<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus supplement and the accompanying base +
+prospectus is not complete and may be changed. This prospectus supplement and +
+the accompanying base prospectus are not an offer to sell these securities +
+and are not soliciting an offer to buy these securities in any state where +
+the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
FILED PURSUANT TO RULE 424B5
REGISTRATION NUMBER 333-93187
Subject to Completion
Preliminary Prospectus dated November 22, 2000
PROSPECTUS SUPPLEMENT
(To prospectus dated January 6, 2000)
250,000 % Capital Securities
Dominion Resources Capital Trust II
(Liquidation Amount $1,000 per Capital Security)
Fully and Unconditionally Guaranteed
to the Extent Set Forth Herein by
[LOGO OF DOMINION]
Dominion Resources, Inc.
----------
THE CAPITAL SECURITIES:
. Capital Securities represent undivided preferred beneficial ownership
interests in the assets of Dominion Resources Capital Trust II (the Trust).
The sole assets of the Trust will be the Junior Subordinated Debentures
issued by Dominion Resources, Inc. (Dominion).
. Dominion will guarantee the Capital Securities to the extent described in the
prospectus supplement and base prospectus.
. Anticipated Closing Date: December , 2000.
DISTRIBUTIONS ON THE CAPITAL SECURITIES:
. Each Capital Security pays a semi-annual distribution at an annual rate of %
or $ per Capital Security, if Dominion pays interest on the Junior
Subordinated Debentures.
. Dominion may defer interest payments on the Junior Subordinated Debentures on
one or more occasions for up to 10 consecutive semi-annual periods. If
Dominion does defer interest payments, the Trust will also defer payment of
distributions on the Capital Securities. Deferred distributions will
accumulate interest at an annual rate of %, to the extent permitted by law.
. If Dominion redeems the Junior Subordinated Debentures held by the Trust, the
Trust will redeem the Capital Securities. The prices and circumstances under
which the Junior Subordinated Debentures can be redeemed by Dominion and the
amount you will receive upon redemption of your Capital Securities are
described in the prospectus supplement.
. If the Trust redeems the Capital Securities or is liquidated and Dominion
does not redeem its Junior Subordinated Debentures, you will receive $1,000
principal amount of Junior Subordinated Debentures for each Capital Security
you own rather than cash.
Investing in the Capital Securities involves risks that are described in "Risk
Factors" beginning on Page S-9 of this prospectus supplement.
----------
<TABLE>
<CAPTION>
Per Capital
Security Total
----------- -----
<S> <C> <C>
Public offering price (1)................................. $ $
Underwriters' commissions to be paid by Dominion.......... $ $
Proceeds, before expenses, to Dominion Resources Capital
Trust II................................................. $ $
</TABLE>
(1) Plus accumulated distributions from December , 2000 if settlement occurs
after that date
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
The Capital Securities will be ready for delivery in book-entry form through
The Depository Trust Company on or about December , 2000.
----------
Merrill Lynch & Co.
First Union Securities, Inc.
Lehman Brothers
Morgan Stanley Dean Witter
----------
The date of this prospectus supplement is December , 2000.
<PAGE>
ABOUT THIS PROSPECTUS SUPPLEMENT
This document is in two parts. The first part is the prospectus supplement,
which describes the specific terms of the Capital Securities (the term Capital
Security used in this prospectus supplement shall have the same meaning as the
term Trust Preferred Security used in the base prospectus as defined below) we
are offering and certain other matters relating to us and our financial
condition. The second part, the base prospectus, gives more general information
about securities we may offer from time to time, some of which does not apply
to the Capital Securities we are offering. Generally, when we refer to the
prospectus, we are referring to both parts of this document combined. To the
extent that the description of the Capital Securities,
Junior Subordinated Debentures or Guarantee in the prospectus supplement
differs from the corresponding description in the base prospectus, the
description in the prospectus supplement supersedes the description in the base
prospectus.
You should rely only on the information contained in this document or to
which this document refers you. We have not, and the underwriters have not,
authorized anyone to provide you with different information. If anyone provides
you with different or inconsistent information, you should not rely on it. This
document may only be used where it is legal to sell these securities. The
information in this document may only be accurate as of the date of this
document. Our business, financial condition, results of operations and
prospects may have changed since that date.
TABLE OF CONTENTS
Prospectus Supplement Base Prospectus
<TABLE>
<CAPTION>
Page
----
<S> <C>
Where You Can Find More Information....................................... S-3
Forward-Looking Information............................................... S-3
Prospectus Supplement Summary............................................. S-5
Risk Factors.............................................................. S-9
Dominion.................................................................. S-13
Recent Developments....................................................... S-17
Use of Proceeds........................................................... S-17
Capitalization............................................................ S-18
Ratio of Earnings to Fixed Charges........................................ S-19
Selected Historical and Pro Forma Consolidated Financial Information...... S-20
Specific Terms of the Capital Securities.................................. S-23
Specific Terms of the Junior Subordinated Debentures...................... S-28
Subordination of the Guarantee............................................ S-30
Book-Entry Procedures and Settlement...................................... S-30
Material United States Federal Income Tax
Consequences ............................................................ S-32
ERISA Considerations...................................................... S-36
Underwriting.............................................................. S-40
Legal Matters............................................................. S-41
Experts................................................................... S-42
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
About This Prospectus..................................................... 2
Where You Can Find More Information....................................... 2
The Company............................................................... 3
The Trusts................................................................ 3
Use of Proceeds........................................................... 3
Ratio of Earnings to Fixed Charges........................................ 4
Description of Debt Securities............................................ 4
Additional Terms of Senior Debt Securities................................ 12
Additional Terms of Junior Subordinated Debentures........................ 13
Description of the Trust Preferred Securities............................. 15
Description of the Guarantees............................................. 25
Relationship Among the Trust Preferred Securities, the Guarantee and the
Junior Subordinated Debentures Held by the Trust......................... 29
Accounting Treatment...................................................... 29
Description of Capital Stock.............................................. 30
Description of Stock Purchase Contracts and Stock Purchase Units.......... 31
Virginia Stock Corporation Act and the Articles and the Bylaws............ 31
Plan of Distribution...................................................... 34
Legal Opinions............................................................ 35
Experts................................................................... 35
</TABLE>
S-2
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Dominion files annual, quarterly and special reports, proxy statements and
other information with the SEC. Dominion's 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 Dominion files at the SEC's public reference
rooms in Washington, D.C., New York, and Chicago. Please call the SEC at 1-800-
SEC-0330 for further information on the public reference rooms. You may also
read and copy these documents at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005.
The SEC allows us to "incorporate by reference" the information Dominion
files with them, which means that Dominion can disclose important information
to you by referring you to those documents. The information incorporated by
reference is considered to be part of this prospectus supplement and later
information that Dominion files with the SEC will automatically update or
supersede this information. Dominion 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, as amended (the
Exchange Act), until such time as all of the securities covered by this
prospectus supplement have been sold:
. Annual Report on Form 10-K and Form 10-K/A for the year ended December 31,
1999;
. Quarterly Reports on Form 10-Q for the quarters ended March 31, 2000, June
30, 2000 and September 30, 2000; and
. Current Reports on Form 8-K and Form 8-K/A, filed January 3, 2000, February
1, 2000, March 23, 2000, June 21, 2000, June 22, 2000, July 11, 2000,
September 11, 2000, October 12, 2000, November 2, 2000, November 16, 2000 and
November 22, 2000.
You may request a copy of these filings, at no cost, by writing or
telephoning us at: Corporate Secretary, Dominion, 120 Tredegar Street,
Richmond, Virginia 23219, Telephone (804) 819-2000.
FORWARD-LOOKING INFORMATION
Dominion has included certain information in this document which is "forward-
looking information" as defined by the Private Securities Litigation Reform Act
of 1995. Examples include discussions as to our expectations, beliefs, plans,
goals, objectives and future financial or other performance or assumptions
concerning matters discussed in this document. This information, by its nature,
involves estimates, projections, forecasts and uncertainties that could cause
actual results or outcomes to differ substantially from those expressed.
Our business is influenced by many factors that are difficult to predict,
involve uncertainties that may materially affect actual results and are often
beyond our ability to control. Dominion has identified a number of these
factors in its filings with the SEC, including its most recent Quarterly Report
on Form 10-Q which is incorporated by reference in this prospectus supplement,
and Dominion refers you to those reports for further information. They include
fluctuations in energy-related commodities prices, weather conditions, the
risks of operating businesses in regulated
S-3
<PAGE>
industries that are in the process of becoming deregulated, completing the
integration of Consolidated Natural Gas Company ("CNG") with the remainder of
Dominion's business and completing the divestiture of Dominion Capital, Inc.
required of Dominion in connection with the CNG transaction as well as the
divestitures we are making to focus our attention on the northeast quadrant of
the United States.
S-4
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
In this prospectus supplement, the words "Dominion," "Company," "we," "our"
and "us" refer to Dominion Resources, Inc., a Virginia corporation, and its
subsidiaries and predecessors and do not refer to the Trust.
The following summary contains basic information about this offering. It may
not contain all the information that is important to you. The "Specific Terms
of the Capital Securities" and "Specific Terms of the Junior Subordinated
Debentures" sections of this prospectus supplement and the "Description of Debt
Securities," "Additional Terms of Junior Subordinated Debentures," "Description
of the Trust Preferred Securities", "Description of the Guarantees" and
"Relationship Among the Trust Preferred Securities, the Guarantee and the
Junior Subordinated Debentures Held by the Trust" sections of the base
prospectus contain more detailed information regarding the terms and conditions
of the Capital Securities. The following summary is qualified in its entirety
by reference to the detailed information appearing elsewhere in this prospectus
supplement and in the accompanying base prospectus.
THE TRUST
Dominion Resources Capital Trust II is a Delaware business trust. It will
sell its Capital Securities to the public and its common securities to
Dominion.
There will be four trustees of the Trust. Two are employees of Dominion,
referred to as Administrative Trustees. The Chase Manhattan Bank will serve as
Property Trustee and Chase Manhattan Bank USA, National Association, will act
as the Delaware Trustee, in each case until removed or replaced by the holder
of the trust common securities or, in some circumstances, the holders of
Capital Securities. The principal place of business of the Trust is c/o
Dominion, 120 Tredegar Street, Richmond, VA 23219 (804) 819-2000.
DOMINION
Dominion is a fully integrated gas and electric energy holding company
headquartered in Richmond, Virginia. As of October 31, 2000, we had
approximately $28 billion in assets.
Our primary operating segments are:
Dominion Energy--Dominion Energy manages our 19,000 megawatt portfolio of
electric power generation, our 7,600 miles of gas transmission pipeline and a
885 billion cubic foot natural gas storage network. It also guides our
generation growth strategy and our commodity trading, marketing and risk
management activities. We currently operate generation facilities in Virginia,
West Virginia, North Carolina and Illinois.
Dominion Delivery--Dominion Delivery manages our local electric and gas
distribution systems serving 3.8 million customers, our 6,000 miles of electric
transmission lines and our customer service operations. We currently operate
transmission and distribution systems in Virginia, West Virginia, North
Carolina, Pennsylvania and Ohio. Dominion Delivery also includes Dominion
Telecom with its 3,620 route-mile fiber optic network and related
telecommunications and advanced data services located principally in the
northeast quadrant of the United States.
S-5
<PAGE>
Dominion Exploration & Production--Dominion Exploration & Production
manages our onshore and offshore oil and gas exploration and production
activities. With approximately 2.8 trillion cubic feet of natural gas
equivalent reserves and 320 billion cubic feet of annual production, Dominion
Exploration & Production is one of the nation's largest independent oil and
gas operators. We operate on the outer continental shelf and deep water areas
of the Gulf of Mexico, western Canada, the Appalachian Basin and other
selected regions in the continental United States.
Dominion's address and telephone number are Dominion, 120 Tredegar Street,
Richmond, Virginia 23219, Telephone (804) 819-2000.
Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Nine Months Twelve Months Ended
Ended December 31,
September 30, ------------------------
2000 1999 1998 1997 1996 1995
------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
1.64 2.02 2.36 1.97 2.71 2.55
</TABLE>
THE OFFERING
Securities of the Trust
The Trust was created by Dominion to make this offering. The Trust will sell
its Capital Securities to the public and its trust common securities to
Dominion. It will use the proceeds from these sales to buy the % Series
Junior Subordinated Debentures, due , 2030 from Dominion.
The Capital Securities and the Junior Subordinated Debentures will have
essentially the same terms.
Dominion will acquire all of the common securities of the Trust. The
liquidation amount of all the trust common securities will equal approximately
3% of the total capital of the Trust. The trust common securities will
generally rank equally with the Capital Securities. However, in the case of
specific defaults and upon liquidation or redemption, the trust common
securities will rank junior to the Capital Securities with respect to
distributions, redemption and liquidation. Except in limited circumstances
specified in the Trust Agreement, Dominion as the holder of the trust common
securities will have sole voting power with respect to matters to be voted upon
by the Trust's securityholders.
The Capital Securities will be represented by one or more global securities
that will be deposited with, and registered in the name of The Depository Trust
Company, New York, New York (DTC) or its nominee. This means that you will not
receive a certificate for your Capital Securities but, instead, will hold your
interest through DTC's system.
Distributions
If you purchase the Capital Securities, you will be entitled to receive
cumulative cash distributions at an annual rate of % of the liquidation
amount of $1,000, or $ per Capital Security. Distributions will
accumulate from the date the Trust issues the Capital Securities and will be
paid semi-annually in arrears on June and December of each year,
beginning June , 2001.
Extension of Payment Periods
So long as there is no event of default under the Subordinated Indenture,
Dominion may defer interest payments on
S-6
<PAGE>
the Junior Subordinated Debentures for an extension period of up to 10
consecutive semi-annual periods. Dominion may defer payments in this way more
than once, but not beyond the maturity date of the Junior Subordinated
Debentures. If Dominion defers interest payments on the Junior Subordinated
Debentures, the Trust will also defer distributions on the Capital Securities.
During this period you will still accumulate distributions at an annual rate of
% of the liquidation amount of $1,000 per Capital Security, and you will
accrue interest on unpaid distributions at the same rate, compounded semi-
annually (to the extent permitted by law). Even though you will not receive any
cash distributions on your Capital Securities during an extension period, you
will be required to include accrued distributions and interest on unpaid
distributions in your gross income for United States federal income tax
purposes, even if you are a cash basis taxpayer.
Redemption
The Trust must redeem the Capital Securities when the Junior Subordinated
Debentures are paid at maturity on , 2030, or if the Junior Subordinated
Debentures are redeemed before they mature. Dominion may redeem the Junior
Subordinated Debentures in whole, but not in part, at any time as described
under SPECIFIC TERMS OF THE JUNIOR SUBORDINATED DEBENTURES--"Redemption" in
this prospectus supplement. In addition, Dominion may choose to redeem all, but
not less than all, of the Junior Subordinated Debentures if specific tax events
result in specific adverse tax consequences or if the status of the Trust under
the Investment Company Act changes. If the Capital Securities are redeemed in
these circumstances, the holders will receive a redemption price as calculated
under SPECIFIC TERMS OF THE CAPITAL SECURITIES--"Redemption of Capital
Securities" in this prospectus supplement.
Neither the Capital Securities nor the Junior Subordinated Debentures can be
redeemed at any time at the option of their holders.
Dominion's Guarantee of the Capital Securities
Dominion will fully and unconditionally guarantee payments due on the Capital
Securities through a combination of the following:
. Dominion's obligations under the Junior Subordinated Debentures;
. The rights of holders of Capital Securities to enforce those obligations;
. Dominion's agreement to pay the expenses of the Trust; and
. Dominion's guarantee of payments due on the Capital Securities to the extent
of the Trust's assets, which is referred to in this prospectus as the
Guarantee.
If Dominion does not make payments on the Junior Subordinated Debentures, the
Trust will not have sufficient funds to make payments on the Capital
Securities. The Guarantee does not cover payments on the Capital Securities
when the Trust does not have sufficient funds.
Dominion's obligations under the Capital Securities Guarantee are junior in
right of
S-7
<PAGE>
payment to all of Dominion's Senior Indebtedness, which is described below
under RISK FACTORS.
Ranking of the Junior Subordinated Debentures
The Junior Subordinated Debentures are subordinate and junior in right of
payment to all of Dominion's Senior Indebtedness which includes all of
Dominion's indebtedness for borrowed money, any indebtedness of Dominion under
commodity contracts or interest rate or currency swap agreements and any
assumption or guarantee obligations of Dominion relating to similar obligations
of other parties. The Junior Subordinated Debentures are not subordinated to
Dominion's obligations to its trade creditors or indebtedness to its
subsidiaries. See ADDITIONAL TERMS OF THE JUNIOR SUBORDINATED DEBENTURES in the
base prospectus.
No Listing of Capital Securities
The Trust does not intend to apply for the listing of the Capital Securities
on any national securities exchange or for quotation of the Capital Securities
on any automated dealer quotation system.
The underwriters have advised us that they presently intend to make a market
in the Capital Securities after completion of this offering. However, they are
under no obligation to do so and may discontinue market making activities at
any time without notice.
Use of Proceeds
The Trust will invest all of the proceeds from the sale of the Capital
Securities and the trust common securities toward the purchase of the Junior
Subordinated Debentures from Dominion.
We intend to use the net proceeds from the sale of the Junior Subordinated
Debentures for general corporate purposes, including the repayment of debt. See
USE OF PROCEEDS in this prospectus supplement. This debt may include a portion
of our short-term debt, including commercial paper, issued in connection with
our acquisition of CNG.
S-8
<PAGE>
RISK FACTORS
An investment in Capital Securities involves a number of risks. Before
deciding to buy any Capital Securities, you should carefully consider the
following information, together with the other information in this prospectus
supplement, the accompanying base prospectus and the documents that are
incorporated by reference in this prospectus supplement about risks concerning
an investment in Capital Securities.
The Trust has no independent operations or assets. If Dominion does not provide
sufficient funds, the Trust will not be able to make payments on the Capital
Securities.
. The Trust's ability to pay amounts when they are due on the Capital
Securities is solely dependent upon Dominion's payment of amounts when they
are due on the Junior Subordinated Debentures. If Dominion fails to pay
principal or interest when due on the Junior Subordinated Debentures, the
Trust will not have funds to pay distributions on the Capital Securities or
amounts due when the Capital Securities are redeemed or when the Trust is
liquidated.
. The Junior Subordinated Debentures are not secured and are junior in right
of payment to Dominion's Senior Indebtedness. As of September 30, 2000,
Dominion had approximately $4.6 billion of Senior Indebtedness. See
ADDITIONAL TERMS OF THE JUNIOR SUBORDINATED DEBENTURES in the base
prospectus.
. Dominion is a holding company. Substantially all of its income comes from
its operating subsidiaries. Required payments on debt and preferred stock at
the subsidiary level will be made before funds from those subsidiaries are
available to Dominion. At September 30, 2000, Dominion's subsidiary Virginia
Electric and Power Company had 5,090,140 outstanding shares of preferred
stock. In addition to trade debt, some of Dominion's operating subsidiaries
have ongoing corporate debt programs used to finance their business
activities. As of September 30, 2000, the subsidiaries had approximately
$8.6 billion of outstanding debt. In addition, the terms of the Capital
Securities and the Junior Subordinated Debentures do not limit the ability
of Dominion or its subsidiaries to incur additional debt or to issue
preferred stock.
. Dominion's obligations under the Guarantee are not secured and are junior in
right of payment to all other liabilities of Dominion, except any
liabilities that expressly rank equal in priority or subordinate to the
Guarantee. See SUBORDINATION OF THE GUARANTEE in this prospectus supplement.
Dominion can defer interest payments on the Junior Subordinated Debentures.
This may affect the market price of the Capital Securities.
. So long as there is no event of default under the Subordinated Indenture,
Dominion may defer interest payments on the Junior Subordinated Debentures,
from time to time, for an extension period of up to 10 consecutive semi-
annual periods. At the end of an extension period, if all amounts due are
paid, Dominion could start a new extension period of up to 10
S-9
<PAGE>
consecutive semi-annual periods. During any extension period, distributions
on the Capital Securities would be deferred but would accumulate at an
annual rate of % and you will accrue interest on unpaid distributions
at the same rate, compounded semi-annually (all additional accruals being
available to the extent permitted by law). No extension period may extend
beyond the maturity date of the Junior Subordinated Debentures. If Dominion
exercises this extension right, the market price of the Capital Securities
is likely to be affected. See SPECIFIC TERMS OF THE CAPITAL SECURITIES--
"Extension of Payment Periods" in this prospectus supplement and ADDITIONAL
TERMS OF THE JUNIOR SUBORDINATED DEBENTURES--"Option to Extend Interest
Payment Period" in the base prospectus.
If Dominion defers interest payments on the Junior Subordinated Debentures,
there will be United States federal income tax consequences to holders of the
Capital Securities.
. If Dominion extends the interest payment period for the Junior Subordinated
Debentures, you will accrue income as original issue discount, (OID), in
respect of the deferred distributions on your Capital Securities. As a
result, for United States federal income tax purposes you will include that
OID in gross income before you receive distributions, regardless of your
regular method of accounting.
. If you sell your Capital Securities before the record date for the payment
of distributions at the end of an extension period, you will not receive
the distributions. Instead, the accrued distributions will be paid to the
holder of record on the record date, regardless of who the holder of record
may have been on any other date during the extension period. Moreover, the
accrued OID will be added to your adjusted tax basis in the Capital
Securities but might not be reflected in the amount you realize on the
sale. To the extent the amount realized on a sale is less than your
adjusted tax basis, you will recognize a capital loss for United States
federal income tax purposes. The deduction of capital losses is subject to
limitations.
. As a result of Dominion's right to extend the interest payment period, the
market price of the Capital Securities may be more volatile than debt
instruments with OID which do not afford the issuer a similar right. See
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES --"Interest Income
and Original Issue Discount" in this prospectus supplement.
