Filed Pursuant to Rule 424(b)(5)
File Number 333-55904
PROSPECTUS SUPPLEMENT
(To Prospectus dated March 2, 2001)
U.S. $2,000,000,000
[LOGO OF DOMINION]
Dominion Resources, Inc.
Medium-Term Notes, Series A
--------------
We plan to use this prospectus supplement to offer medium-term notes from time
to time. We will provide final terms for each Note in a pricing supplement. The
following terms may apply to the Notes:
. Maturities of 9 months . Interest at fixed or
or more from date of floating rates. The
issue floating interest rate
may be based on one or
. Redemption and/or more of the following
repayment provisions, indices:
that may be mandatory . CD rate . Prime rate
or at our option or the
noteholders' option . LIBOR . Treasury rate
. CMT rate
. Federal funds rate
. Payments in U.S.
dollars or one or more . Commercial paper rate
foreign currencies . Interest payments on
fixed rate Notes on a
. Minimum denominations semi-annual basis
of $25 or $1,000 in
U.S. dollars or . Interest payments on
equivalent amounts in floating rate Notes on a
foreign currencies monthly, quarterly,
semi-annual or annual
basis
Investing in the Notes involves certain risks. See RISK FACTORS beginning on
page S-4.
Agents' Discounts
Public Offering Price And Commissions (1) Proceeds to Dominion
--------------------- -------------------------- ---------------------------------
Per Note................ 100% 0.125%-0.750% 99.875%-99.250%
Total(2)................ U.S.$2,000,000,000 U.S.$2,500,000-$15,000,000 U.S.$1,985,000,000-$1,997,500,000
(1) Or as agreed, in the case of Notes with a maturity of more than 30
years.
(2) Or the equivalent in one or more foreign or composite currencies.
We may offer the Notes through agents who solicit offers to purchase the Notes
and receive a commission based on the principal amount of the notes offered, to
agents who purchase the Notes as principal for resale at varying or fixed
offering prices and receive a negotiated commission, or directly to investors.
From time to time we may sell other securities described in the accompanying
prospectus, and the amount of Notes offered hereby may be reduced as a result
of these sales.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus or any applicable pricing or prospectus supplement is truthful
or complete. Any representation to the contrary is a criminal offense.
--------------
Merrill Lynch & Co.
Banc of America Securities LLC
Credit Suisse First Boston
JPMorgan
Lehman Brothers
Morgan Stanley Dean Witter
--------------
The date of this Prospectus Supplement is May 25, 2001.
ABOUT THIS PROSPECTUS SUPPLEMENT AND PRICING SUPPLEMENTS
This prospectus supplement is part of a registration statement that we have
filed with the Securities and Exchange Commission (SEC) utilizing a "shelf"
registration process. Under this shelf process, we may sell up to a total of $2
billion of securities, including medium-term notes, in one or more offerings
using this prospectus supplement, the accompanying prospectus and future
pricing supplements. From time to time we may sell other securities described
in the accompanying prospectus, and the amount of Notes offered hereby may be
reduced as a result of these sales. This prospectus supplement provides you
with a general description of the medium-term notes we may offer. Each time we
sell medium-term notes, we will provide a pricing supplement that will contain
specific information about the terms of that offering and the medium-term notes
offered by us in that offering. The pricing supplement may also add, update or
change information in this prospectus supplement. You should read the
accompanying prospectus, this prospectus supplement and any pricing supplement
together with additional information described under the heading WHERE YOU CAN
FIND MORE INFORMATION.
You should rely only on the information contained in this document or to
which this document refers you. We have not, and the agents have not,
authorized anyone to provide you with different information. If anyone provides
you with different or inconsistent information, you should not rely on it. This
document may only be used where it is legal to sell these securities. The
information in this document may only be accurate as of the date of this
document. Our business, financial condition, results of operations and
prospects may have changed since that date.
In this prospectus supplement, the words "Dominion," "Company," "we," "our"
and "us" refer to Dominion Resources, Inc., a Virginia corporation, and its
subsidiaries and predecessors.
