capital Securities may institute a
legal proceeding directly against the Company for enforcement of payment to
such holder of the principal of or interest on such related Junior
Subordinated Debentures having a principal amount equal to the aggregate
Liquidation Amount of the related Capital Securities of such holder (a "Direct
Action"). The Company may not amend the Indenture to remove the foregoing
right to bring a Direct Action without the prior written consent of the
holders of all of the Capital Securities. If the right to bring a Direct
Action is removed, the Trust may become subject to reporting obligations under
the Securities Exchange Act of 1934, as amended. Notwithstanding any payments
made to a holder of Capital Securities by the Company in connection with a
Direct Action, the Company shall remain obligated to pay the principal of or
interest on the Junior Subordinated Debentures, and the Company shall be
subrogated to the rights of the holder of such Capital Securities with respect
to payments on the Capital Securities to the extent of any payments made by
the Company to such holder in any Direct Action.
The holders of the Capital Securities would not be able to exercise directly
any remedies, other than those set forth in the preceding paragraph, available
to the holders of the Junior Subordinated Debentures unless there shall have
been an Event of Default under the Trust Agreement. See "Description of
Capital Securities--Events of Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that the Company may not merge or consolidate or sell
or convey all or substantially all of its assets unless (i) the successor
entity (if other than the Company) is a U.S. entity that assumes the Company's
obligations under such Indenture and on the Junior Subordinated Debentures
issued under such Indenture, and, after giving effect to such transaction, the
Company or the successor would not be in default under such Indenture; and
(ii) certain other conditions as prescribed in the Indenture are met.
The provisions of the Indenture do not afford holders of the Junior
Subordinated Debentures protection in the event of a highly leveraged or other
transaction involving the Company that may adversely affect holders of the
Junior Subordinated Debentures.
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SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all Junior
Subordinated Debentures not previously delivered to the Debenture Trustee for
cancellation (i) have become due and payable or (ii) will become due and
payable at their Stated Maturity within one year, and the Company deposits or
causes to be deposited with the Debenture Trustee funds, in trust, for the
purpose and in an amount sufficient to pay and discharge the entire
indebtedness on the Junior Subordinated Debentures not previously delivered to
the Debenture Trustee for cancellation, for the principal (and premium, if
any) and interest to the date of the deposit or to the Stated Maturity, as the
case may be, then the Indenture will cease to be of further effect (except as
to remaining rights of registration of transfer, conversion, substitution and
exchange, the rights and obligations of the Debenture Trustee, the Company's
obligations to pay all other sums due pursuant to the Indenture and to provide
the officers' certificates and opinions of counsel described therein), and the
Company will be deemed to have satisfied and discharged the Indenture.
SUBORDINATION
In the Indenture, the Company has covenanted and agreed that the obligations
of the Company to make any payment on account of the principal of and interest
on the Junior Subordinated Debentures will be subordinate and junior in right
of payment to the Company's obligations to the holders of Senior Indebtedness
of the Company to the extent described in the next two paragraphs. Senior
Indebtedness of the Company with respect to the Junior Subordinated Debentures
will include the existing and future senior notes, senior subordinated notes
and subordinated notes of the Company and means (i) any indebtedness of the
Company for borrowed or purchased money, whether or not evidenced by bonds,
debentures, notes or other written instruments, (ii) obligations under letters
of credit, (iii) any indebtedness or other obligations of the Company with
respect to commodity contracts, interest rate and currency swap agreements,
cap, floor and collar agreements, currency spot and forward contracts, and
other similar agreements or arrangements designed to protect against
fluctuations in currency exchange or interest rates, and (iv) any guarantees,
endorsements (other than by endorsement of negotiable instruments for
collection in the ordinary course of business) or other similar contingent
obligations in respect of obligations of others of a type described in (i),
(ii) or (iii) above, whether or not such obligation is classified as a
liability on a balance sheet prepared in accordance with generally accepted
accounting principles, in each case listed in (i), (ii), (iii) and (iv) above,
whether outstanding on the date of execution of the Indenture or thereafter
incurred, other than obligations "ranking on a parity" with the Junior
Subordinated Debentures or "ranking junior" to the Junior Subordinated
Debentures (as those terms are defined in the Indenture); provided, however,
that the Junior Subordinated Debentures will not be subordinate and junior in
right of payment to trade creditors or any indebtedness of the Company to any
subsidiaries. As of December 31, 1997, there was approximately $423.2 million
of Senior Indebtedness of the Company outstanding. The Indenture does not
limit the amount of future increase in Senior Indebtedness of the Company or
any indebtedness of its subsidiaries or affiliates. The Company expects from
time to time to issue additional indebtedness constituting Senior
Indebtedness.
No payments on account of principal (or premium, if any) or interest, if
any, in respect of the Junior Subordinated Debentures may be made if there
shall have occurred and be continuing a default in any payment with respect to
Senior Indebtedness, or an event of default with respect to any Senior
Indebtedness resulting in the acceleration of the maturity thereof, or if any
judicial proceeding shall be pending with respect to any such default.
In the case of any insolvency, receivership, conservatorship,
reorganization, readjustment of debt, marshaling of assets and liabilities or
similar proceedings or any liquidation or winding-up of or relating to the
Company as a whole, whether voluntary or involuntary, all obligations of the
Company to holders of Senior Indebtedness of the Company shall be entitled to
be paid in full before any payment shall be made on account of the principal
of or interest on the Junior Subordinated Debentures. In the event of any such
proceeding, after payment in full of all sums owing with respect to Senior
Indebtedness of the Company, the holders of the Junior Subordinated
Debentures, together with the holders of any obligations of the Company
ranking on a parity with
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the Junior Subordinated Debentures, shall be entitled to be paid from the
remaining assets of the Company the amount at the time due and owing on
account of unpaid principal of and interest on the Junior Subordinated
Debentures before any payment or other distribution, whether in cash, property
or otherwise, shall be made on account of any capital stock or any obligations
of the Company ranking junior to the Junior Subordinated Debentures. By reason
of such subordination, in the event of the insolvency of the Company, holders
of Senior Indebtedness of the Company may receive more, ratably, and holders
of the Junior Subordinated Debentures having a claim pursuant to the Junior
Subordinated Debentures may receive less, ratably, than the other creditors of
the Company. Such subordination will not prevent the occurrence of any Event
of Default in respect of the Junior Subordinated Debentures.
