Pursuant to Rule 424(b)(5)
File No. 333-80377 and 333-80377-01
PRICING SUPPLEMENT NO. 1
(To Prospectus dated July 30, 1999
as supplemented by Prospectus
Supplement dated August 2, 1999)
$100,000,000
DQE CAPITAL CORPORATION
8 3/8% PUBLIC INCOME NOTES (PINES(SM)) DUE 2039
UNCONDITIONALLY GUARANTEED BY
DQE, INC.
---------
This is an offering of 8 3/8% Public Income NotES due 2039, which we
refer to in this pricing supplement as "PINES", to be issued by DQE Capital
Corporation. The PINES are a tranche of Medium-Term Notes, Series A, in the
authorized aggregate principal amount of $250,000,000. The PINES will be general
unsecured, unsubordinated obligations of DQE Capital. The PINES will mature on
September 15, 2039. DQE Capital will pay interest on the PINES on March 15,
June 15, September 15 and December 15 of each year. The first interest payment
will be on December 15, 1999. The PINES will be redeemable at the option of DQE
Capital, in whole or in part, at any time on or after September 16, 2004 at a
redemption price equal to 100% of the principal amount redeemed plus accrued
interest to the date fixed for redemption. The PINES will be issued in
minimum denominations of $25 which may be increased in multiples of $25.
DQE, Inc., which is the parent company of DQE Capital, will
unconditionally guarantee the payment of the PINES when due.
The PINES have been authorized for listing on the New York Stock
Exchange, subject to official notice of issuance. Trading of the PINES is
expected to commence within a 30-day period after initial delivery of the PINES.
The PINES are expected to trade "flat". This means that purchasers will not pay
and sellers will not receive any accrued and unpaid interest on the PINES that
is not included in the trading price. See "DESCRIPTION OF THE PINES - Certain
Trading Characteristics".
--------------------
Neither the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved these securities, or passed upon the adequacy
or accuracy of this pricing supplement, prospectus supplement or the prospectus.
Any representation to the contrary is a criminal offense.
--------------------
Per PINES Total
--------- -----
Initial Public Offering Price 100.00% $100,000,000
Underwriting Discount 3.15% $ 3,150,000
Proceeds to DQE Capital (before expenses) 96.85% $ 96,850,000
---------------------
DQE Capital has given the underwriters an option to purchase an
additional $15,000,000 aggregate principal amount of the PINES.
The initial public offering price set forth above does not include
accrued interest, if any. Interest on the PINES will accrue from September 16,
1999 and must be paid by the purchaser if the PINES are delivered after
September 16, 1999.
The underwriters are severally underwriting the PINES being offered.
The underwriters expect to deliver the PINES in book-entry form only through the
facilities of The Depository Trust Company against payment in New York, New York
on September 16, 1999.
"PINES" is a service mark of Salomon Smith Barney Inc.
-------------------
SALOMON SMITH BARNEY
MORGAN STANLEY DEAN WITTER
PAINEWEBBER INCORPORATED
CIBC WORLD MARKETS
FIRST UNION CAPITAL MARKETS CORP.
September 14, 1999
<PAGE>
You should rely only on the information contained in or incorporated by
reference in this pricing supplement and the accompanying prospectus supplement
and prospectus. We have not authorized anyone 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 contained
in or incorporated by reference in this pricing supplement and the accompanying
prospectus supplement and prospectus is accurate as of any date other than the
date of this pricing supplement.
TABLE OF CONTENTS
PRICING SUPPLEMENT
PAGE
DQE CAPITAL AND DQE........................................................P-3
USE OF PROCEEDS............................................................P-3
DESCRIPTION OF THE PINES...................................................P-3
UNDERWRITING...............................................................P-5
PROSPECTUS SUPPLEMENT
DQE CAPITAL AND DQE........................................................S-3
DESCRIPTION OF THE NOTES...................................................S-4
CERTAIN UNITED STATES TAX CONSIDERATIONS ..................................S-18
SUPPLEMENTAL PLAN OF DISTRIBUTION..........................................S-24
LEGAL OPINIONS.............................................................S-25
PROSPECTUS
AVAILABLE INFORMATION.......................................................3
DQE.........................................................................4
DQE CAPITAL.................................................................4
USE OF PROCEEDS.............................................................5
DESCRIPTION OF THE DEBT SECURITIES..........................................5
PLAN OF DISTRIBUTION.......................................................16
EXPERTS....................................................................17
LEGAL OPINIONS.............................................................18
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DQE CAPITAL AND DQE
DQE Capital Corporation is a wholly-owned subsidiary of DQE, which is a
multi-utility and services company. DQE Capital's primary business purpose is to
provide financing to DQE and its subsidiaries other than Duquesne Light Company.
DQE will unconditionally guarantee the payment of principal of and
premium, if any, and interest, if any, on the PINES, when due and payable,
whether at the stated maturity date, by declaration of acceleration, call for
redemption or otherwise, in accordance with the terms of the PINES and the
Indenture.
Additional information is contained in the accompanying prospectus
supplement and prospectus.
USE OF PROCEEDS
The net proceeds from the issuance and sale of the PINES, after payment
of issuance costs, will be applied, in part, to the repayment of borrowings
under DQE Capital's revolving credit facility which were made for the purpose of
making loans to certain of DQE's direct or indirect subsidiaries (other than
Duquesne Light Company) and in part, to make additional loans to these
companies. Borrowings under the revolving credit facility bear interest at
variable rates based on market indices.
DESCRIPTION OF THE PINES
Information about the PINES is contained in three separate
documents: (1) this pricing supplement which specifically describes the PINES
being offered, (2) a prospectus supplement which describes DQE Capital's
Medium-Term Notes, Series A, being offered from time to time in the total amount
of $250 million, of which the PINES are a tranche, and (3) a prospectus which
describes generally the debt securities of DQE Capital.
The following description of the particular terms of the PINES
supplements and supersedes (to the extent inconsistent) the description of the
general terms and provisions of DQE Capital's Medium-Term Notes, Series A set
forth under "DESCRIPTION OF THE NOTES" in the accompanying prospectus supplement
as well as the description of the general terms and provisions of DQE Capital's
Debt Securities set forth under "DESCRIPTION OF THE DEBT SECURITIES" in the
accompanying prospectus, to which descriptions reference is hereby made. Certain
capitalized terms used and not defined in this pricing supplement are defined
under "DESCRIPTION OF THE NOTES" in the accompanying prospectus supplement or
under "DESCRIPTION OF THE DEBT SECURITIES" in the accompanying prospectus.
GENERAL
The PINES will be issued as a tranche of DQE Capital's Medium-Term
Notes, Series A which constitute a series of debt securities under the
Indenture. The aggregate principal amount of debt securities which may be
authenticated and delivered under the Indenture will not be limited.
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The PINES
(1) will be unsecured obligations of DQE Capital,
(2) will rank pari passu with all other unsecured and
unsubordinated indebtedness of DQE Capital and will be
unconditionally guaranteed by DQE, Inc.,
(3) will be limited in aggregate principal amount of $100,000,000,
unless the Underwriters exercise their option to purchase an
additional $15,000,000 aggregate principal amount of the
PINES,
(4) will bear interest at 83/8% per annum; interest will be
payable on March 15, June 15, September 15 and December 15 of
each year, commencing December 15, 1999; and the regular
record dates for the payment of interest will be the February
28 (29), May 31, August 31 and November 30, as the case may
be, prior to each interest payment date,
(5) will mature on September 15, 2039,
(6) will be issued in minimum denominations of $25 which may be
increased in multiples of $25,
(7) will be redeemable at the option of DQE Capital, in whole or
in part, at any time on or after September 16, 2004 at a
redemption price equal to 100% of the principal amount thereof
plus accrued interest to the date fixed for redemption and may
at any time be repurchased at any price in the open market by
DQE Capital, who may hold, sell or surrender such securities
to the Trustee for cancellation,
(8) will be listed on the New York Stock Exchange, and
(9) will be held in global form only by The Depository Trust
Company except under the circumstances described in the
accompanying prospectus supplement.
CERTAIN TRADING CHARACTERISTICS
DQE Capital has been advised by The New York Stock Exchange
that the PINES are expected to trade at a price that takes into account the
value, if any, of accrued but unpaid interest (except for interest accrued after
a Regular Record Date and prior to an Interest Payment Date, which interest will
be payable to the Holders as of such Regular Record Date, as described above);
thus, purchasers will not pay, and sellers will not receive, accrued and unpaid
interest with respect to the PINES that is not included in the trading price
thereof. Any portion of the trading price of a PINES received by a seller that
is attributable to accrued interest will be treated as ordinary interest income
for federal income tax purposes and will not be treated as part of the amount
realized for purposes of determining gain or loss on the disposition of the
PINES.
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<PAGE>
EVENTS OF DEFAULT
See "DESCRIPTION OF THE DEBT SECURITIES - Events of Default" in the
accompanying prospectus.
UNDERWRITING
Subject to the terms and conditions set forth in a Terms Agreement,
dated September 14, 1999 (the "Terms Agreement"), between DQE Capital, DQE, Inc.
and the underwriters named below (the "Underwriters") incorporating the terms of
a Selling Agency Agreement, dated August 18, 1999, as supplemented, between DQE,
Inc., DQE Capital and Salomon Smith Barney Inc., DQE Capital has agreed to sell
to the Underwriters, and the Underwriters have severally agreed to purchase, as
principals, the respective principal amounts of the PINES set forth below
opposite their names.
UNDERWRITER PRINCIPAL AMOUNT
----------- ----------------
Salomon Smith Barney Inc. ....................................... $25,000,000
Morgan Stanley & Co. Incorporated................................ $25,000,000
PaineWebber Incorporated......................................... $25,000,000
CIBC World Markets Corp........................................... $2,750,000
First Union Capital Markets Corp.................................. $2,750,000
A.G. Edwards & Sons, Inc.......................................... $1,875,000
ABN AMRO Incorporated............................................. $1,875,000
EVEREN Securities, Inc............................................ $1,875,000
McDonald Investments Inc.......................................... $1,875,000
J.J.B. Hilliard, W.L. Lyons, Inc.................................. $1,875,000
Prudential Securities Incorporated................................ $1,875,000
Banc One Capital Markets, Inc....................................... $750,000
BNY Capital Markets, Inc............................................ $750,000
Deutsche Bank Alex Brown............................................ $750,000
Credit Suisse First Boston Corporation.............................. $750,000
Dain Rauscher Wessels,
a division of Dain Rauscher Incorporated................... $750,000
Janney Montgomery Scott Inc......................................... $750,000
Legg Mason Wood Walker, Incorporated................................ $750,000
Parker/Hunter Incorporated.......................................... $750,000
U.S. Bancorp Piper Jaffray Inc...................................... $750,000
Pryor, McClendon, Counts & Co....................................... $750,000
Tucker Anthony Incorporated......................................... $750,000
--------------
Total........................................................... $100,000,000
==============
PINES sold by the Underwriters to the public will initially be offered
at the initial public offering price set forth on the cover of this pricing
supplement, and, in part, to certain securities dealers at such price less a
concession of $0.50 per PINES. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $0.45 per PINES to certain brokers and
dealers. After all the PINES are released for sale to the public, the
Underwriters may change the offering price and the other selling terms.
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DQE Capital has granted the Underwriters an option to purchase up to an
additional $15,000,000 aggregate principal amount of PINES at the initial public
offering price, less the underwriting discount. Such option, which will expire
30 days after the date of this pricing supplement, may be exercised solely to
cover over-allotments. To the extent that the Underwriters exercise such option,
each of the Underwriters will have a firm commitment, subject to certain
conditions, to purchase from DQE Capital approximately the same percentage of
the aggregate principal amount of PINES as the amount set forth next to such
Underwriter's name in the above table bears to the aggregate principal amount of
PINES set forth as the total to be purchased in the above table.
DQE Capital and the Underwriters have agreed that the underwriting
discount will be 3.15% per PINES, except that the underwriting discount will be
2% per PINES for PINES sold to certain institutions.
Prior to the offering, there has been no public market for the PINES.
The PINES have been authorized for listing on the New York Stock Exchange,
subject to official notice of issuance. Trading of the PINES is expected to
commence within a 30-day period after initial delivery of the PINES. In order to
meet one of the requirements for listing the PINES, the Underwriters will
undertake to sell lots of 100 or more PINES to a minimum of 400 beneficial
owners.
The PINES are a new issue of securities with no established trading
market. The Underwriters have advised DQE Capital that the Underwriters intend
to make a market in the PINES but are not obligated to do so and may discontinue
market making at any time without notice. Neither DQE Capital nor the
Underwriters can assure you that the trading market for the PINES will be
liquid.
In connection with this offering, the Underwriters may purchase and
sell PINES in the open market. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the Underwriters of a greater total
principal amount of PINES than they are required to purchase in this offering.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the PINES
while this offering is in progress.
The Underwriters also may impose a penalty bid. This may occur when a
particular Underwriter repays to the Underwriters a portion of the underwriting
discount because the Underwriters have repurchased PINES sold by or for the
account of that Underwriter in stabilizing or short covering transactions.
These activities by the Underwriters may stabilize, maintain or
otherwise affect the market price of the PINES. As a result, the price of the
PINES may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
Underwriters at any time. These transactions may be effected on the New York
Stock Exchange, in the over-the-counter market or otherwise.
In the ordinary course of their business, certain Underwriters or their
affiliates have engaged and may in the future engage in investment and
commercial banking transactions with DQE Capital and DQE. Salomon Smith Barney
Inc. is an affiliate of Citibank N.A., Banc One Capital Markets, Inc. is an
affiliate of Bank One Trust Company, NA (formerly known as The First National
Bank of Chicago), ABN AMRO Incorporated is an affiliate of ABN AMRO Bank, CIBC
World Markets is an affiliate of CIBC Inc., Credit Suisse First Boston Corp. is
an affiliate of Credit Suisse First Boston, First Union Capital Markets Corp. is
P-6
<PAGE>
an affiliate of First Union National Bank, McDonald Investments
Inc. is an affiliate of KeyBank National Association and BNY Capital Markets,
Inc. is an affiliate of The Bank of New York. All of the foregoing banking
affiliates of the Underwriters are a party to our revolving credit facility
currently in place and will receive their proportionate share of the proceeds
from the sale of the PINES if we use the proceeds to repay our revolving credit
facility as we intend to do. If more than 10% of the net proceeds of the
offering are used to repay affiliates of the Underwriters participating in this
offering, then that offering will be made pursuant to Rule 2710(c)(8) of the
Conduct Rules of the National Association of Securities Dealers, Inc. In
addition to being one of our lenders, Bank One Trust Company, NA (formerly known
as The First National Bank of Chicago) is also the trustee under the Indenture.
It is expected that delivery of the PINES will be made against payment
therefor on or about the second business day following the date hereof. Trades
in the secondary market generally are required to settle in three business days,
unless the parties to any such trade expressly agree otherwise. Accordingly,
purchasers who wish to trade PINES on the date hereof will be required, by
virtue of the fact that the PINES initially will settle in T+2, to specify an
alternate settlement cycle at the time of any such trade to prevent a failed
settlement.
DQE Capital has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended.
P-7
<PAGE>
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JULY 30, 1999)
$250,000,000
DQE CAPITAL CORPORATION
MEDIUM-TERM NOTES, SERIES A
UNCONDITIONALLY GUARANTEED BY
DQE, INC.
---------------
DQE Capital Corporation may offer from time to time its unsecured
Medium-Term Notes, Series A. The specific terms of any Notes offered will be
included in a pricing supplement. Unless the pricing supplement provides
otherwise:
() The Notes will mature between 9 months and forty years from the
issue date.
() The Notes will bear interest at either a fixed or a floating
rate. Floating rate interest would be based on:
-- CD Rate -- LIBOR
-- CMT Rate -- Prime Rate
-- Commercial Paper Rate -- Treasury Rate
-- Federal Funds Rate -- Any other rate or index
specified in the
applicable pricing
supplement.
() The Notes will be denominated in U.S. dollars and have minimum
denominations of $1,000 and any larger amount in integral
multiples of $1,000.
() The Notes may be subject to redemption at the option of DQE
Capital or to redemption or purchase at the option of the holder.