The Guarantee is limited to the funds available to the Trust. If Dominion
defaults on its obligations under the Junior Subordinated Debentures, the
Trust would not have the funds necessary to make payments on or to redeem the
Capital Securities.
. The Guarantee guarantees the payment when due of distributions on the
Capital Securities, to the extent the Trust has funds available to make
those payments.
S-10
<PAGE>
.The Guarantee also guarantees payment on redemption or on a bankruptcy or
dissolution of the Trust (except where Junior Subordinated Debentures are
distributed to the holders) of the liquidation amount and all accrued and
unpaid distributions on the Capital Securities to the date of payment or, if
less, the amount of the assets of the Trust remaining available for
distribution. If Dominion were to default on its payment obligations under
the Junior Subordinated Debentures, the Trust would lack funds necessary for
the payment of distributions or amounts payable on liquidation of the Trust
or redemption of the Capital Securities. As a result, you would then not be
able to rely on the Guarantee for payment of those amounts. Instead, the
Property Trustee would have to enforce the Trust's rights under the Junior
Subordinated Debentures. Alternatively, you could institute a legal
proceeding directly against Dominion to enforce payment to you of Junior
Subordinated Debentures in a principal amount equal to the liquidation
amount of your Capital Securities and the accrued interest on those Junior
Subordinated Debentures. See DESCRIPTION OF THE GUARANTEE--"General";
DESCRIPTION OF THE TRUST PREFERRED SECURITIES--"Trust Enforcement Events"
and RELATIONSHIP AMONG THE TRUST PREFERRED SECURITIES, THE GUARANTEE AND THE
JUNIOR SUBORDINATED DEBENTURES HELD BY THE TRUST in the base prospectus.
Dominion has the right to redeem the Junior Subordinated Debentures if it
suffers adverse tax consequences or if the status of the Trust under the
Investment Company Act changes. This redemption would subject you to additional
tax.
. If there is a Tax Event or an Investment Company Event, as described below,
Dominion will have the right to redeem the Junior Subordinated Debentures,
in whole, but not in part, at any time within 90 days following
the occurrence of the Tax Event or an Investment Company Event. That would,
in turn, cause a mandatory redemption of all of the Capital Securities and
the trust common securities at a redemption price as calculated under
SPECIFIC TERMS OF THE CAPITAL SECURITIES--"Redemption of the Capital
Securities" in this prospectus supplement. Under current United States
federal income tax law, that redemption of your Capital Securities would be
a taxable event to you. See SPECIFIC TERMS OF THE CAPITAL SECURITIES--"Right
to Redeem upon a Special Event" in this prospectus supplement and
DESCRIPTION OF THE TRUST PREFERRED SECURITIES--"Mandatory Redemption of
Trust Preferred Securities" and --"Special Event Redemption" in the base
prospectus.
Dominion may dissolve the Trust at any time. This could have an adverse effect
on the market prices of the Capital Securities or the Junior Subordinated
Debentures.
. At any time, Dominion may dissolve the Trust, pay its creditors, if any, and
S-11
<PAGE>
distribute the Junior Subordinated Debentures to the holders of the Capital
Securities.
. There is no assurance as to the market prices for Capital Securities or
Junior Subordinated Debentures that may be distributed in exchange for
Capital Securities if the Trust is liquidated. The Capital Securities or the
Junior Subordinated Debentures may trade at a discount from the price that
an investor paid to purchase the Capital Securities in this offer.
. A distribution of the Junior Subordinated Debentures upon the liquidation of
the Trust would not be a taxable event to holders of the Capital Securities
because the dissolution of the Trust is conditioned upon receipt of an
opinion from tax counsel that the distribution will not result in the
recognition of gain or loss for federal income tax purposes by the holders.
. As a prospective purchaser of Capital Securities, you are also making an
investment decision about the Junior Subordinated Debentures. You should
carefully review all the information about the Junior Subordinated
Debentures in this prospectus supplement and in the base prospectus. See
SPECIFIC TERMS OF THE CAPITAL SECURITIES--"Distribution of the Junior
Subordinated Debentures" in this prospectus supplement and DESCRIPTION OF
THE TRUST PREFERRED SECURITIES-- "Distribution of the Junior Subordinated
Debentures" in the base prospectus.
There is no established trading market for the Capital Securities.
. The Capital Securities constitute a new issue of securities. They have no
established trading market. There is no assurance as to the liquidity of, or
the development and maintenance of trading markets for, the Capital
Securities.
There can be no assurance that there will be an active market for the Capital
Securities.
. The Underwriters currently plan to make a market in the Capital Securities.
However, there can be no assurance that the Underwriters will engage in
those activities or that any active market in the Capital Securities will
develop or be maintained.
Except with respect to some mergers involving the Trust, amendments to the
Trust Agreement and amendments to the Guarantee, the holders of the Capital
Securities have no voting rights.
. Holders of Capital Securities will have limited voting rights, exercisable
only in the event of a proposed change in the terms of the Capital
Securities or defaults under the Trust Agreement and Subordinated Indenture.
See DESCRIPTION OF THE TRUST PREFERRED SECURITIES-- "Voting Rights;
Amendment of Trust Agreement" in the base prospectus.
S-12
<PAGE>
DOMINION
Dominion is a fully integrated gas and electric energy holding company
headquartered in Richmond, Virginia. As of October 31, 2000, we had
approximately $28 billion in assets.
Our primary operating segments are:
Dominion Energy--Dominion Energy manages our 19,000 megawatt portfolio of
electric power generation, our 7,600 miles of gas transmission pipeline and
a 885 billion cubic foot natural gas storage network. It also guides our
generation growth strategy and our commodity trading, marketing and risk
management activities. We currently operate generation facilities in
Virginia, West Virginia, North Carolina and Illinois.
Dominion Delivery--Dominion Delivery manages our local electric and gas
distribution systems serving 3.8 million customers, our 6,000 miles of
electric transmission lines and our customer service operations. We
currently operate transmission and distribution systems in Virginia, West
Virginia, North Carolina, Pennsylvania and Ohio. Dominion Delivery also
includes Dominion Telecom with its 3,620 route-mile fiber optic network and
related telecommunications and advanced data services located principally in
the northeast quadrant of the United States.
Dominion Exploration & Production--Dominion Exploration & Production
manages our onshore and offshore oil and gas exploration and production
activities. With approximately 2.8 trillion cubic feet of natural gas
equivalent reserves and 320 billion cubic feet of annual production,
Dominion Exploration & Production is one of the nation's largest independent
oil and gas operators. We operate on the outer continental shelf and deep
water areas of the Gulf of Mexico, western Canada, the Appalachian Basin and
other selected regions in the continental United States.
Opportunities
Dominion is operating in an industry undergoing fundamental change. We
believe that the United States energy markets are currently characterized by
increasing demand that is outpacing supply. This situation results from
increased use of energy, inadequate investment in new generation facilities and
the need to replace older power plants. Further, a new com-
petitive environment is emerging from a past characterized by cost-of-service
rate regulation and monopoly franchise territories. This situation creates
opportunities for development of new generation capacity and acquisition of
existing generation assets. We believe these opportunities will be significant
as capacity shortages persist and various industry participants seek to divest
generation assets to comply with regulatory directives and implement changing
business strategies.
We believe similar opportunities exist in our delivery and exploration and
production businesses as demand outpaces supply. Today's commodity prices
reflect the current demand for natural gas and oil and, with more than 90% of
new power plants under development planning to use natural gas for fuel, we
believe the long term fundamentals of delivery and production of natural gas
and oil will remain strong.
Changes in the energy markets also require that producers and their principal
customers manage the risks associated with
S-13
<PAGE>
producing and delivering energy commodities. Knowledgeable industry
participants are able to market energy commodities profitably and to manage the
risks associated with commodity market price fluctuations.
Competitive Strengths
We believe that we are well positioned in the new energy environment based on
our following competitive strengths:
Size and Scale--Our size and scale give us the critical mass needed to
provide the financial strength, flexibility and economies of scale necessary
to compete in the new energy marketplace. In addition, our size has provided
better access to capital and improved opportunities for expansion.
MAIN to Maine Focus--We are concentrating our efforts in the Midwest,
Northeast and Mid-Atlantic regions of the United States, which we call the
"MAIN to Maine" region. In the power industry, "MAIN" means the Middle
American Interconnected Network, which
comprises the states of Missouri, Illinois, Wisconsin, Michigan and Indiana.
The MAIN to Maine region is home to approximately 40% of the nation's demand
for energy. It also has some of the nation's highest energy prices and, as a
result, is rapidly moving toward industry deregulation and restructuring.
Our CNG acquisition, completed in early 2000, substantially increased our
concentration of assets and customers in the region.
Integrated Asset Base--We have the capability to discover and produce gas,
store it, sell it or use it to generate power; we can generate electricity
to sell to customers in our retail markets or in wholesale transactions.
This optionality gives us the ability to produce and sell energy in whatever
form we find most useful and economic. We also operate North America's
largest natural gas storage system, which gives us the flexibility to
provide supply when it is most economically advantageous to do so. As a
fully integrated enterprise active in all aspects of the energy supply
chain, we have the ability to optimize the value of our energy portfolio to
maximize return on invested capital.
Market Knowledge--We capitalize on our in-depth knowledge of our trading
and customer markets. Specifically, our knowledge of the energy trading
market allows us to not only manage market risks but also to maximize the
value of our energy portfolio. As our industry deregulates, we know that we
must remain focused on reliably and efficiently serving our customer base in
order to retain existing customers and add new ones.
Investor Focus--The financial interests of our employees and management
are strongly aligned with the interests of our investor base. They own more
than 16 million shares and together would be Dominion's largest shareholder.
Incentive programs in the form of stock options further align the interests
of our employees with those of our investors.
Focused Growth
Our growth strategy is focused on the MAIN to Maine region and building on the
platform provided by our current asset base.
Dominion Energy--During the period from 2000 to 2005, we plan to have
added nearly 10,000 megawatts of
S-14
<PAGE>
generation capacity through new plants, expanded capacity and acquisitions.
As part of this plan, 1,100 megawatts of gas-fired generation capacity are
already on line. An additional 800 megawatts is under construction or in
regulatory approval stages in Virginia. We recently announced our agreement
to acquire, for approximately $1.3 billion, the 2,000 megawatt Millstone
nuclear facility in Connecticut. We have sited four new generation plants
with combined capacity of approximately 2,000 megawatts along the Dominion
gas pipelines in Ohio, Pennsylvania and West Virginia. Additional
anticipated capacity expansion of 4,000 megawatts is also planned, including
capacity expansions at our Elwood facility in Illinois. To support these
plans, we have acquired or have options to acquire 45 General Electric
turbines and eight steam turbines which will be sufficient to support our
8,000 megawatts of generation expansion.
Dominion Delivery--We expect continued growth in our distribution business
as a result of increasing our customer base and improving our operational
efficiencies through technological advances and development. In the
telecommunications market, we believe that the rapid growth in bandwidth
demand occurring in the U.S. will continue. In particular, we believe
significant opportunities for bandwidth expansion exist in smaller markets
that have not yet been targeted by the expansion strategies of the major
participants in the telecommunications industry. We have recently announced
our decision to expand Dominion Telecom in the MAIN to Maine region,
initially through acquisitions of existing fiber capacity and through joint
development projects with third parties. We have targeted expansion of our
fiber optic network to 7,000 route-miles by the end of 2001.
Dominion Exploration & Production--Over the next four years, we plan 10 to
15 percent average annual growth in BCFe production. We anticipate that this
growth will be primarily drill-bit driven from existing resources including
our offshore and Gulf Coast exploration program. Other growth will be
acquisition driven, such as our recent $85 million acquisition of operating
wells and undeveloped locations from Suemaur Exploration Partners and
others.
Because of the changes our industry is undergoing, we continue to encounter
opportunities for acquisitions of assets and business combinations that would
be consistent with our strategic principles. We regularly investigate any
opportunities we learn about that may increase shareholder value or build on
our existing asset platform. We often participate in bidding and negotiating
processes for those transactions. Any acquisitions or combinations of this type
will likely require us to access external financing sources or issue additional
equity.
As we build our geographically focused business, we are also divesting our
assets outside of the targeted MAIN to Maine region. We divested our Latin
American power generation assets to Duke Energy International for approximately
$405 million. We also recently completed the sale of CNG's Argentine operations
for $145 million to Sempra Energy International and the sale of our 80%
interest in a British power station to
S-15
<PAGE>
PowerGen plc for approximately $73 million. We are actively exploring the sale
of CNG's remaining international operations in Australia.
Other divestitures will also be completed as a result of regulatory
requirements imposed in connection with the CNG merger. As part of the SEC
order approving the merger under the Public Utility Holding Company Act of
1935, we are required to divest Dominion Capital. The SEC has allowed three
years for this to be accomplished. We recently agreed to sell $948 million
principal amount of commercial loans held by First Source Financial, a unit of
Dominion Capital, to GE Capital Commercial Finance. To date, we have completed
the sale of approximately $735 million principal amount of these loans and
expect to complete the sale of an additional approximately $93 million
principal amount by 2001. The remaining loans were paid off in accordance with
their terms. We also sold an additional $640 million principal amount of
commercial loans held by First Source Financial through an affiliated special
purpose collateralized loan vehicle on October 11, 2000.
Also, during the merger approval process, we and CNG agreed to divest
Virginia Natural Gas, CNG's gas distribution subsidiary located in Virginia
Beach, Virginia. We completed the sale of VNG to AGL Resources, Inc. for cash
proceeds of $533 million on October 6, 2000. Proceeds from these transactions
and from the sales of non-core assets described above are expected to raise
more than $1.5 billion which will be applied to reduce debt.
Principal Subsidiaries
Dominion's principal subsidiaries include Virginia Electric and Power Company
(Dominion Virginia Power), a regulated public utility engaged in the
generation, transmission, distribution and sale of electric energy in Virginia
and northeastern North Carolina, and CNG, a producer, transporter, distributor
and retail marketer
of natural gas serving customers in Pennsylvania, Ohio, West Virginia, New York
and various cities in the Northeast and Mid-Atlantic. Dominion's other
principal subsidiaries include Dominion Energy, Inc., an independent power and
natural gas subsidiary, and Dominion Capital, Inc., its financial services
subsidiary.
In 1999, the Governor of Virginia signed into law the Virginia Electric
Utility Restructuring Act establishing a detailed plan to restructure the
electric utility industry in Virginia. The new law provides for deregulation of
generation and implementation of customer choice beginning in 2002.
The new law also requires, among other things, the functional separation of
the generation, transmission and retail distribution of incumbent electric
utilities. Virginia electric utilities are required to file their functional
separation plans with the Virginia State Corporation Commission by January 1,
2001. Dominion Virginia Power filed its functional separation plan with the
Virginia Commission on November 1, 2000. Under the plan, Dominion Virginia
Power proposes to separate its generation assets and operations from its
electric transmission and distribution assets and operations. Dominion Virginia
Power would transfer its generation assets, including its obligations under its
non-utility generation contracts, to a new company, Dominion Generation, which
would be spun off to Dominion.
S-16
<PAGE>
Dominion Virginia Power would retain its electric transmission and
distribution assets. Dominion Generation would supply Dominion Virginia Power
with electric power until July 1, 2007 pursuant to a power purchase agreement.
Our legal structure is not currently the same as the operating segments we
use to manage our business. The functional separation of Dominion Virginia
Power's regulated and unregulated businesses may, with regulatory approval,
provide us with the opportunity to realign, in part, our legal structure with
our operating segments.
RECENT DEVELOPMENTS
On November 21, 2000 Dominion agreed to sell six million shares of common
stock in a block trade to Merrill Lynch, Pierce, Fenner & Smith Incorporated.
Net proceeds from the transaction will total approximately $354 million. With
the new issue, Dominion will have approximately 245 million common shares
outstanding. Dominion will use the proceeds to help finance its acquisition of
the Millstone nuclear power plant, which is expected to close by April 1, 2001.
Prior to the close of the Millstone transaction, the proceeds will be used to
reduce Dominion's short-term debt.
For additional information about our company, see WHERE YOU CAN FIND MORE
INFORMATION in this prospectus supplement.
USE OF PROCEEDS
The Trust will invest all of the proceeds from the sale of the Capital
Securities and the trust common securities toward the purchase of the Junior
Subordinated Debentures from Dominion.
We intend to use the net proceeds from the sale of the Junior Subordinated
Debentures for general corporate purposes, including the repayment of debt.
This debt may include a portion of our short-term debt, including commercial
paper, issued in connection with our acquisition of CNG. At October 31, 2000
the weighted average maturity date of Dominion's approximately $1.0 billion of
outstanding commercial paper was approximately 16.97 days and the weighted
average interest rate was approximately 6.81%.
S-17
<PAGE>
CAPITALIZATION
The table below shows our capitalization on a consolidated basis as of
September 30, 2000. The "As Adjusted for Completed Offering" column reflects
our capitalization after giving effect to our October 12, 2000 issuance and
sale of 8,250,000 stock purchase units consisting of a common stock purchase
contract and a senior note issued by Dominion (the "Completed Offering"), and
the use of the net proceeds from the Completed Offering. The table below does
not reflect the effect of the November 21, 2000 common stock transaction
described in RECENT DEVELOPMENTS in this prospectus supplement.
The "As Fully Adjusted" column reflects our capitalization after giving
effect to the Completed Offering, this offering, and the use of the net
proceeds from both offerings.
You should read this table along with our audited financial statements
contained in our most recent Annual Report on Form 10-K as well as the
information presented in our Quarterly Reports on Form 10-Q. See WHERE YOU CAN
FIND MORE INFORMATION in this prospectus supplement.
<TABLE>
<CAPTION>
September 30, 2000
------------------------------
As Adjusted
for Completed As Fully
Actual Offering Adjusted
------- ------------- --------
(in millions)
<S> <C> <C> <C>
Short-term debt/1.........................../.. $ 3,946 $ 3,546 $
Long-term debt, stock purchase units and
capital lease obligations..................... 11,322 11,734 11,734
Obligated mandatorily redeemable preferred
securities of subsidiary trusts............... 385 385
Preferred stock................................ 509 509 509
Common shareholders' equity.................... 6,686 6,667/2/ 6,667
------- ------- -------
Total capitalization........................... $22,848 $22,841 $
======= ======= =======
</TABLE>
--------
/1/Includes securities due within one year.
/2/Reflects an adjustment of approximately $19 million representing the present
value of contract adjustment payments related to the stock purchase units.
S-18
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
These computations reflect Dominion's consolidated earnings and consolidated
fixed charges including proportionate interests in the earnings and fixed
charges of certain other companies in which we hold an equity interest. For
this ratio, 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 of which at least 20% but less than 50% of total equity is
owned by Dominion. 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.
The ratio of earnings to fixed charges for each of the periods indicated is
as follows:
<TABLE>
<CAPTION>
Nine Months Twelve Months Ended December
Ended 31,
September ------------------------------
30, 2000/1/ 1999/2/ 1998 1997/3/ 1996 1995
------------ ------- ---- ------- ---- ----
<S> <C> <C> <C> <C> <C>
1.64 2.02 2.36 1.97 2.71 2.55
</TABLE>
--------
/1/If Dominion had completed the CNG acquisition as of January 1, 2000, the pro
forma ratio of earnings to fixed charges for the nine months ended September
30, 2000 would be 1.18x. Net income for the nine months ended September 30,
2000 includes $411 million in restructuring and other acquisition-related
costs resulting from the CNG acquisition and a write-down at Dominion
Capital, Inc. Dominion is required to divest its financial services business
as a result of the acquisition of CNG. Excluding this charge from the
calculation above results in a ratio of earnings to fixed charges for the
nine months ended September 30, 2000 of 2.17x.
/2/Net income for the twelve months ended December 31, 1999 includes the one-
time after-tax charge of $255 million resulting from the discontinued
application by Virginia Power of Statement of Financial Accounting Standards
No. 71, "Accounting for the Effects of Certain Types of Regulation," to its
generation operations. Excluding this charge from the calculation above
results in a ratio of earnings to fixed charges for the twelve months ended
December 31, 1999 of 2.48x.
/3/Net income for the twelve months ended December 31, 1997 includes the one-
time charge of $157 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 2.22x.
S-19
<PAGE>
SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
We are providing or incorporating by reference in this prospectus supplement
selected financial information for Dominion and CNG. We derived this
information from audited and unaudited financial statements of Dominion and
audited financial statements of CNG for the periods presented. The information
is only a summary and you should read it together with the financial
information included or incorporated by reference in this prospectus
supplement. See WHERE YOU CAN FIND MORE INFORMATION in this prospectus
supplement.
Dominion--Historical Information
In the table below, we provide you with our selected historical consolidated
financial information. We prepared this information using our consolidated
financial statements as of the dates and for the periods indicated. We derived
the consolidated income statement data below for each of the three years ended
December 31, 1999, and the consolidated balance sheet data at December 31, 1999
and 1998, from financial statements audited by Deloitte & Touche LLP,
independent auditors. The remaining data is derived from financial statements
that have not been audited, but which, in the opinion of our management,
contain all adjustments, including normal recurring accruals, necessary to
present fairly our financial position and results of operations and cash flows
for the applicable periods.