RESTRICTIONS ON TRANSFER
The New Junior Subordinated Debentures will be issued, and may be
transferred only, in minimum denominations of not less than $100,000 and
multiples of $1,000 in excess thereof. Any transfer, sale or other disposition
of Junior Subordinated Debentures in a denomination of less than $100,000
shall be deemed to be void and of no legal effect whatsoever. Any such
transferee shall be deemed not to be the holder of such Junior Subordinated
Debentures for any purpose, including but not limited to the receipt of
payments on such Junior Subordinated Debentures, and such transferee shall be
deemed to have no interest whatsoever in such Junior Subordinated Debentures.
GOVERNING LAW
The Indenture is and the New Junior Subordinated Debentures will be governed
by and construed in accordance with the laws of the State of New York, without
regard to conflicts of law principles.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee is subject to all the duties and responsibilities
specified with respect to an indenture trustee under the Trust Indenture Act.
Subject to such provisions, the Debenture Trustee is under no obligation to
exercise any of the powers vested in it by the Indenture at the request of any
holder of Junior Subordinated Debentures, unless offered reasonable indemnity
by such holder against the costs, expenses and liabilities which might be
incurred thereby. The Debenture Trustee is not required to expend or risk its
own funds or otherwise incur personal financial liability in the performance
of its duties if the Debenture Trustee reasonably believes that repayment or
adequate indemnity is not reasonably assured to it.
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DESCRIPTION OF NEW GUARANTEE
The Old Guarantee was executed and delivered by the Company concurrently
with the issuance by the Trust of the Old Capital Securities for the benefit
of the holders from time to time of the Old Capital Securities. In the event
the Exchange Offer is consummated, the Company will exchange the New Guarantee
for the Old Guarantee for the benefit of the holders from time to time of the
New Capital Securities. The New Guarantee Agreement has been qualified under
the Trust Indenture Act. The form and terms of the New Guarantee are identical
in all material respects to the form and terms of the Old Guarantee, except
that the New Guarantee has been registered under the Securities Act.
Accordingly, as the context may require, unless expressly stated otherwise,
"Guarantee" means the Old Guarantee and, in the event the Exchange Offer is
consummated, the New Guarantee. This summary of certain terms and provisions
of the Old Guarantee Agreement and the New Guarantee Agreement does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, all of the provisions of the Old Guarantee Agreement and the New
Guarantee Agreement, including the definitions therein of certain terms, and
the Trust Indenture Act. The Chase Manhattan Bank will act as Guarantee
Trustee and will hold the New Guarantee for the benefit of the holders of all
Capital Securities.
GENERAL
Under the New Guarantee, the Company will irrevocably agree (and under the
Old Guarantee has agreed) to pay in full on a subordinated basis, to the
extent set forth herein, the Guarantee Payments (as defined below) to the
holders of all Capital Securities, as and when due, regardless of any defense,
right of set-off or counterclaim that the Trust may have or assert other than
the defense of payment. The following payments with respect to the Capital
Securities, to the extent not paid by or on behalf of the Trust (the
"Guarantee Payments"), will be subject to the Guarantee: (i) any accumulated
and unpaid Distributions required to be paid on the Capital Securities, to the
extent that the Trust has funds on hand available therefor at such time, (ii)
the applicable Redemption Price with respect to Capital Securities called for
redemption, to the extent that the Trust has funds on hand available therefor
at such time and (iii) upon a voluntary or involuntary termination,
dissolution, winding-up or liquidation of the Trust (unless the Junior
Subordinated Debentures are distributed to holders of the Capital Securities),
the lesser of (a) the aggregate of the Liquidation Amount plus accumulated and
unpaid Distributions on the Capital Securities to the date of payment, to the
extent that the Trust has funds on hand available therefor at such time, and
(b) the amount of assets of the Trust remaining available for distribution to
holders of Capital Securities in liquidation of the Trust. The Company's
obligation to make a Guarantee Payment may be satisfied by direct payment of
the required amounts by the Company to the holders of the Capital Securities
or by causing the Trust to pay such amounts to such holders.
The Guarantee is an irrevocable guarantee on a subordinated basis of the
Trust's obligations under the Capital Securities, but will apply only to the
extent that the Trust has funds legally available to make such payments, and
is not a guarantee of collection. If the Company does not make interest
payments on the Junior Subordinated Debentures held by the Trust, the Trust
will not be able to pay Distributions on the Capital Securities and will not
have funds legally available therefor. In such event, holders of the Capital
Securities would not be able to rely on the Guarantee for such payments.
The Guarantee will rank subordinate and junior in right of payment to all
Senior Indebtedness of the Company, other than any liabilities which expressly
by their terms are made pari passu with or subordinate to the obligations of
the Company under the Guarantee, and will rank pari passu with (i) the Junior
Subordinated Debentures and (ii) all other guarantees, if any, to be issued by
the Company with respect to capital securities to be issued by any other
trusts established by the Company ("Other Guarantees"). See "--Status of the
Guarantee." Because the Company is a holding company, the right of the Company
to participate in any distribution of assets of any subsidiary upon such
subsidiary's liquidation or reorganization or otherwise (and thus the ability
of holders of Capital Securities to benefit indirectly from such
distribution), is subject to the prior claims of creditors of that subsidiary,
except to the extent the Company may itself be recognized as a creditor of
that subsidiary. Claims of the Trust, as the holder of the Guarantee and the
Junior Subordinated Debentures, will
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be effectively subordinated to the claims of creditors of the Company's
subsidiaries, including trade creditors, debt holders, secured creditors,
taxing authorities, guarantee holders and any preferred stockholders.
Accordingly, the Company's obligations under the Guarantee will be effectively
subordinated to all existing and future liabilities of the Company's
subsidiaries, and claimants should look only to the assets of the Company for
payments thereunder. The Guarantee does not limit the incurrence or issuance
of other secured or unsecured debt of the Company or any subsidiaries or
affiliates of the Company, including other securities that are pari passu with
or senior to the Capital Securities, the Junior Subordinated Debentures or the
Guarantee.
The Company has, through the Guarantee, the Guarantee Agreement, the Trust
Agreement, the Junior Subordinated Debentures, the Indenture and the Expense
Agreement, taken together, fully, irrevocably and unconditionally guaranteed
on a subordinated basis all of the Trust's obligations under the Capital
Securities. No single document standing alone or operating in conjunction with
fewer than all of the other documents constitutes such guarantee. It is only
the combined operation of these documents that has the effect of providing a
full, irrevocable and unconditional guarantee of the Trust's obligations under
the Capital Securities. See "Relationship Among the Capital Securities, the
Junior Subordinated Debentures and the Guarantee."