TABLE OF CONTENTS
Prospectus Supplement
Page
----
Where You Can Find More Information...................................... S-3
Forward-Looking Information.............................................. S-3
Important Information for Non-U.S. Residents............................. S-4
Important Currency Information........................................... S-4
Risk Factors............................................................. S-4
Dominion................................................................. S-7
Use of Proceeds.......................................................... S-7
Ratio of Earnings to Fixed Charges....................................... S-8
Description of the Notes................................................. S-8
General................................................................. S-8
Ranking................................................................. S-10
Interest................................................................ S-10
Purchase Price; Registered Form; Minimum Denomination................... S-25
Redemption or Conversion................................................ S-26
Repayment at the Option of the Holder; Repurchases by the Company....... S-26
Payment of Principal, Premium and Interest.............................. S-27
Book-Entry Notes........................................................ S-28
The Trustee............................................................. S-32
Listing................................................................. S-32
Limitation on Liens..................................................... S-32
Special Provisions Relating to Notes Denominated in a Specified Currency
other than U.S. Dollars................................................. S-33
Certain United States Federal Income Tax Considerations.................. S-36
Plan of Distribution..................................................... S-46
Experts.................................................................. S-48
Legal Opinions........................................................... S-49
Prospectus
Page
----
About This Prospectus..................................................... 2
Where You Can Find More Information....................................... 2
Dominion.................................................................. 3
The Trust................................................................. 3
Use of Proceeds........................................................... 4
Ratio of Earnings to Fixed Charges........................................ 4
Description of Debt Securities............................................ 5
Additional Terms of Senior Debt Securities................................ 13
Additional Terms of the Junior Subordinated Debentures.................... 14
Description of the Trust Preferred Securities............................. 15
Description of the Guarantee.............................................. 26
Relationship Among the Trust Preferred Securities, the Guarantee and the
Junior Subordinated Debentures Held by the Trust......................... 29
Accounting Treatment...................................................... 30
Description of Capital Stock.............................................. 30
Virginia Stock Corporation Act and the Articles and the Bylaws............ 31
Description of Stock Purchase Contracts and Stock Purchase Units.......... 34
Plan of Distribution...................................................... 35
Legal Opinions............................................................ 35
Experts................................................................... 36
S-2
WHERE YOU CAN FIND MORE INFORMATION
Dominion files annual, quarterly and special reports, proxy statements and
other information with the SEC. Dominion's SEC filings are available to the
public over the Internet at the SEC's web site at http://www.sec.gov. You may
also read and copy any document Dominion files at the SEC's public reference
rooms in Washington, D.C., New York, and Chicago. Please call the SEC at 1-
800-SEC-0330 for further information on the public reference rooms. You may
also read and copy these documents at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005.
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus supplement and later information that
we file with the SEC will automatically update or supersede this information.
We incorporate by reference the documents listed below and any future filings
made with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934, as amended (the Exchange Act), until such time as all of
the securities covered by this prospectus supplement have been sold:
. Dominion's Annual Report on Form 10-K for its fiscal year ended December
31, 2000; and
. Dominion's Quarterly Report on Form 10-Q for the three month period ended
March 31, 2001.
You may request a copy of these filings, at no cost, by writing or
telephoning us as follows:
Corporate Secretary
Dominion Resources, Inc.
120 Tredegar Street
Richmond, Virginia 23219
Telephone (804) 819-2000
You should not assume that the information in this prospectus supplement, the
accompanying prospectus and any future pricing supplement is accurate as of any
date other than the date on the front of those documents regardless of the time
you receive them. Additional updating information with respect to the matters
discussed in this prospectus supplement, the accompanying prospectus and any
pricing supplement may be provided in the future by means of appendices or
supplements including future pricing supplements and documents incorporated by
reference.
FORWARD-LOOKING INFORMATION
Dominion has included certain information in this document which is "forward-
looking information" as defined by the Private Securities Litigation Reform Act
of 1995. Examples include discussions as to our expectations, beliefs, plans,
goals, objectives and future financial or other performance or assumptions
concerning matters discussed in this document. This information, by its nature,
involves estimates, projections, forecasts and uncertainties that could cause
actual results or outcomes to differ substantially from those expressed.
S-3
Our business is influenced by many factors that are difficult to predict,
involve uncertainties that may materially affect actual results and are often
beyond our ability to control. Dominion has identified a number of these
factors in its filings with the SEC, including its most recent Annual Report on
Form 10-K which is incorporated by reference in this prospectus supplement, and
Dominion refers you to those reports for further information. They include
fluctuations in energy-related commodities prices, weather conditions and
catastrophic weather related damages, the risks of operating businesses in
regulated industries that are in the process of becoming deregulated, energy
trading risks, capital markets conditions and risks related to completing the
divestiture of Dominion Capital, Inc.
IMPORTANT INFORMATION FOR NON-U.S. RESIDENTS
The information set forth in this prospectus supplement, the accompanying
prospectus and any pricing supplement is directed to prospective purchasers who
are U.S. residents, and we disclaim any responsibility to advise prospective
purchasers who are residents of countries other than the United States with
respect to any matters that may affect the purchase, holding or receipt of
payments of principal, any premium and interest on the Notes. Non-U.S.
residents should consult their own financial and legal advisers with regard to
these matters.
IMPORTANT CURRENCY INFORMATION
Purchasers are required to pay for the Notes in U.S. dollars, or in other
currencies, including composite currencies, as may be specified in the
applicable pricing supplement (the Specified Currency), and payments of
principal, any premium and interest on the Notes will also be made in U.S.
dollars, unless the applicable pricing supplement provides that payments will
be made in a Specified Currency. Currently, there are limited facilities in the
United States for the conversion of U.S. dollars into the Specified Currencies
and vice versa. Most banks do not currently offer non-U.S. dollar denominated
checking or savings account facilities in the United States. Accordingly,
unless otherwise specified in the applicable pricing supplement or unless
alternative arrangements are made, payment of principal, any premium and
interest made in a Specified Currency other than U.S. dollars will be made to
an account at a bank outside of the United States. See DESCRIPTION OF THE NOTES
and SPECIAL PROVISIONS RELATING TO NOTES DENOMINATED IN A SPECIFIED CURRENCY
OTHER THAN U.S. DOLLARS.
RISK FACTORS
Your investment in the Notes involves certain risks. In consultation with
your own financial and legal advisers, you should carefully consider, among
other matters, the following discussion of risks before deciding whether an
investment in the Notes is suitable for you. Notes are not an appropriate
investment for you if you are unsophisticated with respect to their significant
components.