() The Notes will be held in global form by The Depository Trust
Company except under the circumstances described in this
prospectus supplement.
() The Notes will be a new issue of securities with no established
trading market.
() The Notes will not be listed on any securities exchange.
DQE, Inc., which is the parent company of DQE Capital, will
unconditionally guarantee the payment of the Notes.
Unless the Pricing Supplement indicates otherwise, DQE Capital will
receive between 99.125% and 99.850% of the proceeds from the sale of the Notes,
after paying the Agents' commissions of between .875% and .150%. The exact net
proceeds of each Note to DQE Capital will be set at the time of issuance.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or passed upon the
accuracy or adequacy of this prospectus supplement, the accompanying prospectus
or any pricing supplement. Any representation to the contrary is a criminal
offense.
SALOMON SMITH BARNEY
August 2, 1999
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE
NOTES. SPECIFICALLY, THE AGENTS MAY OVERALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR, AND PURCHASE, THE NOTES IN THE OPEN MARKET. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE "SUPPLEMENTAL PLAN OF DISTRIBUTION."
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
----
DQE CAPITAL AND DQE..........................................................S-3
DESCRIPTION OF THE NOTES.....................................................S-3
CERTAIN UNITED STATES TAX CONSIDERATIONS....................................S-18
SUPPLEMENTAL PLAN OF DISTRIBUTION.......................................... S-24
LEGAL OPINIONS............................................................. S-25
PROSPECTUS
AVAILABLE INFORMATION..........................................................3
DQE ...........................................................................4
DQE CAPITAL ...................................................................4
USE OF PROCEEDS................................................................5
DESCRIPTION OF THE DEBT SECURITIES.............................................5
PLAN OF DISTRIBUTION..........................................................16
EXPERTS.......................................................................17
LEGAL OPINIONS................................................................18
S-2
<PAGE>
DQE CAPITAL AND DQE
DQE Capital Corporation is a wholly-owned subsidiary of DQE, which is a
multi-utility delivery and services company. DQE Capital's primary business
purpose is to provide financing to DQE and its subsidiaries other than Duquesne
Light Company.
DQE has the following direct subsidiaries, in addition to DQE Capital:
() Duquesne Light Company, a utility engaged in the generation,
transmission, distribution and sale of electric energy to
approximately 580,000 customers in an 800 square mile area in
southwestern Pennsylvania;
() Montauk, Inc., which makes long-term investments in alternative
energy, sale/leasebacks, lease/leasebacks and investments in
affordable housing projects;
() AquaSource, Inc., a water resource management company that
acquires, develops and manages water and wastewater service
operations and bottled water delivery companies;
() Duquesne Enterprises, Inc., which is building businesses in the
energy services and technologies and electronic commerce
industries and in communications;
() DQE Energy Services, Inc., a diversified energy services
company offering a wide range of energy solutions for
industrial, utility and consumer markets worldwide; and
() DQEnergy Partners, Inc., which is working with owners of a
wide range of gas, electricity and telecommunication
distribution systems to help them better meet the needs of
their customers and communities.
DQE will unconditionally guarantee the payment of principal of and
premium, if any, and interest, if any, on the Notes, when due and payable,
whether at the stated maturity date, by declaration of acceleration, call for
redemption or otherwise, in accordance with the terms of the Notes and the
Indenture.
Additional information is contained in the accompanying prospectus.
DESCRIPTION OF THE NOTES
The following description of the particular terms of the Notes
supplements and supersedes (to the extent inconsistent) the description of the
general terms and provisions of the Debt Securities set forth under "DESCRIPTION
OF THE DEBT SECURITIES" in the accompanying prospectus, to which description
reference is hereby made. Certain capitalized terms used and not defined in this
prospectus supplement are defined under "DESCRIPTION OF THE DEBT SECURITIES" in
the accompanying prospectus. The particular terms and conditions of the Notes
sold pursuant to any pricing supplement to this prospectus supplement will be
described therein. The terms and conditions set forth in this "DESCRIPTION OF
NOTES" will apply to each Note unless otherwise specified in the pricing
supplement and in such Note.
GENERAL
The Notes will be issued as a series of debt securities under the
Indenture. The aggregate principal amount of the Notes which may be
authenticated and delivered under the Indenture will not be limited.
The Notes will be issued in fully registered form only, without
coupons. Except as set forth herein under "-- Book-Entry Only Issuance - The
Depository Trust Company" or in any pricing supplement relating to specific
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<PAGE>
Notes, the Notes will not be issuable as Certificated Notes. The authorized
denominations of the Notes will be $1,000 and any larger amount that is an
integral multiple of $1,000.
Each Note will mature from nine months to forty years from its date of
issue, as selected by the purchaser and agreed to by DQE Capital. Each Note may
also be subject to redemption at the option of DQE Capital or to redemption or
purchase by DQE Capital at the option of the Holder before its Stated Maturity
(as defined below). Each Floating Rate Note will mature on an Interest Payment
Date (as defined below) for such Note.
The pricing supplement relating to each Note will describe the
following terms:
(a) the date or dates on which the principal of such Note is
payable or the method of determination thereof and the right, if any,
to extend such date or dates;
(b) whether the Note is a Fixed Rate Note or a Floating Rate
Note;
(c) if the Note is a Fixed Rate Note, the rate per annum at
which the Note will bear interest and the interest payment dates on
which interest on the Note will be payable;
(d) if the Note is a Floating Rate Note, the Base Rate, the
Initial Interest Rate, the Interest Reset Period, the Interest Reset
Dates, the Index Maturity, the Maximum Interest Rate, if any, the
Minimum Interest Rate, if any, the Spread or Spread Multiplier, if any
(all as defined below), and any other terms relating to the particular
method of calculating the interest rate on the Note;
(e) the date or dates from which such interest will accrue on
the Note, the Interest Payment Dates on which such interest shall be
payable, the right, if any, of DQE Capital to defer or extend an
Interest Payment Date, and the Regular Record Date for any interest
payable on any Interest Payment Date and the person or persons to whom
interest on the Notes shall be payable on any Interest Payment Date, if
other than the person in whose name the Note is registered at the close
of business on the Regular Record Date for such interest;
(f) the place or places where, subject to the terms of the
Indenture as described in the accompanying Prospectus under
"DESCRIPTION OF THE DEBT SECURITIES -- Payment and Paying Agents," the
principal of and premium, if any, and interest, if any, on the Note
will be payable and where, subject to the terms of the Indenture as
described in the accompanying Prospectus under "DESCRIPTION OF THE DEBT
SECURITIES -- Registration and Transfer," the Note may be presented for
registration of transfer or exchange and the place or places where
notices and demands to or upon DQE Capital in respect of the Note and
the Indenture may be served; the Security Registrar and Paying Agents
for the Note; and, if such is the case, that the principal of the Note
shall be payable without presentation or surrender thereof;
(g) any period or periods within which, or date or dates on,
which, the price or prices at which and the terms and conditions upon
which the Note may be redeemed, in whole or in part, at the option of
DQE Capital;
(h) the obligation or obligations, if any, of DQE Capital to
redeem or purchase the Note or any portion thereof pursuant to any
sinking fund or other mandatory redemption provisions or at the option
of the holder thereof, and the period or periods within which, or date
or dates on which, the price or prices at which, and the terms and
conditions upon which the Note shall be redeemed or purchased, in whole
or in part, pursuant to such obligation, and applicable exceptions to
the requirements of a notice of redemption in the case of mandatory
redemption or redemption at the option of the holder;
(i) the denominations in which the Note shall be issuable if
other than denominations of $1,000 and any larger amount that is an
integral multiple of $1,000; and
(j) any other terms of the Note.
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"Business Day" with respect to any Note means any day, other than
Saturday or Sunday, which is (a) not a day on which banking institutions or
trust companies in the City of Pittsburgh, Pennsylvania and the City of New
York, New York or other city in which is located any office or agency maintained
for the payment of principal of or premium, if any, or interest, if any, on such
Note, are authorized or required by law, regulation or executive order to remain
closed and (b) if such Note is a LIBOR Note (as defined below), a London Banking
Day. "London Banking Day" with respect to any Note means any day on which
dealings in deposits in U.S. dollars are transacted in the London Interbank
market.
DQE will unconditionally guarantee the payment when due of the
principal of and premium, if any, and interest, if any, on the Notes. See
"DESCRIPTION OF THE DEBT SECURITIES - Guarantee of DQE; Holding Company
Structure" in the accompanying prospectus.
PAYMENT OF PRINCIPAL AND INTEREST
The interest payable on the Notes on any Interest Payment Date (other
than interest payable at Maturity) will be paid to the Holders in whose names
the Notes are registered as of the Regular Record Date immediately preceding
such Interest Payment Date, such payment to be made by check mailed to the
addresses appearing in the Note register. Notwithstanding the foregoing,
(a) if the Original Interest Accrual Date of a Note is after a
Regular Record Date and before the corresponding Interest Payment Date,
interest so payable for the period from and including the Original
Interest Accrual Date to but excluding such Interest Payment Date will
be paid on the next succeeding Interest Payment Date to the Holder of
such Note on the related Regular Record Date;
(b) interest payable at Maturity will be paid to the Person to
whom principal is paid;
(c) defaulted interest will be payable as described under
"DESCRIPTION OF THE DEBT SECURITIES Payment and Paying Agents" in the
accompanying Prospectus;
(d) if such Holder is a securities depositary, payment may be
made by such other means in lieu of check, as shall be agreed upon by
DQE Capital, the Trustee and such Holder; and
(e) upon the written request of a Holder of not less than $10
million in aggregate principal amount of Notes of the same tranche
delivered to DQE Capital and the Paying Agent at least 10 days before
any Interest Payment Date, payment of interest on such Notes to such
Holder on such Interest Payment Date will be made by wire transfer of
immediately available funds to an account maintained within the
continental United States specified by the Holder or, if the Holder
maintains an account with the entity acting as Paying Agent, by deposit
into such account.
The principal of and premium, if any, and interest on the Notes at
Maturity will be made upon presentation at the corporate trust office of the
Paying Agent.
The "Regular Record Date" with respect to any Interest Payment Date for
a Fixed Rate Note will be the 15th day of the calendar month (whether or not a
Business Day) immediately preceding such Interest Payment Date; and the "Record
Date" with respect to any Interest Payment Date for a Floating Rate Note will be
the date (whether or not a Business Day) fifteen calendar days immediately
preceding such Interest Payment Date.
Interest rates offered by DQE Capital with respect to the Notes may
differ depending upon, among other things, the aggregate principal amount of
Notes purchased in any transaction. Notes with similar variable terms but
different interest rates may be offered concurrently at any time. DQE Capital
may also concurrently offer Notes having different variable terms (as are
described herein or in the pricing supplement and Note).
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FIXED RATE NOTES
Each Fixed Rate Note will bear interest from its Original Interest
Accrual Date at the rate per annum stated on its face until the principal amount
of the Note is paid or duly provided for. Unless otherwise set forth in the
pricing supplement, interest on each Fixed Rate Note will be payable
semi-annually in arrears on each Interest Payment Date and at Maturity. Each
payment of interest in respect of an Interest Payment Date will include interest
accrued through the day before such Interest Payment Date. Interest on Fixed
Rate Notes will be computed on the basis of a 360-day year of twelve 30-day
months.
If, with respect to any Fixed Rate Note, any Interest Payment Date, any
redemption date or the Stated Maturity is not a Business Day, payment of the
amounts due on the Note on such date may be made on the next Business Day; and,
if such payment is made or duly provided for on such Business Day, no interest
will accrue on such amounts for the period from and after such Interest Payment
Date, redemption date or Stated Maturity, as the case may be, to such Business
Day.
FLOATING RATE NOTES
General
Each Floating Rate Note will bear interest from its Original Interest
Accrual Date to the first Interest Reset Date for the Note at the Initial
Interest Rate set forth on the face of the Note and in the pricing supplement.
Thereafter, the interest rate on the Note for each Interest Reset Period will be
determined by reference to an interest rate basis (the "Base Rate"), plus or
minus the Spread, if any, and/or multiplied by the Spread Multiplier, if any.
The "Spread" is the number of basis points (one basis point being equal to one
one-hundredth of a percentage point) that may be specified in the pricing
supplement as being applicable to the Note, and the "Spread Multiplier" is the
percentage that may be specified in the pricing supplement as being applicable
to the Note. The pricing supplement will designate one of the following Base
Rates as applicable to a Floating Rate Note:
(a) the CD Rate (a "CD Rate Note");
(b) the Constant-Maturity Treasury Rate (a "CMT Rate Note");
(c) the Commercial Paper Rate (a "Commercial Paper Rate Note");
(d) the Federal Funds Rate (a "Federal Funds Rate Note"),
(e) LIBOR (a "LIBOR Note");
(f) the Prime Rate (a "Prime Rate Note");
(g) the Treasury Rate (a "Treasury Rate Note"), or
(h) such other Base Rate as is set forth in the pricing
supplement and in the Note.
As used herein, "H.15(519)" means the publication entitled "Statistical Release
H.15(519)," Selected Interest Rates, or any successor publication, published by
the Board of Governors of the Federal Reserve System; "Calculation Date," with
respect to an interest determination date, means the earlier of (x) the tenth
calendar day after such interest determination date, or, if such day is not a
Business Day, the next succeeding Business Day, and (y) the Business Day
immediately preceding the related Interest Payment Date or the Maturity Date, as
the case may be; and "Composite Quotations" means the daily statistical release
entitled "Composite 3:30 p.m. Quotations for U.S. Government Securities," or any
successor release, published by the Federal Reserve Bank of New York.
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Maximum Rate; Minimum Rate
As specified in the pricing supplement, a Floating Rate Note may also
have either or both of the following (in each case expressed as a rate per annum
on a simple interest basis):
(a) a maximum limitation, or ceiling, on the rate at which
interest may accrue during any interest period ("Maximum Interest
Rate") and
(b) a minimum limitation, or floor, on the rate at which
interest may accrue during any interest period ("Minimum Interest
Rate").
In addition to any Maximum Interest Rate that may be applicable to any Floating
Rate Note, the interest rate on a Floating Rate Note will in no event be higher
than the maximum rate permitted by New York law, as the same may be modified by
U.S. law of general application. Under New York law currently in effect, a
business corporation may not use usury or the taking of more than the lawful
interest rate as a defense to any proceeding to recover damages on, or enforce
payment of, any obligation executed or effected by such corporation.
Calculation Agent
DQE Capital will appoint, and enter into an agreement with, an agent
(the "Calculation Agent") to calculate interest rates on Floating Rate Notes.
Unless otherwise specified in the pricing supplement, The First National Bank of
Chicago will be the Calculation Agent. All determinations of interest rates by
the Calculation Agent will, in the absence of manifest error, be conclusive for
all purposes and binding on the Holders of the Floating Rate Notes.
Interest Rate Reset
The interest rate on each Floating Rate Note will be reset daily,
weekly, monthly, quarterly, semi-annually or annually (such period being the
"Interest Reset Period" for the Note, and the first day of each Interest Reset
Period being an "Interest Reset Date"), as specified in the pricing supplement;
and such interest rate, as so reset, will be effective as of and for the related
Interest Reset Date and for the balance of the Interest Reset Period to, but
excluding, the next succeeding Interest Reset Date. Unless otherwise specified
in the pricing supplement, the Interest Reset Dates will be:
() in the case of Floating Rate Notes that reset daily, each
Business Day;
() in the case of Floating Rate Notes (other than Treasury Rate
Notes) that reset weekly, Wednesday
of each week;
() in the case of Treasury Rate Notes that reset weekly, Tuesday
of each week (except as provided below under "Treasury Rate
Notes");
() in the case of Floating Rate Notes that reset monthly, the third
Wednesday of each month;
() in the case of Floating Rate Notes that reset quarterly, the
third Wednesday of March, June, September and December of each
year;
() in the case of Floating Rate Notes that reset semi-annually, the
third Wednesday of the two months of each year specified in the
pricing supplement; and
() in the case of Floating Rate Notes that reset annually, the third
Wednesday of the month of each year specified in the pricing
supplement;
provided, however, that the interest rate in effect for the ten days immediately
before Maturity will be that rate in effect on the tenth day preceding Maturity.