STATUS OF THE GUARANTEE
The Guarantee constitutes an unsecured obligation of the Company and ranks
subordinate and junior in right of payment to all liabilities of the Company
(including obligations under the Junior Subordinated Debentures), other than
any liabilities which expressly by their terms are made pari passu with or
subordinate to the obligations of the Company under the Guarantee.
The Guarantee ranks pari passu with all Other Guarantees issued by the
Company. The Guarantee constitutes a guarantee of payment and not of
collection (i.e., the guaranteed party may institute a legal proceeding
directly against the Company to enforce its rights under the Guarantee without
first instituting a legal proceeding against any other person or entity). The
Guarantee is held for the benefit of the holders of all Capital Securities.
The Guarantee will not be discharged except by payment of the Guarantee
Payments in full to the extent not paid by the Trust or upon distribution of
the Junior Subordinated Debentures to the holders of the Capital Securities.
The Guarantee does not place a limitation on the amount of additional Senior
Indebtedness that may be incurred by the Company. The Company expects from
time to time to incur additional indebtedness constituting Senior
Indebtedness.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not adversely affect the rights
of holders of the Capital Securities in any material respect (in which case no
vote will be required), the Guarantee Agreement may not be amended without the
prior approval of the holders of not less than a majority of the aggregate
Liquidation Amount of outstanding Capital Securities. The manner of obtaining
any such approval will be as set forth under "Description of Capital
Securities--Voting Rights; Amendment of the Trust Agreement." All guarantees
and agreements contained in the Guarantee Agreement shall bind the successors,
assigns, receivers, trustees and representatives of the Company and shall
inure to the benefit of the holders of the Capital Securities then
outstanding.
EVENTS OF DEFAULT
An event of default under the Guarantee Agreement will occur upon the
failure of the Company to perform any of its payment obligations or, if the
Company shall have received notice, and shall not have cured such failure
within 60 days of receipt of such notice, its non-payment obligations
thereunder. The holders of not less than a majority in aggregate Liquidation
Amount of the Capital Securities have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Guarantee
Trustee in respect of the Guarantee or to direct the exercise of any trust or
power conferred upon the Guarantee Trustee under the Guarantee Agreement;
provided, however that the Guarantee Trustee may decline to follow such
direction under
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certain circumstances, including if the directed action would be illegal or if
the action would be unduly prejudicial to the rights of holders not party to
such direction.
To the extent permitted by law, any holder of the Capital Securities may
institute a legal proceeding directly against the Company to enforce its
rights under the Guarantee without first instituting a legal proceeding
against the Trust, the Guarantee Trustee or any other person or entity.
The Company, as guarantor, is required to file annually with the Guarantee
Trustee a certificate as to whether or not the Company is in compliance with
all the conditions and covenants applicable to it under the Guarantee
Agreement.
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Guarantee Agreement provides that the Company shall not consolidate with
or merge into any other entity or convey, transfer or lease all or
substantially all of its properties and assets to any other entity, and no
entity shall consolidate with or merge into the Company or convey, transfer or
lease all or substantially all of its properties and assets to the Company,
unless (i) either the Company shall be the continuing corporation or the
successor entity is organized under the laws of the United States or any state
or the District of Columbia and such successor entity expressly assumes the
Company's obligations on the Guarantee; (ii) immediately after giving effect
thereto, no event of default under the Guarantee Agreement and no event which,
after notice or lapse of time or both, would become an event of default under
the Guarantee Agreement, shall have happened and be continuing; and (iii)
certain other conditions as prescribed in the Guarantee Agreement are met.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of a
default by the Company in performance of the Guarantee, undertakes to perform
only such duties as are specifically set forth in the Guarantee Agreement and,
after default with respect to the Guarantee, must exercise the same degree of
care and skill as a prudent person would exercise or use in the conduct of his
or her own affairs. Subject to this provision, the Guarantee Trustee is under
no obligation to exercise any of the powers vested in it by the Guarantee
Agreement at the request of any holder of the Capital Securities unless it is
offered reasonable indemnity against the costs, expenses and liabilities that
might be incurred thereby.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon full
payment of the applicable Redemption Price of the Capital Securities, upon
full payment of the amounts payable upon liquidation of the Trust or upon
distribution of Junior Subordinated Debentures to the holders of the Capital
Securities. The Guarantee will continue to be effective or will be reinstated,
as the case may be, if at any time any holder of the Capital Securities must
restore payment of any sums paid under the Capital Securities or the
Guarantee.
GOVERNING LAW
The Old Guarantee is and the New Guarantee will be governed by and construed
in accordance with the laws of the State of New York, without regard to
conflicts of laws principles.
THE EXPENSE AGREEMENT
Pursuant to the Expense Agreement, the Company has irrevocably and
unconditionally guaranteed to each person or entity to whom the Trust becomes
indebted or liable, the full payment of any costs, expenses or liabilities of
the Trust, other than obligations of the Trust to pay to the holders of any
Trust Securities or other similar interests in the Trust of the amounts due
such holders pursuant to the terms of the Trust Securities or such other
similar interests, as the case may be.
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DESCRIPTION OF OLD SECURITIES
The forms and terms of the Old Securities are identical in all material
respects to the forms and terms of the New Securities, except that (i) the Old
Securities have not been registered under the Securities Act, are subject to
certain restrictions on transfer and are entitled to certain rights under the
Registration Rights Agreement (which rights will terminate upon consummation
of the Exchange Offer, except under limited circumstances); (ii) the New
Capital Securities will not provide for any increase in the Distribution rate
thereon; and (iii) the New Junior Subordinated Debentures will not provide for
any increase in the interest rate thereon. The Old Securities provide that, in
the event that if a registration statement relating to the Exchange Offer has
not been filed on or by May 7, 1998 and declared effective by June 6, 1998,
then interest will accrue (in addition to the stated interest rate on the
Junior Subordinated Debentures) at the rate of 0.25% per annum on the
principal amount of the Junior Subordinated Debentures and Distributions will
accumulate (in addition to the stated Distribution rate on the Capital
Securities) at the rate of 0.25% per annum on the Liquidation Amount of the
Capital Securities, for the period from the occurrence of such event until
such time as the Exchange Offer is consummated or any required Shelf
Registration Statement is effective. The New Securities are not, and upon
consummation of the Exchange Offer the Old Securities will not be, entitled to
any such additional interest or Distributions. Accordingly, holders of Old
Capital Securities should review the information set forth under "Risk
Factors--Certain Consequences of a Failure to Exchange Old Capital Securities"
and "Description of Securities."