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended
September 30, December 31,
-------------- -------------------------
2000/1/ 1999 1999 1998 1997
------- ------ ------- ------- ------
(in millions)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT INFORMATION, for pe-
riod ended
Total revenues....................... $6,479 $4,271 $ 5,520 $ 6,081 $7,263
Income before income taxes, minority
interests, cumulative effect of a
change in accounting principle and
extraordinary item.................. 466 751 828 869 679
Income before extraordinary items and
cumulative effect of a change in
accounting principles............... 309 493 828 869 679
Net income........................... 330 238 296/2/ 536 399
BALANCE SHEET INFORMATION, at period
end
Cash and cash equivalents............ 438 357 280 426
Total assets......................... 29,822 18,415 17,747 17,517
Short-term debt/3/ .................. 3,946 1,549 1,406 744
Long-term debt....................... 11,322 6,857 6,936 6,252
Obligated mandatorily redeemable
preferred securities of subsidiary
trusts.............................. 385 385 385 385
Preferred stock...................... 509 509 509 689
Common shareholders' equity.......... 6,686 5,005 4,752 5,316
</TABLE>
--------
/1/The income statement information and balance sheet information reflect the
acquisition of CNG which was consummated effective January 28, 2000.
/2/As discussed in our Form 8-K, filed March 29, 1999, Virginia Power
discontinued the application of Statement of Financial Accounting Standards
No. 71, Accounting for the Effects of Certain Types of Regulation, to its
generation operations. This resulted in a one-time after-tax charge of $255
million. Excluding this charge, net income for the nine months ended
September 30, 1999 was $493 million and for the year ended December 31, 1999
was $551 million.
/3/Includes securities due within one year.
S-20
<PAGE>
CNG--Historical Information
In the table below, we provide you with CNG's selected historical
consolidated financial information. We prepared this information using CNG's
consolidated financial statements as of the dates and for the periods
indicated. We derived the consolidated income statement data below for each of
the three years ended December 31, 1999, and the consolidated balance sheet
data at December 31, 1999 and 1998, from audited financial statements
incorporated by reference in this prospectus supplement.
<TABLE>
<CAPTION>
Year Ended
December 31,
--------------------
1999 1998 1997
------ ------ ------
(in millions)
<S> <C> <C> <C>
INCOME STATEMENT INFORMATION, for period ended
Total operating revenues and income....................... $3,074 $2,760 $3,177
Income from operations.................................... 533 497 567
Net income................................................ 137 239 304
BALANCE SHEET INFORMATION, at period end
Cash and cash equivalents................................. 94 135
Total assets.............................................. 6,535 6,362
Short-term debt/1/ ....................................... 686 670
Long-term debt............................................ 1,764 1,380
Common shareholders' equity............................... 2,376 2,400
</TABLE>
--------
/1/ Includes current maturities of long-term debt and commercial paper.
S-21
<PAGE>
Dominion--Selected Pro Forma Condensed Financial Information
In the table below, we provide you with unaudited selected pro forma
condensed financial information for Dominion for the year ended December 31,
1999 as if we had completed the CNG acquisition on January 1, 1999, and for the
nine months ended September 30, 2000 as if we had completed the acquisition on
January 1, 2000. The pro forma financial information was prepared using the
purchase method of accounting, with Dominion treated as the acquiring company.
This unaudited selected pro forma condensed financial information should be
read in conjunction with the separate historical financial statements and
accompanying notes of Dominion and CNG, and Dominion's pro forma financial
information, all of which are incorporated by reference in this prospectus
supplement. You should not rely on the unaudited selected pro forma financial
information as an indication of the results of operations or financial position
that would have been achieved if the CNG acquisition had taken place earlier;
nor should you rely on it as an indicator of the results of operations or
financial position of Dominion after the completion of these transactions.
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended
September 30, December 31,
2000/1/ 1999
------------- ------------
(in millions)
<S> <C> <C>
INCOME STATEMENT INFORMATION, for period ended
Total revenues.................................... $ 6,846 $ 8,594
Income before income taxes, minority interests,
cumulative effect of a change in accounting
principle and extraordinary items................ 521 901
Income before extraordinary items and cumulative
effect of a change in accounting principles...... 339
Net income........................................ 360 232/2/
BALANCE SHEET INFORMATION, at period end
Cash and cash equivalents......................... 438 374
Total assets...................................... 29,822 28,867
Short-term debt/3/ ............................... 3,946 6,352
Long-term debt.................................... 11,322 8,680
Obligated mandatorily redeemable preferred
securities of subsidiary trusts.................. 385 385
Preferred stock................................... 509 509
Common shareholders' equity....................... 6,686 6,885
</TABLE>
--------
/1/There are no pro forma adjustments for the balance sheet information for the
nine months ended September 30, 2000 since the acquisition of CNG had been
completed before that date.
/2/As discussed in our Form 8-K, filed March 29, 1999, Virginia Power
discontinued the application of Statement of Financial Accounting Standards
No. 71, Accounting for the Effects of Certain Types of Regulation, to its
generation operations. This resulted in a one-time after-tax charge of $255
million. Excluding this charge, pro forma net income for the year ended
December 31, 1999 was $487 million.
/3/Includes securities due within one year.
S-22
<PAGE>
SPECIFIC TERMS OF THE CAPITAL SECURITIES
Specific terms of the Capital Securities are summarized below. This summary
is not complete and should be read together with the DESCRIPTION OF THE TRUST
PREFERRED SECURITIES in the base prospectus, where provisions of the amended
trust agreement have been summarized.
The form of amended trust agreement was filed as an exhibit to the
registration statement, and you should read the Trust Agreement for provisions
that may be important to you. The amended trust agreement will be qualified as
an indenture under the Trust Indenture Act. You should also refer to the Trust
Indenture Act for provisions that apply to the Capital Securities.
The amended trust agreement permits the Trust to "reopen" this offering of
Capital Securities and trust common securities and issue additional Capital
Securities and trust common securities without the consent of the holders of
the Capital Securities or the trust common securities.
Distributions
Distributions on the Capital Securities will:
. be payable in U.S. dollars at % per annum of the liquidation amount,
including interest payable on overdue distributions, on the basis of a 360-
day year of twelve 30-day months;
. be cumulative and payable semi-annually in arrears on June and December
of each year, commencing June , 2001; and
. originally accrue from, and include, the date they are issued.
In the event that any distribution date is not a business day, payment will
be made on the next business day, and no interest or other payment will result
from the delay. However, if the deferred payment date is in
the next calendar year, the payment will be made on the last business day of
the earlier year.
A business day is any day that is not a Saturday, a Sunday, a day on which
banks in New York City or Richmond, Virginia are authorized or required to
remain closed, or a day on which the Corporate Trust Office of the Property
Trustee or the Subordinated Indenture Trustee is closed for business.
The record date for distributions will be, for so long as the Capital
Securities remain in book-entry only form, one business day prior to the
relevant distribution date. In the event the Capital Securities are not in
book-entry only form, the record date for distributions will be selected by the
Administrative Trustees as provided in the prospectus.
Extension of Payment Periods
So long as there is no event of default under the Subordinated Indenture,
Dominion may defer interest payments on the Junior Subordinated Debentures for
an extension period of up to 10 consecutive semi-annual periods. Distributions
on the Capital Securities would not be paid during any extension period, but
would accrue, with interest on unpaid distributions accruing at an annual rate
of %, compounded semi-annually (to the extent permitted by law). Dominion
could not make specified payments on its other securities during an extension
period. These payments are described under SPECIFIC
S-23
<PAGE>
TERMS OF THE JUNIOR SUBORDINATED DEBENTURES-- "Extension of Payment Periods" in
this prospectus supplement.
Before the end of any extension period that is shorter than 10 consecutive
semi-annual periods, Dominion could further extend the period, so long as the
entire extension period would not exceed 10 consecutive semi-annual periods. No
payments can be deferred beyond the maturity date of the Junior Subordinated
Debentures. At the end of any extension period, if all amounts then due on the
Junior Subordinated Debentures, including additional interest on unpaid
interest, have been paid, Dominion could elect to begin a new extension period.
See ADDITIONAL TERMS OF THE JUNIOR SUBORDINATED DEBENTURES-- "Option to Extend
Interest Payment Period" in the base prospectus.
Dominion has no current intention of exercising its right to defer payments
of interest by extending the interest payment period on the Junior Subordinated
Debentures.
Redemption of Capital Securities
The Trust must redeem the Capital Securities when the Junior Subordinated
Debentures are paid at maturity or if the Junior Subordinated Debentures are
redeemed before they mature. The Junior Subordinated Debentures will mature on
, 2030, and may be redeemed (i) at any time, in whole but not in
part, upon the occurrence of a Special Event at a redemption price equal to the
Special Event Redemption Make-Whole Amount, as described below, and (ii) at any
time, in whole but not in part, at a redemption price equal to the Optional
Redemption Make-Whole Amount, as described below. See "Right to Redeem Upon a
Special Event" below for a description of the term Special Event.
Upon the repayment of the Junior Subordinated Debentures, whether at maturity
or upon redemption, the proceeds from such repayment or payment shall
simultaneously be applied to redeem Capital Securities having an aggregate
liquidation amount equal to the aggregate principal amount of the Junior
Subordinated Debentures so repaid or redeemed at the redemption price; provided
that holders of Capital Securities shall be given not less than 20 nor more
than 60 days notice of such redemption.
The redemption price shall equal, for each Capital Security, the applicable
Make-Whole Amount for a corresponding $1,000 principal amount of Junior
Subordinated Debentures together with accrued distributions to but excluding
the redemption date.
The "Special Event Redemption Make-Whole Amount" shall be equal to the
greater of (i) 100% of the principal amount of such Junior Subordinated
Debentures or (ii) as determined by a Quotation Agent as of the redemption
date, the sum of the present value of scheduled payments of principal and
interest on the Junior Subordinated Debentures from the redemption date to
, 2030, discounted to the redemption date on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months) at a
S-24
<PAGE>
discount rate equal to (a) the Treasury Rate plus % before ,
2001, and (b) the Treasury Rate plus % if after such date.
The "Optional Redemption Make-Whole Amount" shall be equal to the greater of
(i) 100% of the principal amount of such Junior Subordinated Debentures or (ii)
as determined by a Quotation Agent as of the redemption date, the sum of the
present value of the scheduled payments of principal and interest on the Junior
Subordinated Debentures from the redemption date to , 2030
discounted to the redemption date on a semiannual basis (assuming a 360-day
year consisting of twelve 30-day months) at a discount rate equal to the
Treasury Rate plus %.
"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 time period from the redemption date to
, 2030, (if no maturity is within three months before or after
such time period, yields for the two published maturities most closely
corresponding to such time period shall be determined and the Treasury Rate
shall be interpolated or extrapolated from such yields on a straight-line
basis, rounding to the nearest month) or (ii) if such release (or any successor
release) is not published during the week preceding the calculation date or
does not contain such yields, the rate per annum equal to the semi-annual
equivalent yield to maturity of the Comparable Treasury Issue, calculated using
a price for the Comparable Treasury Issue (expressed as a percentage of its
principal amount) equal to the Comparable Treasury Price for such redemption
date. The Treasury Rate shall be calculated on the third business day preceding
the redemption date.
"Comparable Treasury Issue" means, with respect to any redemption date, the
United States Treasury security selected by the Quotation Agent as having a
maturity comparable to the time period from the redemption date to
, 2030 that would be utilized, at the time of selection and in
accordance with customary financial practice, in pricing new issues of
corporate debt securities of comparable maturity to the time period. If no
United States Treasury security has a maturity which is within a period from
three months before to three months after , 2030, the two most
closely corresponding United States Treasury securities shall be used as the
Comparable Treasury Issue, and the Treasury Rate shall be interpolated and
extrapolated on a straight-line basis, rounding to the nearest month using such
securities.
"Quotation Agent" means Merrill Lynch, Pierce, Fenner & Smith Incorporated
and its successors; provided, however, that if the foregoing shall cease to be
a primary United States Government securities dealer in New York City (a
"Primary Treasury Dealer"), Dominion shall substitute therefor another Primary
Treasury Dealer.
"Reference Treasury Dealer" means (i) the Quotation Agent and (ii) up to four
other Primary Treasury Dealer selected by
S-25
<PAGE>
the Subordinated Indenture Trustee after consultation with Dominion.
"Comparable Treasury Price" means (i) the average of up to five Reference
Treasury Dealer Quotations for such redemption date, after excluding the
highest and lowest Reference Treasury Dealer Quotations, or (ii) if the
Subordinated Indenture Trustee obtains fewer than five such Reference Treasury
Dealer Quotations, the average of all such Quotations.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any redemption date, the average, as determined by the
Subordinated Indenture Trustee, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount)
quoted in writing to the Subordinated Indenture Trustee by such Reference
Treasury Dealer at 5:00 p.m., New York City time, on the third business day
preceding such redemption date.
Right to Redeem Upon a Special Event
Dominion will have the right to redeem all, but not fewer than all, of the
Junior Subordinated Debentures, at the Special Event Redemption Make-Whole
Amount, plus accrued interest, at any time within 90 days after a Tax Event or
an Investment Company Event (either, a Special Event) happens.
In the event of redemption of the Junior Subordinated Debentures due to the
occurrence of a Special Event, the Property Trustee will use the proceeds to
redeem the Capital Securities and trust common securities at a redemption price
equal to the Special Event Redemption Make-Whole Amount for a corresponding
$1,000 principal amount of Junior Subordinated Debentures plus any unpaid
distributions to but excluding the date of redemption.
A Tax Event means that the Administrative Trustees have received an opinion
of independent tax counsel experienced in those matters to the effect that, as
a result of any amendment to, change or announced proposed change in:
. the laws or regulations of the United States or any of its political
subdivisions or taxing authorities, or
. any official administrative pronouncement, action or judicial decision
interpreting or applying those laws or regulations,
which amendment or change becomes effective or proposed change, pronouncement,
action or decision is announced on or after the date the Capital
Securities are issued and sold, there is more than an insubstantial risk that:
. the Trust is or within 90 days would be subject to U.S. federal income tax
with respect to income accrued or received on the Junior Subordinated
Debentures,
. interest payable to the Trust on the Junior Subordinated Debenture is not or
within 90 days would not be deductible, in whole or in part, by us for U.S.
federal income tax purposes, or
. the Trust is or within 90 days would be subject to a material amount of other
taxes, duties or other govenmental charges.
Investment Company Event means that the Administrative Trustees have received
an opinion of a nationally recognized independent counsel to the effect that,
as a result of an amendment to or change in the Investment Company Act or
regulations thereunder on or after the date the Capital Securities are issued
and sold, there is more
S-26
<PAGE>
than an insubstantial risk that the Trust is or will be considered an
investment company and be required to be registered under the Investment
Company Act.
Liquidation
The amount payable on the Capital Securities in the event of any liquidation
of the Trust is $1,000 per Capital Security plus accumulated and unpaid
distributions, which may be in the form of a distribution of Junior
Subordinated Debentures. See "Distribution of Junior Subordinated Debentures"
below and DESCRIPTION OF THE TRUST PREFERRED SECURITIES "Liquidation
Distribution Upon Dissolution" in the base prospectus.
Distribution of the Junior Subordinated Debentures
In addition to the events that would cause a dissolution of the Trust as
described under DESCRIPTION OF THE TRUST PREFERRED SECURITIES --"Liquidation
Distribution Upon Dissolution" in the base prospectus and subject to the
condition described below, at any time, Dominion may:
. dissolve the Trust; and
. distribute Junior Subordinated Debentures to the holders of the Capital
Securities.
The right to dissolve the Trust and distribute the Junior Subordinated
Debentures will be conditioned on Dominion's receipt of an opinion rendered by
an independent tax counsel that the distribution would not result in the
recognition of gain or loss for federal income tax purposes by the holders.
After dissolution and distribution of the Junior Subordinated Debentures, the
Capital Securities and the trust common securities will no longer be
outstanding. Certificates representing Capital Securities will then represent
Junior Subordinated Debentures that:
. have a principal amount equal to the liquidation amount of the Capital
Securities; and
. bear accrued and unpaid interest equal to any accrued and unpaid
distributions on the Capital Securities.
If Dominion distributes Junior Subordinated Debentures to holders of Capital
Securities in a dissolution of the Trust, those Junior Subordinated Debentures
will be issued in denominations of $1,000 and integral multiples of $1,000 and
will initially be issued in the form of one or more global securities. DTC, or
any successor depositary for the Capital Securities, will act as depositary for
the Junior Subordinated Debentures. It is anticipated that the depositary
arrangements for the Junior Subordinated Debentures would be substantially
identical to those in effect for the Capital Securities. See BOOK-ENTRY
PROCEDURES AND SETTLEMENT in this prospectus supplement. There can be no
assurances as to the market price of any Junior Subordinated Debentures that
may be distributed to the holders of Capital Securities.
Book-Entry Securities
The Capital Securities will trade through DTC. The Capital Securities will be
represented by a global certificate and registered in the name of Cede & Co.,
DTC's nominee. See BOOK-ENTRY PROCEDURES AND SETTLEMENT in this prospectus
supplement.
Information Concerning the Property Trustee
The Chase Manhattan Bank is the Property Trustee. It is also the Guarantee
S-27
<PAGE>
Trustee, the Subordinated Indenture Trustee and the Senior Indenture Trustee.
Dominion and certain of its affiliates maintain deposit accounts and banking
relationships with The Chase Manhattan Bank. The Chase Manhattan Bank also
serves as trustee under other indentures pursuant to which Dominion securities
and securities of certain of its affiliates are outstanding.
Information Concerning the Delaware Trustee
Chase Manhattan Bank USA, National Association (formerly known as Chase
Manhattan Bank Delaware) is the Delaware Trustee. It is an affiliate of The
Chase Manhattan Bank which serves as Property Trustee and in the other
capacities described above under "Information Concerning the Property Trustee."
SPECIFIC TERMS OF THE JUNIOR SUBORDINATED DEBENTURES
Specific terms of the Junior Subordinated Debentures are summarized below.
This summary is not complete and should be read together with the DESCRIPTION
OF DEBT SECURITIES and ADDITIONAL TERMS OF THE JUNIOR SUBORDINATED DEBENTURES
in the base prospectus, where provisions of the Subordinated Indenture have
been summarized.
The Subordinated Indenture and the form of supplemental indenture under which
the Junior Subordinated Debentures will be issued were filed as exhibits to the
registration statement, and you should read these documents for provisions that
may be important to you. The Subordinated Indenture is qualified as an
indenture under the Trust Indenture Act. You should also refer to the Trust
Indenture Act for provisions that apply to the Junior Subordinated Debentures.
The Subordinated Indenture permits Dominion to "reopen" this series of Junior
Subordinated Debentures and issue additional Junior Subordinated Debentures of
this series without the consent of the holders of Junior Subordinated
Debentures.
The Junior Subordinated Debentures will mature on , 2030.
Interest
Interest on the Junior Subordinated Debentures will:
. be payable in U.S. dollars at % per annum, including interest payable
on
overdue interest, on the basis of a 360-day year of twelve 30-day months;
. be cumulative and payable semi-annually in arrears on June , and December
of each year, beginning June , 2001; and
. originally accrue from, and include, the date they are issued.
If any payment date is not a business day, payment will be made on the next
following business day, and no interest or other payment will result from the
delay.
For so long as the Capital Securities or Junior Subordinated Debentures
distributed to holders of Capital Securities remain in book-entry only form,
the record date for interest will be one business day prior to the scheduled
distribution or interest payment date. For any of these Junior Subordinated
Debentures not in book-entry only form, the record date for distributions will
be the fifteenth day before the
S-28
<PAGE>
scheduled distribution or interest payment date, whether or not it is a
business day.
Extension of Payment Periods
So long as there is no event of default under the Subordinated Indenture,
Dominion may defer interest payments on the Junior Subordinated Debentures for
an extension period of up to 10 consecutive semi-annual periods; provided,
however, that no such extension period may extend beyond the maturity of the
Junior Subordinated Debentures. During this period, the interest on the Junior
Subordinated Debentures will still accrue at a per annum rate of %. In
addition, interest on the unpaid interest will accrue at an annual rate of
%, compounded semi-annually, to the extent permitted by law. Distributions
on the Capital Securities would not be paid during any extension period with
respect to the Junior Subordinated Debentures, but would accumulate at the per
annum rate of %. In addition, interest on unpaid distributions will accrue
at an annual rate of %, compounded semi-annually, to the extent permitted
by law. When we refer to any payment of interest, interest includes such
additional interest and any interest payable as described in the second bullet
point under ADDITIONAL TERMS OF JUNIOR SUBORDINATED DEBENTURES--"Additional
Covenants Applicable to Junior Subordinated Debentures" in the base prospectus.
Before the end of any extension period that is shorter than 10 consecutive
semi-annual periods, Dominion could further extend the period, so long as the
entire extension period would not exceed 10 consecutive semi-annual periods. No
payments can be deferred beyond the maturity date of the Junior Subordinated
Debentures. At the end of any extension period, if all amounts then due on the
Junior Subordinated Debentures, including additional interest on unpaid
interest, have been paid, Dominion could elect to begin a new extension period.
If Dominion defers payment on the Junior Subordinated Debentures, Dominion
may not:
. declare or pay any dividend or distribution on its capital stock, other than
dividends paid in shares of common stock of Dominion;
. redeem, purchase, acquire or make a liquidation payment with respect to, any
of its capital stock;
. make any payment of principal or of interest or premium, if any, or repay or
repurchase or redeem any indebtedness that is equal in right of payment with,
or subordinated to, the Junior Subordinated Debentures; or
. make any guarantee payments with respect to any of the above.
. See ADDITIONAL TERMS OF THE JUNIOR SUBORDINATED DEBENTURES--"Option to Extend
Interest Payment Period" in the base prospectus.
Any extension of the payment period for interest on the Junior Subordinated
Debentures, or on any other securities issued under the Subordinated Indenture
or on any similar securities, will apply to all securities of the same type.
Those extensions will also apply to distributions on Capital Securities and
trust common securities and all other securities with terms substantially the
same as Capital Securities and trust common securities. Dominion will
S-29
<PAGE>
give the Trust and the Subordinated Indenture Trustee notice of its election of
an extension period before the earlier of:
. one business day before the record date for the scheduled distribution; and
. the date Dominion is required to give notice of an extension period to the
NYSE.