If an Interest Reset Date for any Floating Rate Note would otherwise be a day
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that is not a Business Day, such Interest Reset Date will be postponed to the
next succeeding Business Day, except that, in the case of a LIBOR Note, if such
Business Day is in the next succeeding calendar month, the Interest Reset Date
shall be the immediately preceding Business Day.
Accrual of Interest
Unless otherwise specified in the pricing supplement, interest payments
on Floating Rate Notes will be the amount of interest accrued from and including
the last date to which interest has been paid or duly provided for, or, if no
interest has been paid or duly provided for, from and including the Original
Interest Accrual Date, to but excluding the next succeeding Interest Payment
Date; provided, however, that in the case of a Floating Rate Note that resets
daily or weekly, interest payments will be the amount of interest accrued from
and including the most recent date to which interest has been paid or duly
provided for, or if no interest has been paid, from the Original Interest
Accrual Date, to, but excluding, the Regular Record Date immediately preceding
such Interest Payment Date, except that, at Maturity, interest payable will
include interest accrued to but excluding the date of Maturity.
Accrued interest for each Floating Rate Note will be calculated by
multiplying the principal amount of the Note by an accrued interest factor. Such
accrued interest factor will be computed by adding the interest factors
calculated for each day in the Interest Payment Period for which accrued
interest is being calculated. The interest factor (expressed as a decimal
calculated to seven decimal places without rounding) for each such day is
computed by dividing the interest rate applicable to such day by 360, in the
case of CD Rate Notes, Commercial Paper Rate Notes, Federal Fund Rate Notes,
LIBOR Notes and Prime Rate Notes or by the actual number of days in the year, in
the case of CMT Rate Notes and Treasury Rate Notes. For purposes of making the
foregoing calculation, the interest rate in effect on any Interest Reset Date
will be the applicable rate as reset on such date. Unless otherwise specified in
the pricing supplement, all percentages resulting from any calculation of the
rate of interest on a Floating Rate Note will be rounded, if necessary, to the
nearest 1/100,000 of 1% (.0000001), with five one-millionths of a percentage
point rounded upward, and all dollar amounts used in or resulting from such
calculation will be rounded to the nearest one-hundredth of a cent (with .005 of
a cent being rounded upward).
Interest Payment Dates
Unless otherwise indicated in the pricing supplement and except as
provided below, interest will be payable, in the case of Floating Rate Notes
that reset daily, weekly or monthly, on the third Wednesday of each month or on
the third Wednesday of March, June, September and December of each year, as
specified in the pricing supplement; in the case of Floating Rate Notes that
reset quarterly, on the third Wednesday of March, June, September and December
of each year; in the case of Floating Rate Notes that reset semi-annually, on
the third Wednesday of the two months of each year specified in the pricing
supplement; and in the case of Floating Rate Notes that reset annually, on the
third Wednesday of the month of each year specified in the pricing supplement
(each such day being an "Interest Payment Date").
If, with respect to any Floating Rate Note, any Interest Payment Date
other than a redemption date or the Stated Maturity is not a Business Day, such
Interest Payment Date will be postponed to the next Business Day, except that,
if such Note is a LIBOR Note and such next Business Day is in the next calendar
month, such Interest Payment Date will be the immediately preceding Business
Day. If a redemption date or the Stated Maturity is not a Business Day, payment
of the amounts due on the Note on such date in respect of principal, premium, if
any, and/or interest, if any, may be made on the next Business Day; and if
payment is made or duly provided for on such Business Day, no interest shall
accrue on such amounts for the period from and after such redemption date or
Stated Maturity, as the case may be, to such Business Day.
CD Rate Notes
Each CD Rate Note will bear interest for each Interest Reset Period at
an interest rate calculated with reference to the CD Rate and the Spread or
Spread Multiplier, if any, and subject to the Maximum Interest Rate, if any, and
the Minimum Interest Rate, if any, specified in the CD Rate Note and the pricing
supplement.
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Unless otherwise specified in the pricing supplement, the "CD Rate" for
each Interest Reset Period in respect of each CD Rate Note will be determined by
the Calculation Agent on the Calculation Date and will be
(a) the rate (expressed as a percentage per annum) as of the
second Business Day before the related Interest Reset Date (a "CD Rate
Determination Date") for negotiable certificates of deposit having the
Index Maturity specified in the CD Rate Note and the pricing supplement
as published in H.15(519) under the heading "CDs (Secondary Market)",
or
(b) if such rate is not so published by 9:00 A.M., New York
City time, on the Calculation Date, the rate as of the CD Rate
Determination Date for negotiable certificates of deposit of such Index
Maturity as published in Composite Quotations, or
(c) if neither of such rates is published by 3:00 P.M., New
York City time, on the Calculation Date, the arithmetic mean of the
secondary market offered rates as of 10:00 A.M., New York City time, on
the CD Rate Determination Date for certificates of deposit in an amount
that is representative of a single transaction at that time with a
remaining maturity closest to such Index Maturity of three leading
nonbank dealers in negotiable U.S. dollar certificates of deposit in
The City of New York selected by the Calculation Agent, in its
discretion (after consultation with DQE Capital); provided, however,
that if the dealers selected as aforesaid by the Calculation Agent are
not quoting as described above, the CD Rate for such Interest Reset
Period will be the same as the CD Rate for the immediately preceding
Interest Reset Period (or, if there was no previous Interest Reset
Period in respect of the CD Rate Note, the rate of interest on the Note
for such Interest Reset Period shall be the Initial Interest Rate).
CMT Rate Notes
Each CMT Rate Note will bear interest for each Interest Reset Period at
a rate calculated with reference to the CMT Rate and the Spread or Spread
Multiplier, if any, and subject to the Maximum Interest Rate, if any, and the
Minimum Interest Rate, if any, specified in the CMT Rate Note and the pricing
supplement.
Unless otherwise specified in the pricing supplement, the "CMT Rate"
for each Interest Reset Period in respect of each CMT Rate Note will be
determined by the Calculation Agent on the Calculation Date and will be the rate
(expressed as a percentage per annum) displayed on the Designated CMT Telerate
Page (as defined below) under the caption "...Treasury Constant Maturities...
Federal Reserve Board Release H.15...Mondays Approximately 3:45 p.m." under the
column for the Designated CMT Maturity Index (as defined below) for
(a) (1) if the Designated CMT Telerate Page is 7055, the second
Business Day before the related Interest Reset Date (a "CMT Rate
Determination Date") or (2) if the Designated CMT Telerate Page is
7052, the week or the month, as applicable, ended immediately preceding
the week in which such CMT Rate Determination Date occurs, or
(b) if such rate is no longer displayed on the relevant page,
or if not displayed by 3:00 p.m., New York City time on the Calculation
Date, the Treasury Constant Maturity rate for the Designated CMT
Maturity Index as published in H.15(519), or
(c) if such rate is no longer published or, if not published
by 3:00 p.m., New York City time, on the Calculation Date, the Treasury
Constant Maturity rate for the Designated CMT Maturity Index (or other
United States Treasury rate for the Designated CMT Maturity Index) for
the CMT Rate Determination Date as may then be published by either the
Board of Governors of the Federal Reserve System or the United States
Department of the Treasury that the Calculation Agent determines to be
comparable to the rate formerly displayed on the Designated CMT
Telerate Page and published in H.15(519), or
(d) if such information is not provided by 3:00 p.m., New York
City time, on the Calculation Date, then the CMT Rate for the CMT Rate
Determination Date will be a yield to maturity, based on the arithmetic
mean of the secondary market closing offer side prices as of
approximately 3:30 p.m., New York City time, on the CMT Rate
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Determination Date reported, according to their written records, by
three leading primary United States government securities dealers
(each, a "Reference Dealer") in The City of New York selected by the
Calculation Agent (from five such Reference Dealers selected by the
Calculation Agent, in its discretion (after consultation with DQE
Capital), and eliminating the highest quotation (or, in the event of
equality, one of the highest) and the lowest quotation (or, in the
event of equality, one of the lowest)), for the most recently issued
direct noncallable fixed rate obligations of the United States
("Treasury notes") with an original maturity of approximately the
Designated CMT Maturity Index and a remaining term to maturity of not
less than such Designated CMT Maturity Index minus one year, or
(e) if the Calculation Agent cannot obtain three such Treasury
notes quotations, a yield to maturity based on the arithmetic mean of
the secondary market offer side prices as of approximately 3:30 p.m.,
New York City time, on the CMT Rate Determination Date of three
Reference Dealers in The City of New York (from five such Reference
Dealers selected by the Calculation Agent, in its discretion (after
consultation with DQE Capital), and eliminating the highest quotation
(or, in the event of equality, one of the highest) and the lowest
quotation (or, in the event of equality, one of the lowest)), for
Treasury notes with an original maturity of the number of years that is
the next highest to the Designated CMT Maturity Index and a remaining
term to maturity closest to the Designated CMT Maturity Index and in an
amount of at least $100 million, or
(f) if three or four (and not five) of such Reference dealers
are quoting as described above, the arithmetic mean of the offer prices
obtained without the elimination of either the highest or the lowest of
such quotes; provided, however, that if fewer than three Reference
Dealers selected by the Calculation Agent are quoting as described
above, the CMT Rate for such Interest Reset Period will be the same as
the CMT Rate for the immediately preceding Interest Reset Period (or,
if there was no such previous Interest Reset Period in respect of such
CMT Rate Note, the rate of interest on such Note for such Interest
Reset Period shall be the Initial Interest Rate). For purposes of
clause (e) in the first sentence of this paragraph, if two Treasury
notes have remaining terms to maturity equally close to the Designated
CMT Maturity Index, the quotes for the Treasury note with the shorter
remaining term to maturity shall be used.
"Designated CMT Maturity Index", with respect to any CMT Rate Note,
will be the original period to maturity of the U.S. Treasury securities (either
1, 2, 3, 5, 7, 10, 20 or 30 years) specified in such CMT Rate Note and the
pricing supplement with respect to which the CMT Rate will be calculated. If no
such maturity is so specified, the Designated CMT Maturity Index will be 2
years.
"Designated CMT Telerate Page", with respect to any CMT Rate Note,
means the display on the Dow Jones Market service (formerly known as the Dow
Jones Telerate Service) on the page specified in the CMT Rate Note and the
pricing supplement (or any other page that may replace such page on that
service, or any successor service, for the purpose of displaying Treasury
Constant Maturities as reported in H.15(519)), for the purpose of displaying
Treasury Constant Maturities as reported in H.15(519). If no such page is so
specified, the page shall be 7052, for the most recent week.
Commercial Paper Rate Notes
Each Commercial Paper Rate Note will bear interest for each Interest
Reset Period at a rate calculated with reference to the Commercial Paper Rate
and the Spread or Spread Multiplier, if any, and subject to the Maximum Interest
Rate, if any, and the Minimum Interest Rate, if any, specified in the Commercial
Paper Rate Note and the pricing supplement.
Unless otherwise specified in the pricing supplement, the "Commercial
Paper Rate" for each Interest Reset Period in respect of each Commercial Paper
Rate Note will be determined by the Calculation Agent on the Calculation Date
and will be
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(a) the Money Market Yield (as hereinafter defined) as of the
second Business Day before the related Interest Reset Date (a
"Commercial Paper Rate Determination Date") of the rate (expressed as a
percentage per annum) for commercial paper having the Index Maturity
specified in such Commercial Paper Rate Note and the pricing
supplement, as such rate shall be published in H.15(519) (as
hereinafter defined) under the heading "Commercial Paper -
Nonfinancial", or
(b) if the rate is not so published before 9:00 a.m., New York
City time, on the Calculation Date, the Money Market Yield as of the
Commercial Paper Rate Determination Date of the rate for commercial
paper of the Index Maturity as published in Composite Quotations under
the heading "Commercial Paper", or
(c) if none of the rates is published by 3:00 p.m., New York
City time, on the Calculation Date, the Money Market Yield of the
arithmetic mean of the offered rates, as of 11:00 a.m., New York City
time, on such Commercial Paper Rate Determination Date, of three
leading dealers in commercial paper in The City of New York selected by
the Calculation Agent, in its discretion (after consultation with DQE
Capital), for commercial paper of the Index Maturity placed for a
nonfinancial issuer whose bond rating is "AA," or the equivalent, from
a nationally recognized statistical rating organization; provided,
however, that if the dealers selected are not quoting offered rates as
described above, the Commercial Paper Rate for the Interest Reset
Period will be deemed to be the same as the Commercial Paper Rate for
the preceding Interest Reset Period (or, if there was no such previous
Interest Reset Period in respect of such Commercial Paper Rate Note,
the rate of interest on the Note for such Interest Reset Period shall
be the Initial Interest Rate).
"Money Market Yield" is a yield calculated in accordance with the
following formula:
Money Market Yield = D x 360 x 100
-----------------
360 - (D x M)
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the Index Maturity specified in the Commercial Paper Rate Note
and the pricing supplement.
Federal Funds Rate Notes
Each Federal Funds Rate Note will bear interest for each Interest Reset
Period at a rate calculated with reference to the Federal Funds Rate and the
Spread or Spread Multiplier, if any, and subject to the Maximum Interest Rate,
if any, and the Minimum Interest Rate, if any, specified in the Federal Funds
Rate Note and the pricing supplement.
Unless otherwise specified in the pricing supplement, the "Federal
Funds Rate" for each Interest Reset Period in respect of each Federal Funds Rate
Note will be determined by the Calculation Agent on the Calculation Date and
will be
(a) the rate (expressed as a percentage per annum) as of the
second Business Day before the related Interest Reset Date (a "Federal
Funds Rate Determination Date") for Federal funds as published in
H.15(519) under the heading "Federal Funds (Effective)", or
(b) if the rate is not so published by 9:00 A.M., New York
City time, on the Calculation Date, the rate on the Federal Funds Rate
Determination Date as published in Composite Quotations under the
heading "Federal Funds/Effective Rate", or
(c) if neither of the rates is published by 3:00 P.M., New
York City time, on the Calculation Date, the arithmetic mean of the
rates for the last transaction in overnight Federal funds as of 11:00
A.M., New York City time, on such Federal Funds Rate Determination Date
arranged by three leading brokers in Federal Funds transactions in
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The City of New York selected by the Calculation Agent, in its
discretion (after consultation with DQE Capital); provided, however,
that if the brokers selected by the Calculation Agent are not quoting
as described above, the Federal Funds Rate for the Interest Reset
Period will be the same as the Federal Funds Rate for the immediately
preceding Interest Reset Period (or, if there was no such previous
Interest Reset Period in respect of such Federal Funds Rate Note, the
rate of interest on the Note for such Interest Reset Period will be
the Initial Interest Rate).
LIBOR Notes
Each LIBOR Note will bear interest for each Interest Reset Period at a
rate calculated with reference to LIBOR and the Spread or Spread Multiplier, if
any, and subject to the Maximum Interest Rate, if any, and the Minimum Interest
Rate, if any, specified in the LIBOR Note and the pricing supplement.