RELATIONSHIP AMONG THE NEW CAPITAL SECURITIES, THE NEW JUNIORSUBORDINATED
DEBENTURES, THE NEW GUARANTEE AND CERTAINUNDERTAKINGS UNDER THE TRUST
AGREEMENT
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the New Capital
Securities (to the extent the Trust has funds legally available for the
payment of such Distributions) will be irrevocably guaranteed by the Company
as and to the extent set forth under "--Description of Guarantee." Taken
together, the Company's obligations under the New Junior Subordinated
Debentures, the Indenture, the Trust Agreement, the Expense Agreement, the New
Guarantee Agreement and the New Guarantee provide, in the aggregate, a full,
irrevocable and unconditional guarantee of payments of Distributions and other
amounts due on the Capital Securities. No single document standing alone or
operating in conjunction with fewer than all of the other documents
constitutes such guarantee. It is only the combined operation of these
documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the Trust's obligations under the Capital
Securities. If and to the extent that the Company does not make payments on
the Junior Subordinated Debentures, the Trust will not pay Distributions or
other amounts due on the Capital Securities. The Guarantee does not cover
payment of Distributions when the Trust does not have sufficient funds to pay
such Distributions. In such event, the remedy of a holder of Capital
Securities is to institute a Direct Action. The obligations of the Company
under the Guarantee are subordinate and junior in right of payment to all
Senior Indebtedness.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
Junior Subordinated Debentures, such payments will be sufficient to cover
Distributions and other payments due on the Capital Securities, primarily
because (i) the aggregate principal amount of the Junior Subordinated
Debentures will be equal to the sum of the aggregate Liquidation Amount or
Redemption Price, as applicable, of the Capital Securities and Common
Securities; (ii) the interest rate and interest and other payment dates on the
Junior Subordinated Debentures will match the Distribution rate and
Distribution and other payment dates for the Trust Securities; (iii) under the
Expense Agreement, the Company shall pay for all and any costs, expenses and
liabilities of the Trust except the Trust's obligations to holders of Trust
Securities under such Trust Securities; and (iv) the Trust Agreement further
provides that the Trust will not engage in any activity that is not consistent
with the limited purposes thereof.
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ENFORCEMENT RIGHTS OF HOLDERS OF CAPITAL SECURITIES
A holder of any Capital Security may institute a legal proceeding directly
against the Company to enforce its rights under the Guarantee without first
instituting a legal proceeding against the Guarantee Trustee, the Trust or any
other person or entity.
A default or event of default under any Senior Indebtedness would not
constitute a default or Event of Default under the Trust Agreement. However,
in the event of payment defaults under, or acceleration of, Senior
Indebtedness, the subordination provisions of the Indenture provide that no
payments may be made in respect of the Junior Subordinated Debentures until
such Senior Indebtedness has been paid in full or any payment default
thereunder has been cured or waived. Failure to make required payments on
Junior Subordinated Debentures would constitute an Event of Default under the
Trust Agreement.
LIMITED PURPOSES OF THE TRUST
The Capital Securities evidence an undivided beneficial interest in the
assets of the Trust, and the Trust exists for the exclusive purposes of
issuing and selling the Trust Securities, using the proceeds from the sale of
the Common Securities and Old Capital Securities to acquire the Old Junior
Subordinated Debentures and exchanging the Old Junior Subordinated Debentures
for New Junior Subordinated Debentures in the Exchange Offer pursuant to the
Indenture, and engaging in only those other activities necessary, convenient
or incidental thereto (such as registering the transfer of Capital
Securities). A principal difference between the rights of a holder of a
Capital Security and a holder of a Junior Subordinated Debenture is that a
holder of a Junior Subordinated Debenture is entitled to receive from the
Company the principal amount of and interest accrued on Junior Subordinated
Debentures held, while a holder of Capital Securities is entitled to receive
Distributions from the Trust (or from the Company under the Guarantee) if and
to the extent the Trust has funds available for the payment of such
Distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding-up or liquidation of
the Trust involving the liquidation of the Junior Subordinated Debentures,
after satisfaction of liabilities to creditors as required by applicable law,
the holders of the Trust Securities will be entitled to receive, out of assets
held by the Trust, the Liquidation Distribution in cash. See "Description of
Securities--Description of Capital Securities--Liquidation of the Trust and
Distribution of Junior Subordinated Debentures." Upon any voluntary or
involuntary liquidation or bankruptcy of the Company, the Property Trustee, as
holder of the Junior Subordinated Debentures, would be a subordinated creditor
of the Company, subordinated in right of payment to all Senior Indebtedness as
set forth in the Indenture, but entitled to receive payment in full of
principal and interest, before any stockholders of the Company receive
payments or distributions. Since the Company is the guarantor under the
Guarantee and has agreed under the Expense Agreement to pay for all costs,
expenses and liabilities of the Trust (other than the Trust's obligations to
the holders of its Trust Securities), the positions of a holder of Capital
Securities and a holder of Junior Subordinated Debentures relative to other
creditors and to stockholders of the Company in the event of liquidation or
bankruptcy of the Company are expected to be substantially the same.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal United States federal income tax
consequences of the purchase, ownership and disposition of Capital Securities.
The statements of law and legal conclusions set forth in this summary
regarding the tax consequences to the beneficial owners of Capital Securities
(the "Securityholders") represent the opinion of McGuire, Woods, Battle &
Boothe LLP, special tax counsel to the Company and the Trust. This summary and
the tax opinion of counsel only address the tax consequences to a person that
acquires Capital Securities in their original issue at their original offering
price. This summary does not address all tax consequences that may be
applicable to a Securityholder, nor does it address the tax consequences to
(i) persons that may be subject to special treatment under United States
federal income tax law, such as banks, insurance
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companies, thrift institutions, regulated investment companies, real estate
investment trusts, tax-exempt organizations and dealers in securities or
currencies, (ii) persons that will hold Capital Securities as part of a
position in a "straddle" or as part of a "hedging," "conversion" or other
integrated investment transaction for federal income tax purposes, (iii)
except with respect to the discussion under the caption "United States Alien
Securityholders," persons whose functional currency is not the United States
dollar or (iv) persons that do not hold Capital Securities as capital assets.
Further, it does not include any description of the tax laws of any state or
local government that may be applicable to the Capital Securities.