Dominion will cause the Trust to send notice of that election to the holders
of Capital Securities.
Redemption
The Junior Subordinated Debentures may be redeemed (i) at any time, in whole
but not in part, within 90 days after the occurrence of a Special Event at a
redemption price equal to the Special Event Redemption Make-Whole Amount and
(ii) at any time, in whole but not in part, at a redemption price equal to the
Optional Redemption Make-Whole Amount.
For the definitions of Tax Event and Investment Company Event, see SPECIFIC
TERMS OF THE CAPITAL SECURITIES--"Right to Redeem Upon a Special Event" in this
prospectus supplement. For the definitions of Special Event Redemption Make-
Whole Amount and Optional Redemption Make-Whole Amount, see SPECIFIC TERMS OF
THE CAPITAL SECURITIES--"Redemption of the Capital Securities" in this
prospectus supplement.
SUBORDINATION OF THE GUARANTEE
Our obligations under the Guarantee will be unsecured obligations of the
Company. Those obligations will rank:
. Subordinate and junior in right of payment to all of our other
liabilities, other than obligations or liabilities that rank equal in
priority or subordinate by their terms;
. Equal in priority with the Junior Subordinated Debentures that we may
issues and similar guarantees; and
. Senior to our preferred and common stock.
We have approximately $258 million in Junior Subordinated Debentures
outstanding that will rank equal in priority with the Guarantee. We have no
preferred stock outstanding at this time. We have common stock outstanding that
will rank junior to the Guarantee.
The Guarantee will be a guarantee of payment and not of collection. This
means that the guaranteed party may institute a legal proceeding directly
against us, as guarantor, to enforce its rights under the Guarantee without
first instituting a legal proceeding against any other person or entity.
The terms of the Capital Securities will provide that each holder to the
Capital Securities, by accepting those Capital Securities, agrees to the
subordination provisions and other terms of the Guarantee.
BOOK-ENTRY PROCEDURES AND SETTLEMENT
Upon issuance, all book-entry securities will be represented by one or more
fully registered global certificates. Each global security will be deposited
with DTC or its
S-30
<PAGE>
custodian and will be registered in the name of DTC or a nominee of DTC. DTC
will thus be the only registered holder of these securities.
The following is based on information furnished to us by DTC:
DTC is a limited-purpose trust company organized under the laws of the State
of New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
was created to hold securities of its participants ("Participants") and to
facilitate the clearance and settlement of securities transactions among its
Participants in these securities through electronic book-entry changes in
accounts of the Participants, thereby eliminating the need for physical
movement of securities certificates. DTC's Participants include securities
brokers and dealers (including the underwriters), banks, trust companies,
clearing corporations and certain other organizations, some of whom (and/or
their representatives) own DTC. Persons who are not Participants may
beneficially own securities held by DTC only through Participants.
DTC is owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange LLC and the National Association of
Securities Dealers, Inc. Access to DTC's system is also available to others
including securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a Direct Participant, either
directly or indirectly ("Indirect Participants"). The rules applicable to DTC
and its Participants are on file with the SEC.
Purchases of securities within the DTC system must be made by or through
Direct Participants, which will receive a credit for the securities on DTC's
records. The ownership interest of each actual purchaser of securities
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchases, but Beneficial Owners are expected to receive
written confirmations providing details of the transactions, as well as
periodic statements of their holdings, from the Direct or Indirect Participants
through which the Beneficial Owners purchased securities. Transfers of
ownership interests in the securities are to be accomplished by entries made on
the books of Participants acting on behalf of Beneficial Owners. Beneficial
Owners will not receive certificates representing their ownership interests in
securities, except in the event that use of the book-entry system for the
securities is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the securities. DTC's
records reflect only the identity of the Direct Participants to whose accounts
the securities are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants,
by Direct Participants to Indirect Participants, and by Direct Participants and
Indirect Participants to
S-31
<PAGE>
Beneficial Owners will be governed by arrangements among them, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Although voting with respect to the securities is limited, in those cases
where a vote is required, neither DTC nor Cede & Co. will itself consent or
vote with respect to securities. Under its usual procedures, DTC would mail an
Omnibus Proxy to us as soon as possible after the record date. The Omnibus
Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the securities are credited on the record date
(identified in a listing attached to the Omnibus Proxy).
Payments on the securities will be made to DTC in immediately available
funds. DTC's practice is to credit Direct Participants' accounts on the
relevant payment date in accordance with their respective holdings shown on
DTC's records unless DTC has reason to believe that it will not receive
payments on the relevant payment date. Payments by Participants to Beneficial
Owners will be governed by standing instructions and customary practices, as is
the case with securities held for the account of customers in bearer form or
registered in "street name", and will be the responsibility of the Participant
and not of DTC or Dominion, subject to any statutory or regulatory requirements
as may be in effect from time to time. Payment to DTC is our responsibility,
disbursement of the payments to Direct Participants is the responsibility of
DTC, and disbursement of the payments to the Beneficial Owners is the
responsibility of Direct and Indirect Participants.
Except as provided in this prospectus supplement, a Beneficial Owner of
securities will not be entitled to receive physical delivery of securities.
Accordingly, each Beneficial Owner must rely on the procedures of DTC to
exercise any rights under the securities. The laws of some jurisdictions
require that certain purchasers of securities take physical delivery of
securities in definitive form. These laws may impair the ability to transfer
beneficial interests in a global security.
DTC may discontinue providing its services as securities depositary with
respect to the securities at any time by giving reasonable notice to us. Under
those circumstances, in the event that a successor securities depositary is not
obtained, securities certificates will be printed and delivered to the holders
of record. Additionally, we may decide to discontinue use of the system of
book-entry transfers through DTC (or a successor depositary) with respect to
the securities. In that event, certificates for the securities will be printed
and delivered to the holders of record.
We have no responsibility for the performance by DTC or its Participants of
their respective obligations as described in this prospectus supplement or
under the rules and procedures governing their respective operations.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
General
In this section, we summarize certain of the material United States federal
income tax consequences of purchasing, owning and selling the Capital
Securities. The
S-32
<PAGE>
statements of law and legal conclusions set forth in this summary represent the
opinion of McGuireWoods LLP, special tax counsel to Dominion and the Trust.
Except where we state otherwise, this summary deals only with Capital
Securities held as capital assets (as defined in the Internal Revenue Code of
1986, as amended (the "Code")) by a U.S. Holder (as defined below) who
purchases the Capital Securities at their original offering price when the
Trust originally issues them.
We do not address all of the tax consequences that may be relevant to a U.S.
Holder. We also do not address, except as stated below, any of the tax
consequences to holders that may be subject to special tax treatment including
banks, thrift institutions, real estate investment trusts, personal holding
companies, tax-exempt organizations, regulated investment companies, insurance
companies, and brokers and dealers in securities or currencies. Further, we do
not address:
. the United States federal income tax consequences to shareholders in, or
partners or beneficiaries of, an entity that is a holder of the Capital
Securities;
. the United States federal estate and gift or alternative minimum tax
consequences of the purchase, ownership or sale of the Capital Securities;
. persons who hold the Capital Securities in a "straddle" or as part of a
"hedging," "conversion" or
"constructive sale" transaction or whose "functional currency" is not the
United States dollar; or
. any state, local or foreign tax consequences of the purchase, ownership and
sale of Capital Securities.
Accordingly, you should consult your tax advisor regarding the tax
consequences of purchasing, owning and selling the Capital Securities in light
of your circumstances.
A "U. S. Holder" is a Capital Securities holder who or which is:
. a citizen or resident of the United States;
. a corporation, partnership or other entity created or organized in or under
the laws of the United States, any state thereof or the District of Columbia
(unless, in the case of a partnership, Treasury regulations provide
otherwise);
. an estate if its income is subject to United States federal income taxation
regardless of its source; or
. a trust if (1) a United States court can exercise primary supervision over
its administration and (2) one or more United States persons have the
authority to control all of its substantial decisions.
This summary is based on the Code, Treasury regulations (proposed and final)
issued under the Code, and administrative and judicial interpretation thereof,
all as they currently exist as of the date of this prospectus supplement. These
income tax laws and regulations, however, may change at any time, possibly on a
retroactive basis. Any such changes may affect this summary.
Classification of the Junior Subordinated Debentures
McGuireWoods LLP will render its opinion to the effect that the Junior
Subordinated Debentures will be classified for United States federal income tax
purposes as indebtedness of Dominion under current law, and, by acceptance of a
Capital Security, each holder covenants to
S-33
<PAGE>
treat the Junior Subordinated Debentures as indebtedness and the Capital
Securities as evidence of an indirect beneficial ownership interest in the
Junior Subordinated Debentures. No assurance can be given, however, that the
Internal Revenue Service will not challenge this position or, if challenged,
that such a challenge would not be successful. The remainder of this discussion
assumes that the Junior Subordinated Debentures will be classified as
indebtedness of Dominion for United States federal income tax purposes.
Classification of the Trust
In connection with the issuance of the Capital Securities, McGuireWoods LLP
will render a legal opinion generally to the effect that, under current law and
assuming full compliance with the terms of the trust agreement, the indenture,
and certain other documents, and based on certain facts and assumptions
described in the opinion, the Trust will be classified for United States
federal income tax purposes as a grantor trust and will not be subject to tax
as a corporation. Accordingly, for United States federal income tax purposes,
you will generally be treated as the owner of an undivided beneficial interest
in the assets of the Trust, including the Junior Subordinated Debentures. You
will be required to include in ordinary income for United States federal income
tax purposes your allocable share of interest (or "OID", if any) paid or
accrued on the Junior Subordinated Debentures.
Interest Income and Original Issue Discount
Generally, stated interest on the Junior Subordinated Debentures will be
taxable as ordinary income at the time the interest is paid or accrued
(depending on your method of tax accounting) unless the Junior Subordinated
Debentures are issued with original issue discount or "OID."
Under the Treasury regulations relating to OID, a debt instrument will be
deemed to be issued with OID if there is more than a "remote" contingency that
periodic stated interest payments due on the instrument will not be timely
paid. Because the exercise by us of our option to defer payments of stated
interest on the Junior Subordinated Debentures would prevent us from:
. declaring dividends, or engaging in certain other capital transactions, with
respect to our capital stock, or
. making any payment on any debt securities issued by us that rank equal with
or junior to the Junior Subordinated Debentures, we believe that the
likelihood of our exercising the option is "remote" within the meaning of the
Treasury regulations.
As a result, we intend to take the position, based on the advice of our tax
counsel, that the Junior Subordinated Debentures will not be deemed to be
issued with OID. Based on this position, stated interest payments on the Junior
Subordinated Debentures will be includible in your ordinary income at the time
that such payments are received or accrued in accordance with your regular
method of accounting. Because the Internal Revenue Service has not yet
addressed the Treasury regulations in any published rulings or other
interpretations, it is possible that the Internal Revenue Service could take a
position contrary to the position taken by us. In that event, the Internal
Revenue Service may, for example, require you to include interest on the Junior
Subordinated Debentures in your taxable income as it
S-34
<PAGE>
accrues rather than when you receive payment even though you use the cash
method of accounting for federal income tax purposes.
Exercise of Deferral Options
Under Treasury regulations, if we were to exercise our option to defer the
payment of interest on the Junior Subordinated Debentures, the Junior
Subordinated Debentures would be treated as redeemed and reissued for OID
purposes and the sum of the remaining interest payments on the Junior
Subordinated Debentures would be treated as OID, which you would be required to
accrue and include in taxable income on an economic accrual basis (regardless
of your method of accounting for income tax purposes) over the remaining term
of the Junior Subordinated Debentures (including any period of interest
deferral), without regard to the timing of payments under the Junior
Subordinated Debentures. The amount of interest income includible in your
taxable income would be determined on the basis of a constant yield method over
the remaining term of the Junior Subordinated Debentures and the actual receipt
of future payments of stated interest on the Junior Subordinated Debentures
would no longer be separately reported as taxable income. The total amount of
OID that would accrue during the deferred interest payment period would be
approximately equal to the amount of the cash payment due at the end of such
period. Any OID included in income would increase your adjusted tax basis in
your Capital Securities, and your actual receipt of cash interest payments
would reduce your basis in the Capital Securities.
Corporate U.S. Holders
Corporate U.S. holders of the Capital Securities will not be entitled to a
dividends-received deduction for any income from the Capital Securities.
Sales of Capital Securities
If you sell your Capital Securities, you will recognize gain or loss in an
amount equal to the difference between your adjusted tax basis in the Capital
Securities and the amount realized from the sale (generally, your selling price
less any amount received in respect of accrued but unpaid interest not
previously included in your income). Your adjusted tax basis in the Capital
Securities generally will equal:
. the initial purchase price that you paid for the Capital Securities plus
. any accrued and unpaid distributions that you were required to treat as OID
less any cash distributions received in respect of accrued OID.
Gain or loss on the sale of Capital Securities generally will be capital gain
or loss.
The Capital Securities may trade at a price that does not accurately reflect
the value of accrued but unpaid interest (or OID if the Junior Subordinated
Debentures are treated as having been issued or reissued with OID) relating to
the underlying Junior Subordinated Debentures. If you dispose of your Capital
Securities, you will be required to include in ordinary income for United
States federal income tax purposes any portion of the amount realized that is
attributable to accrued but unpaid interest (including OID, if any) through the
date of sale. This income inclusion will increase your adjusted tax basis in
the Capital Securities but may not be reflected in the sale price. To the
extent the sale price is less than your adjusted tax basis, you will recognize
a capital loss. Subject to certain
S-35
<PAGE>
limited exceptions, capital losses cannot be applied to offset ordinary income
for United States federal income tax purposes.
Receipt of Junior Subordinated Debentures or Cash Upon Liquidation of the Trust
If we dissolve the Trust and cause the Trust to distribute the Junior
Subordinated Debentures on a proportionate basis to you, you will not be
subject to tax. Rather, you would have an adjusted tax basis in the Junior
Subordinated Debentures received in the liquidation equal to the adjusted tax
basis in your Capital Securities surrendered for the Junior Subordinated
Debentures. Your holding period for the Junior Subordinated Debentures would
include the period during which you had held the Capital Securities. If,
however, the trust is classified, for United States federal income tax
purposes, as an association that is subject to tax as a corporation at the time
of the liquidation, the distribution of the Junior Subordinated Debentures
would constitute a taxable event to you and you would acquire a new holding
period in the Junior Subordinated Debentures received.
If the Junior Subordinated Debentures are redeemed for cash and the proceeds
of the redemption are distributed to you in redemption of your Capital
Securities, the redemption would be treated as a sale of the Capital
Securities, in which gain or loss would be recognized, as described immediately
above.
Possible Tax Legislation
Certain tax law changes have been proposed from time to time which could
affect the deductibility of interest paid on instruments similar to the Junior
Subordinated Debentures. None of these proposals have become law. There can be
no assurance however that legislation affecting our ability to deduct interest
paid on the Junior Subordinated will not be enacted in the future or that any
such legislation would not be effective retroactively. Any such legislation
could give rise to a Tax Event and result in the early redemption of the
Capital Securities.
Information Reporting and Back-Up Withholding
Generally, income on the Capital Securities will be reported to you on an
Internal Revenue Service Form 1099, which should be mailed to you by January 31
following each calendar year. If you fail to supply your correct taxpayer
identification number or under-report your tax liability, the Internal Revenue
Service may require the property trustee or its agent to withhold federal
income tax at the rate of 31% from each interest payment. You will be permitted
to credit any withheld tax against your federal income tax liability.
ERISA CONSIDERATIONS
ERISA and the Internal Revenue Code impose requirements on Plans and Plan
fiduciaries. The term "Plan" means an employee benefit plan, as defined in
Section 3(3) of ERISA, that is subject to Title I of ERISA; a plan, as defined
in Section 4975(e)(1) of the Internal Revenue Code, that is subject to Section
4975 of the Internal Revenue Code, including individual retirement accounts or
Keogh plans; and an entity whose underlying assets include plan assets by
reason of a plan's investment in that entity, including insurance company
general accounts. A Plan fiduciary considering an investment in the Capital
Securities should determine,
S-36
<PAGE>
among other factors, whether that investment is permitted under the governing
Plan, is appropriate for the Plan in view of its overall investment policy and
the composition and diversification of its portfolio and is prudent considering
the factors discussed in this prospectus and the attached prospectus
supplement.
ERISA and the Internal Revenue Code prohibit various transactions involving
the assets of a Plan and persons referred to as parties in interest under ERISA
or disqualified persons under the Internal Revenue Code. A prohibited
transaction could subject disqualified persons to excise taxes and impose other
liabilities on Plan fiduciaries, unless exemptive relief is available under an
applicable statutory or administrative exemption. Such administrative
exemptions include prohibited transaction class exemption ("PTCE") 96-23 (for
certain transactions effected by in-house asset managers), PTCE 95-60 (for
certain transactions involving insurance company general accounts), PTCE 91-38
(for certain transactions involving bank collective investment funds), PTCE 90-
1 (for certain transactions involving insurance company pooled separate
accounts), and PTCE 84-14 (for certain transactions determined by independent
qualified asset managers). A Plan fiduciary considering an investment in the
Capital Securities should consider whether that investment might constitute a
prohibited transaction under
ERISA or the Internal Revenue Code, and whether exemptive relief is available.
A number of employee benefit plans, such as foreign plans, governmental
plans, as defined in Section 3(32) of ERISA, and certain church plans, as
defined in Section 3(33) of ERISA, are not subject to the restrictions of
ERISA. As a result, assets of these plans may be invested in the Capital
Securities without regard to the ERISA restrictions, subject to the provisions
of any other applicable federal or state law. You should note, however, that
any governmental plan or church plan that is qualified and exempt from taxation
under Sections 401(a) and 501(a) of the Internal Revenue Code is subject to the
prohibited transaction rules set forth in Section 503 of the Internal Revenue
Code.
Prohibited Transaction Considerations
Treatment of Trust Assets as Plan Assets. A transaction involving the
operation of the Trust might constitute a prohibited transaction under ERISA
and the Internal Revenue Code if assets of the Trust were deemed to be assets
of an investing Plan. The United States Department of Labor ("DOL") has issued
regulations, called the plan asset regulations, addressing whether the assets
of a Plan would include the assets of an entity in which the Plan has invested
for purposes of the fiduciary responsibility provisions of ERISA and the
prohibited transaction provisions of ERISA and the Internal Revenue Code. In
general, under the plan asset regulations, when a Plan acquires an equity
interest in an entity such as the Trust, the assets of the Plan include both
the equity interest and an undivided interest in each of the underlying assets
of the entity unless the exceptions set forth in the regulations apply. In
general, an
equity interest is defined under the plan asset regulations as any interest in
an entity, other than an instrument that is treated as indebtedness under
applicable local law and has no substantial equity features, and includes a
beneficial interest in a Trust.
If the assets of the Trust are deemed to be the assets of an investing Plan,
any
S-37
<PAGE>
person who has discretionary authority or control with respect to the Trust
assets, and any person who provides investment advice for a fee with respect to
Trust assets, will be a fiduciary of the investing Plan. This fiduciary status
would increase the scope of activities that would constitute prohibited
transactions under ERISA and the Internal Revenue Code.
Exception for Insignificant Participation by Benefit Plan Investors. The plan
asset regulation provides that the assets of an entity such as the Trust will
not be deemed to be the assets of an investing Plan if equity participation in
the entity by benefit plan investors, such as employee benefit plans or
individual retirement accounts, is not significant. An equity participation in
an entity is not deemed to be significant if benefit plan investors hold less
than 25% of the value of each class of equity interests in that entity. In
calculating the value of a class of equity interests, the value of any equity
interests held by Dominion Resources, Inc., the Trustee or any of their
affiliates must be excluded. We cannot assure you that benefit plan investors
will hold less than 25% of the value of each class of equity interests in the
Trust.
Exception for Publicly Offered Securities. The plan asset regulation provides
that the issuer of a publicly-offered security acquired by a Plan will not be
deemed to hold Plan assets solely because of that
acquisition. A publicly-offered security is a security that is freely
transferable, part of a class of securities that is owned by 100 or more
investors independent of the issuer and of one another and either:
. part of a class of securities registered under the Exchange Act; or
. sold to the Plan as part of an offering of securities to the public under
the Securities Act; provided, however, that the class of securities of
which the security is a part must be registered under the Exchange Act
within 120 days, or later if allowed by the SEC, after the end of the
fiscal year of the issuer during which the offering of the securities to
the public occurred.
The underwriters expect that the Capital Securities will qualify as publicly
offered securities under the plan asset regulations. We cannot assure you that
the Capital Securities will be held by 100 or more independent investors,
however, and no monitoring or other measures will be taken to insure that this
requirement of the publicly offered security exception will be satisfied. If
the Capital Securities do not qualify as publicly offered securities under the
plan asset regulations, the assets of the Trust may be deemed the assets of any
Plan that invests in the Capital Securities. In that event, transactions
involving the Trust and either parties in interest or disqualified persons with
respect to an investing Plan might be prohibited under ERISA or the Internal
Revenue Code and could subject disqualified persons to excise taxes and impose
other liabilities on Plan fiduciaries, unless exemptive relief is available
under an applicable statutory or administrative exemption.
We suggest that Plan fiduciaries or other persons considering an investment
in the Capital Securities on behalf of or with the assets of a Plan consult
their own counsel regarding the consequences to the Plan of that investment,
including the consequence to the Plan if the assets of the Trust were to become
subject to the fiduciary and
S-38
<PAGE>
prohibited transaction rules of ERISA and the Internal Revenue Code.
Additional Considerations for Insurance Company General Accounts
In John Hancock Mut. Life Ins. Co. v. Harris Trust and Sav. Bank, 510 U.S. 86
(1993), the United States Supreme Court held that, under some circumstances,
assets held in an insurance company's general account may be deemed to be
assets of Plans that were issued policies supported by that general account.