Unless otherwise specified in the pricing supplement, "LIBOR" for each
Interest Reset Period will be determined by the Calculation Agent and will be:
(a) (1) if "LIBOR Reuters" is specified in the Note and the
pricing supplement as the Reporting Service, the arithmetic mean of the
offered rates (unless the specified Designated LIBOR Page (as
hereinafter defined) by its terms provides only for a single rate, in
which case the single rate will be used) for deposits in the Index
Currency specified in the LIBOR Note and the pricing supplement in the
London interbank market, for the period of the Index Maturity so
specified commencing on the related Interest Reset Date for the
Interest Reset Period, which appear or appears on the Designated LIBOR
Page at approximately 11:00 a.m., London time, on the second London
Banking Day (as defined above) before such Interest Reset Date (a
"LIBOR Determination Date"), or (2) if "LIBOR Telerate" is specified in
the Note and the pricing supplement as the Reporting Service, the rate
for deposits in the Index Currency, for the period of such Index
Maturity commencing on the Interest Reset Date (or, if the pound
sterling is the Index Currency, commencing on the LIBOR Determination
Date), that appears on the Designated LIBOR Page at approximately
11:00 a.m., London time, on the LIBOR Determination Date;
(b) with respect to a LIBOR Determination Date on which fewer
than two offered rates appear (if "LIBOR Reuters" is specified in the
Note as the Reporting Service and calculation of LIBOR is based on the
arithmetic mean of the offered rates) or on which no rate appears (if
the Reporting Service specified in the Note and the pricing supplement
is either (1) "LIBOR Reuters" and the Designated LIBOR Page by its
terms provides only for a single rate or (2) "LIBOR Telerate"), the
Calculation Agent will request the principal London office of each of
four major reference banks in the London interbank market selected by
the Calculation Agent, in its discretion (after consultation with DQE
Capital), to provide the Calculation Agent with its offered quotations
for deposits in the Index Currency, for the period of the Index
Maturity commencing on the Interest Reset Date (or, if the pound
sterling is the Index Currency, commencing on the LIBOR Determination
Date) for such Interest Reset Period and in a principal amount equal to
an amount of not less than U.S.$1 million (or the equivalent amount in
the Index Currency) that is representative of a single transaction in
the Index Currency in the market at such time, to prime banks in the
London interbank market at approximately 11:00 a.m., London time, on
the LIBOR Determination Date; if at least two such quotations are
provided, LIBOR, in respect of the LIBOR Determination Date, shall be
the arithmetic mean of such quotations;
(c) if fewer than two quotations are so provided, LIBOR in
respect of the LIBOR Determination Date will be the arithmetic mean of
the rates quoted by three major banks in the applicable Principal
Financial Center for the country of the Index Currency on the LIBOR
Determination Date selected by the Calculation Agent, in its discretion
(after consultation with DQE Capital), at approximately 11:00 a.m. on
the LIBOR Determination Date, for loans in the Index Currency to
leading European banks, for the period of the Index Maturity commencing
on the Interest Reset Date (or, if the pound sterling is the Index
Currency, commencing on the LIBOR Determination Date) for the Interest
Reset Period and in a principal amount of not less than U.S.$1 million
(or the equivalent amount in the Index Currency) that is representative
of a single transaction in the Index Currency in the market at such
time; provided, however, that if fewer than three banks selected by
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the Calculation Agent are quoting rates described above, LIBOR for
such Interest Reset Period shall be the same as LIBOR for the
immediately preceding Interest Reset Period (or, if there was no such
previous Interest Reset Period, the rate of interest on the Note for
the Interest Reset Period shall be the Initial Interest Rate).
"Designated LIBOR Page" means (x) if "LIBOR Reuters" is specified in a
LIBOR Note and the pricing supplement as the Reporting Service, the display on
the Reuters monitor money rates service (or any successor service) for the
purpose of displaying the London interbank rates of major banks for the Index
Currency, or (y) if "LIBOR Telerate" is so specified as the Reporting Service,
the display on the Dow Jones Market service (formerly known as the Dow Jones
Telerate Service), or any successor service, for the purpose of displaying the
London interbank rates of major banks for the Index Currency. If neither LIBOR
Reuters nor LIBOR Telerate is so specified as the Reporting Service, LIBOR will
be determined as if LIBOR Telerate Page 3750 had been specified.
"Index Currency", with respect to any LIBOR Note, means the currency
(including any composite currency) so specified in the LIBOR Note and the
pricing supplement. If no currency is so specified, "Index Currency" means U.S.
dollars.
"LIBOR Telerate Page 3750" means the display designated as "Page 3750"
on the Dow Jones Market service (formerly known as the Dow Jones Telerate
Service), or such other page as may replace Page 3750 on such service or such
other successor service or services as may be nominated by the British Bankers'
Association as the information vendor for the purpose of displaying London
interbank offered rates for U.S. dollar deposits.
"Principal Financial Center" will be, for purposes of clause (c) above,
the principal financial center of the country of the specified Index Currency,
which generally will be the capital city of such country, except that with
respect to U.S. Dollars, Deutsche Marks and Euros, the Principal Financial
Center will be the City of New York, Frankfurt or Brussels, as the case may be.
Prime Rate Notes
Each Prime Rate Note will bear interest for each Interest Reset Period
at a rate calculated with reference to the Prime Rate and the Spread or Spread
Multiplier, if any, and subject to the Maximum Interest Rate, if any, and the
Minimum Interest Rate, if any, specified in the Prime Rate Note and the pricing
supplement.
Unless otherwise specified in the pricing supplement, the "Prime Rate"
for each Interest Reset Period in respect of each Prime Rate Note will be
determined by the Calculation Agent on the Calculation Date and will be
(a) the rate (expressed as a percentage per annum) as of the
second Business Day before the related Interest Reset Date (a "Prime
Rate Determination Date") set forth in H.15(519) opposite the caption
"Bank Prime Loan", or
(b) if the rate is not so published before 3:00 p.m., New York
City time, on the Calculation Date, the arithmetic mean of the rates
publicly announced by each bank named on the Reuters Screen USPRIME1
Page (as defined below) as the bank's prime rate or base lending rate
as in effect on such Prime Rate Determination Date as quoted on the
Reuters Screen USPRIME1 Page on such Prime Rate Determination Date or
(c) if fewer than four such rates appear on the Reuters Screen
USPRIME1 Page for the Prime Rate Determination Date, the arithmetic
mean of the prime rates quoted on the basis of the actual number of
days in the year divided by 360 as of the close of business on the
Prime Rate Determination Date by at least two of three major money
center banks in The City of New York selected by the Calculation Agent,
in its discretion (after consultation with DQE Capital), from which
quotations are requested; provided, however, that if fewer than two
prime rates are quoted by major money center banks as described above,
there shall be included in the group of rates whose arithmetic mean is
to be so determined the prime rates or base lending rates, as of such
Prime Rate Determination Date, of that number of substitute banks or
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trust companies organized and doing business under the laws of the
United States, or any State thereof, in each case having total equity
capital of at least U.S. $500 million and being subject to supervision
or examination by Federal or State authority, selected by the
Calculation Agent, in its discretion (after consultation with DQE
Capital), which, when added to the number of rates provided by major
money center banks as aforesaid, shall equal two.
If in any calendar month the Prime Rate is not published in H.15(519)
and the banks or trust companies selected are not quoting as described in the
preceding paragraph, the "Prime Rate" for the Interest Reset Period will be
Prime Rate for the immediately preceding Interest Reset Period (or, if there was
no such previous Interest Reset Period in respect of such Prime Rate Note, the
rate of interest on the Prime Rate Note for the Interest Reset Period shall be
the Initial Interest Rate).
"Reuters Screen USPRIME1 Page" means the display designated as Page
"USPRIME1" on the Reuters monitor money rates service (or such other page as may
replace the USPRIME1 Page on that service for the purpose of displaying prime
rates or base lending rates of major United States banks).
Treasury Rate Notes
Each Treasury Rate Note will bear interest for each Interest Reset
Period at a rate calculated with reference to the Treasury Rate and the Spread
or Spread Multiplier, if any, and subject to the maximum Interest Rate, if any,
and the minimum Interest Rate, if any, specified in the Treasury Rate Note and
the pricing supplement.
Unless otherwise specified in the pricing supplement, the "Treasury
Rate" for each Interest Reset Period in respect of each Treasury Rate Note will
be determined by the Calculation Agent on the Calculation Date and will be
(a) the rate (expressed as a percentage per annum) for the
auction held on the Treasury Rate Determination Date (as hereinafter
defined) for the Interest Reset Period of direct obligations of the
United States ("Treasury bills") having the Index Maturity specified in
the Treasury Rate Note and the pricing supplement, as such rate shall
be published in H.15(519) under the heading "U.S. Government Securities
-- Treasury bills -- auction average (investment)", or
(b) if the rate is not published before 9:00 a.m., New York
City time, on the Calculation Date, the auction average rate (expressed
as a bond equivalent on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) on the Treasury Rate
Determination Date as otherwise announced by the United States
Department of Treasury, or
(c) if the results of the auction of Treasury bills having
such Index Maturity are not published or reported as provided above by
3:00 p.m., New York City time, on the Calculation Date, or if no such
auction is held on the Treasury Rate Determination Date, a yield to
maturity (expressed as a bond equivalent on the basis of a year of 365
or 366 days, as applicable, and applied on a daily basis) of the
arithmetic mean of the secondary market bid rates, as of approximately
3:30 p.m., New York City time, on the Treasury Rate Determination Date,
of three leading primary United States government securities dealers
selected by the Calculation Agent, in its discretion (after
consultations with DQE Capital), for the issue of Treasury bills with a
remaining maturity closest to such Index Maturity; provided, however,
that if the dealers selected as aforesaid by the Calculation Agent are
not quoting bid rates as described above, then the "Treasury Rate" for
such Interest Reset Period will be deemed to be the same as the
Treasury Rate for the immediately preceding Interest Reset Period (or,
if there was no such previous Interest Reset Period in respect of such
Treasury Rate Note, the rate of interest on the Note for the Interest
Reset Period shall be the Initial Interest Rate).
The "Treasury Rate Determination Date" for each Interest Reset Period
is the day of the week in which the Interest Reset Date for the Interest Reset
Period falls on which Treasury bills would normally be auctioned. (As of the
date of this Prospectus Supplement, Treasury bills are normally sold at auction
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on Monday of each week, unless that day is a legal holiday, in which case the
auction is normally held on the following Tuesday, except that such auction may
be held on the preceding Friday.) If, as the result of a legal holiday, an
auction is held on the preceding Friday, such Friday is the Treasury Rate
Determination Date pertaining to the Interest Reset Period commencing in the
next week. If an auction date falls on any day that would otherwise be an
Interest Reset Date for a Treasury Rate Note, then the Interest Reset Date is
instead the Business Day immediately following such auction date.
REDEMPTION
The pricing supplement relating to each Note will indicate either that
such Note cannot be redeemed at the election of DQE Capital before Stated
Maturity or that the Note will be redeemable, at the election of DQE Capital, in
whole or in part, on any date on or after the date designated as the "Initial
Redemption Date" in the pricing supplement, at the applicable redemption price
plus accrued interest to the date fixed for redemption. If the Note is so
redeemable, the redemption price will initially be a percentage of the principal
amount of the Note to be redeemed equal to the "Initial Redemption Price"
specified in the pricing supplement for the twelve-month period commencing on
the Initial Redemption Date and will decline for the twelve-month period
commencing on each anniversary of the Initial Redemption Date by a percentage of
principal amount equal to the "Reduction Percentage" specified in the pricing
supplement until the redemption price is 100% of the principal amount of the
Note. The pricing supplement may specify a "Redemption Limitation Date" before
which DQE Capital may not redeem a Note as contemplated above as a part of, or
in anticipation of, any refunding operation by the application, directly or
indirectly, of moneys borrowed having an effective interest cost to DQE Capital
(calculated in accordance with generally accepted financial practice) less than
the effective interest cost to DQE Capital (similarly calculated) of such Note.
The pricing supplement relating to each Note will also specify any
sinking fund or other mandatory redemption provisions applicable to the Note,
and any provisions for the redemption or purchase by DQE Capital of the Note at
the option of the Holder.
Reference is made to the information contained under "DESCRIPTION OF
THE DEBT SECURITIES -- Redemption" in the accompanying Prospectus.
LIMITATION ON SECURED DEBT
So long as any of the Notes remain outstanding, DQE will not create,
issue, incur or assume any Secured Debt (as hereinafter defined) without the
consent of the Holders of a majority in principal amount of the outstanding
Securities of all series (including the Notes) and tranches with respect to
which this covenant is made (all such Securities being hereinafter called
"Benefitted Securities"), considered as one class, provided, however, that the
foregoing covenant will not prohibit the creation, issuance, incurrence or
assumption of any Secured Debt if either
(a) DQE shall make effective provision whereby all Benefitted
Securities then outstanding will be secured equally and ratably with
such Secured Debt; or
(b) DQE delivers to the Trustee bonds, notes or other
evidences of indebtedness secured by the Lien (as hereinafter defined)
which secures such Secured Debt in an aggregate principal amount equal
to the aggregate principal amount of the Benefitted Securities then
outstanding and meeting certain other requirements set forth in the
Indenture.
"Debt", with respect to any person, means
(a) indebtedness of such person for borrowed money evidenced
by a bond, debenture, note or other written instrument or agreement by
which such person is obligated to repay such borrowed money and
(b) any guaranty by such person of any such indebtedness of
another person.
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"Debt" does not include, among other things,
(x) indebtedness of such person under any installment sale or
conditional sale agreement or any other agreement relating to
indebtedness for the deferred purchase price of property or services,
(y) obligations of such person under any lease agreement
(including any lease intended as security), whether or not such
obligations are required to be capitalized on the balance sheet of such
person under generally accepted accounting principles, or
(z) liabilities secured by any Lien on any property owned by
such person if and to the extent that such person has not assumed or
otherwise become liable for the payment thereof.
"Lien" means any lien, deed of trust, pledge or security interest.
"Secured Debt", with respect to any person, means Debt created, issued,
incurred or assumed by such person which is secured by a Lien upon any shares of
stock of Duquesne Light Company, whether owned at the date of the initial
authentication and delivery of the Notes or thereafter acquired.
BOOK-ENTRY ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
DTC will act as securities depositary for the Notes. The Notes will be
issued only as fully-registered securities registered in the name of Cede & Co.
(DTC's nominee). One or more fully-registered global certificates for the Notes,
representing the aggregate principal amount of Notes, will be issued and will be
deposited with DTC.
The following is based upon information furnished by DTC:
DTC is a limited-purpose trust company organized under the
New York Banking Law, a "banking organization" within the meaning
of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as amended. DTC holds securities that its
participants ("Participants") deposit with DTC. DTC also
facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited
securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. "Direct Participants" in DTC
include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations. DTC is
owned by a number of its Direct Participants and by the NYSE, the
American Stock Exchange, Inc., and the National Association of
Securities Dealers, Inc. Access to the DTC system is also
available to others, such as securities brokers and dealers,
banks and trust companies that clear transactions 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
Securities and Exchange Commission.
Purchases of Notes within the DTC system must be made by or
through Direct Participants, which will receive a credit for the
Notes on DTC's records. The ownership interest of each actual
purchaser of each Note ("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 purchase, but Beneficial Owners are expected to receive
written confirmation providing details of the transaction, as
well as periodic statements of their holdings, from the Direct or
Indirect Participants through which the Beneficial Owners entered
into the transaction. Transfers of ownership interests in the
Notes are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial
Owners will not receive certificates representing their ownership
interests in the Notes, except in the event that use of the
book-entry system for the Notes is discontinued, as discussed
below.
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To facilitate subsequent transfers, all Notes deposited by
Participants with DTC are registered in the name of DTC's
partnership nominee, Cede & Co. The deposit of Notes with DTC and
their registration in the name of Cede & Co. effect no change in
beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the Notes; DTC's records reflect only the
identity of the Direct Participants to whose accounts such Notes
are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
The delivery of notices and other communications by DTC to
Direct Participants, by Direct Participants to Indirect
Participants, and by Direct Participants and Indirect
Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices will be sent to Cede & Co., as registered
Holder of the Notes. If less than all of the Notes are being
redeemed, DTC's practice is to determine by lot the amount of the
interest of each Direct Participant to be redeemed.
Neither DTC nor Cede & Co. will itself consent or vote with
respect to Notes. Under its usual procedures, DTC mails an
Omnibus Proxy to DQE Capital 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 Notes
are credited on the record date (identified in a listing attached
to the Omnibus Proxy).
Payments on the Notes will be made to DTC. DTC's practice is
to credit Direct Participants' accounts on the relevant payment
date in accordance with their respective holdings shown on DTC's
records unless DTC has reason to believe that it will not receive
payment on such payment date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the
accounts of customers in bearer form or registered in "street
name", and will be the responsibility of such Participants and
not of DTC or DQE Capital, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment to
DTC will be the responsibility of DQE Capital, disbursement of
payments to Direct Participants will be the responsibility of
DTC, and further disbursement of payments to the Beneficial
Owners will be the responsibility of Direct Participants and
Indirect Participants.