This summary is based upon the Internal Revenue Code of 1986, as amended
(the "Code"), Treasury regulations, Internal Revenue Service (the "IRS")
rulings and pronouncements and judicial decisions now in effect, all of which
are subject to change at any time. Such changes may be applied retroactively
in a manner that could cause the tax consequences to vary substantially from
the consequences described below, possibly adversely affecting a beneficial
owner of Capital Securities. See "--Possible Tax Law Changes."
The authorities on which this summary is based (including authorities
distinguishing debt from equity) are subject to various interpretations, and
it is therefore possible that the federal income tax treatment of the Capital
Securities may differ from the treatment described below. No ruling has been
received from the IRS regarding the tax consequences of the Capital
Securities. Counsel's opinion regarding such tax consequences represents only
counsel's best legal judgment based on current authorities and is not binding
on the IRS or the courts.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT WITH THEIR OWN TAX ADVISORS IN
LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES AS TO THE FEDERAL TAX CONSEQUENCES
OF THE PURCHASE, OWNERSHIP DISPOSITION AND EXCHANGE OF CAPITAL SECURITIES, AS
WELL AS THE EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
EXCHANGE OF CAPITAL SECURITIES
The exchange of Old Capital Securities for New Capital Securities should not
be a taxable event to Securityholders for United States federal income tax
purposes. The exchange of Old Capital Securities for New Capital Securities
pursuant to the Exchange Offer should not be treated as an "exchange" for
United States federal income tax purposes because the New Capital Securities
should not be considered to differ materially in kind or extent from the Old
Capital Securities and because the exchange will occur by operation of the
terms of the Old Capital Securities. If however, the exchange of the Old
Capital Securities for the New Capital Securities were treated as an exchange
for United States federal income tax purposes, such exchange should constitute
a recapitalization for federal income tax purposes. Accordingly, the New
Capital Securities should have the same issue price as the Old Capital
Securities, and a Securityholder should have the same adjusted tax basis and
holding period in the New Capital Securities as the Securityholder had in the
Old Capital Securities immediately before the Exchange.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
In connection with the issuance of the Capital Securities, McGuire, Woods,
Battle & Boothe LLP will render its opinion to the effect that, under then-
current law and assuming compliance with the Indenture, and based on certain
facts and assumptions contained in such opinion, the Junior Subordinated
Debentures held by the Trust will be classified for United States federal
income tax purposes as indebtedness of the Company.
CLASSIFICATION OF THE TRUST
In the opinion of McGuire, Woods, Battle & Boothe LLP, under current law and
assuming compliance with the terms of the Trust Agreement, the Trust will be
classified as a grantor trust and not as an association taxable as a
corporation for United States federal income tax purposes. As a result, each
Securityholder will be treated as owning an undivided beneficial interest in
the Junior Subordinated Debentures. Accordingly, each Securityholder will be
required to include in its gross income its pro rata share of the interest
income, including original issue discount, paid or accrued with respect to the
Junior Subordinated Debentures whether or not cash
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is actually distributed to the Securityholders. See "--Interest Income and
Original Issue Discount." No amount included in income with respect to the
Capital Securities will be eligible for the dividends-received deduction.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Except as described below, the allocable share of stated interest on the
Junior Subordinated Debentures will be taxable to a Securityholder as ordinary
income. A "remote" contingency that stated interest will not be timely paid
will be ignored in determining whether a debt instrument is issued with
original issue discount ("OID"). The Company believes that the likelihood of
its exercising its option to defer payments of interest on the Junior
Subordinated Debentures is remote since exercising that option would prevent
the Company and its subsidiaries from declaring dividends on any of the
Company's capital stock. Based on the foregoing, the Company intends to take
the position, based on the advice of its counsel, that the Junior Subordinated
Debentures will not be considered to be issued with OID at the time of their
original issuance and, accordingly, stated interest on the Junior Subordinated
Debentures generally will be taxable to a Securityholder as ordinary income at
the time it is paid or accrued in accordance with such Securityholder's method
of accounting for tax purposes.
If the Company should actually exercise its option to defer any payment of
interest, the Junior Subordinated Debentures would at that time be treated as
issued with OID, and all stated interest on the Junior Subordinated Debentures
would thereafter be treated as OID as long as the Junior Subordinated
Debentures remained outstanding. In such event, all of a Securityholder's
taxable interest income with respect to the Junior Subordinated Debentures
would be accounted for as OID on an economic accrual basis regardless of such
Securityholder's method of tax accounting, and actual payments of stated
interest would not be reported as taxable income. Consequently, a
Securityholder would be required to include in gross income OID even though
the Company would not make any cash payments during an Extension Period.
If the option to defer the payment of interest were determined not to be
"remote", the Junior Subordinated Debentures would be treated as having been
originally issued with OID. In such event, all of the Securityholder's taxable
interest income with respect to the Junior Subordinated Debentures would be
accounted for on an economic accrual basis regardless of such Securityholder's
method of tax accounting, and actual distributions of stated interest would
not be reported as taxable income.
Treasury regulations concerning OID have not been addressed in any rulings
or other interpretations by the IRS, and it is possible that the IRS could
take a position contrary to the interpretation herein.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES TO HOLDERS OF CAPITAL
SECURITIES
A distribution by the Trust of the Junior Subordinated Debentures as
described under the caption "Description of Capital Securities--Liquidation of
the Trust and Distribution of Junior Subordinated
Debentures" is conditioned on receipt by the Company of an opinion of counsel
to the effect that such distribution would be a non-taxable event to
Securityholders for United States federal income tax purposes. Under current
law, such a distribution will be non-taxable and will result in the
Securityholder receiving directly its pro rata share of the Junior
Subordinated Debentures previously held indirectly through the Trust, with a
holding period and aggregate tax basis equal to the holding period and
aggregate tax basis such Securityholder had in its Capital Securities before
such distribution. A Securityholder will account for interest in respect of
Junior Subordinated Debentures received from the Trust in the manner described
above under "--Interest Income and Original Issue Discount."