The Small Business Job Protection Act of 1996 added a new section of ERISA
relating to the status of the assets of insurance company general accounts
under ERISA and the Internal Revenue Code. This new section provides that
assets underlying general account policies issued before December 31, 1998 will
not be considered assets of a Plan to the extent the criteria set forth in DOL
regulations are satisfied. This new section also requires the DOL to issue
regulations establishing those criteria. On January 4, 2000, the DOL issued
final regulations, called the general account regulations, for this purpose.
The general account regulations are not generally applicable until July 5,
2001. The general account regulations provide that, when a Plan acquires a
policy issued by an insurance company on or before December 31, 1998 which is
supported by assets of the insurance company's general account, the assets of
the Plan will include the policy but not the underlying assets of the general
account to the extent the requirements set forth in the general account
regulations are satisfied. The general account regulations do not apply to any
general account policies issued after December 31, 1998.
We suggest that Plan fiduciaries or other persons considering an investment
in the Capital Securities on behalf of an insurance company general account
consult their own counsel regarding the effect of the John Hancock decision and
the general account regulations on that investment.
S-39
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date of this prospectus supplement, each of the
Underwriters named below has severally agreed to purchase, and the Trust has
agreed to sell to each of the Underwriters, for whom Merrill Lynch, Pierce,
Fenner & Smith Incorporated is acting as the representative, severally, the
number of Capital Securities listed opposite its name below:
<TABLE>
<CAPTION>
Number of
Capital
UNDERWRITER Securities
----------- ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith Incorporated..................
First Union Securities, Inc. .......................................
Lehman Brothers Inc. ...............................................
Morgan Stanley & Co. Incorporated...................................
----
Total..........................................................
----
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Capital Securities are
subject to the approval of specified legal matters by their counsel and to
other conditions. In the Underwriting Agreement, the several Underwriters have
agreed, subject to the terms and conditions described in the
Underwriting Agreement, to purchase all the Capital Securities offered in this
issuance if any of the Capital Securities are purchased. In the event of
default by an Underwriter, the Underwriting Agreement provides that, in some
circumstances, the purchase commitments of the nondefaulting Underwriters may
be increased or the Underwriting Agreement may be terminated.
The Underwriters initially propose to offer the Capital Securities directly
to the public at the initial public offering price set forth on the cover page
of this prospectus supplement and to dealers at that price less a concession
not in excess of $ per Capital Security. The Underwriters may allow, and the
dealers may reallow, a concession not in excess of $ per Capital Security to
other dealers. After the initial offering of the Capital Securities, the public
offering price, concession and other selling terms may be changed.
Because the proceeds of the sale of the Capital Securities will ultimately be
used to purchase the Junior Subordinated Debentures of Dominion, the
Underwriting Agreement provides that Dominion will pay to the Underwriters as
compensation for their services $ per Capital Security, or $ in the
aggregate. Dominion will also pay other expenses of the offering, which it
expects to be approximately $ .
Dominion and the Trust have agreed that, without the prior written consent of
the representative, on behalf of the Underwriters, they will not, during the
period ending 30 days after the date of this prospectus supplement and the
delivery of the Capital Securities, directly or indirectly, publicly issue,
sell, offer or contract to sell, in the market in which the Capital Securities
are being offered and sold, any securities of Dominion or any of its
subsidiaries or of Dominion which are of the same class as the Capital
Securities.
S-40
<PAGE>
Prior to this offering, there has been no market for the Capital Securities.
Dominion does not intend to apply for listing of the Capital Securities on any
national securities exchange or for quotation of the Capital Securities on any
automated dealer quotation system. The Underwriters have advised Dominion that
they intend to make a market in the Capital Securities but are not obligated to
do so and may discontinue market making at any time without notice. No
assurance can be given as to the liquidity of the trading market for the
Capital Securities.
In order to facilitate the offering of the Capital Securities, the
Underwriters may engage in transactions that stabilize, maintain, or otherwise
affect the price of the Capital Securities. Specifically, the Underwriters may
over-allot in connection with the offering, creating a short position in the
Capital Securities for their account. In addition, to cover over-allotments or
to stabilize the price of the Capital Securities, the Underwriters may bid for,
and purchase, the Capital Securities in the open market. Finally, the
underwriting syndicate may reclaim selling concessions allowed to an
Underwriter or a dealer for distributing the Capital Securities in the offering
if the syndicate repurchases previously distributed Capital Securities in
transactions to cover syndicate short positions, in stabilization transactions,
or otherwise. Any of these activities may stabilize or maintain the market
price of the Capital Securities above independent market levels. The
Underwriters are not required to engage in these activities, and may end any of
these activities at any time.
Dominion and the Trust have agreed to indemnify the Underwriters against, or
contribute to payments the Underwriters may be required to make in respect of,
certain liabilities, including liabilities under the Securities Act.
Some of the Underwriters engage in transactions with, and from time to time
have performed services for, Dominion and its subsidiaries in the ordinary
course of business.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Capital
Securities, the enforceability of the Trust Agreement and the creation of the
Trust will be passed upon on behalf of the Trust by Richards, Layton & Finger,
P.A., Wilmington, Delaware, special Delaware counsel to the Trust. Certain
legal matters in connection with the offering of the Capital Securities, the
Junior Subordinated Debentures and the Guarantee will be passed upon for
Dominion by McGuireWoods LLP, and for the underwriters by Mays & Valentine,
L.L.P. In addition, certain legal matters will be passed upon for the
underwriters by Dewey Ballantine LLP, New York, New York. McGuireWoods LLP will
also pass upon certain matters relating to United States Federal income tax
considerations. In rendering its opinion, Dewey Ballantine LLP will rely upon
Mays & Valentine, L.L.P., as to all matters of Virginia law.
S-41
<PAGE>
EXPERTS
The financial statements incorporated in this prospectus supplement by
reference from Dominion's Annual Report on Form 10-K for the year ended
December 31, 1999 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated herein by reference,
and has been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
The audited historical consolidated financial statements of CNG incorporated
by reference in Dominion's Form 8-K filed with the SEC on February 1, 2000,
incorporated by reference in this prospectus supplement, have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of that firm as experts in
auditing and accounting.
S-42
<PAGE>
Prospectus
[LOGO OF DOMINION RESOURCES INC.]
DOMINION RESOURCES, INC.
120 Tredegar Street
Richmond, Virginia 23219
(804) 819-2000
$4,500,000,000
Senior Debt Securities
Junior Subordinated Debentures
Trust Preferred Securities and Related Guarantee
Common Stock
Preferred Stock
Stock Purchase Contracts
Stock Purchase Units
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this Prospectus. Any representation to the contrary is
a criminal offense.
This prospectus is dated January 6, 2000.
<PAGE>
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission utilizing a shelf registration process.
Under this shelf process, we may, from time to time, sell any combination of
the securities described in this prospectus in one or more offerings up to a
total dollar amount of $4,500,000,000. This prospectus provides you with a
general description of the securities we may offer. Each time we sell
securities, we will provide a prospectus supplement that will contain specific
information about the terms of that offering. Material United States federal
income tax considerations applicable to the offered securities will also be
discussed in the applicable prospectus supplement. The prospectus supplement
may also add, update or change information contained in this prospectus. You
should read both this prospectus and any prospectus supplement together with
additional information described under the heading WHERE YOU CAN FIND MORE
INFORMATION.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our 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 we file 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. You may also
read and copy these documents at the offices of the New York Stock Exchange,
20 Broad Street, New York, New York 10005.
The SEC allows us to incorporate by reference the information we file with
them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We
incorporate 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 we sell all of the securities.
. Annual Report on Form 10-K for the year ended December 31, 1998;
. Quarterly Reports on Form 10-Q for the quarters ended March 31, 1999, June
30, 1999 and September 30, 1999;
. Current Report on Form 8-K filed March 29, 1999; and
. The description of our common stock contained in Form 8-B (Item 4) dated
April 29, 1983.
You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:
Corporate Secretary
Dominion Resources, Inc.
120 Tredegar Street
Richmond, Virginia 23219
(804) 819-2000
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not
authorized anyone else to provide you with different information. We are not
making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information in this prospectus or
any prospectus supplement is accurate as of any date other than the date on
the front of those documents.
2
<PAGE>
THE COMPANY
Dominion Resources, Inc. is a diversified utility holding company
headquartered in Richmond, Virginia. Our principal operating subsidiaries are
Virginia Electric and Power Company, a regulated public utility, engaged in
the generation, transmission, distribution and sale of electric energy,
Dominion Energy, Inc., an independent power and natural gas subsidiary, and
Dominion Capital, Inc., a financial services subsidiary. We also own an 80%
interest in and operate a 365 megawatt natural gas fired generating facility
in the United Kingdom.
In May 1999, we entered into a merger agreement with Consolidated Natural
Gas Company (CNG), one of the nation's largest producers, transporters,
distributors and retail marketers of natural gas. The merger is scheduled to
close on January 28, 2000. As a result of the merger with CNG, we will become
a registered public utility holding company under the provisions of the Public
Utility Holding Company Act of 1935 (1935 Act). Because of limits the 1935 Act
will impose on our non-utility activities, it will be necessary for us to
divest ourselves of Dominion Capital, Inc. after the merger.
THE TRUSTS
Each of Dominion Resources Capital Trust II and Dominion Resources Capital
Trust III is a statutory business trust newly formed under Delaware law by us,
as sponsor for the Trust, and Chase Manhattan Bank Delaware, who will serve as
trustee in the State of Delaware for the purpose of complying with the
provisions of the Delaware Business Trust Act. The trust agreement for each of
the Trusts will be amended and restated substantially in the form filed as an
exhibit to the registration statement, effective when securities of
the Trusts are initially issued. The amended trust agreement will be qualified
as an indenture under the Trust Indenture Act of 1939.
Each Trust exists for the exclusive purposes of
. issuing two classes of trust securities, trust preferred securities and
trust common securities, which together represent undivided beneficial
interests in the assets of each Trust;
. investing the gross proceeds of the trust securities in our Junior
Subordinated Debentures;
. making distributions; and
. engaging in only those other activities necessary, advisable or incidental
to the purposes listed above.
The Junior Subordinated Debentures will be the sole assets of each Trust,
and our payments under the Junior Subordinated Debentures and the Agreement as
to Expenses and Liabilities will be the sole revenue of each Trust.
No separate financial statements of any Trust are included in this
prospectus. We consider that these financial statements would not be material
to holders of the Trust preferred securities because no Trust has any
independent operations and the purposes of each Trust are as described above.
We do not expect that any of the Trusts will be filing annual, quarterly or
special reports with the SEC.
The principal place of business of each of the Trusts will be c/o Dominion
Resources, Inc., 120 Tredegar Street, Richmond, VA 23219.
USE OF PROCEEDS
The net proceeds from the sale of the offered securities will be used for
financing our merger with CNG, refinancing of our
3
<PAGE>
debt incurred in connection with that merger, and for other general corporate
purposes.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for each of the periods indicated is
as follows:
<TABLE>
<CAPTION>
Twelve Twelve Months ended Dec. 31,
Months ended -----------------------------
Sep. 30, 1999(/2/) 1994 1995 1996 1997(/1/) 1998
------------------ ---- ---- ---- --------- ----
<S> <C> <C> <C> <C> <C>
2.07 2.77 2.55 2.71 1.97 2.36
</TABLE>
These computations include us and our subsidiaries, and certain other
companies in which we hold an equity interest. 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.
--------
(1) 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
U.K. 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 2.22x.
(2) Net income for the twelve months ended September 30, 1999 includes the
one-time charge of $254.8 million for the write-off of regulatory assets.
Excluding this charge from the calculation above results in a ratio of
earnings to fixed charges for the twelve months ended September 30, 1999
of 2.55x.
DESCRIPTION OF DEBT SECURITIES
The term Debt Securities includes the Senior Debt Securities and the Junior
Subordinated Debentures. We will issue the Senior Debt Securities in one or
more series under a Senior Indenture between us and The Chase Manhattan Bank
as Trustee. We will issue the Junior Subordinated Debentures in one or more
series under our Junior Subordinated Indenture dated as of December 1, 1997
between us and The Chase Manhattan Bank as Trustee, as supplemented from time
to time. The Indenture related to the Junior Subordinated Debentures is called
the Subordinated Indenture in this prospectus, and together, the Senior
Indenture and the Subordinated Indenture are called Indentures. We have
summarized selected provisions of the Indentures below. The form of the Senior
Indenture and the Subordinated Indenture have been filed as exhibits to the
registration statement and you should read the Indentures for provisions that
may be important to you. In the summary below, we have included references to
section numbers of the Indentures so that you can easily locate these
provisions. Capitalized terms used in the summary have the meanings specified
in the Indentures.
General
The Senior Debt Securities will be our direct, unsecured obligations and
will rank equally with all of our other senior and unsubordinated debt. The
Junior Subordinated Debentures will be our unsecured obligations and are
junior in
4
<PAGE>
right of payment to our Senior Indebtedness, as described under the caption
ADDITIONAL TERMS OF JUNIOR SUBORDINATED DEBENTURES--SUBORDINATION.
Because we are a holding company that conducts all of our operations through
our subsidiaries, our ability to meet our obligations under the Debt
Securities is dependent on the earnings and cash flows of those subsidiaries
and the ability of those subsidiaries to pay dividends or to advance or repay
funds to us. Holders of Debt Securities will generally have a junior position
to claims of creditors of our subsidiaries, including trade creditors,
debtholders, secured creditors, taxing authorities, guarantee holders and any
preferred stockholders. Virginia Power has 6,890,140 issued and outstanding
shares of preferred stock. In addition to trade debt, all of our operating
subsidiaries have ongoing corporate debt programs used to finance their
business activities. As ofSeptember 30, 1999, our subsidiaries had
approximately $6.9 billion of outstanding debt.
Neither of the Indentures limits the amount of Debt Securites that we may
issue under it. We may issue Debt Securities from time to time under the
Indentures in one or more series by entering into supplemental indentures or
by our Board of Directors or a duly authorized committee authorizing the
issuance. A form of supplemental indenture to each of the Indentures is an
exhibit to the registration statement.
The Indentures do not protect the holders of Debt Securities if we engage in
a highly leveraged transaction.
Provisions of a Particular Series
The Debt Securities of a series need not be issued at the same time, bear
interest at the same rate or mature on the same date. The prospectus
supplement for a particular series of Debt Securities will specify the terms
of that series, including, if applicable, some or all of the following:
. the title and type of the Debt Securities;
. the total principal amount of the Debt Securities;
. the portion of the principal payable upon acceleration of maturity, if other
than the entire principal;
. the date or dates on which principal is payable or the method for
determining the date or dates, and any right that we have to change the date
on which principal is payable;
. the interest rate or rates, if any, or the method for determining the rate
or rates, and the date or dates from which interest will accrue;
. any interest payment dates and the regular record date for the interest
payable on each interest payment date, if any;
. any payments due if the maturity of the Debt Securities is accelerated;
. any optional redemption terms, or, with respect to the Senior Debt
Securities, any repayment terms;
. any provisions that would obligate us to repurchase or otherwise redeem the
Debt Securities, or, with respect to the Senior Debt Securities, any sinking
fund provisions;
. the currency in which payments will be made if other than U.S. dollars, and
the manner of determining the equivalent of those amounts in U.S. dollars;
5
<PAGE>
. if payments may be made, at our election or at the holder's election, in a
currency other than that in which the Debt Securities are stated to be
payable, then the currency in which those payments may be made, the terms
and conditions of the election and the manner of determining those amounts;
. any index or formula used for determining principal, interest, or premium,
if any;
. the percentage of the principal amount at which the Debt Securities will be
issued, if other than 100% of the principal amount;
. whether to be issued in fully registered certificated form or book-entry
form, represented by certificates deposited with, or on behalf of, a
securities depositary and registered in the name of the depositary's nominee
(Book-Entry Debt Securities);
. denominations, if other than $1,000 each or multiples of $1,000;
. any changes to events of defaults or covenants; and
. any other terms of the Debt Securities. (Sections 201 & 301 of the Senior
Indenture & Sections 2.1 & 2.3 of the Subordinated Indenture.)
The prospectus supplement will also indicate any special tax implications of
the Debt Securities and any provisions granting special rights to holders when
a specified event occurs.
Conversion or Redemption
No Debt Security will be subject to conversion, amortization, or redemption,
unless otherwise provided in the applicable prospectus supplement. Any
provisions relating to the conversion or redemption of Debt Securities will be
set forth in the applicable prospectus supplement, including whether
conversion is mandatory or at our option. If no redemption date or redemption
price is indicated with respect to a Debt Security, we may not redeem the Debt
Security prior to Stated Maturity. Debt Securities subject to redemption by us
will be subject to the following terms:
. redeemable on and after the applicable redemption dates;
. redemption dates and redemption prices fixed at the time of sale and set
forth on the Debt Security; and
. redeemable in whole or in part (provided that any remaining principal amount
of the Debt Security will be equal to an authorized denomination) at our
option at the applicable redemption price, together with interest, payable
to the date of redemption, on notice given not more than 60 nor less than 20
days prior to the date of redemption. (Section 1104 of the Senior Indenture
& Section 3.2 of the Subordinated Indenture.)
We will not be required to:
. issue, register the transfer of, or exchange any Debt Securities of a series
during the period beginning 15 days before the date the notice is mailed
identifying the Debt Securities of that series that have been selected for
redemption; or
. register the transfer of, or exchange any Debt Security of that series
selected for redemption except the unredeemed portion of a Debt Security
being partially redeemed. (Section 305 of the Senior Indenture & Section 2.5
of the Subordinated Indenture.)
6
<PAGE>
Payment and Transfer; Paying Agent
The paying agent will pay the principal of any Debt Securities only if those
Debt Securities are surrendered to it. Unless we state otherwise in the
applicable prospectus supplement, the paying agent will pay principal, interest
and premium, if any, on Debt Securities, subject to such surrender, where
applicable, at its office or, at our option:
. by wire transfer to an account at a banking institution in the United States
that is designated in writing to the Trustee prior to the deadline set forth
in the applicable prospectus supplement by the person entitled to that
payment (which in the case of Book-Entry Debt Securities is the securities
depositary or its nominee); or
. by check mailed to the address of the person entitled to that interest as
that address appears in the security register for those Debt Securities.
(Sections 307 & 1001 of the Senior Indenture & Section 4.1 of the
Subordinated Indenture.)
Neither we nor the Trustee will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in a Book-Entry Debt Security, or for maintaining,
supervising or reviewing any records relating to the beneficial ownership
interests. We expect that the securities depositary, upon receipt of any
payment of principal, interest or premium, if any, in a Book-Entry Debt
Security, will credit immediately the accounts of the related participants with
payment in amounts proportionate to their respective holdings in principal
amount of beneficial interest in the Book-Entry Debt Security as shown on the
records of the securities depositary. We also expect that payments by
participants to owners of beneficial interests in a Book-Entry Debt Security
will be governed by standing customer instructions and customary practices, as
is now the case with securities held for the accounts of customers in bearer
form or registered in "street name" and will be the responsibility of the
participants.
Unless we state otherwise in the applicable prospectus supplement, the
Trustee will act as paying agent for the Debt Securities, and the principal
corporate trust office of the Trustee will be the office through which the
paying agent acts. We may, however, change or add paying agents or approve a
change in the office through which a paying agent acts. (Section 1002 of the
Senior Indenture & Section 4.4 of the Subordinated Indenture.)
Any money that we have paid to a paying agent for principal or interest on
any Debt Securities which remains unclaimed at the end of two years after that
principal or interest has become due will be repaid to us at our request. After
repayment to the Company, holders should look only to us for those payments.
(Section 1003 of the Senior Indenture & Section 12.4 of the Subordinated
Indenture.)
Fully registered securities may be transferred or exchanged at the corporate
trust office of the Trustee or at any other office or agency we maintain for
those purposes, without the payment of any service charge except for any tax or
governmental charge. (Section 1002 of the Senior Indenture & Section 2.5 of the
Subordinated Indenture.)
Global Securities
We may issue some or all of the Debt Securities as Book-Entry Debt
Securities. Book-Entry Debt Securities will be represented by one or more fully
registered
7
<PAGE>
global certificates. Book-Entry Debt Securities of like tenor and terms up to
$200,000,000 aggregate principal amount may be represented by a single global
certificate. Each global certificate will be deposited and registered with the
securities depositary or its nominee or a custodian for the securities
depositary. Unless it is exchanged in whole or in part for Debt Securities in
definitive form, a global certificate may generally be transferred only as a
whole unless it is being transferred to certain nominees of the depositary.
(Section 305 of the Senior Indenture & Section 2.5 of the Subordinated
Indenture.)
Unless otherwise stated in any prospectus supplement, The Depository Trust
Company will act as the securities depositary. Beneficial interests in global
certificates will be shown on, and transfers of global certificates will be
effected only through, records maintained by the securities depositary and its
participants. If there are any additional or differing terms of the depositary
arrangement with respect to the Book-Entry Debt Securities, we will describe
them in the applicable prospectus supplement.
Holders of beneficial interests in Book-Entry Debt Securities represented by
a global certificate are referred to as beneficial owners. Beneficial owners
will be limited to institutions having accounts with the securities depositary
or its nominee, which are called participants in this discussion, and to
persons that hold beneficial interests through participants. When a global
certificate representing Book-Entry Debt Securities is issued, the securities
depositary will credit on its book-entry, registration and transfer system the
principal amounts of Book-Entry Debt Securities the global certificate
represents to the accounts of its participants. Ownership of beneficial
interests in a global certificate will be shown only on, and the transfer of
those ownership interests will be effected only through, records maintained
by:
. the securities depositary, with respect to participants' interests; and
. any participant, with respect to interests the participant holds on behalf
of other persons.