Management of DTC is aware that some computer applications,
systems and the like for processing data ("Systems") that are
dependent upon calendar dates, including dates before, on, and
after January 1, 2000, may encounter "Year 2000 problems." DTC
has informed Direct Participants and Indirect Participants and
other members of the financial community (the "Industry") that it
has developed and is implementing a program so that its Systems,
as the same relate to the timely payment of distributions
(including principal and interest payments) to security holders,
book-entry deliveries, and settlement of trades within DTC
("Depositary Services"), continue to function appropriately. This
program includes a technical assessment and a remediation plan,
each of which is complete. Additionally, DTC's plan includes a
testing phase, which is expected to be completed within
appropriate time frames.
However, DTC's ability to perform its services properly is
also dependent upon other parties, including, but not limited to,
issuers and their agents, as well as DTC's Direct Participants
and Indirect Participants, third party vendors from whom DTC
licenses software and hardware, and third party vendors on whom
DTC relies for information or the provision of services,
including telecommunication and electrical utility service
providers, among others. DTC has informed the Industry that it is
contacting (and will continue to contact) third party vendors
from whom DTC acquires services to: (1) impress upon them the
importance of such services being Year 2000 compliant; and (2)
determine the extent of their efforts for Year 2000 remediation
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(and, as appropriate, testing) of their services. In addition,
DTC is in the process of developing such contingency plans as it
deems appropriate.
According to DTC, the information in the preceding two
paragraphs with respect to DTC has been provided to the Industry
for informational purposes only and is not intended to serve as a
representation, warranty, or contract modification of any kind.
DTC may discontinue providing its services as securities depositary for
the Notes at any time by giving notice to DQE Capital. Under such circumstances,
in the event that a successor securities depositary is not obtained, Note
certificates will be delivered to the Beneficial Owners. Additionally, DQE
Capital may decide to discontinue use of the system of book-entry transfers
through DTC (or a successor depositary). In that event, certificates for the
Notes will be delivered.
The information in this section concerning DTC and DTC's book-entry
system and procedures has been obtained from sources that DQE Capital believes
to be reliable, but DQE Capital takes no responsibility for the accuracy
thereof. Neither DQE Capital, the Trustee nor the Agents will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Notes or for
maintaining, supervising or reviewing any records relating thereto.
Except as provided herein, a Beneficial Owner of an interest in a
global Note certificate may not receive physical delivery of Notes. Accordingly,
each Beneficial Owner must rely on the procedures of DTC to exercise any rights
under the Notes.
CERTAIN UNITED STATES TAX CONSIDERATIONS
The following is a discussion of certain U.S. income tax considerations
based on the Internal Revenue Code of 1986, as amended (the "Code"), existing
and proposed Treasury regulations (the "Regulations"), published rulings, and
judicial decisions, all as currently in effect. This discussion deals only with
Notes held as capital assets (within the meaning of Section 1221 of the Code) by
U.S. Holders (as defined below) that are initial purchasers, and not with
special classes of holders such as banks, insurance companies, dealers in
securities or currencies, traders in securities that elect to mark to market,
tax-exempt organizations, persons holding Notes as part of a straddle, hedging
or conversion transaction, or persons whose functional currency is not the U.S.
dollar. All persons considering the purchase of Notes are advised to consult
their own tax advisors concerning the consequences, in their particular
circumstances, under the Code and the laws of any other taxing jurisdiction, of
the ownership of the Notes.
As used herein, the term "U.S. Holder" means a beneficial owner of a
Note that is for United States federal income tax purposes:
(a) a citizen or resident of the United States;
(b) a corporation, partnership or other entity created or
organized in or under the laws of the United States or any political
subdivision thereof;
(c) an estate the income of which is subject to United States
federal income tax without regard to its source; or
(d) a trust if a court within the United States is able to
exercise primary supervision over the administration of the trust and
one or more United States persons have the authority to control all
substantial decisions of the trust.
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PAYMENTS OF INTEREST
Interest on a Note, other than original issue discount, generally will
be taxable to a U.S. Holder as ordinary income at the time it is received or
accrued, depending on the holder's regular method of accounting for tax
purposes.
ORIGINAL ISSUE DISCOUNT
General
Original issue discount ("OID") is the excess of the "stated redemption
price at maturity" of a Note over its issue price if such excess equals or
exceeds a "de minimis amount" (as defined below). The issue price of a Note
generally will be the first price at which a substantial amount of Notes
included in the issue of which the Note is a part is sold other than to bond
houses, brokers, or similar persons or organizations acting in the capacity of
underwriters, placement agents, or wholesalers. The stated redemption price at
maturity is the sum of all payments provided for under the terms of the Note
other than "qualified stated interest". A qualified stated interest payment is
generally any one of a series of stated interest payments on a Note that are
unconditionally payable at least annually at a single fixed rate (with certain
exceptions for lower rates paid during some periods) applied to the outstanding
principal amount of the Note. Notes issued with OID are hereinafter called "OID
Notes". Special rules for "Floating Rate Notes" are described below under "Notes
Issued with Floating Interest Rates."
U.S. Holders of OID Notes that mature more than one year from the date
of issuance generally must include OID in income as ordinary interest income in
advance of actual receipt of some or all of the corresponding interest payments
from DQE Capital. U.S. Holders of OID Notes generally must include in income the
daily portion of OID as it accrues during each accrual period over the life of a
Note under a formula based upon the compounding of interest at a rate that
provides for a constant yield to maturity (the "Constant Yield Method").
The Constant Yield Method
Under the Constant Yield Method, the amount of OID includible in income
by a U.S. Holder of an OID Note is the sum of the daily portions of OID with
respect to the OID Note for each day during the taxable year or portion of the
taxable year on which the U.S. Holder holds such OID Note ("accrued OID"). The
daily portion is determined by allocating to each day in any "accrual period" a
pro rata portion of the OID allocable to that accrual period. Accrual periods
with respect to a Note may be of any length selected by the U.S. Holder and may
vary in length over the term of the Note as long as:
(a) no accrual period is longer than one year and
(b) each scheduled payment of interest or principal on the
Note occurs on either the final or first day of an accrual period.
The amount of OID allocable to an accrual period equals the excess of
(x) the product of the OID Note's adjusted issue price at the
beginning of the accrual period and such Note's yield to maturity
(determined on the basis of compounding at the close of each accrual
period and properly adjusted for the length of the accrual period) over
(y) the sum of the payments of qualified stated interest on
the Note allocable to the accrual period. The "adjusted issue price" of
an OID Note at the beginning of any accrual period is the issue price
of the Note:
(a) increased by the amount of accrued OID for each prior
accrual period; and
(b) decreased by the amount of any payments previously made on
the Note that were not qualified stated interest payments.
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For purposes of determining the amount of OID allocable to an accrual
period, if an interval between payments of qualified stated interest on the Note
contains more than one accrual period, the amount of qualified stated interest
payable at the end of the interval (including any qualified stated interest that
is payable on the first day of the accrual period immediately following the
interval) is allocated pro rata on the basis of relative lengths to each accrual
period in the interval, and the adjusted issue price at the beginning of each
accrual period in the interval must be increased by the amount of any qualified
stated interest that has accrued before the first day of the accrual period but
that is not payable until the end of the interval. The amount of OID allocable
to an initial short accrual period may be computed using any reasonable method
if all other accrual periods other than a final short accrual period are of
equal length.
The amount of OID allocable to the final accrual period is the
difference between
(a) the amount payable at the maturity of the Note (other than
any payment of qualified stated interest) and
(b) the Note's adjusted issue price as of the beginning of the
final accrual period.
Because OID is calculated based on the compounding of interest, U.S.
Holders will generally have to include in income increasingly greater amounts of
OID in successive accrual periods.
De Minimis OID
In general, if the excess of a Note's stated redemption price at
maturity over its issue price is less than 1/4 of 1 percent of the Note's stated
redemption price at maturity multiplied by the number of complete years to its
maturity (the "de minimis amount"), then such excess, if any, constitutes "de
minimis original issue discount" and the Note is not an OID Note. Unless the
election described below under "Election to Treat All Interest as Original Issue
Discount" is made, a United States Holder of a Note with de minimis original
issue discount must include such de minimis original issue discount in income as
stated principal payments on the Note are made. The includible amount with
respect to each such payment will equal the product of the total amount of the
Note's de minimis original issue discount and a fraction, the numerator of which
is the amount of the principal payment made and the denominator of which is the
stated principal amount of the Note.
Short Term Notes
In general, an individual or other cash basis U.S. Holder of a Note
with a term of one year or less (a "short-term Note") is not required to accrue
OID (as specially defined below for the purposes of this paragraph) for U.S.
federal income tax purposes unless it elects to do so (but may be required to
include any stated interest in income as the interest is received). Accrual
basis U.S. Holders and certain other U.S. Holders, including banks, regulated
investment companies, dealers in securities, common trust funds, U.S. Holders
who hold Notes as part of certain identified hedging transactions, certain
pass-through entities and cash basis U.S. Holders who so elect, are required to
accrue OID on short-term Notes on either a straight-line basis or under the
Constant Yield Method (based on daily compounding), at the election of the U.S.
Holder. In the case of a U.S. Holder not required and not electing to include
OID in income currently, any gain realized on the sale or retirement of the
short-term Note will be ordinary income to the extent of the OID accrued on a
straight-line basis (unless an election is made to accrue the OID under the
Constant Yield Method) through the date of sale or retirement. U.S. Holders who
are not required and do not elect to accrue OID on short-term Notes will be
required to defer deductions for interest on borrowings allocable to short-term
Notes in an amount not exceeding the deferred income until the deferred income
is realized.
For purposes of determining the amount of OID subject to these rules,
all interest payments on a short-term Note, including stated interest, are
included in the short-term Note's stated redemption price at maturity.
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Election to Treat All Interest as Original Issue Discount
A U.S. Holder may elect to include in gross income all interest that
accrues on a Note using the Constant Yield Method, with the modifications
described below. For purposes of this election, interest includes stated
interest, OID, de minimis original issue discount, market discount, de minimis
market discount and unstated interest, as adjusted by an amortizable bond
premium (described below under "Notes Purchased at a Premium") or acquisition
premium.
In applying the Constant Yield Method to a Note with respect to which
this election has been made, the issue price of the Note will equal its cost to
the electing U.S. Holder, the issue date of the Note will be the date of its
acquisition by the electing U.S. Holder, and no payments on the Note will be
treated as payments of qualified stated interest. This election will generally
apply only to the Note with respect to which it is made and may not be revoked
without the consent of the Internal Revenue Service. If this election is made
with respect to a Note with amortizable bond premium, then the electing U.S.
Holder will be deemed to have elected to apply amortizable bond premium against
interest with respect to all debt instruments with amortizable bond premium
(other than debt instruments the interest on which is excludible from gross
income) held by the electing U.S. Holder as of the beginning of the taxable year
in which the Note with respect to which the election is made is acquired or
thereafter acquired. The deemed election with respect to amortizable bond
premium may not be revoked without the consent of the Internal Revenue Service.
Notes Issued with Floating Interest Rates
Floating Rate Notes are subject to special rules. For these purposes, a
Floating Rate Note will qualify as a "variable rate debt instrument" if it:
(a) has an issue price that does not exceed the total
noncontingent principal payments by more than the lesser of (1) the
product of (A) the total noncontingent principal payments, (B) the
number of complete years to maturity from the issue date and (C) .015
and (2) 15 percent of the total noncontingent principal payments; and
(b) does not provide for stated interest other than stated
interest compounded or paid at least annually at (1) one or more
"qualified floating rates," (2) a single fixed rate and one or more
qualified floating rates, (3) a single "objective rate" or (4) a single
fixed rate and a single objective rate that is a "qualified inverse
floating rate."
A qualified floating rate or objective rate in effect at any time
during the term of the instrument must be set at a "current value" of that rate.
A "current value" of a rate is the value of the rate on any day that is no
earlier than 3 months before the first day on which that value is in effect and
no later than 1 year following that first day.
A variable rate is a "qualified floating rate" if:
(a) variations in the value of the rate can reasonably be
expected to measure contemporaneous variations in the cost of newly
borrowed funds in the currency in which the Note is denominated; or
(b) it is equal to the product of such a rate and either (1) a
fixed multiple that is greater than 0.65 but not more that 1.35, or
(2) a fixed multiple greater than 0.65 but not more than 1.35,
increased or decreased by a fixed rate.
If a Note provides for two or more qualified floating rates that (a) are within
0.25 percentage points of each other on the issue date or (b) can reasonably be
expected to have approximately the same values throughout the term of the Note,
the qualified floating rates together constitute a single qualified floating
rate. A rate is not a qualified floating rate, however, if the rate is subject
to certain restrictions (including caps, floors, governors, or other similar
restrictions) unless such restrictions are fixed throughout the term of the Note
or are not reasonably expected to significantly affect the yield on the Note.
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An "objective rate" is a rate, other than a qualified floating rate,
that is determined using a single, fixed formula and that is based on objective
financial or economic information that is not within the control of or unique to
the circumstances of the issuer or a related party. A variable rate is not an
objective rate, however, if it is reasonably expected that the average value of
the rate during the first half of the Note's term will be either significantly
less than or significantly greater than the average value of the rate during the
final half of the Note's term. An objective rate is a "qualified inverse
floating rate" if:
(a) the rate is equal to a fixed rate minus a qualified floating
rate; and
(b) the variations in the rate can reasonably be expected to
inversely reflect contemporaneous variations in the cost of newly
borrowed funds.
If interest on a Note is stated at a fixed rate for an initial period
of one year or less followed by either a qualified floating rate or an objective
rate for a subsequent period and:
(a) the fixed rate and the qualified floating rate or
objective rate have values on the issue date of the Note that do not
differ by more than 0.25 percentage points; or
(b) the value of the qualified floating rate or objective rate
is intended to approximate the fixed rate,
the fixed rate and the qualified floating rate or the objective rate constitute
a single qualified floating rate or objective rate. Under these rules, CD Rate
Notes, CMT Rate Notes, Commercial Paper Rate Notes, Federal Funds Rate Notes,
LIBOR Notes, Prime Rate Notes and Treasury Rate Notes should generally be
treated as "variable rate debt instruments."
In general, if
(a) a Floating Rate Note that provides for stated interest at
a single qualified floating rate or objective rate throughout the term
thereof qualifies as a "variable rate debt instrument," and
(b) interest on such Note is unconditionally payable in cash
or other property (other than debt instruments of the issuer),
then all stated interest on the Note is qualified stated interest and will be
taxed accordingly. The amount of OID for such Notes, if any, is determined by
using, in the case of a qualified floating rate or qualified inverse floating
rate, the value as of the issue date of the qualified floating rate or qualified
inverse floating rate, or, in the case of any other objective rate, a fixed rate
that reflects the yield reasonably expected for the Note.
In general, any other Floating Rate Note that qualifies as a variable
rate debt instrument will be converted into an "equivalent" fixed rate debt
instrument for purposes of determining the amount and accrual of OID and
qualified stated interest on the Note. For this calculation, the amount of
interest and OID accruals on the Note are generally determined by:
(a) determining a fixed rate substitute for each variable rate
provided under the Floating Rate Note (generally, the value of each
variable rate as of the issue date or, in the case of an objective rate
that is not a qualified inverse floating rate, a rate that reflects the
reasonably expected yield on the Note);
(b) constructing the equivalent fixed rate debt instrument
(using the fixed rate substitutes described above);
(c) determining the amount of qualified stated interest and
OID with respect to the equivalent fixed rate debt instrument, and
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(d) making the appropriate adjustments for actual variable
rates during the applicable accrual period.
If a Floating Rate Note does not qualify as a "variable rate debt
instrument," then the Note would be treated as a contingent payment debt
obligation. The effect of treating a Floating Rate Note as a contingent payment
debt obligation would be to require a U.S. Holder, regardless of its regular
method of accounting, to accrue income based on the "comparable yield" of the
Floating Rate Note (i.e., the yield at which DQE Capital would issue a fixed
rate debt instrument with the same maturity and with terms and conditions
otherwise similar to the Floating Rate Note, including without limitation the
DQE guaranty). As a result, a U.S. Holder could accrue income in excess of cash
payments actually received, and any gain or loss upon the sale, exchange or
retirement of the Floating Rate Note would be treated as other than long-term
capital gain or loss.