SALES OR REDEMPTION OF CAPITAL SECURITIES
Upon a sale (including redemption) of Capital Securities, a Securityholder
will recognize gain or loss equal to the difference between its adjusted tax
basis in the Capital Securities and the amount realized on the sale of such
Capital Securities (excluding any amount attributable to any accrued interest
with respect to such Securityholder's pro rata share of the Junior
Subordinated Debentures not previously included in income, which will be
taxable as ordinary income). Provided that the Company does not exercise its
option to defer payment of
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interest on the Junior Subordinated Debentures, and the Capital Securities are
not considered to be issued with OID, a Securityholder's adjusted tax basis in
the Capital Securities generally will be its initial purchase price. If the
Junior Subordinated Debentures are deemed to be issued with OID as a result of
the Company's deferral of any interest payment, a Securityholder's tax basis
in the Capital Securities generally will be its initial purchase price,
increased by OID previously includable in such Securityholder's gross income
to the date of disposition and decreased by distributions or other payments
received on the Capital Securities since and including the commencement date
of the first Extension Period. Such gain or loss generally will be a capital
gain or loss and generally will be a long-term capital gain or loss if the
Capital Security has been held for more than 12 months but no more than 18
months, and long-term capital gain or loss if the Capital Security has been
held for more than 18 months. Under the Taxpayer Relief Act of 1997,
individuals are subject to a maximum long-term capital gain rate of 20% and a
maximum mid-term capital gain rate or 28% on the sale of certain investments
such as the Capital Securities.
Should the Company exercise its option to defer any payment of interest on
the Junior Subordinated Debentures, the Capital Securities may trade at a
price that does not accurately reflect the value of accrued but unpaid
interest with respect to the underlying Junior Subordinated Debentures. As a
result, and because a Securityholder will be required to include in income
accrued but unpaid interest on Junior Subordinated Debentures and to add such
amount to its adjusted tax basis, such Securityholder may recognize a capital
loss on a sale of Capital Securities during an Extension Period. Subject to
certain limited exceptions, capital losses cannot be applied to offset
ordinary income for United States federal income tax purposes.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
The amount of interest paid and any OID accrued on the Capital Securities to
Securityholders (other than corporations and other exempt Securityholders)
will be reported to the IRS. It is expected that such income on the Capital
Securities will be reported to Securityholders on Form 1099 and mailed to
Securityholders by January 31 following each calendar year. "Backup"
withholding at a rate of 31% will apply to payments of interest and payments
of disposition (including redemption) proceeds to a non-exempt Securityholder
unless the securityholder furnishes to the payor its taxpayer identification
number, certifies that such number is correct, and meets certain other
conditions. Any amounts withheld from a Securityholder under the backup
withholding rules will be allowable as a refund or a credit against such
Securityholder's United States federal income tax liability provided the
required information is provided to the IRS.
UNITED STATES ALIEN SECURITYHOLDERS
For purposes of this discussion, a "United States Alien Securityholder" is
any Securityholder who is for United States federal income tax purposes (i) a
nonresident alien individual or (ii) a foreign corporation,
partnership or estate or trust. This discussion assumes that income with
respect to the Capital Securities is not effectively connected with a trade or
business in the United States in which the United States Alien Securityholder
is engaged.
Under current United States federal income tax law:
(i) payments by the Trust or any of its payment agents to any holder of
Capital Securities that is a United States Alien Securityholder generally
will not be subject to withholding or other United States federal Income
tax, provided that, in the case of payments with respect to interest
(including OID), (a) the beneficial owner of the Capital Securities does
not actually or constructively own 10% or more of the total combined voting
power of all classes of stock of the Company entitled to vote, (b) the
beneficial owner of the Capital Securities is not a controlled foreign
corporation that is related to the Company through stock ownership, and (c)
either (A) the beneficial owner of the Capital Securities certifies to the
Trust or its agent, under penalties of perjury, that it is a United States
Alien Securityholder and provides its name and address or (B) a securities
clearing organization, bank or other financial institution that holds
customers' securities in the ordinary courses of its trade or business (a
"Financial Institution") and holds the Capital Securities in such capacity
certifies to the Trust or its agent under penalties of perjury that such
statement has been
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received from the beneficial owner by it or by a Financial Institution
between it and the beneficial owner and furnishes the Trust or its agent
with a copy thereof; and
(ii) a United States Alien Securityholder of Capital Securities generally
will not be subject to withholding or other United States federal income
tax on any gain realized upon the sale or other disposition of Capital
Securities.
Recently issued Treasury regulations provide alternative methods for
satisfying the certification requirement described in clause (i) (c) above. In
the case of Capital Securities held by a foreign partnership, the new
regulations require that (1) the certification described in clause (i)(c)
above be provided by (x) the partners rather than by the foreign partnership
or, (y) alternatively, by the foreign partnership if it has entered into an
agreement with the IRS to be treated as a "withholding foreign partnership",
and (2) the partnership provide certain information, including a United States
taxpayer identification number. A look-through rule applies in the case of
tiered partnerships. The new regulations are effective for payments made after
December 31, 1998.
POSSIBLE TAX LAW CHANGES
Under current law, the Company will be able to deduct interest on the Junior
Subordinated Debentures and stated interest will be taxable to a United States
Person as ordinary income at the time paid or accrued. However, on February 6,
1997, as part of the Clinton Administration's Fiscal 1998 Budget Proposal, the
Treasury Department proposed the Clinton Proposal, which would have, among
other things, generally denied corporate issuers a federal income tax
deduction for interest in respect of debt obligations, such as the Junior
Subordinated Debentures, issued on or after the date of "first committee
action" with respect to the Clinton Proposal (i) if such debt obligations had
a maximum term in excess of 15 years and were not shown as indebtedness on the
issuer's applicable consolidated balance sheet or (ii) if such debt
obligations had a maximum weighted average maturity of more than 40 years.
The Clinton Proposal was not enacted. There can be no assurance, however,
that legislation similar to the Clinton Proposal or future legislative
proposals, future regulations or official administrative pronouncements or
future judicial decisions will not affect the ability of the Company to deduct
interest on the Junior Subordinated Debentures. Such a change could give rise
to a Tax Event, which may permit the Company, to cause a redemption of the
Capital Securities, as described more fully under "Description of Capital
Securities--Redemption" and "Description of Capital Securities--Liquidation of
the Trust and Distribution of Junior Subordinated Debentures."
ERISA CONSIDERATIONS
GENERAL
A fiduciary of an employee benefit plan subject to Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") should consider
the fiduciary obligations imposed under ERISA, in the context of the
particular circumstances of the plan, before authorizing an investment in the
Capital Securities or the Exchange Capital Securities with assets of the plan.
The fiduciary should consider whether such an investment satisfies ERISA's
diversification and prudence requirements, whether the investment constitutes
unauthorized delegation of fiduciary authority and whether the investment is
in accordance with the documents and instruments governing the plan. In
addition, ERISA and the Code prohibit a wide range of transactions
("Prohibited Transactions") involving the assets of a plan subject to ERISA or
the assets of an individual retirement account or a plan subject to Section
4975 of the Code (hereinafter an "ERISA Plan") and persons who have certain
specified relationships to the ERISA Plan ("parties in interest," within the
meaning of ERISA, and "disqualified persons," within the meaning of the Code).