Notes Indexed to Interest Rate, Currency or Other Indices or Formulas May Have
Risks Not Associated With a Conventional Debt Security
If you invest in Notes indexed to one or more interest rate, currency or
other
S-4
indices or formulas, you will be subject to significant risks not associated
with a conventional fixed rate or floating rate debt security. These risks
include fluctuation of the particular indices or formulas and the possibility
that you will receive a lower, or no, amount of principal, premium or interest
and at different times than you expected. We have no control over a number of
matters, including economic, financial and political events, that are important
in determining the existence, magnitude and longevity of these risks and their
results. In addition, if an index or formula used to determine any amounts
payable in respect of the Notes contains a multiplier or leverage factor, the
effect of any change in the particular index or formula will be magnified. In
recent years, values of certain indices and formulas have been volatile and
volatility in those and other indices and formulas may be expected in the
future. However, past experience is not necessarily indicative of what may
occur in the future.
Redemption May Adversely Affect Your Return on the Notes
If your Notes are redeemable at our option, we may choose to redeem your
Notes at times when prevailing interest rates are relatively low. In addition,
if your Notes are subject to mandatory redemption, we may be required to redeem
your Notes also at times when prevailing interest rates are relatively low. As
a result, you generally will not be able to reinvest the redemption proceeds in
a comparable security at an effective interest rate as high as the interest
rate on your Notes being redeemed.
There May Not Be Any Trading Market for Your Notes; Many Factors Affect the
Trading and Market Value of Your Notes
Upon issuance, your Notes will not have an established trading market. We
cannot assure you a trading market for your Notes will ever develop or be
maintained if developed. In addition to our creditworthiness, many factors
affect the trading market for, and trading value of, your Notes. These factors
include:
. the complexity and volatility of the index or formula applicable to your
Notes,
. the method of calculating the principal, premium and interest in respect of
your Notes,
. the time remaining to the maturity of your Notes,
. the outstanding amount of Notes,
. any redemption features of your Notes,
. the amount of other debt securities linked to the index or formula
applicable to your Notes, and
. the level, direction and volatility of market interest rates generally.
There may be a limited number of buyers when you decide to sell your Notes.
This may affect the price you receive for your Notes or your ability to sell
your Notes at all. In addition, Notes that are designed for specific investment
objectives or strategies often experience a more limited trading market and
more price volatility than those not so designed. You should not purchase Notes
unless you understand and know you can bear all of the investment risks
involving your Notes.
S-5
Foreign Currency Notes Are Subject to Exchange Rate and Exchange Control Risks
If you invest in Notes that are denominated and/or payable in a Specified
Currency other than U.S. dollars (Foreign Currency Notes), you will be subject
to significant risks not associated with an investment in a debt security
denominated and payable in U.S. dollars, including the possibility of material
changes in the exchange rate between U.S. dollars and the applicable foreign
currency and the imposition or modification of exchange controls by the
applicable governments. We have no control over the factors that generally
affect these risks, including economic, financial and political events and the
supply and demand for the applicable currencies. Moreover, if payments on your
Foreign Currency Notes are determined by reference to a formula containing a
multiplier or leverage factor, the effect of any change in the exchange rates
between the applicable currencies will be magnified. In recent years, exchange
rates between certain currencies have been highly volatile and volatility
between these currencies or with other currencies may be expected in the
future. Fluctuations between currencies in the past are not necessarily
indicative, however, of fluctuations that may occur in the future. Depreciation
of your payment currency would result in a decrease in the U.S. dollar
equivalent yield of your Foreign Currency Notes, in the U.S. dollar equivalent
value of the principal and any premium payable at maturity or any earlier
redemption of your Foreign Currency Notes and, generally, in the U.S. dollar
equivalent market value of your Foreign Currency Notes.
Governmental exchange controls could affect exchange rates and the
availability of the payment currency for your Foreign Currency Notes on a
required payment date. Even if there are no exchange controls, it is possible
that your payment currency will not be available on a required payment date as
a result of circumstances beyond our control. In these cases, we will be
allowed to satisfy our obligations in respect of your Foreign Currency Notes in
U.S. dollars.
Our Credit Ratings May Not Reflect All Risks of an Investment in the Notes
The credit ratings of our medium-term note program may not reflect the
potential impact of all risks related to structure and other factors on any
trading market for, or trading value of, your Notes. In addition, real or
anticipated changes in our credit ratings will generally affect any trading
market for, or trading value of, your Notes.
S-6
DOMINION
Dominion is a fully integrated gas and electric energy holding company
headquartered in Richmond, Virginia. As of March 31, 2001, we had approximately
$30.5 billion in assets.
Primary Operating Segments
Dominion's primary operating segments are:
Dominion Energy--Dominion Energy manages Dominion's 21,000 megawatt portfolio
of electric power generation assets, its 7,600 miles of gas transmission
pipeline and a 959 billion cubic foot natural gas storage network. It also
guides Dominion's generation growth strategy and its commodity trading,
marketing and risk management activities. Dominion currently operates
generation facilities in Virginia, West Virginia, North Carolina, Illinois and
Connecticut.