As long as the securities depositary or its nominee is the registered holder
of a global certificate representing Book-Entry Debt Securities, that person
will be considered the sole owner and holder of the global certificate and the
Book-Entry Debt Securities it represents for all purposes. Except in limited
circumstances, beneficial owners:
. may not have the global certificate or any Book-Entry Debt Securities it
represents registered in their names;
. may not receive or be entitled to receive physical delivery of certificated
Book-Entry Debt Securities in exchange for the global certificate; and
. will not be considered the owners or holders of the global certificate or
any Book-Entry Debt Securities it represents for any purposes under the Debt
Securities or the Indentures. (Section 2.2 of the Subordinated Indenture.)
We will make all payments of principal, interest and premium, if any, on a
Book-Entry Debt Security to the securities depositary or its nominee as the
holder of the global certificate. The laws of some jurisdictions require that
certain purchasers of securities take physical delivery of securities in
definitive form. These laws
8
<PAGE>
may impair the ability to transfer beneficial interests in a global
certificate.
Payments participants make to beneficial owners holding interests through
those participants will be the responsibility of those participants. The
securities depositary may from time to time adopt various policies and
procedures governing payments, transfers, exchanges and other matters relating
to beneficial interests in a global certificate. None of the following will
have any responsibility or liability for any aspect of the securities
depositary's or any participant's records relating to beneficial interests in
a global certificate representing Book-Entry Debt Securities, for payments
made on account of those beneficial interests or for maintaining, supervising
or reviewing any records relating to those beneficial interests:
. the Company;
. the Trustee;
. the Trust (only with respect to the Junior Subordinated Debentures if the
Junior Subordinated Debentures are issued to a Trust); or
. any agent of any of the above.
Covenants
Under the Indentures we will:
. pay the principal, interest and premium, if any, on the Debt Securities when
due;
. maintain a place of payment;
. deliver an officer's certificate to the Trustee at the end of each fiscal
year confirming our compliance with our obligations under each of the
Indentures; and
. deposit sufficient funds with any paying agent on or before the due date for
any principal, interest or premium, if any. (Sections 1001, 1002, 1003 &
1006 of the Senior Indenture & Sections 4.1, 4.2 4.4 & 4.6 of the
Subordinated Indenture.)
Consolidation, Merger or Sale
The Indentures provide that we may consolidate or merge with or into, or
sell all or substantially all of our properties and assets to, another
corporation or other entity, provided that any successor assumes our
obligations under the Indentures and the Debt Securities issued under the
Indentures. We must also deliver an opinion of counsel to the Trustee
affirming our compliance with all conditions in the applicable Indenture
relating to the transaction. When the conditions are satisfied, the successor
will succeed to and be substituted for us under the Senior Indenture, and we
will be relieved of our obligations under the Senior Indenture and the Debt
Securities issued under them. (Sections 801 & 802 of the Senior Indenture &
Sections 11.1, 11.2 & 11.3 of the Subordinated Indenture.)
Events of Default
Event of Default when used in each of the Indentures, will mean any of the
following:
. failure to pay the principal or any premium on any Debt Security when due;
. with respect to the Senior Debt Securities, failure to deposit any sinking
fund payment when due that continues for 60 days;
. failure to pay any interest on any Debt Securities of that series, when due,
that continues for 60 days (or for 30 days in the case of any Junior
Subordinated
9
<PAGE>
Debentures); provided that, if applicable, for this purpose, the date on which
interest is due is the date on which we are required to make payment following
any deferral of interest payments by us under the terms of Junior Subordinated
Debentures that permit such deferrals;
. failure to perform any other covenant in the Indentures (other than a
covenant expressly included solely for the benefit of other series) that
continues for 90 days after the Trustee or the holders of at least 33% of the
outstanding Debt Securities (25% in the case of the Junior Subordinated
Debentures) of that series give us written notice of the default;
. certain events in bankruptcy, insolvency or reorganization of the Company; or
. any other Event of Default included in the Indentures or any supplemental
indenture. (Section 501 of the Senior Indenture & Section 6.1 of the
Subordinated Indenture.)
In the case of a general covenant default described above, the Trustee may
extend the grace period. In addition, if holders of a particular series have
given a notice of default, then holders of at least the same percentage of Debt
Securities of that series, together with the Trustee, may also extend the grace
period. The grace period will be automatically extended if we have initiated
and are diligently pursuing corrective action.
An Event of Default for a particular series of Debt Securities does not
necessarily constitute an Event of Default for any other series of Debt
Securities issued under the Indentures. Additional events of default may be
established for a particular series and, if established, will be described in
the applicable prospectus supplement.
If an Event of Default for any series of Debt Securities occurs and
continues, the Trustee or the holders of at least 33% (25%, in the case of the
Junior Subordinated Debentures) in aggregate principal amount of the Debt
Securities of the series may declare the entire principal of all the Debt
Securities of that series to be due and payable immediately. If this happens,
subject to certain conditions, the holders of a majority of the aggregate
principal amount of the Debt Securities of that series can void the trust
agreement. (Section 502 of the Senior Indenture & Section 6.1 of the
Subordinated Indenture.)
The Trustee may withhold notice to the holders of Debt Securities of any
default (except in the payment of principal or interest) if it considers the
withholding of notice to be in the best interests of the holders. Other than
its duties in case of a default, a Trustee is not obligated to exercise any of
its rights or powers under the Indentures at the request, order or direction of
any holders, unless the holders offer the Trustee reasonable indemnity. If they
provide this reasonable indemnification, the holders of a majority in principal
amount of any series of Debt Securities may direct the time, method and place
of conducting any proceeding or any remedy available to the Trustee, or
exercising any power conferred upon the Trustee, for any series of Debt
Securities. (Sections 512, 601 & 602 of the Senior Indenture & Sections 6.6,
7.1 & 7.2 of the Subordinated Indenture.)
The holder of any Debt Security will have an absolute and unconditional right
to receive payment of the principal, any premium and, within certain
limitations, any interest on that Debt Security on its maturity date or
redemption date and to
10
<PAGE>
enforce those payments. (Section 508 of the Senior Indenture & Section 14.2 of
the Subordinated Indenture.)
Satisfaction; Discharge
We may discharge all our obligations (except those described below) to
holders of the Debt Securities issued under the Indentures, which Debt
Securities have not already been delivered to the Trustee for cancellation and
which either have become due and payable or are by their terms due and payable
within one year, or are to be called for redemption within one year, by
depositing with the Trustee an amount certified to be sufficient to pay when
due the principal, interest and premium, if any, on all outstanding Debt
Securities. However, certain of our obligations under the Indentures will
survive, including with respect to the following:
. remaining rights to register the transfer, conversion, substitution or
exchange of Debt Securities of the applicable series;
. rights of holders to receive payments of principal of, and any interest on,
the Debt Securities of the applicable series, and other rights, duties and
obligations of the holders of Debt Securities with respect to any amounts
deposited with the Trustee; and
. the rights, obligations and immunities of the Trustee under the Indentures.
(Section 401 of Senior Indenture & Section 12.1 of Subordinated Indenture.)
Modification of Indentures; Waiver
Under the Indentures our rights and obligations and the rights of the holders
may be modified with the consent of the holders of a majority in aggregate
principal amount of the outstanding Debt Securities of each series affected by
the modification. No modification of the principal or interest payment terms,
and no modification reducing the percentage required for modifications, is
effective against any holder without its consent. (Section 902 of the Senior
Indenture & Section 10.2 of the Subordinated Indenture.) In addition, we may
supplement the Indentures to create new series of Debt Securities and for
certain other purposes, without the consent of any holders of Debt Securities.
(Section 901 of the Senior Indenture & Section 10.1 of the Subordinated
Indenture.)
The holders of a majority of the outstanding Debt Securities of all series
under the applicable Indenture with respect to which a default has occurred and
is continuing may waive a default for all those series, except a default in the
payment of principal or interest, or any premium, on any Debt Securities or a
default with respect to a covenant or provision which cannot be amended or
modified without the consent of the holder of each outstanding Debt Security of
the series affected. (Section 513 of the Senior Indenture & Section 6.6 of the
Subordinated Indenture.)
In addition, under certain circumstances, the holders of a majority of the
outstanding Junior Subordinated Debentures of any series may waive in advance,
for that series, our compliance with certain restrictive provisions of the
Subordinated Indenture under which those Junior Subordinated Debentures were
issued. (Section 4.7 of the Subordinated Indenture.)
Concerning the Trustee
The Chase Manhattan Bank is the Subordinated Indenture Trustee and the
Trustee under the Senior Indenture. We and certain of our affiliates maintain
deposit accounts and banking relationships with The Chase Manhattan Bank. The
Chase
11
<PAGE>
Manhattan Bank also serves as trustee under other indentures pursuant to which
securities of ours and of certain of our affiliates are outstanding. It has
purchased, and is likely to purchase in the future, our securities and
securities of our affiliates.
The Trustee will perform only those duties that are specifically set forth in
the Indentures unless an event of default under an Indenture occurs and is
continuing. The Trustee is under no obligation to exercise any of its powers
under the Indentures at the request of any holder of Debt Securities unless
that holder offers reasonable indemnity to the Trustee against the costs,
expenses and liabilities which it might incur as a result. (Section 601 of the
Senior Indenture & Section 7.1 of the Subordinated Indenture.)
The Trustee administers its corporate trust business at 450 West 33rd Street,
New York, New York 10001 (Attention: Capital Markets Fiduciary Services).
ADDITIONAL TERMS OF SENIOR DEBT SECURITIES
Repayment at the Option of the Holder; Repurchases by the Company
We must repay the Senior Debt Securities at the option of the Holders prior
to the Stated Maturity Date only if specified in the applicable prospectus
supplement. Unless otherwise provided in the prospectus supplement, the Senior
Debt Securities subject to repayment at the option of the Holder will be
subject to repayment:
. on the specified Repayment Dates; and
. at a repayment price equal to 100% of the unpaid principal amount to be
repaid, together with unpaid interest accrued to the Repayment Date. (Section
1302 of the Senior Indenture.)
For any Senior Debt Security to be repaid, the Trustee must receive, at its
office maintained for that purpose in the Borough of Manhattan, New York City
not more than 60 nor less than 30 calendar days prior to the date of repayment:
. in the case of a certificated Senior Debt Security, the certificated Senior
Debt Security and the form in the Senior Debt Security entitled Option of
Holder to Elect Purchase duly completed; or
. in the case of a book-entry Senior Debt Security, instructions to that effect
from the beneficial owner to the securities depositary and forwarded by the
securities depositary. Exercise of the repayment option by the Holder will be
irrevocable. (Section 1303 of the Senior Indenture.)
Only the securities depositary may exercise the repayment option in respect
of beneficial interests in the book-entry Senior Debt Securities. Accordingly,
beneficial owners that desire repayment in respect of all or any portion of
their beneficial interests must instruct the participants through which they
own their interests to direct the securities depositary to exercise the
repayment option on their behalf. All instructions given to participants from
beneficial owners relating to the option to elect repayment will be
irrevocable. In addition, at the time the instructions are given, each
beneficial owner will cause the participant through which it owns its interest
to transfer its interest in the book-entry Senior Debt Securites or the global
certificate representing the related book-entry Senior Debt Securities, on the
securities depositary's records, to the Trustee. See DESCRIPTION OF THE DEBT
SECURITIES--GLOBAL SECURITIES.
12
<PAGE>
Defeasance
We will be discharged from our obligations on the Senior Debt Securities of
any series at any time if we deposit with the Trustee sufficient cash or
government securities to pay the principal, interest, any premium and any other
sums due to the stated maturity date or a redemption date of the Senior Debt
Securities of the series. If this happens, the holders of the Senior Debt
Securities of the series will not be entitled to the benefits of the Senior
Indenture except for registration of transfer and exchange of Senior Debt
Securities and replacement of lost, stolen or mutilated Senior Debt Securities.
(Section 402 of the Senior Indenture.)
Under federal income tax law as of the date of this prospectus, a discharge
may be treated as an exchange of the related Senior Debt Securities. Each
holder might be required to recognize gain or loss equal to the difference
between the holder's cost or other tax basis for the Senior Debt Securities and
the value of the holder's interest in the trust. Holders might be required to
include as income a different amount than would be includable without the
discharge. We urge prospective investors to consult their own tax advisers as
to the consequences of a discharge, including the applicability and effect of
tax laws other than the federal income tax law.
ADDITIONAL TERMS OF THE JUNIOR SUBORDINATED DEBENTURES
Additional Covenants Applicable to Junior Subordinated Debentures
Under the Subordinated Indenture, we will:
. maintain 100% ownership of any Trust to which the Junior Subordinated
Debentures have been issued while the Junior Subordinated Debentures remain
outstanding; and
. pay to any Trust to which the Junior Subordinated Debentures have been issued
any taxes, duties, assessments or governmental charges of whatever nature
(other than withholding taxes) imposed by the United States or any other
taxing authority on that Trust, so that the net amounts received and retained
by that Trust (after paying any taxes, duties, assessments or other
governmental charges) will be not less than the Trust would have received had
no such taxes, duties, assessments or other governmental charges been
imposed. (Sections 4.8 & 4.9 of the Subordinated Indenture.)
Option to Extend Interest Payment Period
We can defer interest payments by extending the interest payment period for
the number of consecutive extension periods specified in the applicable
prospectus supplement (each, an Extension Period). Other details regarding the
Extension Period will also be specified in the applicable prospectus
supplement. No Extension Period may extend beyond the maturity of the Junior
Subordinated Debentures. At the end of the Extension Period(s), we will pay all
interest then accrued and unpaid, together with interest compounded quarterly
at the rate for the Junior Subordinated Debentures, to the extent permitted by
applicable law. (Section 2.10 of the Subordinated Indenture.)
13
<PAGE>
During any Extension Period, we will not make distributions related to our
capital stock, including dividends, redemptions, repurchases, liquidation
payments, or guarantee payments. Also we will not make any payments, redeem or
repurchase any debt securities of equal or junior rank to the Junior
Subordinated Debentures or make any guarantee payments on any such debt
securities. We may, however, make the following types of distributions:
. dividends paid in common stock;
. dividends in connection with the implementation of a shareholder rights
plan;
. payments to a trust holding securities of the same series under a guarantee;
or
. repurchases, redemptions or other acquisitions of shares of our capital
stock in connection with any employment contract, benefit plan or other
similar arrangement with or for the benefit of employees, officers,
directors or consultants.
Subordination
Each series of Junior Subordinated Debentures will be subordinate and junior
in right of payment, to the extent set forth in the Subordinated Indenture, to
all Senior Indebtedness as defined below. If:
. we make a payment or distribution of any of our assets to creditors upon our
dissolution, winding-up, liquidation or reorganization, whether in
bankruptcy, insolvency or otherwise;
. a default beyond any grace period has occurred and is continuing with
respect to the payment of principal, interest or any other monetary amounts
due and payable on any Senior Indebtedness; or
. the maturity of any Senior Indebtedness has been accelerated because of a
default on that Senior Indebtedness,
then the holders of Senior Indebtedness generally will have the right to
receive payment, in the case of the first instance, of all amounts due or to
become due upon that Senior Indebtedness, and, in the case of the second and
third instances, of all amounts due on that Senior Indebtedness, or we will
make provision for those payments, before the holders of any Junior
Subordinated Debentures have the right to receive any payments of principal or
interest on their Junior Subordinated Debentures. (Sections 14.1 and 14.9 of
the Subordinated Indenture.)
Senior Indebtedness means, with respect to any series of Junior Subordinated
Debentures, the principal, premium, interest and any other payment in respect
of any of the following:
. all of our indebtedness for borrowed or purchased money that is evidenced by
notes, debentures, bonds or other written instruments;
. our obligations for reimbursement under letters of credit, banker's
acceptances, security purchase facilities or similar facilities issued for
our account;
. any of our other indebtedness or obligations with respect to commodity
contracts, interest rate commodity and currency swap agreements and other
similar agreements or arrangements; and
. all indebtedness of others of the kinds described in the preceding
categories which we have assumed or guaranteed.
Senior Indebtedness will not include our obligations to trade creditors or
indebtedness to our subsidiaries. (Section 1.1 of the Subordinated Indenture.)
14
<PAGE>
Senior Indebtedness will be entitled to the benefits of the subordination
provisions in the Subordinated Indenture irrespective of the amendment,
modification or waiver of any term of the Senior Indebtedness. We may not
amend the Subordinated Indenture to change the subordination of any
outstanding Junior Subordinated Debentures without the consent of each holder
of Senior Indebtedness that the amendment would adversely affect. (Sections
10.2 & 14.7 of the Subordinated Indenture.)
The Subordinated Indenture does not limit the amount of Senior Indebtedness
that we may issue.
DESCRIPTION OF THE TRUST PREFERRED SECURITIES
The following is a summary of the principal terms of the Trust Preferred
Securities. The form of amended trust agreement is filed as an exhibit to the
registration statement of which this prospectus forms a part, or is
incorporated by reference. The terms of the Trust Preferred Securities will
include those stated in the amended trust agreement and those made part of the
amended trust agreement by the Trust Indenture Act.
General
Each Trust will exist until terminated as provided in its amended trust
agreement. Except under certain circumstances, we will be entitled to appoint,
remove, or replace trustees, who will conduct the business and affairs of each
Trust. The trustees of each Trust will consist of:
. two employees, officers or affiliates of the Company as Administrative
Trustees;
. a financial institution unaffiliated with us that will act as property
trustee and as indenture trustee for purposes of the Trust Indenture Act,
under the terms set forth in a prospectus supplement (the Property Trustee);
and
. one trustee with its principal place of business or who resides in the State
of Delaware and who will act under the terms set forth in a prospectus
supplement. (Sections 6.1 through 6.5 of the Amended Trust Agreement.)
The amended trust agreement will authorize the Administrative Trustees to
issue, on behalf of the applicable Trust, two classes of trust securities,
Trust Preferred Securities and trust common securities, each of which will
have the terms described in this prospectus and in the applicable prospectus
supplement. We will own all of the trust common securities. The trust common
securities will rank equally in right of payment, and payments will be made on
the trust common securities, proportionately with the Trust Preferred
Securities. However, if an event of default occurs and is continuing under the
amended trust agreement, the rights of the holders of the trust common
securities to payment for distributions and payments upon liquidation,
redemption and otherwise, will be subordinated to the rights of the holders of
the Trust Preferred Securities. We will acquire, directly or indirectly, trust
common securities in a total liquidation amount of approximately 3% of the
total capital of each of the Trusts. (Sections 3.6, 5.1, 5.2 and 7.1 of the
Amended Trust Agreement.)
The proceeds from the sale of the Trust Preferred Securities will be used by
the applicable Trust to purchase our Junior Subordinated Debentures. These
Junior Subordinated Debentures will be held in trust by the Property Trustee
for the benefit
15
<PAGE>
of the holders of the trust securities. We will guarantee the payments of
distributions and payments on redemption or liquidation with respect to the
Trust Preferred Securities, but only to the extent the Trust has funds
available to make those payments and has not made the payments. See DESCRIPTION
OF THE GUARANTEES.
The assets of the Trust available for distribution to the holders of Trust
Preferred Securities will be limited to payments from us under the Junior
Subordinated Debentures held by the Trust. If we fail to make a payment on the
Junior Subordinated Debentures, the Trust will not have sufficient funds to
make related payments, including distributions, on its Trust Preferred
Securities.
The Guarantee, when taken together with our obligations under the Junior
Subordinated Debentures, the Subordinated Indenture and the amended trust
agreement, will provide a full and unconditional guarantee of amounts due on
the Trust Preferred Securities issued by the Trust.
The Trust Preferred Securities will have the terms, including distributions,
redemption, voting, liquidation rights and other preferred, deferred or other
special rights or restrictions that will be described in the amended trust
agreement or made part of the amended trust agreement by the Trust Indenture
Act or the Delaware Business Trust Act. The terms of the Trust Preferred
Securities will mirror the terms of the Junior Subordinated Debentures held by
the Trust. In other words, the distribution rate and the distribution payment
dates and other payment dates for the Trust Preferred Securities will
correspond to the interest rate and interest payment dates and other payment
dates on the Junior Subordinated Debentures. Holders of Trust Preferred
Securities have no preemptive or similar rights. (Section 7.1 of the Amended
Trust Agreement.)
Provisions of a Particular Series
Each Trust may issue only one series of Trust Preferred Securities. The
applicable prospectus supplement will set forth the principal terms of the
Trust Preferred Securities that will be offered, including:
. the name of the Trust Preferred Securities;
. the liquidation amount and number of Trust Preferred Securities issued;
. the annual distribution rate(s) or method of determining such rate(s), the
payment date(s) and the record dates used to determine the holders who are to
receive distributions;
. the date from which distributions will be cumulative;
. the optional redemption provisions, if any, including the prices, time
periods and other terms and conditions on which the Trust Preferred
Securities will be purchased or redeemed, in whole or in part;
. the terms and conditions, if any, upon which the Junior Subordinated
Debentures and the related Guarantee may be distributed to holders of those
Trust Preferred Securities;
. any securities exchange on which the Trust Preferred Securities will be
listed;
. whether the Trust Preferred Securities are to be issued in book-entry form
and represented by one or more global certificates, and if so, the depository
for
16
<PAGE>
those global certificates and the specific terms of the depositary
arrangements; and
. any other relevant rights, preferences, privileges, limitations or
restrictions of the Trust Preferred Securities. (Article 7 of the Amended
Trust Agreement.)
The interest rate and interest and other payment dates of each series of
Junior Subordinated Debentures issued to a Trust will correspond to the rate at
which distributions will be paid and the distribution and other payment dates
of the Trust Preferred Securities of that Trust.