Such transactions may cause ERISA Plan fiduciaries, parties in interest or
disqualified persons to be subject to excise taxes or to incur other
liabilities.
The acquisition of any Capital Security or any Exchange Capital Security by
any person who is using for such acquisition the assets of an ERISA Plan shall
constitute a representation by such person to the Company
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that (i) if the Company or a subsidiary or affiliate of the Company is a
"party in interest" or a "disqualified person" with respect to such ERISA
plan, then such security is being acquired pursuant to an exemption from the
Prohibited Transaction rules under ERISA and the Code, and (ii) neither the
Company nor a subsidiary or affiliate of the Company is a "fiduciary," within
the meaning of Section 3(21) of ERISA and the regulations thereunder, with
respect to such person's interest in the Capital Securities, the Exchange
Capital Securities, or the Junior Subordinated Debentures or the Exchange
Debentures.
Governmental plans and certain church plans (each as defined under ERISA)
are not subject to the fiduciary standards of ERISA and the Prohibited
Transaction rules. Such plans may, however, be subject to federal, state or
local laws or regulations which may affect their ability to invest in the
Capital Securities or the Exchange Capital Securities. Any fiduciary of such a
governmental or church plan considering an investment in the Capital
Securities or the Exchange Capital Securities should determine the need for,
and if necessary, the availability of, any exemptive relief under such laws or
regulations.
THE DISCUSSION HEREIN OF ERISA IS GENERAL IN NATURE AND IS NOT INTENDED TO
BE COMPLETE. ANY FIDUCIARY OF AN ERISA PLAN, GOVERNMENTAL PLAN OR CHURCH PLAN
CONSIDERING AN INVESTMENT IN THE CAPITAL SECURITIES OR THE EXCHANGE CAPITAL
SECURITIES SHOULD CONSULT WITH ITS LEGAL ADVISORS REGARDING THE CONSEQUENCES
AND ADVISABILITY OF SUCH INVESTMENT.
PROHIBITED TRANSACTIONS
The Company (or a subsidiary or affiliate of the Company) may be a party in
interest or a disqualified person with respect to an ERISA Plan investing in
the Capital Securities or the Exchange Capital Securities, and, therefore,
such investments by an ERISA Plan may give rise to a Prohibited Transaction.
Consequently, before investing in the Capital Securities or the Exchange
Capital Securities, any ERISA Plan fiduciary or other person who is using the
assets of an ERISA Plan to acquire such Securities should determine whether
its investment in the Capital Securities or the Exchange Capital Securities
will result in a Prohibited Transaction, and whether a statutory or
administrative exemption from the Prohibited Transaction rules would apply to
such person's investment in the Capital Securities or the Exchange Capital
Securities.
Certain statutory or administrative exemptions from the Prohibited
Transaction rules under ERISA and the code may be available to an ERISA Plan
which is investing in the Capital Securities or the Exchange Capital
Securities. Included among these exemptions are: Prohibited Transaction Class
Exemption ("PTCE") 90-1, regarding transactions involving insurance company
pooled separate accounts; PTCE 91-38, regarding transactions involving bank
collective investment funds; PTCE 84-14, regarding transactions effected by
qualified professional asset managers; PTCE 96-23, regarding transactions
effected by in-house asset managers; or PTCE 95-60, regarding transactions
involving insurance company general accounts. There can be no assurance,
however, that these exemptions, even if all of the conditions specified
therein are satisfied, will apply to transactions involving the Capital
Securities or the Exchange Capital Securities.
Insurance companies considering an investment in the Capital Securities or
the Exchange Capital Securities should note that the small Business Job
Protection Act of 1996 added new Section 401(c) of ERISA relating to the
status of the assets of insurance company general accounts under ERISA and
Section 4975 of the Code. Pursuant to Section 401(c), the Department of Labor
is required to issue final regulations (the "General Account Regulations")
with respect to insurance policies issued on or before December 31, 1998 that
are supported by an insurer's general account. The General Account Regulations
are to provide guidance on which assets held by the insurer constitute "plan
assets" of an ERISA Plan for purposes of the fiduciary responsibility
provisions of ERISA and Section 4975 of the Code. Section 401(c) also provides
that, except in the case of avoidance of the General Account Regulations and
actions brought by the Secretary of Labor relating to certain breaches of
fiduciary duties that also constitute breaches of state or federal criminal
law, until the date that is 18 months after the General Account Regulations
become final, no liability under the fiduciary responsibility and prohibited
transaction provisions of ERISA and Section 4975 may result on the basis of a
claim that the assets of the general account of an insurance company
constitute the plan assets of an ERISA Plan. The Department of Labor issued
proposal General Account Regulation on December 22, 1997 (see 6Z Fed. Reg.
66908) The plan asset status of
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insurance company separate accounts is unaffected by new Section 401(c) of
ERISA, and separate account assets continue to be treated as the plan assets
of an ERISA Plan invested in a separate account.
TRUST ASSETS AS "PLAN ASSETS"
The Department of Labor has issued final regulations (the "Final
Regulations") as to what constitutes assets of an employee benefit plan ("plan
asset") under ERISA and the Code. The Final Regulations provide that, as a
general rule, when an ERISA Plan acquires an equity interest in an entity and
such interest does not constitute a "publicly-offered security" or a security
issued by an investment company registered under the Investment Company Act of
1940, the ERISA Plan's assets include both the equity interest and an
undivided interest in each of the underlying assets of the entity, unless it
is established either that the entity is an operating company or that equity
participation in the entity by "benefit plan investors" is not "significant."
For purposes of the Final Regulations, the Trust will not be an investment
company or an operating company, and the Capital Securities will not
constitute a "publicly-offered security." As discussed below, at the time of
the Exchange Offer, the Exchange Capital Securities may qualify as "publicly
offered securities" for purposes of the Final Regulations, but such results
cannot be assured.
Under the Final Regulations, equity participation by benefit plan investors
will not be considered "significant" on any date only if, immediately after
the most recent acquisition of Capital Securities, the aggregate interest in
the Capital Securities held by benefit plan investors will be less than 25% of
the value of the Capital Securities. For purposes of this rule, a benefit plan
investor is any ERISA Plan and any other employee benefit plan, whether or not
subject to ERISA (such as government plans, foreign plans and certain church
plans). Although it is possible that the equity participation by benefit plan
investors on any date will not be "significant" for purposes of the Final
Regulations, such result cannot be assured because neither the Company nor the
Issuer Trustees will monitor equity participation by benefit plan investors.