NOTES PURCHASED AT A PREMIUM
A U.S. Holder that purchases a Note for an amount in excess of its
stated redemption price at maturity may elect to treat such excess as
"amortizable bond premium," in which case the amount required to be included in
the U.S. Holder's income each year with respect to interest on the Note will be
reduced by the amount of amortizable bond premium allocable (based on the Note's
yield to maturity) to such year. Any election to amortize bond premium shall
apply to all bonds (other than bonds the interest on which is excludible from
gross income) held by the U.S. Holder at the beginning of the first taxable year
to which the election applies or thereafter acquired by the U.S. Holder, and is
irrevocable without the consent of the Internal Revenue Service. See also
"Original issue Discount -- Election to Treat All Interest as Original issue
Discount."
BASIS AND SALES, EXCHANGES OR RETIREMENTS
A U.S. Holder's tax basis in a Note will generally equal the cost of
such Note to the U.S. Holder plus the total amount of OID or market discount
included in such U.S. Holder's income plus the amount of income, if any,
attributable to de minimis OID and de minimis market discount included in the
U.S Holder's income with respect to the Note, less (a) any payments received by
such U.S. Holder that are not qualified stated interest and (b) the amount of
any amortizable bond premium applied to reduce interest on the Note.
Upon the sale, exchange or payment of a Note having a maturity date
more than one year from the date of issuance, the U.S. Holder of a Note will
generally realize capital gain or loss equal to the difference between the
amount realized and the U.S. Holder's tax basis in such Note. U.S. Holders of
OID Notes that have a maturity date one year or less from the date of issuance,
and who do not elect to accrue OID using the Constant Yield Method, will
generally be required to treat gain realized on the sale, exchange or payment of
such Note as interest income to the extent of OID accrual on a straight-line
basis through the date of the such sale, exchange or payment. Capital gain of a
non-corporate U.S. Holder is generally subject to a maximum tax rate of 20% in
respect of property held for more than one year. Under current law, the
deductibility of capital losses is subject to certain limitations.
BACKUP WITHHOLDING
Certain backup withholding and information reporting requirements may
apply to payments on a Note to registered U.S. Holders who are not otherwise
exempt from such requirements pursuant to the Code. In general, with respect to
non-corporate U.S. Holders, information reporting requirements will apply to
payments of principal, any premium and interest on a Note and the proceeds of
the sale of a Note before maturity, and to the accrual of OID on an OID Note,
and backup withholding at a rate of 31% will apply to such payments and to
payments of OID if the U.S. Holder fails to provide an accurate taxpayer
identification number or is notified by the Internal Revenue Service that it has
failed to report all interest and dividends required to be shown on its federal
income tax returns. Any amounts withheld from a payment to a U.S. Holder under
backup withholding rules would be allowed as a refund or a credit against such
U.S. Holder's U.S. federal income tax provided the required information is
furnished to the Internal Revenue Service.
S-23
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SUPPLEMENTAL PLAN OF DISTRIBUTION
The Notes are being offered on a continuing basis by DQE Capital
through Salomon Smith Barney Inc., which has agreed to use reasonable best
efforts to solicit offers to purchase the Notes; provided that DQE Capital and
Salomon Smith Barney may arrange for additional brokers or dealers to
participate in the offering of any particular tranche of the Notes (Salomon
Smith Barney and each such other broker or dealer being called, individually, an
"Agent" and, collectively, the "Agents"); and provided, further, that DQE
Capital has reserved its right to sell, solicit and accept offers to purchase
Notes on its own behalf. DQE Capital will have the sole right to accept offers
to purchase Notes and may reject any offer in whole or in part. An Agent will
have the right to reject any offer in whole or in part. Payment of the purchase
price of the Notes will be required to be made in immediately available funds.
Unless otherwise specified in the pricing supplement, DQE Capital will pay an
Agent, in connection with sales of Notes resulting from a solicitation made or
an offer to purchase received by such Agent, a commission ranging from .150% to
.875% of the initial offering price of the Notes to be sold, depending upon the
maturity of the Notes.
DQE Capital may also sell Notes to an Agent as principal for its own
account at discounts to be agreed upon at the time of sale. The Notes may be
resold to investors and other purchasers at a fixed offering price or at
prevailing market prices, or prices related thereto at the time of such resale
or otherwise, as determined by the Agent and specified in the pricing
supplement. An Agent may offer the Notes it has purchased as principal to other
dealers. An Agent may sell the Notes to any dealer at a discount and, unless
otherwise specified in the pricing supplement, such discount allowed to any
dealer will not be in excess of the discount to be received by such Agent from
DQE Capital. After the initial public offering of the Notes that are to be
resold by the Agents to investors and other purchasers on a fixed public
offering price basis, the public offering price, concession, and discount may be
changed.
In order to facilitate the offering of the Notes, the Agents may engage
in transactions that stabilize, maintain or otherwise affect the price of the
Notes. Specifically, the Agents may overallot in connection with the offering,
creating a short position in the Notes for their own account. In addition, to
cover overallotments or to stabilize the price of the Notes, the Agents may bid
for, and purchase, the Notes in the open market. Finally, any underwriting
syndicate participating in a sale of Notes to one or more Agents acting as
principal may reclaim selling concessions allowed to an underwriter or a dealer
for distributing the Notes in the offering, if the syndicate repurchases
previously distributed Notes 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 Notes above independent market
levels. The Agents are not required to engage in these activities, and may end
any of these activities at any time.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). DQE Capital and the
Agents have agreed to indemnify each other against certain liabilities,
including liabilities under the federal securities laws, or to contribute to
payments made in respect of any such liabilities. DQE Capital has also agreed to
reimburse the Agents for certain expenses.
Unless otherwise specified in the pricing supplement, DQE Capital does
not intend to apply for the listing of the Notes on a national securities
exchange, but has been advised by the Agents that the Agents intend to make a
market in the Notes, as permitted by applicable laws and regulations. The Agents
are not obligated to do so, however, and the Agents may discontinue making a
market at any time without notice. No assurance can be given as to the liquidity
of any trading market for the Notes.
Concurrently with the offering of Notes through the Agents as described
herein, DQE Capital may issue other Debt Securities under the Indenture referred
to herein. Any Debt Securities sold by DQE Capital pursuant to the accompanying
prospectus will reduce the aggregate principal amount of Notes that may be
offered by this prospectus supplement and the prospectus.
The Agents and/or certain of their affiliates may engage in
transactions with and perform services for DQE and certain of its affiliates in
the ordinary course of business.
S-24
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LEGAL OPINIONS
The following information supplements the information regarding legal
opinions contained under "LEGAL OPINIONS" in the accompanying prospectus. In
addition to the matters referred to in the prospectus, certain U.S. federal
income tax matters will be passed upon for DQE Capital by Thelen Reid & Priest
LLP. The opinions of David R. High, Esq. and Thelen Reid & Priest LLP, each as
counsel to DQE Capital and DQE, and Milbank, Tweed, Hadley & McCloy LLP, as
counsel to the Agents, will be conditioned upon, and subject to certain
assumptions regarding, future action required to be taken by DQE Capital and the
Trustee in connection with the issuance and sale of any particular Note, the
specific terms of Notes and other matters which may affect the validity of Notes
but which cannot be ascertained on the date of such opinions.
S-25
<PAGE>
PROSPECTUS
$250,000,000
DQE CAPITAL CORPORATION
DEBT SECURITIES
UNCONDITIONALLY GUARANTEED BY
DQE, INC.
DQE Capital Corporation may offer from time to time up to $250,000,000 in
principal amount of its unsecured debt securities at prices and on terms to be
determined at the time of sale. DQE, Inc., which is the parent company of DQE
Capital, will unconditionally guarantee the payment of the debt securities.
One or more supplements to this prospectus will indicate the terms of each
series of debt securities, and each tranche within a series, including, where
applicable, the
() series designation,
() principal amount,
() stated maturity date,
() interest rate and interest payment dates,
() initial public offering price and
() provisions for redemption, if any.
DQE Capital may sell the debt securities to or through underwriters, dealers or
agents or directly to one or more purchasers. The applicable prospectus
supplement will describe each offering of the debt securities.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
July 30, 1999.
<PAGE>
THIS PROSPECTUS INCORPORATES BY REFERENCE IMPORTANT BUSINESS AND FINANCIAL
INFORMATION ABOUT DQE THAT IS NOT INCLUDED IN OR DELIVERED WITH THIS PROSPECTUS.
SEE AVAILABLE INFORMATION. YOU MAY OBTAIN COPIES OF DOCUMENTS CONTAINING SUCH
INFORMATION FROM US, WITHOUT CHARGE, BY EITHER CALLING OR WRITING TO US AT:
DQE CAPITAL CORPORATION
411 SEVENTH AVENUE
PITTSBURGH, PENNSYLVANIA 15219-1905
ATTENTION: TREASURER
TELEPHONE: (412) 393-6700
TABLE OF CONTENTS
PAGE
AVAILABLE INFORMATION..........................................................3
DQE........................................................................... 4
DQE CAPITAL................................................................... 4
USE OF PROCEEDS............................................................... 5
DESCRIPTION OF THE DEBT SECURITIES........................................... 5
General ............................................................ 5
Guaranty of DQE; Holding
Company Structure................................................. 6
Payment and Paying Agents............................................ 7
Registration and Transfer............................................ 8
Redemption........................................................... 8
Satisfaction and Discharge........................................... 8
Events of Default.....................................................9
Remedies............................................................ 10
Consolidation, Merger
Sale of Assets................................................... 12
Modification of Indenture........................................... 13
Duties of the Trustee; Resignation;
Removal.......................................................... 16
Evidence of Compliance.............................................. 16
Governing Law....................................................... 16
PLAN OF DISTRIBUTION......................................................... 16
EXPERTS...................................................................... 17
LEGAL OPINIONS............................................................... 18
WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION OTHER THAN THIS
PROSPECTUS AND THE USUAL SUPPLEMENTS TO THIS PROSPECTUS. YOU SHOULD NOT ASSUME
THAT THE INFORMATION CONTAINED OR INCORPORATED IN THIS PROSPECTUS IS ACCURATE AS
OF ANY DATE AFTER JULY 30, 1999, WHICH IS THE DATE OF THIS PROSPECTUS. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THE DEBT SECURITIES AND IT IS NOT SOLICITING
AN OFFER TO BUY THE DEBT SECURITIES IN ANY JURISDICTION IN WHICH THE OFFER IS
NOT PERMITTED.
2
<PAGE>
AVAILABLE INFORMATION
DQE, Inc., which is the parent company of DQE Capital Corporation,
files annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy this information at the SEC's
Public Reference Room and at its Regional Offices:
Public Reference Room New York Regional Office Chicago Regional Office
Judiciary Plaza 7 World Trade Center Citicorp Center
450 Fifth Street, N.W. Suite 1300 500 West Madison Street
Room 1024 New York, New York 10048 Suite 1400
Washington, D.C. 20549 Chicago, Illinois 60661-2551
You may obtain information on the operation of the SEC's public
reference rooms by calling the SEC at 1-800-SEC-0330. You may also obtain copies
of such material by mail from the Public Reference Section of the SEC, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The
SEC also maintains an Internet site that contains DQE's reports, proxy
statements and other information filed with the SEC. The address of that site is
http://www.sec.gov.
DQE's Common Stock is listed on the New York Stock Exchange, and
reports, proxy statements and other information concerning DQE can also be
inspected at the office of that exchange located at 20 Broad Street, New York,
New York 10005.
DQE is incorporating into this prospectus by reference:
() DQE's most recent Annual Report on Form 10-K filed
with the SEC pursuant to the Exchange Act and
() all other documents filed by DQE with the SEC
pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the filing of DQE's most
recent Annual Report and prior to the termination of
the offering made by this prospectus,
and all of those documents are deemed to be a part of this prospectus from the
date of filing those documents. We refer to the documents incorporated into this
prospectus by reference as the "Incorporated Documents". Any statement contained
in an Incorporated Document may be modified or superseded by a statement in this
prospectus or in any prospectus supplement or in any subsequently filed
Incorporated Document. The Incorporated Documents as of the date of this
prospectus are:
() Annual Report on Form 10-K for the year ended
December 31, 1998;
() Quarterly Report on Form 10-Q for the quarter ended
March 31, 1999; and
() Current Reports on Form 8-K dated March 19, March 26
and July 29, 1999.
DQE maintains an Internet site at http://www.dqe.com which contains
information concerning DQE and its affiliates. The information contained at
DQE's Internet site is not incorporated in this prospectus by reference and you
should not consider it a part of this prospectus.
DQE Capital is not required to file reports with the SEC. There will be
no separate reports or other information relating to DQE Capital included or
incorporated in this prospectus.
3
<PAGE>
DQE
DQE, Inc., a Pennsylvania corporation, is a multi-utility delivery and
services company. DQE has the following direct subsidiaries, in addition to DQE
Capital:
() Duquesne Light Company, a utility engaged in the generation,
transmission, distribution and sale of electric energy, is DQE's
largest subsidiary, accounting for 88.7% of DQE's consolidated
revenue as of December 31, 1998. The utility provides power to
approximately 580,000 customers in an 800 square mile area
located within the Allegheny, Beaver and, to a limited extent,
Westmoreland counties of southwestern Pennsylvania. The total
population within the area is over 1.5 million, of which over
350,000 live in Pittsburgh.
() Montauk, Inc. makes long-term investments in affordable housing
projects, sale/leasebacks, lease/leasebacks and investments in
alternative energy.
() AquaSource, Inc., is a water resource management company that
acquires, develops and manages water and wastewater service
operations and bottled water delivery companies.
() Duquesne Enterprises, Inc., is building businesses in the energy
services and technologies and electronics commerce industries and
in communications.
() DQE Energy Services, Inc. is a diversified energy services
company offering a wide range of energy solutions for industrial,
utility and consumer markets worldwide. DES' initiatives include
energy facility development and operation, domestic and
international independent power production and the production and
supply of innovative fuels.
() DQEnergy Partners, Inc. is working with owners of a wide range of
gas, electricity and telecommunication distribution systems to
help them better meet the needs of their customers and
communities.
DQE's principal executive offices are located at Cherrington Corporate
Center, Suite 100, 500 Cherrington Parkway, Coraopolis, Pennsylvania 15108-3189
and the telephone number is (412) 262-4700.
See AVAILABLE INFORMATION for the availability of additional
information about DQE.
DQE CAPITAL
DQE Capital Corporation is a Delaware corporation and a wholly-owned
subsidiary of DQE. DQE Capital's primary business purpose is to provide
financing for the operations of the direct and indirect subsidiaries of DQE
other than Duquesne Light Company.
DQE Capital's principal executive offices are located at 411 Seventh
Avenue, Pittsburgh, Pennsylvania 15219-1905 and the telephone number is (412)
393-6700.
4
<PAGE>
USE OF PROCEEDS
Unless otherwise specified in the prospectus supplement relating to any
series or tranche of the debt securities offered by this prospectus (the "Debt
Securities"), the net proceeds from the sale of Debt Securities will be loaned
to DQE and/or to one or more of DQE's direct or indirect subsidiaries (other
than Duquesne Light Company). DQE Capital expects that the proceeds will be used
for general corporate purposes, including investing in unregulated business
activities and reducing short-term debt incurred to provide interim financing
for these purposes.
DESCRIPTION OF THE DEBT SECURITIES
GENERAL
DQE Capital may issue the Debt Securities in one or more series, or in
one or more tranches within a series, under an Indenture dated as of August 1,
1999 (the "Indenture"), from DQE Capital and DQE to The First National Bank of
Chicago, as trustee (the "Trustee"). The terms of the Debt Securities will
include those stated in the Indenture and those made part of the Indenture by
the Trust Indenture Act of 1939, as amended. The following summary is not
complete and is subject in all respects to the provisions of, and is qualified
in its entirety by reference to, the Indenture and the Trust Indenture Act. DQE
Capital has filed the Indenture, as well as a form of officer's certificate to
establish a series of debt securities, as exhibits to the registration statement
of which this prospectus is a part. Capitalized terms used under this heading
which are not otherwise defined in this prospectus have the meanings set forth
in the Indenture. Wherever particular provisions of the Indenture or terms
defined in the Indenture are referred to, those provisions or definitions are
incorporated by reference as a part of the statements made in this prospectus
and those statements are qualified in their entirety by that reference.