Extensions
We have the right under the Subordinated Indenture to defer payments of
interest on the Junior Subordinated Debentures by extending the interest
payment period from time to time on the Junior Subordinated Debentures. The
Administrative Trustees will give the holders of the Trust Preferred Securities
notice of any Extension Period upon their receipt of notice from us. If
distributions are deferred, the deferred distributions and accrued interest
will be paid to holders of record of the Trust Preferred Securities as they
appear on the books and records of the Trust on the record date next following
the termination of such deferral period. See ADDITIONAL TERMS OF JUNIOR
SUBORDINATED DEBENTURES--OPTION TO EXTEND INTEREST PAYMENT PERIOD.
Distributions
Distributions on the Trust Preferred Securities will be made on the dates
payable to the extent that the Trust has funds available for the payment of
distributions in the Property Account. The Trust's funds available for
distribution to the holders of the trust securities will be limited to payments
received from us on the Junior Subordinated Debentures. We have guaranteed the
payment of distributions out of monies held by the Trust to the extent set
forth under DESCRIPTION OF THE GUARANTEES.
Distributions on the Trust Preferred Securities will be payable to the
holders named on the securities register of the Trust at the close of business
on the relevant record dates, which, as long as the Trust Preferred Securities
remain in book-entry only form, will be one business day prior to the relevant
payment dates. Distributions will be paid through the Property Trustee who will
hold amounts received in respect of the Junior Subordinated Debentures in the
Property Account for the benefit of the holders of the trust securities. In the
event that the Trust Preferred Securities do not continue to remain in book-
entry only form, the relevant record dates will conform to the rules of any
securities exchange on which the Trust Preferred Securities are listed and, if
none, the Administrative Trustees will have the right to select relevant record
dates, which will be more than 14 days but less than 60 days prior to the
relevant payment dates. In the event that any date on which distributions are
to be made on the Trust Preferred Securities is not a business day, then
payment of the distributions payable on that date will be made on the next
succeeding day which is a business day and without any interest or other
payment in respect of that delay, except that, if that business day is in the
next succeeding calendar year, the payment will be made on the immediately
preceding business day, in each case with the same force and effect as if made
on the record date. (Section 7.2 of the Amended Trust Agreement.)
17
<PAGE>
Mandatory Redemption of Trust Preferred Securities
The Trust Preferred Securities have no stated maturity date, but will be
redeemed upon the maturity of the Junior Subordinated Debentures or to the
extent the Junior Subordinated Debentures are redeemed prior to maturity. The
Junior Subordinated Debentures will mature on the date specified in the
applicable prospectus supplement and may be redeemed at any time, in whole but
not in part, in certain circumstances upon the occurrence of a Tax Event or an
Investment Company Event as described under SPECIAL EVENT REDEMPTION.
Upon the maturity of the Junior Subordinated Debentures, the proceeds of
their repayment will simultaneously be applied to redeem all the outstanding
trust securities at the Redemption Price. Upon the redemption of the Junior
Subordinated Debentures, either at our option or as a result of a Tax Event or
an Investment Company Event, the proceeds from the redemption will
simultaneously be applied to redeem trust securities having a total liquidation
amount equal to the total principal amount of the Junior Subordinated
Debentures so redeemed at the redemption price; provided, that holders of trust
securities will be given not less than 20 nor more than 60 days' notice of the
redemption. In the event that fewer than all of the outstanding trust
securities are to be redeemed, the trust securities will be redeemed
proportionately. (Section 7.3 of the Amended Trust Agreement.)
Special Event Redemption
Both a Tax Event and an Investment Company Act Event constitute Special
Events for purposes of the redemption provisions described in the preceding
paragraph.
A Tax Event means that the Administrative Trustees have received an opinion
of independent tax counsel experienced in those matters to the effect that, as
a result of any amendment to, change or announced proposed change in:
. the laws or regulations of the United States or any of its political
subdivisions or taxing authorities, or
. any official administrative pronouncement, action or judicial decision
interpreting or applying those laws or regulations,
which amendment or change becomes effective or proposed change, pronouncement,
action or decision is announced on or after the date the Trust Preferred
Securities are issued and sold, there is more than an insubstantial risk that:
. the Trust is or within 90 days would be subject to U.S. federal income tax
with respect to income accrued or received on the Junior Subordinated
Debentures,
. interest payable to the Trust on the Junior Subordinated Debentures is not or
within 90 days would not be deductible, in whole or in part, by us for U.S.
federal income tax purposes, or
. the Trust is or within 90 days would be subject to a material amount of other
taxes, duties or other governmental charges.
Investment Company Event means that the Administrative Trustees have received
an opinion of a nationally recognized independent counsel to the effect that,
as a result of an amendment to or change in the Investment Company Act or
regulations
18
<PAGE>
thereunder on or after the date the Trust Preferred Securities are issued and
sold, there is more than an insubstantial risk that the Trust is or will be
considered an investment company and be required to be registered under the
Investment Company Act. (Section 1.1 of the Amended Trust Agreement.)
Redemption Procedures
The Trust may not redeem fewer than all the outstanding trust securities
unless all accrued and unpaid distributions have been paid on all trust
securities for all distribution periods terminating on or before the date of
redemption. In the event that fewer than all of the outstanding trust
securities are to be redeemed, the trust securities will be redeemed
proportionately.
If the Trust gives a notice of redemption in respect of the trust securities
(which notice will be irrevocable), then, by 12:00 noon, New York City time, on
the redemption date, and if we have paid to the Property Trustee a sufficient
amount of cash in connection with the related redemption or maturity of the
Junior Subordinated Debentures, the Property Trustee will irrevocably deposit
with the depositary funds sufficient to pay the applicable redemption price and
will give the depositary irrevocable instructions and authority to pay the
redemption price to the holders of the Trust Preferred Securities, and the
paying agent will pay the applicable redemption price to the holders of the
trust common securities by check. If notice of redemption has been given and
funds deposited as required, then, immediately prior to the close of business
on the date of the deposit, distributions will cease to accrue and all rights
of holders of Trust Preferred Securities called for redemption will cease,
except the right of the holders of the Trust Preferred Securities to receive
the redemption price but without interest on the redemption price. In the event
that any date fixed for redemption of Trust Preferred Securities is not a
business day, then payment of the redemption price payable on that date will be
made on the next succeeding day that is a business day, without any interest or
other payment in respect of any such delay, except that, if that business day
falls in the next calendar year, payment will be made on the immediately
preceding business day. In the event that payment of the redemption price in
respect of Trust Preferred Securities is improperly withheld or refused and not
paid either by the Trust or by us under the Guarantee, distributions on the
Trust Preferred Securities will continue to accrue at the then applicable rate
from the original redemption date to the date of payment, in which case the
actual payment date will be considered the date fixed for redemption for
purposes of calculating the redemption price.
Subject to the foregoing and applicable law, including, without limitation,
U.S. federal securities laws, we or our subsidiaries may at any time, and from
time to time, purchase outstanding Trust Preferred Securities by tender, in the
open market or by private agreement. (Section 7.4 of the Amended Trust
Agreement.)
Conversion or Exchange Rights
The terms on which the Trust Preferred Securities are convertible into or
exchangeable for common stock or our other securities will be contained in the
applicable prospectus supplement. Those terms will include provisions as to
whether conversion or exchange is mandatory, at the
19
<PAGE>
option of the holder or at our option, and may include provisions under which
the number of shares of common stock or our other securities to be received by
the holders of Trust Preferred Securities would be subject to adjustment.
Distribution of the Junior Subordinated Debentures
We will have the right at any time to dissolve the Trust and, after
satisfaction of the liabilities of creditors of the Trust as provided by
applicable law, to cause Junior Subordinated Debentures to be distributed to
the holders of the Trust Preferred Securities in a total stated principal
amount equal to the total stated liquidation amount of the Trust Preferred
Securities then outstanding. Prior to any such dissolution, we will obtain any
required regulatory approvals. The right to dissolve the trust and distribute
the Junior Subordinated Debentures will be conditioned on our receipt of an
opinion rendered by an independent tax counsel that the distribution would not
result in the recognition of gain or loss for federal income tax purposes by
the holders. (Section 8.1 of the Amended Trust Agreement.)
Liquidation Distribution Upon Dissolution
The amended trust agreement will state that the Trust will be dissolved:
. upon our bankruptcy;
. upon the filing of a certificate of dissolution or its equivalent with
respect to us;
. upon the filing of a certificate of cancellation with respect to the Trust
after obtaining the consent of at least a majority in liquidation amount of
the Trust Preferred Securities, voting together as a single class;
. 90 days after the revocation of our charter, but only if the charter is not
reinstated during that 90-day period;
. upon the distribution of the related Junior Subordinated Debentures directly
to the holders of the trust securities;
. upon the redemption of all of the trust securities; or
. upon entry of a court order for the dissolution of us or the Trust. (Section
8.1 of the Amended Trust Agreement.)
In the event of a dissolution, after the Trust pays all amounts owed to
creditors, the holders of the Trust Preferred Securities will be entitled to
receive:
. cash equal to the total liquidation amount of each Trust Preferred Security
specified in an accompanying prospectus supplement, plus accumulated and
unpaid distributions to the date of payment, or
. Junior Subordinated Debentures in a total principal amount equal to the
total liquidation amount of the Trust Preferred Securities.
If the Trust cannot pay the full amount due on its trust securities because
insufficient assets are available for payment, then the amounts payable by the
Trust on its trust securities will be paid proportionately. However, if an
event of default under the related amended trust agreement occurs, the total
amounts due on the Trust Preferred Securities will be paid before any
distribution on the trust common securities. Under certain circumstances
involving the dissolution of a Trust, subject to obtaining any required
regulatory approval, Junior Subordinated Debentures
20
<PAGE>
will be distributed to the holders of the trust securities in liquidation of
that Trust. (Section 8.2 of the Amended Trust Agreement.)
Trust Enforcement Events
An event of default under the Subordinated Indenture relating to the Junior
Subordinated Debentures will be an event of default under the amended trust
agreement (a Trust Enforcement Event). See DESCRIPTION OF DEBT SECURITIES--
EVENTS OF DEFAULT.
In addition, the voluntary or involuntary dissolution, winding up or
termination of the Trust is also a Trust Enforcement Event, except in
connection with:
. the distribution of the Junior Subordinated Debentures to holders of the
trust securities of the Trust,
. the redemption of all of the trust securities of the Trust, and
. mergers, consolidations or amalgamations permitted by the amended trust
agreement of the Trust.
Under the amended trust agreement, the holder of the trust common securities
will be deemed to have waived any Trust Enforcement Event with respect to the
trust common securities until all Trust Enforcement Events with respect to the
Trust Preferred Securities have been cured, waived or otherwise eliminated.
Until all Trust Enforcement Events with respect to the Trust Preferred
Securities have been so cured, waived, or otherwise eliminated, the Property
Trustee will be deemed to be acting solely on behalf of the holders of the
Trust Preferred Securities and only the holders of the Trust Preferred
Securities will have the right to direct the Property Trustee with respect to
certain matters under the amended trust agreement and the Subordinated
Indenture. In the event that any Trust Enforcement Event with respect to the
Trust Preferred Securities is waived by the holders of the Trust Preferred
Securities as provided in the amended trust agreement, under the amended trust
agreement the holders of trust common securities have agreed that the waiver
also constitutes a waiver of the Trust Enforcement Event with respect to the
trust common securities for all purposes under the amended trust agreement
without any further act, vote or consent of the holders of trust common
securities. (Section 2.6 of the Amended Trust Agreement.)
We and the Administrative Trustees must file annually with the Property
Trustee a certificate evidencing compliance with all the applicable conditions
and covenants under the amended trust agreement. (Section 2.4 of the Amended
Trust Agreement.)
Upon the occurrence of a Trust Enforcement Event the Property Trustee, as the
sole holder of the Junior Subordinated Debentures, will have the right under
the Subordinated Indenture to declare the principal of, interest and premium,
if any, on the Junior Subordinated Debentures to be immediately due and
payable.
If a Property Trustee fails to enforce its rights under the amended trust
agreement or the Subordinated Indenture to the fullest extent permitted by law
and subject to the terms of the amended trust agreement and the Subordinated
Indenture, any holder of Trust Preferred Securities may sue us, or seek other
remedies, to
21
<PAGE>
enforce the Property Trustee's rights under the amended trust agreement or the
Subordinated Indenture without first instituting a legal proceeding against the
Property Trustee or any other person. If a Trust Enforcement Event occurs and
is continuing as a result of our failure to pay principal of or interest or
premium, if any, on the Junior Subordinated Debentures when payable, then a
holder of the Trust Preferred Securities may directly sue us or seek other
remedies, to collect its proportionate share of payments owned. See
RELATIONSHIP AMONG THE TRUST PREFERRED SECURITIES, THE GUARANTEE AND THE JUNIOR
SUBORDINATED DEBENTURES HELD BY THE TRUST.
Removal and Replacement of Trustees
Only the holders of trust common securities have the right to remove or
replace the trustees of the Trust, except that while an event of default in
respect of the Junior Subordinated Debentures has occurred or is continuing,
the holders of a majority of the Trust Preferred Securities will have this
right. The resignation or removal of any trustee and the appointment of a
successor trustee will be effective only on the acceptance of appointment by
the successor trustee in accordance with the provisions of the amended trust
agreement. (Section 6.6 of the Amended Trust Agreement.)
Mergers, Consolidations or Amalgamations of the Trust
The Trust may not consolidate, amalgamate, merge with or into, or be replaced
by or convey, transfer or lease its properties and assets substantially as an
entirety to any other corporation or other body (each, a Merger Event), except
as described below. The Trust may, with the consent of a majority of its
Administrative Trustees and without the consent of the holders of its trust
securities, consolidate, amalgamate, merge with or into, or be replaced by
another trust, provided that:
. the successor entity either
. assumes all of the obligations of the Trust relating to its trust
securities, or
. substitutes other securities for the trust securities that are
substantially similar to the trust securities, so long as the successor
securities rank the same as the trust securities for distributions and
payments upon liquidation, redemption and otherwise;
. we acknowledge a trustee of the successor entity who has the same powers and
duties as the Property Trustee of the Trust, as the holder of the Junior
Subordinated Debentures;
. the Trust Preferred Securities are listed, or any successor securities will
be listed, upon notice of issuance, on the same securities exchange or other
organization that the Trust Preferred Securities are then listed;
. the Merger Event does not cause the Trust Preferred Securities or successor
securities to be downgraded by any nationally recognized rating agency;
. the Merger Event does not adversely affect the rights, preferences and
privileges of the holders of the trust securities or successor securities in
any material way, other than with respect to any dilution of the holders'
interest in the new entity;
. the successor entity has a purpose identical to that of the Trust;
22
<PAGE>
. prior to the Merger Event, we have received an opinion of counsel from a
nationally recognized law firm stating that
. the Merger Event does not adversely affect the rights of the holders of the
Trust Preferred Securities or any successor securities in any material way,
other than with respect to any dilution of the holders' interest in the new
entity, and
. following the Merger Event, neither the Trust nor the successor entity will
be required to register as an investment company under the Investment
Company Act; and
. we guarantee the obligations of the successor entity under the successor
securities in the same manner as in the Guarantee.
In addition, unless all of the holders of the Trust Preferred Securities and
trust common securities approve otherwise, the Trust will not consolidate,
amalgamate, merge with or into, or be replaced by any other entity or permit
any other entity to consolidate, amalgamate, merge with or into, or replace it,
if, in the opinion of a nationally recognized tax counsel experienced in such
matters, the transaction would cause the Trust or the successor entity to be
classified other than as a grantor trust for U.S. federal income tax purposes.
(Section 3.15 of the Amended Trust Agreement.)
Voting Rights; Amendment of Trust Agreement
The holders of Trust Preferred Securities have no voting rights except as
discussed under MERGERS, CONSOLIDATIONS OR AMALGAMATIONS OF THE TRUST AND
DESCRIPTION OF THE GUARANTEES--AMENDMENTS, and as otherwise required by law and
the amended trust agreement.
The amended trust agreement may be amended if approved by a majority of the
Administrative Trustees of the Trust. However, if any proposed amendment
provides for, or the Administrative Trustees otherwise propose to effect,
. any action that would adversely affect the powers, preferences or special
rights of the trust securities, whether by way of amendment to the amended
trust agreement or otherwise, or
. the dissolution, winding-up or termination of the Trust other than under the
terms of its amended trust agreement,
then the holders of the Trust Preferred Securities as a single class will be
entitled to vote on the amendment or proposal. In that case, the amendment or
proposal will only be effective if approved by at least a majority in
liquidation amount of the Trust Preferred Securities affected by the amendment
or proposal.
No amendment may be made to an amended trust agreement if that amendment
would:
. cause the Trust to be characterized as other than a grantor trust for U.S.
federal income tax purposes;
. reduce or otherwise adversely affect the powers of the Property Trustee; or
. cause the Trust to be deemed to be an investment company which is required to
23
<PAGE>
be registered under the Investment Company Act. (Section 11.1 of the Amended
Trust Agreement.)
The holders of a majority of the total liquidation amount of the Trust
Preferred Securities have the right to:
. direct the time, method and place of conducting any proceeding for any remedy
available to the Property Trustee; or
. direct the exercise of any trust or power conferred upon the Property Trustee
under the amended trust agreement, including the right to direct the Property
Trustee, as the holder of the Junior Subordinated Debentures, to
. exercise the remedies available under the Subordinated Indenture with
respect to the Junior Subordinated Debentures,
. waive any event of default under the Subordinated Indenture that is
waivable, or
. cancel an acceleration of the principal of the Junior Subordinated
Debentures.
In addition, before taking any of the foregoing actions, the Property Trustee
must obtain an opinion of counsel stating that, as a result of that action, the
Trust will continue to be classified as a grantor trust for U.S. federal income
tax purposes. (Section 7.5 of the Amended Trust Agreement.)
As described in the form of amended trust agreement, the Property Trustee may
hold a meeting to have holders of Trust Preferred Securities vote on a change
or have them approve a change by written consent.
If a vote by the holders of Trust Preferred Securities is taken or a consent
is obtained, any Trust Preferred Securities owned by us or any of our
affiliates will, for purposes of the vote or consent, be treated as if they
were not outstanding, which will have the following consequences:
. we and any of our affiliates will not be able to vote on or consent to
matters requiring the vote or consent of holders of Trust Preferred
Securities; and
. any Trust Preferred Securities owned by us or any of our affiliates will not
be counted in determining whether the required percentage of votes or
consents has been obtained. Section 7.5 of the Amended Trust Agreement.)
Information Concerning the Property Trustee
For matters relating to compliance with the Trust Indenture Act, the Property
Trustee will have all of the duties and responsibilities of an indenture
trustee under the Trust Indenture Act. The Property Trustee, other than during
the occurrence and continuance of a Trust Enforcement Event, undertakes to
perform only the duties that are specifically described in the amended trust
agreement and, upon a Trust Enforcement Event, must use 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 given it by the applicable amended
trust agreement at the request of any holder of Trust Preferred Securities
unless it is offered reasonable security or indemnity against the costs,
expenses and liabilities that it might incur. However, the holders of the Trust
Preferred
24
<PAGE>
Securities will not be required to offer such an indemnity where the holders,
by exercising their voting rights, direct the Property Trustee to take any
action following a Trust Enforcement Event. (Section 3.9 of the Amended Trust
Agreement.)
Information Concerning the Administrative Trustees
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Trust in a way that:
. will not cause it to be deemed to be an investment company required to be
registered under the Investment Company Act;
. will cause it to be classified as a grantor trust for U.S. federal income tax
purposes; and
. will cause the Junior Subordinated Debentures it holds to be treated as our
indebtedness for U.S. federal income tax purposes.
We and the Administrative Trustees are authorized to take any action, so long
as it is consistent with applicable law or the certificate of trust or amended
trust agreement, that we and the Administrative Trustees determine to be
necessary or desirable for those purposes. (Section 3.6 of the Amended Trust
Agreement.)
DESCRIPTION OF THE GUARANTEES
We will execute the Guarantees from time to time for the benefit of the
holders of the Trust Preferred Securities of the respective Trusts.
The Chase Manhattan Bank will act as Guarantee Trustee under each Guarantee.
The Guarantee Trustee will hold each Guarantee for the benefit of the holders
of the Trust Preferred Securities to which it relates.
The following description of the Guarantees is only a summary. The form of
Guarantee is an exhibit to the registration statement.
General
We will irrevocably and unconditionally agree under each Guarantee to pay the
Guarantee Payments that are defined below, to the extent specified in that
Guarantee, to the holders of the Trust Preferred Securities to which the
Guarantee relates, to the extent that the Guarantee Payments are not paid by or
on behalf of the related Trust. We are required to pay the Guarantee Payments
to the extent specified in the relevant Guarantee regardless of any defense,
right of set-off or counterclaim that we may have or may assert against any
person. (Section 5.1 of the Guarantee.)
The following payments and distributions on the Trust Preferred Securities of
a Trust are Guarantee Payments:
. any accrued and unpaid distributions required to be paid on the Trust
Preferred Securities of the Trust, but only to the extent that the Trust has
funds legally and immediately available for those distributions;
. the redemption price for any Trust Preferred Securities that the Trust calls
for redemption, including all accrued and unpaid distributions to the
redemption date, but only to the extent that the Trust
25
<PAGE>
has funds legally and immediately available for the payment; and
. upon a dissolution, winding-up or termination of the Trust, other than in
connection with the distribution of Junior Subordinated Debentures to the
holders of Trust Securities of the Trust or the redemption of all the Trust
Preferred Securities of the Trust, the lesser of:
. the sum of the liquidation amount and all accrued and unpaid distributions on
the Trust Preferred Securities of the Trust to the payment date, to the
extent that the Trust has funds legally and immediately available for the
payment; and
. the amount of assets of the Trust remaining available for distribution to
holders of the Trust Preferred Securities of the Trust in liquidation of the
Trust. (Section 1.1 of the Guarantee.)