Dominion Delivery--Dominion Delivery manages Dominion's local electric and
gas distribution systems serving 3.8 million customers, its 6,000 miles of
electric transmission lines and its customer service operations. Dominion
currently operates transmission and distribution systems in Virginia, West
Virginia, North Carolina, Pennsylvania and Ohio. Dominion Delivery also
includes our managing equity interest in Dominion Fiber Ventures, LLC, which
owns Dominion Telecom with its 3,620 route-mile fiber optic network and related
telecommunications and advanced data services located principally in the
northeast quadrant of the United States.
Dominion Exploration & Production--Dominion Exploration & Production manages
Dominion's onshore and offshore oil and gas exploration and production
activities. With approximately 2.8 trillion cubic feet of natural gas
equivalent reserves and 320 billion cubic feet of annual production, Dominion
Exploration & Production is one of the nation's largest independent oil and gas
operators. It operates on the outer continental shelf and deep water areas of
the Gulf of Mexico, western Canada, the Appalachian Basin and other selected
regions in the continental United States.
Principal Legal Subsidiaries
Dominion's principal legal subsidiaries include Virginia Electric and Power
Company (Dominion Virginia Power), a regulated public utility engaged in the
generation, transmission, distribution and sale of electric energy in Virginia
and northeastern North Carolina, and Consolidated Natural Gas Company, a
producer, transporter, distributor and retail marketer of natural gas serving
customers in Pennsylvania, Ohio, West Virginia, New York and various cities in
the Northeast and Mid-Atlantic. Dominion's other major legal subsidiaries
include Dominion Energy, Inc., an independent power and natural gas subsidiary,
and Dominion Capital, Inc., a financial services subsidiary that is being
divested.
Dominion's address and telephone number are 120 Tredegar Street, Richmond,
Virginia 23219, telephone (804) 819-2000.
USE OF PROCEEDS
The net proceeds from the sale of the Notes will be used to meet a portion of
the general capital requirements of the Company and for the refinancing of
other outstanding debt. The refinancing of debt may include a portion of our
commercial paper issued in connection with the acquisition of Millstone Nuclear
Power
S-7
Station, located in Connecticut. At April 30, 2001 commercial paper aggregated
$682 million in outstanding principal. The weighted average maturity date was
21 days and the weighted average interest rate was 5.18%.
RATIO OF EARNINGS TO FIXED CHARGES
This section supersedes and replaces the "Ratio of Earnings to Fixed Charges"
section found in the accompanying prospectus in its entirety.
These computations reflect Dominion's consolidated earnings and consolidated
fixed charges including proportionate interests in the earnings and fixed
charges of certain other companies in which we hold an equity interest. For
this ratio, earnings is determined by adding total fixed charges (excluding
interest capitalized), income taxes, extraordinary items, minority common
stockholders equity in net income and amortization of interest capitalized to
net income after eliminating equity in undistributed earnings and adding back
losses of companies of which at least 20% but less than 50% of total equity is
owned by Dominion. For this purpose, total fixed charges consists of (1)
interest on all indebtedness and amortization of debt discount and expense, (2)
interest capitalized, (3) preferred dividends on a pretax basis and (4) an
interest factor attributable to rentals.
The ratio of earnings to fixed charges for each of the periods indicated is
as follows:
Twelve Months Ended December 31,
Three Months Ended --------------------------------------
March 31, 2001/1/ 2000/2/ 1999 1998 1997/3/ 1996
------------------ -------- ------ ------ -------- ------
1.96 1.56 2.35 2.28 1.91 2.50
--------
/1/Net income for the three months ended March 31, 2001 includes the one time
charge of $136 million for the purchase of three generating facilities and
termination of seven long-term power purchase agreements. Excluding this
charge from the calculation above results in a ratio of earnings to fixed
charges for the three months ended March 31, 2001 of 2.79x.
/2/Net income for the twelve months ended December 31, 2000 includes the one
time charge of $460 million for restructuring and other acquisition-related
costs. Excluding this charge from the calculation above results in a ratio
of earnings to fixed charges for the twelve months ended December 31, 2000
of 1.99x.
/3/Net income for the twelve months ended December 31, 1997 includes a one-time
charge of $157 million for the windfall profits tax levied by the United
Kingdom government. Excluding this charge from the calculation above results
in a ratio of earnings to fixed charges for the twelve months ended December
31, 1997 of 2.12x.
DESCRIPTION OF THE NOTES
Set forth below is a description of the specific terms of the Notes. This
description supplements, and should be read together with, the description of
the general terms and provisions of the Senior Debt Securities set forth in the
accompanying prospectus under the captions DESCRIPTION OF DEBT SECURITIES and
ADDITIONAL TERMS OF SENIOR DEBT SECURITIES. The following description does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the description in the accompanying prospectus, the Senior
Indenture and the supplemental indenture pertaining to the Notes. Capitalized
terms used in this DESCRIPTION OF THE NOTES that are not defined in this
prospectus supplement have the meanings given to them in the accompanying
prospectus, the Senior Indenture or the supplemental indenture.