References to article and section numbers, unless otherwise indicated, are
references to article and section numbers of the Indenture.
In addition to the Debt Securities, other debt securities may be issued
under the Indenture, without any limit on the aggregate principal amount. The
Debt Securities and all other debt securities issued under the Indenture are
collectively referred to as the "Indenture Securities." Each series of Indenture
Securities will be unsecured and will rank pari passu with all other series of
Indenture Securities, except as otherwise provided in the Indenture, and with
all other unsecured and unsubordinated indebtedness of DQE Capital. Except as
otherwise described in the applicable prospectus supplement, the Indenture does
not limit the incurrence or issuance by DQE Capital of other secured or
unsecured debt, whether under the Indenture, under any other indenture that DQE
Capital may enter into in the future or otherwise. See the prospectus supplement
relating to any offering of Debt Securities.
DQE will unconditionally guarantee the payment when due of the
principal of and premium, if any, and interest, if any, on the Indenture
Securities. See "Guaranty of DQE; Holding Company Structure".
The applicable prospectus supplements will describe the following terms
of the Debt Securities of each series or tranche:
(a) the title of the Debt Securities;
5
<PAGE>
(b) any limit upon the aggregate principal amount of the Debt
Securities;
(c) the date or dates on which the principal of the Debt
Securities is payable or the method of determination thereof and the
right, if any, to extend such date or dates;
(d) the rate or rates at which the Debt Securities will bear
interest, if any, or the method by which such rate or rates, if any,
will be determined, the date or dates from which any such interest
will accrue, the interest payment dates on which any such interest
will be payable, the right, if any, of DQE Capital to defer or extend
an interest payment date, and the regular record date for any interest
payable on any interest payment date and the person or persons to whom
interest on the Debt Securities will be payable on any interest
payment date, if other than the person or persons in whose names the
Debt Securities are registered at the close of business on the regular
record date for such interest;
(e) the place or places where, subject to the terms of the
Indenture as described below under "- Payment and Paying Agents", the
principal of and premium, if any, and interest, if any, on the Debt
Securities will be payable and where, subject to the terms of the
Indenture as described below under "- Registration and Transfer", the
Debt Securities may be presented for registration of transfer or
exchange and the place or places where notices and demands to or upon
DQE Capital in respect of the Debt Securities and the Indenture may be
served; the Security Registrar and Paying Agents for the Debt
Securities; and, if such is the case, that the principal of the Debt
Securities will be payable without presentation or surrender;
(f) any period or periods within which, date or dates on which,
the price or prices at which and the terms and conditions upon
which the Debt Securities may be redeemed, in whole or in part, at the
option of DQE Capital;
(g) the obligation or obligations, if any, of DQE Capital to
redeem or purchase any of the Debt Securities pursuant to any sinking
fund or other mandatory redemption provisions or at the option of the
Holder, and the period or periods within which, or date or dates on
which, the price or prices at which, and the terms and conditions upon
which the Debt Securities will be redeemed or purchased, in whole or
in part, pursuant to such obligation, and applicable exceptions to the
requirements of a notice of redemption in the case of mandatory
redemption or redemption at the option of the Holder;
(h) the denominations in which any of the Debt Securities will be
issuable if other than denominations of $1,000 and any integral
multiple of $1,000;
(i) if the Debt Securities are to be issued in global form, the
identity of the depositary; and
(j) any other terms of the Debt Securities.
GUARANTY OF DQE; HOLDING COMPANY STRUCTURE
DQE will unconditionally guarantee the payment of principal of and
premium, if any, and interest, if any, on the Debt Securities, when due and
payable, whether at the stated maturity date, by declaration of acceleration,
call for redemption or otherwise, in accordance with the terms of such Debt
6
<PAGE>
Securities and the Indenture. The Guaranty will be contained in the Indenture
and will also be endorsed on each Debt Security. The Guaranty will remain in
effect until the entire principal of and premium, if any, and interest, if any,
on the Debt Securities has been paid in full or otherwise discharged in
accordance with the provisions of the Indenture. (See Article Thirteen.)
DQE conducts its operations primarily through its direct and indirect
subsidiaries, and substantially all of the assets shown on DQE's consolidated
balance sheet are held by such subsidiaries. Accordingly, DQE's cash flow and
its ability to meet its obligations under the Guaranty are largely dependent
upon the earnings of such subsidiaries and the distribution or other payment of
such earnings to DQE in the form of dividends or loans or advances and repayment
of loans and advances from DQE. The subsidiaries are separate and distinct legal
entities and, except for DQE Capital, have no obligation to pay any amounts due
on the Debt Securities or to make any funds available for such payment.
Because DQE is a holding company, its obligations under the Guaranty
will be effectively subordinated to all existing and future liabilities of its
subsidiaries. Therefore, DQE's rights and the rights of its creditors, including
the rights of the Holders of the Debt Securities under the Guaranty, to
participate in the assets of any subsidiary (other than DQE Capital) upon the
liquidation or reorganization of such a subsidiary will be subject to the prior
claims of such subsidiary's creditors. To the extent that DQE may itself be a
creditor with recognized claims against any such subsidiary, DQE's claims would
still be effectively subordinated to any security interest in, or mortgages or
other liens on, the assets of such subsidiary and would be subordinated to any
indebtedness or other liabilities of such subsidiary senior to that held by DQE.
Although certain agreements to which DQE and its subsidiaries are parties limit
the incurrence of additional indebtedness, DQE and its subsidiaries retain the
ability to incur substantial additional indebtedness and other liabilities.
PAYMENT AND PAYING AGENTS
Except as may be provided in the applicable prospectus supplement, DQE
Capital will pay interest, if any, on each Debt Security on each interest
payment date to the person in whose name such Debt Security is registered (the
registered holder of any Indenture Security being called a "Holder") as of the
close of business on the regular record date relating to such interest payment
date; provided, however, that DQE Capital will pay interest at maturity (whether
at stated maturity, upon redemption or otherwise, "Maturity") to the person to
whom principal is paid. However, if there has been a default in the payment of
interest on any Debt Security, such defaulted interest may be payable to the
Holder of such Debt Security as of the close of business on a date selected by
the Trustee which is not more than 30 days and not less than 10 days before the
date proposed by DQE Capital for payment of such defaulted interest or in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which such Debt Security may be listed, if the Trustee deems such
manner of payment practicable. (See Section 307.)
Unless otherwise specified in the applicable prospectus supplement, DQE
Capital will pay the principal of and premium, if any, and interest, if any, on
the Debt Securities at Maturity upon presentation of the Debt Securities at the
corporate trust office of The First National Bank of Chicago in Chicago,
Illinois, as paying agent for DQE Capital. DQE Capital may change the place of
payment of the Debt Securities, may appoint one or more additional paying agents
(including DQE Capital) and may remove any paying agent, all at its discretion.
(See Section 502.)
7
<PAGE>
REGISTRATION AND TRANSFER
Unless otherwise specified in the applicable prospectus supplement,
Holders may register the transfer of Debt Securities, and may exchange Debt
Securities for other Debt Securities of the same series and tranche, of
authorized denominations and having the same terms and aggregate principal
amount, at the corporate trust office of The First National Bank of Chicago in
Chicago, Illinois as security registrar for the Debt Securities. DQE Capital may
change the place for registration of transfer and exchange of the Debt
Securities, may appoint one or more additional security registrars (including
DQE Capital) and may remove any security registrar, all at its discretion. (See
Section 502.) Except as otherwise provided in the applicable prospectus
supplement, no service charge will be made for any transfer or exchange of the
Debt Securities, but DQE Capital may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of the Debt Securities. DQE
Capital will not be required to execute or provide for the registration of
transfer of or the exchange of (a) any Debt Security during a period of 15 days
before giving any notice of redemption or (b) any Debt Security selected for
redemption in whole or in part, except the unredeemed portion of any Debt
Security being redeemed in part. (See Section 305.)
REDEMPTION
The applicable prospectus supplement will set forth any terms for the
optional or mandatory redemption of Debt Securities. Except as otherwise
provided in the applicable prospectus supplement with respect to Debt Securities
redeemable at the option of the Holder, Debt Securities will be redeemable only
upon notice by mail not less than 30 nor more than 60 days before the date fixed
for redemption. If less than all the Debt Securities of a series, or any tranche
thereof, are to be redeemed, the particular Debt Securities to be redeemed will
be selected by such method as shall be provided for such series or tranche, or
in the absence of any such provision, by such method of random selection as the
Security Registrar deems fair and appropriate. (See Sections 403 and 404.)
Any notice of redemption at the option of DQE Capital may state that
such redemption will be conditional upon receipt by the Paying Agent or Agents,
on or before the date fixed for such redemption, of money sufficient to pay the
principal of and premium, if any, and interest, if any, on such Debt Securities
and that if such money has not been so received, such notice will be of no force
or effect and DQE Capital will not be required to redeem such Debt Securities.
(See Section 404.)
SATISFACTION AND DISCHARGE
Any Indenture Securities, or any portion of the principal amount
thereof, will be deemed to have been paid for purposes of the Indenture and, at
DQE Capital's election, the entire indebtedness of DQE Capital and DQE in
respect thereof will be deemed to have been satisfied and discharged, if there
shall have been irrevocably deposited with the Trustee or any Paying Agent
(other than DQE Capital or DQE), in trust:
(a) money in an amount which will be sufficient, or
(b) in the case of a deposit made before the maturity of such
Indenture Securities, Eligible Obligations, which do not contain
provisions permitting the redemption or other prepayment thereof at
the option of the issuer thereof, the principal of and the interest on
which when due, without any regard to reinvestment thereof, will
8
<PAGE>
provide moneys which, together with the money, if any, deposited with
or held by the Trustee or such Paying Agent, will be sufficient, or
(c) a combination of (a) and (b) which will be sufficient,
to pay when due the principal of and premium, if any, and interest, if any, due
and to become due on such Indenture Securities. For this purpose, Eligible
Obligations include direct obligations of, or obligations unconditionally
guaranteed by, the United States, entitled to the benefit of the full faith and
credit thereof and certificates, depositary receipts or other instruments which
evidence a direct ownership interest in such obligations or in any specific
interest or principal payments due in respect thereof, and such other
obligations or instruments as shall be specified in an accompanying prospectus
supplement. (See Section 601.)
The right of DQE Capital to cause its entire indebtedness in respect of
the Indenture Securities of any series to be deemed to be satisfied and
discharged as described above will be subject to the satisfaction of conditions
specified in the instrument creating such series.
The Indenture will be deemed to have been satisfied and discharged when
no Indenture Securities remain outstanding thereunder and DQE Capital has paid
or caused to be paid all other sums payable by DQE Capital under the Indenture.
(See Section 602.)
EVENTS OF DEFAULT
Any one or more of the following events with respect to a series of
Indenture Securities that has occurred and is continuing will constitute an
"Event of Default" with respect to such series of Indenture Securities:
(a) failure to pay interest on any Indenture Security of such
series within 30 days after the same becomes due and payable;
provided, however, that no such failure will constitute an Event of
Default if DQE Capital has made a valid extension of the interest
payment period with respect to the Indenture Securities of such series
if so provided with respect to such series; or
(b) failure to pay the principal of or premium, if any, on any
Indenture Security of such series when due; provided, however, that no
such failure will constitute an Event of Default if DQE Capital has
made a valid extension of the Maturity of the Indenture Securities of
such series, if so provided with respect to such series; or
(c) failure to perform, or breach of, any covenant or warranty of
DQE Capital or DQE contained in the Indenture for 60 days after
written notice to DQE Capital and DQE from the Trustee or to DQE
Capital, DQE and the Trustee by the holders of at least 33% in
principal amount of the Outstanding Indenture Securities of such
series as provided in the Indenture unless the Trustee, or the Trustee
and the Holders of a principal amount of Securities of such series not
less than the principal amount of Indenture Securities the Holders of
which gave such notice, as the case may be, agree in writing to an
extension of such period before its expiration; provided, however,
that the Trustee, or the Trustee and the Holders of such principal
amount of Indenture Securities of such series, as the case may be,
will be deemed to have agreed to an extension of such period if
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corrective action is initiated by DQE Capital or DQE within such
period and is being diligently pursued; or
(d) certain events in bankruptcy, insolvency or reorganization
of DQE Capital or DQE.
(See Section 701.)
REMEDIES
Acceleration of Maturity
If an Event of Default applicable to the Indenture Securities of any
series occurs and is continuing, then either the Trustee or the Holders of not
less than 33% in aggregate principal amount of the Outstanding Indenture
Securities of such series may declare the principal amount (or, if any of the
Outstanding Indenture Securities of such series are Discount Securities, such
portion of the principal amount thereof as may be specified in the terms
thereof) of all of the Outstanding Indenture Securities of such series to be due
and payable immediately by written notice to the Company (and to the Trustee if
given by Holders); provided, however, that if an Event of Default occurs and is
continuing with respect to more than one series of Indenture Securities, the
Trustee or the Holders of not less than 33% in aggregate principal amount of the
Outstanding Indenture Securities of all such series, considered as one class,
may make such declaration of acceleration and not the Holders of the Indenture
Securities of any one such series.
At any time after such a declaration of acceleration with respect to
the Indenture Securities of any series has been made, but before a judgment or
decree for payment of the money due has been obtained, such declaration and its
consequences will, without further act, be deemed to have been rescinded and
annulled, if
(a) DQE Capital or DQE has paid or deposited with the Trustee a sum
sufficient to pay
(1) all overdue interest, if any, on all Indenture Securities of
such series;
(2) the principal of and premium, if any, on any Indenture
Securities of such series which have become due otherwise than by such
declaration of acceleration and interest, if any, thereon at the rate
or rates prescribed therefor in such Indenture Securities;
(3) interest, if any, upon overdue interest, if any, at the rate
or rates prescribed therefor in such Indenture Securities, to the
extent that payment of such interest is lawful; and
(4) all amounts due to the Trustee under the Indenture in respect
of compensation and reimbursement of expenses; and
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(b) all Events of Default with respect to Indenture Securities of such
series, other than the non-payment of the principal of the Indenture
Securities of such series which has become due solely by such declaration
of acceleration, have been cured or waived as provided in the Indenture.
(See Section 702.)
Right to Direct Proceedings
If an Event of Default with respect to the Indenture Securities of any
series occurs and is continuing, the Holders of a majority in principal amount
of the Outstanding Indenture Securities of such series will have the right to
direct the time, method and place of conducting any proceedings for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee; provided, however, that if an Event of Default occurs and is continuing
with respect to more than one series of Indenture Securities, the Holders of a
majority in aggregate principal amount of the Outstanding Indenture Securities
of all such series, considered as one class, will have the right to make such
direction, and not the Holders of the Indenture Securities of any one of such
series; and provided, further, that (a) such direction does not conflict with
any rule of law or with the Indenture, and could not involve the Trustee in
personal liability in circumstances where indemnity would not, in the Trustee's
sole discretion, be adequate, (b) the Trustee does not determine that the action
so directed would be unjustly prejudicial to the Holders of Indenture Securities
of such series not taking part in such direction and (c) the Trustee may take
any other action deemed proper by the Trustee which is not inconsistent with
such direction. (See Section 712.)
Limitation on Right to Institute Proceedings
No Holder of any Indenture Security will have any right to institute
any proceeding, judicial or otherwise, with respect to the Indenture or for the
appointment of a receiver or for any other remedy thereunder unless:
(a) such Holder has previously given to the Trustee written
notice of a continuing Event of Default with respect to the Indenture
Securities of any one or more series;
(b) the Holders of a majority in aggregate principal amount of
the Outstanding Indenture Securities of all series in respect of which
such Event of Default has occurred, considered as one class, have made
written request to the Trustee to institute proceedings in respect of
such Event of Default and have offered the Trustee reasonable indemnity
against costs and liabilities to be incurred in complying with such
request; and
(c) for 60 days after receipt of such notice, the Trustee has
failed to institute any such proceeding and no direction inconsistent
with such request has been given to the Trustee during such 60 day
period by the Holders of a majority in aggregate principal amount of
Indenture Securities then Outstanding.