We may satisfy our obligation to make a Guarantee Payment by making that
payment directly to the holders of the related Trust Preferred Securities or by
causing the Trust to make the payment to those holders. (Section 5.1 of the
Guarantee.)
Each Guarantee will be a full and unconditional guarantee, subject to certain
subordination provisions, of the Guarantee Payments with respect to the related
Trust Preferred Securities from the time of issuance of those Trust Preferred
Securities, except that the Guarantee will only apply to the payment of
distributions and other payments on the Trust Preferred Securities when the
Trust has sufficient funds legally and immediately available to make those
distributions or other payments.
If we do not make the required payments on the Junior Subordinated Debentures
that the Property Trustee holds under a Trust, that Trust will not make the
related payments on its Trust Preferred Securities.
Subordination
Our obligations under each Guarantee will be unsecured obligations of the
Company. Those obligations will rank:
. subordinate and junior in right of payment to all of our other liabilities,
other than obligations or liabilities that rank equal in priority or
subordinate by their terms;
. equal in priority with the Junior Subordinated Debentures that we may issue
and similar guarantees; and
. senior to our common stock. (Section 6.2 of the Guarantee.)
We have $257.7 million in Junior Subordinated Debentures outstanding that
will rank equal in priority with the Guarantees. We have common stock
outstanding that will rank junior to the Guarantees.
Each Guarantee will be a guarantee of payment and not of collection. This
means that the guaranteed party may institute a legal proceeding directly
against us, as guarantor, to enforce its rights under the Guarantee without
first instituting a legal proceeding against any other person or entity.
(Section 5.4 of the Guarantee.)
The terms of the Trust Preferred Securities will provide that each holder of
the Trust Preferred Securities, by accepting those Trust Preferred Securities,
agrees to the subordination provisions and other terms of the related
Guarantee.
26
<PAGE>
Amendments
We may amend each Guarantee without the consent of any holder of the Trust
Preferred Securities to which that Guarantee relates if the amendment does not
materially and adversely affect the rights of those holders. We may otherwise
amend each Guarantee with the approval of the holders of at least 50% of the
outstanding Trust Preferred Securities to which that Guarantee relates.
(Section 9.2 of the Guarantee.)
Termination
Each Guarantee will terminate and be of no further effect when:
. the redemption price of the Trust Preferred Securities to which the Guarantee
relates is fully paid;
. we distribute the related Junior Subordinated Debentures to the holders of
those Trust Preferred Securities; or
. the amounts payable upon liquidation of the related Trust are fully paid.
(Section 7.1 of the Guarantee.)
Each Guarantee will remain in effect or will be reinstated if at any time any
holder of the related Trust Preferred Securities must restore payment of any
sums paid to that holder with respect to those Trust Preferred Securities or
under that Guarantee.
Material Covenants
We will covenant that, so long as any Trust Preferred Securities remain
outstanding, if there is an event of default under the Guarantee or the amended
trust agreement:
. we will not make distributions related to our debt securities that rank
equally with or junior to the Junior Subordinated Debentures, including any
payment of interest, principal or premium, or repayments, repurchases or
redemptions; and
. we will not make distributions related to our capital stock, including
dividends, redemptions, repurchases, liquidation payments, or guarantee
payments. We may, however, make the following types of distributions:
. dividends paid in common stock;
. dividends in connection with the implementation of a shareholder rights
plan;
. payments to a trust holding securities of the same series under a
guarantee; and
. repurchases, redemptions or other acquisitions of shares of our capital
stock in connection with any benefit plan or other similar arrangement with
or for the benefit of employees, officers, directors or consultants.
(Section 6.1 of the Guarantee.)
Because we are a holding company that conducts all of our operations through
our subsidiaries, our ability to meet our obligations under the Guarantees is
dependent on the earnings and cash flows of those subsidiaries and the ability
of those subsidiaries to pay dividends or to advance or repay funds to us. The
Trust, as holder of the Guarantee and the Junior Subordinated Debentures will
generally have a junior position to claims of creditors of our subsidiaries,
including trade creditors, debtholders, secured creditors, taxing authorities,
guarantee holders and any preferred stockholders.
27
<PAGE>
Events of Default
An event of default will occur under any Guarantee if we fail to perform any
of our payment obligations under that Guarantee. The holders of a majority of
the Trust Preferred Securities of any series may waive any such event of
default and its consequences on behalf of all of the holders of the Trust
Preferred Securities of that series. (Section 2.6 of the Guarantee.) The
Guarantee Trustee is entitled to enforce the Guarantee for the benefit of the
holders of the Trust Preferred Securities of a series if an event of default
occurs under the related Guarantee. (Section 3.1 of the Guarantee.)
The holders of a majority of the Trust Preferred Securities to which a
Guarantee relates have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee
with respect to that Guarantee or to direct the exercise of any trust or power
that the Guarantee Trustee holds under that Guarantee. Any holder of the
related Trust Preferred Securities may institute a legal proceeding directly
against us to enforce that holder's rights under the Guarantee without first
instituting a legal proceeding against the Guarantee Trustee or any other
person or entity. (Section 5.4 of the Guarantee.)
Concerning the Guarantee Trustee
The Chase Manhattan Bank is the Guarantee Trustee. It is also the Property
Trustee, the Subordinated Indenture Trustee and the Senior Indenture Trustee.
We and certain of our affiliates maintain deposit accounts and banking
relationships with The Chase Manhattan Bank. The Chase Manhattan Bank also
serves as trustee under other indentures pursuant to which securities of ours
and certain of our affiliates are outstanding.
The Guarantee Trustee will perform only those duties that are specifically
set forth in each Guarantee unless an event of default under the Guarantee
occurs and is continuing. In case an event of default occurs and is continuing,
the Guarantee Trustee will exercise the same degree of care as a prudent
individual would exercise in the conduct of his or her own affairs. (Section
3.1 of the Guarantee.) Subject to those provisions, the Guarantee Trustee is
under no obligation to exercise any of its powers under any Guarantee at the
request of any holder of the related Trust Preferred Securities unless that
holder offers reasonable indemnity to the Guarantee Trustee against the costs,
expenses and liabilities which it might incur as a result. (Section 3.2 of the
Guarantee.)
Agreements as to Expenses and Liabilities
We will enter into an Agreement as to Expenses and Liabilities under each
Trust Agreement. Each Agreement as to Expenses and Liabilities will provide
that we will, with certain exceptions, irrevocably and unconditionally
guarantee the full payment of any indebtedness, expenses or liabilities of the
related Trust to each person or entity to whom that Trust becomes indebted or
liable. The exceptions are the obligations of the Trust to pay to the holders
of the related trust common or other similar interests in that Trust the
amounts due to the holders under the terms of those trust common securities or
those similar interests.
28
<PAGE>
RELATIONSHIP AMONG THE TRUST PREFERRED SECURITIES, THE GUARANTEE AND THE JUNIOR
SUBORDINATED DEBENTURES HELD BY THE TRUST
We will guarantee payments of distributions and redemption and liquidation
payments due on the Trust Preferred Securities, to the extent the trust has
funds available for the payments, to the extent described under DESCRIPTION OF
THE GUARANTEES. No single document executed by us in connection with the
issuance of the Trust Preferred Securities will provide for our full,
irrevocable and unconditional guarantee of the Trust Preferred Securities. It
is only the combined operation of our obligations under the Guarantee, the
amended trust agreement and the Subordinated Indenture that has the effect of
providing a full, irrevocable and unconditional guarantee of the Trust's
obligations under the Trust Preferred Securities.
As long as we make payments of interest and other payments when due on the
Junior Subordinated Debentures held by the Trust, those payments will be
sufficient to cover the payment of distributions and redemption and liquidation
payments due on the Trust Preferred Securities issued by the Trust, primarily
because:
. the total principal amount of the Junior Subordinated Debentures will be
equal to the sum of the total liquidation amount of the trust securities;
. 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 Preferred Securities;
. we will pay for any and all costs, expenses and liabilities of the Trust
except its obligations under its Trust Preferred Securities; and
. each amended trust agreement will provide that the Trust will not engage in
any activity that is not consistent with the limited purposes of the Trust.
If and to the extent that we do not make payments on the Junior Subordinated
Debentures, the Trust will not have funds available to make payments of
distributions or other amounts due on its Trust Preferred Securities. In those
circumstances, you will not be able to rely upon the Guarantee for payment of
these amounts. Instead, you may directly sue us or seek other remedies to
collect your proportionate share of payments owed. If you sue us to collect
payment, then we will assume your rights as a holder of Trust Preferred
Securities under the amended trust agreement to the extent we make a payment to
you in any such legal action.
ACCOUNTING TREATMENT
Each Trust will be treated as a subsidiary of ours for financial reporting
purposes. Accordingly, our consolidated financial statements will include the
accounts of each Trust. The Trust Preferred Securities, along with other trust
preferred securities that we guarantee on an equivalent basis, will be
presented as a separate line item in our consolidated balance sheets, and
appropriate disclosures about the Trust Preferred Securities, the Guarantees
and the Junior Subordinated Debentures will be included in the notes to the
consolidated financial statements. We will record distributions that each Trust
pays on the Trust Preferred Securities as an expense in our consolidated
statement of income.
29
<PAGE>
DESCRIPTION OF CAPITAL STOCK
As of September 30, 1999, our authorized capital stock was 520,000,000
shares. Those shares consisted of: (a) 20,000,000 shares of preferred stock,
none of which were outstanding; and (b) 500,000,000 shares of common stock, of
which 190,807,645 shares were outstanding as of October 31, 1999. No holder of
shares of common stock or preferred stock has any preemptive rights.
Common Stock
Listing
Our outstanding shares of common stock are listed on the New York Stock
Exchange under the symbol "D". Any additional common stock we issue will also
be listed on the NYSE.
Dividends
Common shareholders may receive dividends when declared by the Board of
Directors. Dividends may be paid in cash, stock or other form. In certain
cases, common shareholders may not receive dividends until we have satisfied
our obligations to any preferred shareholders. Under certain circumstances, the
Subordinated Indenture also restricts our ability to pay cash dividends.
Fully Paid
All outstanding shares of common stock are fully paid and non-assessable. Any
additional common stock we issue will also be fully paid and non-assessable.
Voting Rights
Each share of common stock is entitled to one vote in the election of
directors and other matters. Common shareholders are not entitled to cumulative
voting rights.
Other Rights
We will notify common shareholders of any shareholders' meetings according to
applicable law. If we liquidate, dissolve or wind up our business, either
voluntarily or not, common shareholders will share equally in the assets
remaining after we pay our creditors and preferred shareholders.
Transfer Agents and Registrars
We, along with Chase Mellon Shareholder Services, are transfer agent and
registrar. You may contact us at the address listed on page 2 or Chase Mellon
located in Ridgefield, New Jersey.
Preferred Stock
The following description of the terms of the preferred stock sets forth
certain general terms and provisions of our authorized preferred stock. If we
offer preferred stock, the specific designations and rights will be described
in the prospectus supplement and a description will be filed with the SEC.
Our Board of Directors can, without approval of shareholders, issue one or
more series of preferred stock. The Board can also determine the number of
shares of each series and the rights, preferences and limitations of each
series including the dividend rights, voting rights, conversion rights,
redemption rights and any liquidation preferences of any wholly unissued series
of preferred stock, the number of shares constituting each series and the terms
and conditions of issue. In some cases, the issuance of preferred stock could
delay a change in control of the Company and make it harder to remove present
management. Under certain circumstances, preferred stock could also restrict
dividend payments to holders of our common stock.
30
<PAGE>
The preferred stock will, when issued, be fully paid and non-assessable.
Unless otherwise specified in the applicable prospectus supplement, the
preferred stock will rank on a parity in all respects with any outstanding
preferred stock we may have and will have priority over our common stock as to
dividends and distributions of assets. Therefore, the rights of any preferred
stock that may subsequently be issued may limit the rights of the holders of
our common stock and preferred stock.
The transfer agent, registrar, and dividend disbursement agent for a series
of preferred stock will be named in a prospectus supplement. The registrar for
shares of preferred stock will send notices to shareholders of any meetings at
which holders of the preferred stock have the right to elect directors or to
vote on any other matter.
DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS
We may issue stock purchase contracts, including contracts obligating holders
to purchase from us, and us to sell to the holders, a specified number of
shares of common stock at a future date or dates, which we refer to in this
prospectus as stock purchase contracts. The price per share of common stock and
the number of shares of common stock may be fixed at the time the stock
purchase contracts are issued or may be determined by reference to a specific
formula set forth in the stock purchase contracts. The stock purchase contracts
may be issued separately or as part of units consisting of a stock purchase
contract and beneficial interests in debt securities, trust preferred
securities, preferred stock or debt obligations of third parties, including
U.S. treasury securities, securing the holders' obligations to purchase the
common stock under the stock purchase contracts, which we refer to in this
prospectus as stock purchase units. The stock purchase contracts may require us
to make periodic payments to the holders of the stock purchase units or vice
versa, and these payments may be unsecured or refunded on some basis. The stock
purchase contracts may require holders to secure their obligations under those
contracts in a specified manner.
The applicable prospectus supplement will describe the terms of the stock
purchase contracts or stock purchase units, including, if applicable,
collateral or depositary arrangements, relating to the stock purchase contracts
or stock purchase units.
VIRGINIA STOCK CORPORATION ACT AND THE ARTICLES AND THE BYLAWS
General
We are a Virginia corporation subject to the Virginia Stock Corporation Act
(the Virginia Act). Provisions of the Virginia Act, in addition to provisions
of our Articles of Incorporation and Bylaws, address corporate governance
issues, including the rights of shareholders. Some of these provisions could
hinder management changes while others could have an anti-takeover effect. This
anti-takeover effect may, in some circumstances, reduce the control premium
that might otherwise be reflected in the value of our common stock. If you are
buying this stock as part of a short-term investment strategy, this might be
especially important to you.
31
<PAGE>
We have summarized the key provisions below. You should read the actual
provisions of our Articles and Bylaws and the Virginia Act that relate to your
individual investment strategy.
Business Combinations
Our Articles require that any merger, share exchange or sale of substantially
all of the assets of the Company be approved by a plurality of the shares
represented at a meeting where a quorum is present. Abstentions and broker non-
votes have the same effect as a vote against the matter.
Section 13.1-725 of the Virginia Act contains several provisions relating to
transactions with interested shareholders. Interested shareholders are holders
of more than 10% of any class of a corporation's outstanding voting shares.
Transactions between a corporation and an interested shareholder are referred
to as affiliated transactions. The Virginia Act requires that material
affiliated transactions must be approved by at least two-thirds of the
shareholders not including the interested shareholder. Affiliated transactions
requiring this two-thirds approval include mergers, share exchanges, material
dispositions of corporate assets, dissolution or any reclassification of the
corporation with its subsidiaries which increases the percentage of voting
shares owned by an interested shareholder by more than five percent.
For three years following the time that a shareholder becomes an interested
shareholder, a Virginia corporation cannot engage in an affiliated transaction
with the interested shareholder without approval of two-thirds of the
disinterested voting shares, and majority approval of disinterested directors.
A disinterested director is a director who was a director on the date on which
an interested shareholder became an interested shareholder and was recommended
for election or elected by a majority of the disinterested directors then on
the board. After three years, the approval of the disinterested directors is no
longer required.
The provisions of the Virginia Act relating to affiliated transactions do not
apply if a majority of disinterested directors approve the acquisition of
shares making a person an interested shareholder.
The Virginia Act permits corporations to opt out of the affiliated
transactions provisions. We have not opted out.
The Virginia Act also contains provisions regulating certain control share
acquisitions, which are transactions causing the voting strength of any person
acquiring beneficial ownership of shares of a public corporation in Virginia to
meet or exceed certain threshold voting percentages (20%, 33 1/3%, or 50%).
Shares acquired in a control share acquisition have no voting rights unless the
voting rights are granted by a majority vote of all outstanding shares other
than those held by the acquiring person or any officer or employee-director of
the corporation. The acquiring person may require that a special meeting of the
shareholders be held to consider the grant of voting rights to the shares
acquired in the control share acquisition.
Our Bylaws give us the right to redeem the shares purchased by an acquiring
person in a control share acquisition. We can do this if the acquiring person
fails to deliver a statement to us listing information required by the Virginia
Act or if our shareholders vote not to grant voting rights to the acquiring
person.
32
<PAGE>
The Virginia Act permits corporations to opt out of the control share
acquisition provisions. We have not opted out.
Directors' Duties
The standards of conduct for directors of Virginia corporations are listed in
Section 13.1-690 of the Virginia Act. Directors must discharge their duties in
accordance with their good faith business judgement of the best interest of the
corporation. Directors may rely on the advice or acts of others, including
officers, employees, attorneys, accountants and board committees if they have a
good faith belief in their competence. Directors' actions are not subject to a
reasonableness or prudent person standard. Virginia's federal and state courts
have focused on the process involved with directors' decision-making and are
generally supportive of directors if they have based their decision on an
informed process. These elements of Virginia law could make it more difficult
to take over a Virginia corporation than corporations in other states.
Board of Directors
Members of our Board of Directors serve one-year terms and are elected
annually.
Shareholder Proposals and Director Nominations
Our shareholders can submit shareholder proposals and nominate candidates for
the Board of Directors if the shareholders follow advance notice procedures
described in our Bylaws.
To nominate directors, shareholders must submit a written notice to our
corporate secretary at least 60 days before a scheduled meeting. The notice
must include the name and address of the shareholder and of the nominee, a
description of any arrangements between the shareholder and the nominee,
information about the nominee required by the SEC, the written consent of the
nominee to serve as a director and other information.
Shareholder proposals must be submitted to our corporate secretary at least
90 days before the first anniversary of the date of our last annual meeting.
The notice must include a description of the proposal, the reasons for
presenting the proposal at the annual meeting, the text of any resolutions to
be presented, the shareholder's name and address and number of shares held and
any material interest of the shareholder in the proposal.
Director nominations and shareholder proposals that are late or that do not
include all required information may be rejected. This could prevent
shareholders from bringing certain matters before an annual or special meeting,
including making nominations for directors.
Meetings of Shareholders
Under our Bylaws, meetings of the shareholders may be called only by the
chairman of the board, the president or a majority of the Board of Directors.
This provision could have the effect of delaying until the next annual
shareholders' meeting shareholder actions which are favored by the holders of a
majority of our outstanding voting securities, because such person or entity,
even if it acquired a majority of our outstanding voting securities, would be
able to take action as a shareholder, such as electing new directors or
approving a merger, only at a duly called shareholders' meeting.
33
<PAGE>
Amendment of Articles and Bylaws
Generally, our Articles may be amended by a majority of the votes present by
each voting group entitled to vote on a given matter. Some provisions of the
Articles, however, may only be amended or repealed by a vote of at least two-
thirds of the outstanding shares entitled to vote.
Indemnification
We indemnify our officers and directors to the fullest extent permitted under
Virginia law against all liabilities incurred in connection with their service
to us.
Limitation of Liability
Our Articles provide that our directors and officers will not be personally
liable for monetary damages to us for breaches of their fiduciary duty as
directors or officers, unless they violated their duty of loyalty to us or our
shareholders, acted in bad faith, knowingly or intentionally violated the law,
authorized illegal dividends or redemptions or derived an improper personal
benefit from their action as directors or officers. This provision applies only
to claims against directors or officers arising out of their role as directors
or officers and not in any other capacity. Directors and officers remain liable
for violations of the federal securities laws and we retain the right to pursue
legal remedies other than monetary damages, such as an injunction or rescission
for breach of the officer's or director's duty of care.
PLAN OF DISTRIBUTION
We may sell the offered securities (a) through agents; (b) through
underwriters or dealers; or (c) directly to one or more purchasers.
By Agents
Offered securities may be sold through agents that we designate. The agents
agree to use their reasonable best efforts to solicit purchases for the period
of their appointment.
By Underwriters
If underwriters are used in the sale, the offered securities will be acquired
by the underwriters for their own account. The underwriters may resell the
securities in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of
sale. The obligations of the underwriters to purchase the securities will be
subject to certain conditions. The underwriters will be obligated to purchase
all the securities of the series offered if any of the securities are
purchased. Any initial public offering price and any discounts or concessions
allowed or re-allowed or paid to dealers may be changed from time to time.
Direct Sales
We may also sell offered securities directly. In this case, no underwriters
or agents would be involved.
General Information
Underwriters, dealers and agents that participate in the distribution of the
offered securities may be underwriters as defined in the Securities Act of 1933
(the Act), and any discounts or commissions received by them from us and any
profit on the resale of the offered securities by them may be treated as
underwriting discounts and commissions under the Act. Any underwriters or
agents will be identified and their compensation described in a prospectus
supplement.
34
<PAGE>
We may have agreements with the underwriters, dealers and agents to indemnify
them against certain civil liabilities, including liabilities under the Act, or
to contribute with respect to payments which the underwriters, dealers or
agents may be required to make.
Underwriters, dealers and agents may engage in transactions with, or perform
services for, us or our subsidiaries in the ordinary course of their
businesses.
LEGAL OPINIONS
McGuire, Woods, Battle & Boothe LLP, Richmond Virginia, counsel to the
Company, will issue an opinion about the legality of the offered securities for
us. As of December 20, 1999, partners of McGuire, Woods, Battle & Boothe LLP
own less than one half of one percent of our common stock. Certain matters
relating to the formation of the Trusts and the issuance of the Trust Preferred
Securities under Delaware law and the Trust Agreements will be passed upon by
Richards, Layton & Finger, special Delaware counsel to the Trusts and the
Company. Any underwriters will be advised about other issues relating to any
offering by their own legal counsel.
EXPERTS
The financial statements incorporated in this prospectus by reference from
the Company's Annual Report on Form 10-K for the year ended December 31, 1998
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report, which is incorporated by reference, and has been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
35
<PAGE>
[LOGO OF DOMINION RESOURCES INC.]