General
The Notes will be issued under our Indenture, dated as of June 1, 2000, as
supplemented by a Ninth Supplemental
S-8
Indenture, dated as of May 1, 2001 (as further amended or modified from time to
time, the Senior Indenture) between the Company and The Chase Manhattan Bank,
as trustee (the Trustee). There is no limitation on the aggregate principal
amount of Notes that we may issue. Also, we may, without the consent of the
holders of Notes, issue additional Notes having the same ranking and the same
interest rate, maturity and other terms as any tranche of Notes. Any additional
Notes having such similar terms, together with the Notes, will constitute a
single series of Senior Debt Securities under the Senior Indenture.
The terms and conditions set forth in this prospectus supplement will apply
to each Note unless otherwise specified herein or in the applicable pricing
supplement and in the Note. The Notes will likely be issued in book-entry form
and will constitute a series of Securities issued under the Senior Indenture.
Notes issued in book-entry form will be represented by certificates deposited
with, or on behalf of, The Depository Trust Company (the Depositary) and
registered in the name of the Depositary's nominee (Book-Entry Notes). Any
Notes issued in certificated form will be represented by certificates delivered
to the purchasers designated by the Agents.
The Notes will be offered on a continuing basis and each Note will be due
nine months or more from its date of issue, as selected by the purchaser and
agreed to by the Company prior to the issuance thereof (the fixed date on which
a Note is due is referred to as the Stated Maturity Date). Maturity Date means
the date on which the principal amount of a Note is due, whether at the Stated
Maturity Date, or the date of earlier redemption or repayment.
Interest rates offered by the Company with respect to the Notes may differ
depending upon, among other things, the aggregate principal amount of the Notes
purchased in any single transaction.
References to U.S. dollars, U.S. $, dollars or $ in this prospectus or any
supplement hereto are to the legal currency of the United States of America.
The pricing supplement for each Note will state the following:
. the principal amount of the Note;
. the Specified Currency in which the Note is denominated (or, if the currency
is no longer legal tender for the payment of public and private debts in the
country issuing the applicable currency or, in the case of the euro, in the
member states of the European Union that have adopted the single currency in
accordance with the Treaty establishing the European Community, as amended
by the Treaty on European Union, the currency which is then legal tender)
and if the Note is denominated in a Specified Currency other than U.S.
dollars, the pricing supplement will include information relative to the
Specified Currency;
. the date on which the Note will be issued;
. the Stated Maturity Date of the Note;
. the Fixed Rate if a Fixed Rate Note or, if a Floating Rate Note, the Base
Rate at which the Note will bear interest (including the Spread and/or
Spread Multiplier (each as defined below) applicable thereto and any Minimum
and/or Maximum Interest Rates (each as defined below) applicable thereto);
. the specified Interest Payment Dates;
. the redemption terms, if any, of the Note;
. the repayment terms, if any, of the Note; and
. additional terms (if any) applicable to the Note.
S-9
Ranking
The Notes will be our direct, unsecured and unsubordinated obligations,
ranking equally with all of our other senior unsecured indebtedness and will
rank senior in right of payment to all our subordinated indebtedness. The Notes
will be effectively subordinated to our secured debt, if any.
Because we are a holding company and conduct all of our operations through
our subsidiaries, our ability to meet our obligations under the Notes is
dependent on the earnings and cash flows of those subsidiaries and the ability
of those subsidiaries to pay dividends or to advance or repay funds to us.
Holders of Notes will generally have a junior position to claims of creditors
of our subsidiaries, including trade creditors, debtholders, secured creditors,
taxing authorities, guarantee holders and any preferred stockholders. As of
March 31, 2001, Dominion Virginia Power had approximately 5.1 million issued
and outstanding shares of preferred stock. In addition to trade debt, most of
our operating subsidiaries have ongoing corporate debt programs used to finance
their business activities. As of March 31, 2001, our subsidiaries had
approximately $7.9 billion of outstanding long-term debt (including securities
due within one year).
The Senior Indenture contains no restrictions on the amount of additional
indebtedness that we may incur.
Interest
General
Unless otherwise specified in the applicable pricing supplement, each Note
will bear interest from its date of issue at the rate per annum, in the case of
a Fixed Rate Note, or pursuant to the interest rate formula, in the case of a
Floating Rate Note, Floating Rate/Fixed Rate Note, or Inverse Floating Rate
Note, in each case as specified in the applicable pricing supplement, until the
principal thereof is paid or duly made available for payment. Interest payments
in respect of the Notes will equal the amount of interest accrued from and
including the immediately preceding Interest Payment Date in respect of which
interest has been paid or duly made available for payment (or from and
including the date of issue, if no interest has been paid with respect to the
applicable Note) to but excluding the related Interest Payment Date or the
Maturity Date.
Interest will be payable in arrears on each Interest Payment Date specified
in the applicable pricing supplement on which an installment of interest is due
and payable and on the Maturity Date. Unless otherwise specified in the
applicable pricing supplement, the first payment of interest on any Note
originally issued between a Record Date (as defined below) and the related
Interest Payment Date or on an Interest Payment Date will be made on the
Interest Payment Date immediately following the next succeeding Record Date to
the Holder on the next succeeding Record Date.
So long as the Notes remain in book-entry only form, the record date for each
Interest Payment Date will be the close of business on the 15th calendar day
(whether or not a Business Day) prior to the applicable Interest Payment Date.
In the event the Notes are not in book-entry only form, the record date for
each Interest Payment Date will be the close of business on the fifteenth
calendar day prior to the applicable Interest Payment Date.