Furthermore, no Holder of Indenture Securities of any series will be
entitled to institute any such action if and to the extent that such action
would disturb or prejudice the rights of other Holders of Indenture Securities
of such series. (See Section 707.)
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No Impairment of Right to Receive Payment
Notwithstanding that the right of a Holder to institute a proceeding
with respect to the Indenture is subject to certain conditions precedent, each
Holder of an Indenture Security will have the right, which is absolute and
unconditional, to receive payment of the principal of and premium, if any, and
interest, if any, on such Indenture Security when due and to institute suit for
the enforcement of any such payment, and such rights may not be impaired or
affected without the consent of such Holder. (See Section 708.)
Notice of Default
The Trustee is required to give the Holders notice of any default under
the Indenture to the extent required by the Trust Indenture Act, unless such
default shall have been cured or waived, except that no such notice to holders
of a default of the character described in clause (c) under "- Events of
Default" may be given until at least 75 days after the occurrence thereof. For
purposes of the preceding sentence, the term "default" means any event which is,
or after notice or lapse of time, or both, would become, an Event of Default.
The Trust Indenture Act currently permits the Trustee to withhold notices of
default (except for certain payment defaults) if the Trustee in good faith
determines the withholding of such notice to be in the interests of the holders.
(See Section 802.)
CONSOLIDATION, MERGER, SALE OF ASSETS
Neither DQE Capital nor DQE may consolidate with or merge into any
other Person, or convey or otherwise transfer, or lease, all of its properties,
as or substantially as an entirety, to any Person, unless:
(a) the Person formed by such consolidation or into which DQE
Capital or DQE, as the case requires, is merged or the Person which
acquires by conveyance or other transfer, or which leases (for a term
extending beyond the last Stated Maturity of the Indenture Securities
then Outstanding), all of the properties of DQE Capital or DQE, as the
case requires, as or substantially as an entirety, shall be a Person
organized and existing under the laws of the United States, any State
or Territory thereof or the District of Columbia or under the laws of
Canada or any Province thereof; and
(b) such Person shall expressly assume the due and punctual
payment of the principal of and premium, if any, and interest, if any,
on all the Indenture Securities then Outstanding and the performance
and observance of every covenant and condition of the Indenture to be
performed or observed by DQE Capital or DQE, as the case requires.
In the case of the conveyance or other transfer of all of the properties of DQE
Capital or DQE, as or substantially as an entirety, to any person as
contemplated above, DQE Capital or DQE, as the case requires, would be released
and discharged from all obligations under the Indenture and on all Indenture
Securities then outstanding unless DQE Capital or DQE, as the case requires,
elects to waive such release and discharge. Upon any such consolidation or
merger or any such conveyance or other transfer of properties of DQE Capital or
DQE, as the case requires, the successor or transferee would succeed to, and be
substituted for, and would be entitled to exercise every power and right of, DQE
Capital or DQE, as the case requires, under the Indenture. (See Sections 1001,
1002 and 1003).
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The Indenture will not prevent or restrict:
(a) any consolidation or merger after the consummation of
which DQE Capital or DQE would be the surviving or resulting entity;
(b) any consolidation of DQE Capital with DQE or any other
Person all of the outstanding voting securities of which are owned,
directly or indirectly, by DQE; or any merger of any of such Persons
into any other of such Persons; or any conveyance or other transfer, or
lease, of properties by any thereof to any other thereof;
(c) any conveyance or other transfer, or lease, of any part of
the properties of DQE Capital or DQE which does not constitute the
entirety, or substantially the entirety, thereof; or
(d) the approval by DQE Capital or DQE of, or the consent by
DQE Capital or DQE to, any consolidation or merger to which any direct
or indirect subsidiary or affiliate of DQE Capital or DQE, as the case
requires, may be a party or any conveyance, transfer or lease by any
such subsidiary or affiliate of any of its assets. (See Section 1004.)
MODIFICATION OF INDENTURE
Modifications Without Consent
DQE Capital, DQE and the Trustee may enter into one or more
supplemental indentures without the consent of any Holders of Indenture
Securities, for any of the following purposes:
(a) to evidence the succession of another Person to DQE Capital
or DQE, as the case may be, and the assumption by any such successor
of the covenants of such party; or
(b) to add one or more covenants of DQE Capital or DQE, as the
case may be, or other provisions for the benefit of all Holders of
Indenture Securities or for the benefit of the Holders of, or to
remain in effect only so long as there shall be Outstanding, Indenture
Securities of one or more specified series, or one or more Tranches
thereof, or to surrender any right or power conferred upon DQE Capital
or DQE by the Indenture; or
(c) to change or eliminate any provision of the Indenture or to
add any new provision to the Indenture, provided that if such change,
elimination or addition adversely affects the interests of the Holders
of the Indenture Securities of any series or Tranche in any material
respect, such change, elimination or addition will become effective
with respect to such series or Tranche only when no Indenture Security
of such series or Tranche remains Outstanding; or
(d) to provide collateral security for the Indenture Securities
or any series thereof; or
(e) to establish the form or terms of the Indenture Securities of
any series or Tranche as permitted by the Indenture; or
(f) to provide for the authentication and delivery of bearer
securities and coupons appertaining thereto representing interest, if
any, thereon and for the procedures for the registration, exchange and
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replacement thereof and for the giving of notice to, and the
solicitation of the vote or consent of, the Holders thereof, and for
any and all other matters incidental thereto; or
(g) to evidence and provide for the acceptance of appointment by
a successor trustee with respect to the Indenture Securities of one or
more series; or
(h) to provide for the procedures required to permit the
utilization of a non-certificated system of registration for all, or
any series or Tranche of, the Indenture Securities; or
(i) to change any place or places where (1) the principal of
and premium, if any, and interest, if any, on all or any series of
Indenture Securities, or any Tranche thereof, will be payable, (2) all
or any series of Indenture Securities, or any Tranche thereof, may be
surrendered for registration of transfer, (3) all or any series of
Indenture Securities, or any Tranche thereof, may be surrendered for
exchange and (4) notices and demands to or upon DQE Capital or DQE in
respect of all or any series of Indenture Securities, or any Tranche
thereof, and the Indenture may be served; or
(j) to cure any ambiguity, to correct or supplement any provision
therein which may be defective or inconsistent with any other
provision therein, or to make any other changes to the provisions
thereof or to add other provisions with respect to matters and
questions arising under the Indenture, so long as such other changes
or additions do not adversely affect the interests of the Holders of
Indenture Securities of any series or Tranche in any material respect.
Without limiting the generality of the foregoing, if the Trust
Indenture Act is amended after the date of the Original Indenture in such a way
as to require changes to the Indenture or the incorporation therein of
additional provisions or so as to permit changes to, or the elimination of,
provisions which, at the date of the Original Indenture or at any time
thereafter, were required by the Trust Indenture Act to be contained in the
Indenture, the Indenture will be deemed to have been amended so as to conform to
such amendment or to effect such changes or elimination, and DQE Capital, DQE
and the Trustee may, without the consent of any Holders of Indenture Securities,
enter into one or more supplemental indentures to evidence such amendment. (See
Section 1101.)
Modifications Requiring Consent
Except as provided above, the consent of the Holders of a majority in
aggregate principal amount of the Indenture Securities of all series then
Outstanding, considered as one class, is required for the purpose of adding any
provisions to, or changing in any manner, or eliminating any of the provisions
of, the Indenture pursuant to one or more supplemental indentures; provided,
however, that if less than all of the series of Indenture Securities Outstanding
are directly affected by a proposed supplemental indenture, then the consent
only of the Holders of a majority in aggregate principal amount of Outstanding
Indenture Securities of all series so directly affected, considered as one
class, will be required; and provided, further, that if the Indenture Securities
of any series have been issued in more than one Tranche and if the proposed
supplemental indenture directly affects the rights of the Holders of one or
more, but less than all, of such Tranches, then the consent only of the Holders
of a majority in aggregate principal amount of the Outstanding Indenture
Securities of all Tranches so directly affected, considered as one class, will
be required; and provided, further, that no such supplemental indenture may:
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(a) change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any Indenture Security
other than pursuant to the terms thereof, or reduce the principal
amount thereof or the rate of interest thereon (or the amount of any
installment of interest thereon) or change the method of calculating
such rate or reduce any premium payable upon the redemption thereof, or
reduce the amount of the principal of any Discount Security that would
be due and payable upon a declaration of acceleration of Maturity or
change the coin or currency (or other property) in which any Indenture
Security or any premium or the interest thereon is payable, or impair
the right to institute suit for the enforcement of any such payment on
or after the Stated Maturity of any Indenture Security (or, in the case
of redemption, on or after the redemption date) without, in any such
case, the consent of the Holder of such Indenture Security;
(b) reduce the percentage in principal amount of the
Outstanding Indenture Securities of any series, or any Tranche thereof,
the consent of the Holders of which is required for any such
supplemental indenture, or the consent of the Holders of which is
required for any waiver of compliance with any provision of the
Indenture or of any default thereunder and its consequences, or reduce
the requirements for quorum or voting, without, in any such case, the
consent of the Holder of each Outstanding Indenture Security of such
series or Tranche; or
(c) modify certain of the provisions of the Indenture relating
to supplemental indentures, waivers of certain covenants and waivers of
past defaults with respect to the Indenture Securities of any series,
or any Tranche thereof, without the consent of the Holder of each
Outstanding Indenture Security of such series or Tranche.
A supplemental indenture which changes or eliminates any covenant or
other provision of the Indenture which has expressly been included solely for
the benefit of the Holders of, or which is to remain in effect only so long as
there shall be Outstanding, Indenture Securities of one or more specified
series, or one or more Tranches thereof, or modifies the rights of the Holders
of Indenture Securities of such series or Tranches with respect to such covenant
or other provision, will be deemed not to affect the rights under the Indenture
of the Holders of the Indenture Securities of any other series or Tranche.
If the supplemental indenture or other document establishing any series
or Tranche of Indenture Securities so provides, and as specified in the
applicable prospectus supplement and/or pricing supplement, the Holders of such
Indenture Securities will be deemed to have consented, by virtue of their
purchase of such Indenture Securities, to a supplemental indenture containing
the additions, changes or eliminations to or from the Indenture which are
specified in such supplemental indenture or other document, no Act of such
Holders will be required to evidence such consent and such consent may be
counted in the determination of whether the Holders of the requisite principal
amount of Indenture Securities have consented to such supplemental indenture.
(See Section 1102.)
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DUTIES OF THE TRUSTEE; RESIGNATION; REMOVAL
The Trustee will have, and will be subject to, all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to such provisions, the Trustee will be under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any Holder of Indenture Securities, unless such Holder offers it
reasonable indemnity against the costs, expenses and liabilities which might be
incurred thereby. The Trustee will not be required to expend or risk its own
funds or otherwise incur personal financial liability in the performance of its
duties if the Trustee reasonably believes that repayment or adequate indemnity
is not reasonably assured to it. (See Sections 801 and 803.)
The Trustee may resign at any time with respect to the Indenture
Securities of one or more series by giving written notice thereof to DQE Capital
or may be removed at any time with respect to the Indenture Securities of one or
more series by Act of the Holders of a majority in principal amount of the
Outstanding Indenture Securities of such series delivered to the Trustee and DQE
Capital. No resignation or removal of the Trustee and no appointment of a
successor trustee will become effective until the acceptance of appointment by a
successor trustee in accordance with the requirements of the Indenture. So long
as no Event of Default or event which, after notice or lapse of time, or both,
would become an Event of Default has occurred and is continuing, if DQE Capital
has delivered to the Trustee with respect to one or more series an instrument
appointing a successor trustee with respect to that or those series and such
successor has accepted such appointment in accordance with the terms of the
Indenture, the Trustee with respect to that or those series will be deemed to
have resigned and the successor will be deemed to have been appointed as trustee
in accordance with the Indenture. (See Section 810.)
EVIDENCE OF COMPLIANCE
Compliance with the Indenture provisions is evidenced by written
statements of officers of DQE Capital and DQE or persons selected or paid by DQE
Capital or DQE. In addition, the Indenture requires that DQE Capital and DQE
give the Trustee, not less than annually, a brief statement as to compliance
with the conditions and covenants under the Indenture.
GOVERNING LAW
The Indenture and the Indenture Securities will be governed by and
construed in accordance with the laws of the State of New York, except to the
extent that the Trust Indenture of 1939, as amended, shall be applicable.
PLAN OF DISTRIBUTION
DQE Capital may sell the Debt Securities in any of three ways: (1) to
or through underwriters or dealers, (2) directly to one or more purchasers or
(3) through agents. The applicable prospectus supplement or a supplement thereto
will set forth the terms of the offering of any Debt Securities, including the
names of any underwriters, dealers or agents, the purchase price of such Debt
Securities and the proceeds to DQE Capital from such sale, any underwriting
discounts or commissions and other items constituting underwriters'
compensation, the initial public offering price, any discounts or concessions
allowed or reallowed or paid to dealers and any securities exchanges on which
such Debt Securities may be listed.
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If underwriters are used in any sale of Debt Securities, such Debt
Securities will be acquired by the underwriters for their own account and may be
resold from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. Such Debt Securities may be offered to the public either
through underwriting syndicates represented by managing underwriters or by
underwriters without a syndicate. Unless otherwise set forth in the applicable
prospectus supplement, the obligations of the underwriters to purchase such Debt
Securities will be subject to certain conditions precedent, and the underwriters
will be obligated to purchase all of such Debt Securities if any of such Debt
Securities are purchased, except that, in certain cases involving a default by
one or more underwriters, less than all of such Debt Securities may be
purchased. The initial public offering prices and any discounts or concessions
allowed or reallowed or paid to dealers may be changed from time to time.
The Debt Securities may also be sold directly by DQE Capital or through
agents designated by DQE Capital from time to time. Any agent involved in the
offer or sale of the Debt Securities will be named, and any commissions payable
by DQE Capital to such agent will be set forth, in the applicable prospectus
supplement or a supplement thereto. Unless otherwise indicated in the applicable
prospectus supplement, any such agent will act on a best efforts basis for the
period of its appointment.
If so indicated in the applicable prospectus supplement or a supplement
thereto, DQE Capital will authorize agents, underwriters or dealers to solicit
offers by certain specified institutions to purchase the Debt Securities at the
public offering price set forth in such prospectus supplement or supplement
pursuant to delayed delivery contracts providing for payment and delivery on a
future date specified in such prospectus supplement or supplement. Such
contracts will be subject only to those conditions set forth in the applicable
prospectus supplement or supplement thereto and such prospectus supplement or
supplement will set forth the commissions payable for solicitation of such
contracts.
Any underwriters, dealers or agents participating in the distribution
of the Debt Securities may be deemed to be underwriters and any discounts or
commissions received by them on the sale or resale of the Debt Securities may be
deemed to be underwriting discounts and commissions under the Securities Act of
1933, as amended. Agents and underwriters may be entitled under agreements
entered into with DQE Capital to indemnification by DQE Capital against certain
liabilities, including liabilities under the Securities Act and other securities
laws, or to contribution with respect to payments that the agents or
underwriters may be required to make in respect thereof.
Any underwriters, dealers or agents participating in the distribution
of the Debt Securities, and/or affiliates thereof, may engage in transactions
with and perform services for DQE Capital and its affiliates in the ordinary
course of business.
EXPERTS
The consolidated financial statements and the related financial
statement schedule incorporated in this prospectus by reference to DQE's most
recent Annual Report on Form 10-K have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which is included in such Form
10-K, and have been so incorporated in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.
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LEGAL OPINIONS
The validity of the Debt Securities and the Guaranty and certain other
matters will be passed upon for DQE Capital and DQE by David R. High, Esq.,
employed by DQE as its Associate General Counsel, and by Thelen Reid & Priest
LLP, special counsel for DQE Capital and DQE, and for any agents, underwriters
or dealers by Milbank, Tweed, Hadley & McCloy LLP. In giving their opinions,
Thelen Reid & Priest LLP and Milbank, Tweed, Hadley & McCloy LLP may rely on the
opinion of Mr. High as to all matters of Pennsylvania law, and Mr. High may rely
upon the opinion of Thelen Reid & Priest LLP as to all matters of New York law
and certain matters of federal securities law.
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