Consequently, if ERISA Plans or investors using assets of ERISA Plans purchase
the Capital Securities, the Trust's assets could be deemed to be "plan assets"
of such ERISA Plans for purposes of the fiduciary responsibility provisions of
ERISA and the Code. Under ERISA, any person who exercises any authority or
control respecting the management or disposition the assets of an ERISA Plan
is considered to be a fiduciary of the plan. For example, the Property Trustee
could therefore become a fiduciary of the ERISA Plans that invest in the
Capital Securities and be subject to the general fiduciary requirements of
ERISA in exercising its authority with respect to the management of the assets
of the Trust. However, the Property Trustee will have only limited
discretionary authority with respect to the Trust's assets and the remaining
functions and responsibilities performed by the Property Trustee will be for
the most part custodial and ministerial in nature. Inasmuch as the Property
Trustee or another person with authority or control respecting the management
or disposition of the Trust assets may become a fiduciary with respect to the
ERISA Plans that will purchase the Capital Securities, there may be an
improper delegation by such ERISA Plans of the responsibility to manage plan
assets.
The Exchange Capital Securities will be distributed pursuant to an effective
registration statement under the Securities Act and will be registered under
the Exchange Act within 120 days (or such later time as may be allowed by the
SEC) after the end of the fiscal year of the Trust during which the offering
of the Exchange Capital Securities occurs. The Exchange Capital Securities may
qualify as "publicly offered securities" under the Final Regulations if, in
addition to such distribution and registration, at the time of the Exchange
Offer they are also "widely held" and "freely transferable". Under the Final
Regulations, a class of securities is "widely held" only if it is a class of
securities that is owned by 100 or more investors independent of the issuer
and of one another. Although it is possible that at the time of the Exchange
Offer the Exchange Capital Securities will be "widely held," such result
cannot be assured. Whether a security is "freely transferable" for purposes of
the Final Regulations is a factual question to be determined on the basis of
all relevant facts and circumstances. If at the time of the Exchange Offer the
Exchange Capital Securities qualify as "publicly offered securities," the
assets of the Trust should not be "plan assets" as of such time. If at the
time of the Exchange Offer the Exchange Capital Securities do not qualify as
"publicly offered securities," the "plan asset" considerations discussed in
the immediately preceding paragraph in connection with the Capital Securities
would apply in connection with the investment by ERISA Plans in the Exchange
Capital Securities.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives New Capital Securities for its own account
in connection with the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Capital Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by Participating Broker-Dealers during the 90-day period referred to
below in connection with resales of New Capital Securities received in
exchange for Old Capital Securities if such Old Capital Securities were
acquired by such Participating Broker-Dealers for their own accounts as a
result of market-making activities or other trading activities. The Company
has agreed that this Prospectus, as it may be amended or supplemented from
time to time, may be used by a Participating Broker-Dealer in connection with
resales of such New Capital Securities for a period ending 90 days after the
Expiration Date (subject to extension under certain limited circumstances
described herein) or, if earlier, when all such New Capital Securities have
been disposed of by such Participating Broker-Dealer. See "The Exchange
Offer--Resales of New Capital Securities."
The Company will not receive any cash or other proceeds from the issuance of
the New Capital Securities offered hereby. New Capital Securities received by
broker-dealers for their own accounts in connection with the Exchange Offer
may be sold from time to time in one or more transactions in the over-the-
counter market, in negotiated transactions, through the writing of options on
the New Capital Securities or a combination of such methods of resale, at
market prices prevailing at the time of resale, at prices related to such
prevailing market prices or at negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such broker-
dealer and/or the purchasers of any such New Capital Securities. Any broker-
dealer that resells New Capital Securities that were received by it for its
own account in connection with the Exchange Offer and any broker or dealer
that participates in a distribution of such New Capital Securities may be
deemed to be an "underwriter" within the meaning of the Securities Act, and
any profit on any such resale of New Capital Securities and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that
by acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
EXPERT
The financial statements and the related financial statement schedules
incorporated in this prospectus by reference from the Company's Annual Report
on Form 10-K for the year ended December 31, 1997 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report, which
is incorporated herein by reference, and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in
accounting and auditing.
VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the New Capital
Securities and the creation of the Trust have been passed upon by Potter
Anderson & Corroon LLP, Wilmington, Delaware, special Delaware counsel to the
Company and the Trust. The validity of the New Guarantee and the New Junior
Subordinated Debentures and certain matters relating to United States federal
income tax considerations have been passed upon for the Company by McGuire,
Woods, Battle & Boothe LLP.
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE
BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE TRUST.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL
UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY OR THE TRUST SINCE THE DATE HEREOF. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
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TABLE OF CONTENTS
<TABLE>
<S> <C>
Available Information...................................................... 5
Incorporation of Certain Documents by Reference............................ 6
Summary.................................................................... 7
Risk Factors............................................................... 16
Dominion Resources, Inc. Ratio of Earnings to Fixed Charges................ 22
Use of Proceeds from Sale of the Old Capital Securities.................... 22
Dominion Resources Capital Trust I......................................... 22
Dominion Resources, Inc.................................................... 23
Accounting Treatment for the Trust......................................... 24
The Exchange Offer......................................................... 24
Description of New Securities.............................................. 33
Description of New Junior Subordinated Debentures.......................... 45
Description of New Guarantee............................................... 55
Description of Old Securities.............................................. 58
Relationship Among the New Capital Securities, the New Junior Subordinated
Debentures, the New Guarantee and Certain Undertakings Under the Trust
Agreement................................................................. 58
Certain Federal Income Tax Consequences.................................... 59
ERISA Considerations....................................................... 63
Plan of Distribution....................................................... 66
Experts.................................................................... 66
Validity of Securities..................................................... 66
</TABLE>
UNTIL AUGUST 8, 1998, (90 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENT OR
SUBSCRIPTIONS.
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DOMINION RESOURCES CAPITAL TRUST I
OFFER TO EXCHANGE ITS
7.83% CAPITAL SECURITIES WHICH
HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 FOR ANY
AND ALL OF ITS OUTSTANDING
7.83% CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000
PER CAPITAL SECURITY) FULLY AND
UNCONDITIONALLY GUARANTEED,
AS DESCRIBED HEREIN,
BY DOMINION RESOURCES, INC.
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PROSPECTUS
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[LOGO OF DOMINION RESOURCES APPEARS HERE]
MAY 8, 1998
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