Fixed Rate Notes
Unless otherwise specified in the applicable pricing supplement, the Interest
S-10
Payment Dates for the Fixed Rate Notes will be May 1 and November 1 of each
year. Unless otherwise specified in the applicable pricing supplement, interest
on Fixed Rate Notes will be computed on the basis of a 360-day year of twelve
30-day months.
If any Interest Payment Date or the Maturity Date of a Fixed Rate Note falls
on a day that is not a Business Day, the required payment of principal, any
premium and interest will be made on the next succeeding Business Day as if
made on the date the payment was due, and no interest will accrue on the
payment for the period from and after the Interest Payment Date or the Maturity
Date, as the case may be, to the date of the payment on the next succeeding
Business Day.
Floating Rate Notes
Each Floating Rate Note will bear interest from the date of issuance until
the principal thereof is paid or made available for payment at a rate
determined by reference to an interest rate basis or formula based on the Index
Maturity (the Base Rate), which may be adjusted by a Spread and/or Spread
Multiplier (each as defined below). The applicable pricing supplement will
designate one or more of the following Base Rates as applicable to each
Floating Rate Note:
. the CD Rate (a CD Rate Note),
. the Commercial Paper Rate (a Commercial Paper Rate Note),
. the Federal Funds Rate (a Federal Funds Rate Note),
. LIBOR (a LIBOR Note),
. the Prime Rate (a Prime Rate Note),
. the Treasury Rate (a Treasury Rate Note),
. the CMT Rate (a CMT Rate Note) or
. some other Base Rate or interest rate formula as is set forth in the pricing
supplement and in the Floating Rate Note.
The Index Maturity for any Floating Rate Note is the period to maturity of
the instrument or obligation from which the Base Rate is calculated and will be
specified in the applicable pricing supplement.
Unless otherwise specified in the applicable pricing supplement, the interest
rate on each Floating Rate Note will be calculated by reference to the
specified Base Rate (i) plus or minus the Spread, if any, and/or (ii)
multiplied by the Spread Multiplier, if any. The Spread is the number of basis
points (one one-hundredth of a percentage point) specified in the applicable
pricing supplement to be added to or subtracted from the Base Rate for the
Floating Rate Note, and the Spread Multiplier is the percentage specified in
the applicable pricing supplement to be applied to the Base Rate for the
Floating Rate Note.
As specified in the applicable pricing supplement, a Floating Rate Note may
also have either or both of the following: (i) a maximum limitation, or
ceiling, on the rate of interest which may accrue during any interest period
(Maximum Interest Rate); and (ii) a minimum limitation, or floor, on the rate
of interest which 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 pursuant to the above provisions, the interest rate on a
Floating Rate Note will in no event be higher than the maximum rate from time
to time permitted by New York law, as the rate may be modified by United States
law of general application.
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Unless otherwise specified in the applicable pricing supplement, the rate of
interest on each Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually or annually (that 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 applicable pricing supplement. Unless
otherwise specified in the pricing supplement, the Interest Reset Date will be,
in the case of Floating Rate Notes which reset:
. daily, on each Business Day;
. weekly, on the Wednesday of each week (other than Treasury Rate Notes which
reset the Tuesday of each week, unless otherwise provided below);
. monthly, on the third Wednesday of each month;
. quarterly, on the third Wednesday of March, June, September and December;
. semiannually, on the third Wednesday of two months of each year, as
specified in the applicable pricing supplement; and
. annually, on the third Wednesday of one month of each year, as specified in
the applicable pricing supplement;
provided, however, that the interest rate in effect from the date of issue to
the first Interest Reset Date with respect to a Floating Rate Note will be the
initial interest rate set forth in the applicable pricing supplement (the
Initial Interest Rate). If any Interest Reset Date for any Floating Rate Note
would otherwise be a day that is not a Business Day, the Interest Reset Date
shall be postponed to the next succeeding Business Day, except that in the case
of a LIBOR Note, if the next succeeding Business Day is in the next succeeding
calendar month, the Interest Reset Date shall be the immediately preceding
Business Day.
With respect to Floating Rate/Fixed Rate Notes (as defined below), the rate
of interest thereon will not reset after the particular fixed rate commencement
date, as set forth in the pricing supplement.
Except as provided below, unless otherwise specified in the applicable
pricing supplement, the date on which interest on Floating Rate Notes will be
payable is, in the case of Floating Rate Notes which reset:
. daily, weekly or monthly, on the third Wednesday of each month, as specified
in the applicable pricing supplement;
. quarterly, on the third Wednesday of March, June, September and December;
. semiannually, on the third Wednesday of the two months specified in the
applicable pricing supplement; and
. annually, on the third Wednesday of the month specified in the applicable
pricing supplement.
If any Interest Payment Date for any Floating Rate Note would fall on a day
that is not a Business Day with respect to that Floating Rate Note, the
Interest Payment Date will be postponed to the following day that is a Business
Day with respect to that Floating Rate Note, except that, in the case of a
LIBOR Note, if the following Business Day is in the next succeeding calendar
month, the Interest Payment Date shall be the immediately preceding day that is
a Business Day with respect to the LIBOR Note. If the Maturity Date of a
Floating Rate Note falls on a day that is not a Business Day, the payment of
principal, premium, if any, and interest will be made on the next succeeding
Business Day, and no interest on the payment shall accrue for the period from
and after the Maturity Date.
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With respect to a Floating Rate Note, accrued interest shall be calculated by
multiplying the principal amount of the Floating Rate Note by an accrued
interest factor. The accrued interest factor will be computed by adding the
interest factors calculated for each day in the period for which interest is
being accrued. Unless otherwise specified in the applicable pricing supplement,
the interest factor for each day in the interest period is computed by dividing
the interest rate applicable to the day by 360, in the case of CD Rate Notes,
Commercial Paper Rate Notes, Federal Funds Rate Notes, LIBOR Notes (except for
LIBOR Notes denominated in pounds sterling) and Prime Rate Notes, by 365, in
the case of LIBOR Notes denominated in pounds sterling, or by the actual number
of days in the year, in the case of Treasury Rate Notes and CMT Rate Notes. All
percentages used in or resulting from any calculation of the rate of interest
on a Floating Rate Note will be rounded, if necessary, to the nearest one
hundred-thousandth of a percentage point, with five one-millionths of a
percentage point rounded upward, and all amounts used in or resulting from that
calculation on Floating Rate Notes will be rounded, in the case of U.S.
dollars, to the nearest cent or, in the case of a foreign currency, to the
nearest unit (with one-half cent or unit being rounded upwards). The interest
rate in effect on any Interest Reset Date will be the applicable rate as reset
on that date. The interest rate applicable to any other day is the interest
rate from the immediately preceding Interest Reset Date (or, if none, the
Initial Interest Rate).
Unless otherwise stated in the applicable pricing supplement, the calculation
agent (the Calculation Agent) with respect to any issue of Floating Rate Notes
shall be The Chase Manhattan Bank. Upon the request of the holder of any
Floating Rate Note, the Calculation Agent will provide the interest rate then
in effect and, if determined, the interest rate that will become effective on
the next Interest Reset Date with respect to that Floating Rate Note.
The Interest Determination Date pertaining to an Interest Reset Date for
Commercial Paper Rate Notes, Federal Funds Rate Notes and Prime Rate Notes will
be the Business Day immediately preceding the related Interest Reset Date. The
Interest Determination Date pertaining to an Interest Reset Date for CD Rate
Notes and CMT Rate Notes will be the second Business Day next preceding that
Interest Reset Date. The Interest Determination Date pertaining to an Interest
Reset Date for a LIBOR Note will be the second London Business Day immediately
preceding that Interest Reset Date, unless the Index Currency (as defined
below) is British pounds sterling, in which case the Interest Determination
Date will be the applicable Interest Reset Date. The Interest Determination
Date pertaining to an Interest Reset Date for a Treasury Rate Note will be the
day of the week in which that Interest Reset Date falls on which Treasury bills
would normally be auctioned. Treasury bills are normally sold at auction on
Monday of each week, unless that day is a legal holiday, in which case the
auction is normally held on the immediately following Tuesday, but the auction
may be held on the preceding Friday. If, as the result of a legal holiday, an
auction is held on the preceding Friday, that Friday will be the Interest
Determination Date pertaining to the Interest Reset Date occurring in the next
succeeding week. If an auction falls on a
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day that is an Interest Reset Date, the Interest Reset Date will be the next
following Business Day.
Unless otherwise specified in the applicable pricing supplement, the
Calculation Date, where applicable, pertaining to an Interest Determination
Date will be the earlier of (i) the tenth calendar day after that Interest
Determination Date, or, if that day is not a Business Day, the next succeeding
Business Day, or (ii) the Business Day preceding the applicable Interest
Payment Date or Maturity Date, as the case may be.
As used herein, Business Day means any day, other than a Saturday or Sunday,
that is neither a legal holiday nor a day on which commercial banking
institutions are authorized or required by law, regulation or executive order
to close in New York City provided, however, that, with respect to Notes the
payment of which is to be made in a Specified Currency other than U.S. dollars,
that day is also not a day on which commercial banking institutions are
authorized or required by law, regulation or executive order to close in the
Principal Financial Center (as defined below) of the country issuing the
Specified Currency (or, in the case of the euro, is also a day on which the
Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET)
System is open); provided, further, that, with respect to Notes as to which
LIBOR is an applicable Base Rate, the day is also a London Business Day (as
defined below).
London Business Day means any day on which commercial banks are open for
business (including for dealings in the Index Currency) in London.
Principal Financial Center will generally be the capital city of the country
issuing the Specified Currency, or to which the Index Currency relates, except
that with respect to United States dollars, Deutsche marks, Dutch guilders,
Italian lire, Portuguese escudos, Swiss francs, Australian dollars, Canadian
dollars and South African rand, the Principal Financial Center shall be New
York City, Frankfurt, Amsterdam, Milan, London (solely in the case of the Index
Currency), Zurich, Sydney and Melbourne (solely in the case of the Index
Currency), Toronto and Johannesburg, respectively.
Floating Rate/Fixed Rate Notes
If a Floating Rate Note is designated as a "Floating Rate/Fixed Rate Note",
the particular Floating Rate Note will bear interest at the rate determined by
reference to the applicable Base Rate:
. plus or minus the applicable Spread, if any, and/or
. multiplied by the applicable Spread Multiplier, if any.
Commencing on the first Interest Reset Date, the rate at which interest on a
Floating Rate/Fixed Rate Note is payable will be reset as of each Interest
Reset Date; provided, however, that:
. the interest rate in effect for the period, if any, from the date of issue
to the first Interest Reset Date will be the Initial Interest Rate; and
. the interest rate in effect commencing on the fixed rate commencement date
will be the fixed interest rate, if specified in the applicable pricing
supplement, or, if not so specified, the interest rate in effect on the day
immediately preceding the fixed rate commencement date.
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Inverse Floating Rate Notes
If a Floating Rate Note is designated as an "Inverse Floating Rate Note," the
particular Floating Rate Note will bear interest at the fixed interest rate
minus the rate determined by reference to the applicable Base Rate:
. plus or minus the applicable Spread, if any, and/or
. multiplied by the applicable Spread Multiplier, if any;
provided, however, that interest on an Inverse Floating Rate Note will not be
less than zero. Commencing on the first Interest Reset Date, the rate at which
interest on an Inverse Floating Rate Note is payable will be reset as of each
Interest Reset Date; provided, further, that the interest rate in effect for
the period, if any, from the date of issue to the first Interest Reset Date
will be the Initial Interest Rate.
Unless otherwise specified in the applicable pricing supplement, interest
rates will be determined by the Calculation Agent as follows:
CD Rate Notes
CD Rate Notes will bear interest at the interest rate (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the CD Rate Notes and in the applicable pricing supplement.
Unless otherwise specified in the applicable pricing supplement, CD Rate
means, with respect to any Interest Determination Date, the rate on that date
for negotiable U.S. dollar certificates of deposit having the Index Maturity
designated in the applicable pricing supplement as published by the Board of
Governors of the Federal Reserve System in "Statistical Release H.15(519),
Selected Interest Rates," or any successor publication of the Board of
Governors of the Federal Reserve System (H.15(519)) under the heading "CDs
(secondary market)."
The following procedures will be followed if the CD Rate cannot be determined
as described above:
. If the above rate is not published by 3:00 P.M., New York City time, on the
Calculation Date pertaining to the applicable Interest Determination Date,
the CD Rate will be the rate on that Interest Determination Date for
negotiable certificates of deposit of the Index Maturity designated in the
applicable pricing supplement as published in the daily update of H.15(519),
available through the internet site of the Board of Governors of the Federal
Reserve System at http:// www.federalreserve.gov/releases/h15/ update, or
any successor site or publication (the H.15 Daily Update), or some other
recognized electronic source for the purpose of displaying the rate, under
the heading "CDs (secondary market)."
. If the rate is not yet published in H.15(519), the H.15 Daily Update or some
other recognized electronic source for the purpose of displaying the rate,
by 3:00 P.M., New York City time, on the Calculation Date pertaining to the
applicable Interest Determination Date, the CD Rate on the Interest
Determination Date will be calculated by the Calculation Agent and will be
the arithmetic mean of the secondary market
S-15
offered rates as of 10:00 A.M., New York City time, on the Interest
Determination Date for certificates of deposit in an amount that is
representative for a single transaction at that time with a remaining
maturity closest to the Index Maturity designated in the pricing supplement
of three leading nonbank dealers in negotiable U.S. dollar certificates of
deposit in New York City (which may include the Agents or their affiliates)
selected by the Calculation Agent for negotiable certificates of deposit of
major United States money center banks.
. If the dealers selected by the Calculation Agent are not quoting as set
forth above, the CD Rate in effect for the applicable period will be the
same as the CD Rate for the immediately preceding Interest Reset Period (or,
if there was no Interest Reset Period, the rate of interest payable on the
CD Rate Notes for which the CD Rate is being determined shall be the Initial
Interest Rate).
Commercial Paper Rate Notes
Commercial Paper Rate Notes will bear interest at the interest rate
(calculated with reference to the Commercial Paper Rate and the Spread and/or
Spread Multiplier, if any, and subject to the Minimum Interest Rate and the
Maximum Interest Rate, if any) specified in the Commercial Paper Rate Notes and
in the applicable pricing supplement.
Unless otherwise specified in the applicable pricing supplement, Commercial
Paper Rate means, with respect to any Interest Determination Date, the Money
Market Yield (as defined below) of the rate on that date for commercial paper
having the Index Maturity specified in the applicable pricing supplement, as
the rate shall be published in H.15(519), under the heading "Commercial Paper--
Nonfinancial."
The following procedures will be followed if the Commercial Paper Rate cannot
be determined as described above:
. If the above rate is not published by 3:00 P.M., New York City time, on the
Calculation Date pertaining to the applicable Interest Determination Date,
then the Commercial Paper Rate shall be the Money Market Yield of the rate
on the Interest Determination Date for commercial paper of the specified
Index Maturity as published in H.15 Daily Update or some other recognized
electronic source for the purpose of displaying the rate, under the heading
"Commercial Paper--Nonfinancial."
. If by 3:00 P.M., New York City time, on the Calculation Date the rate is not
yet available in either H.15(519) or H.15 Daily Update, or some other
recognized electronic source for the purpose of displaying the rate, then
the Commercial Paper Rate shall be the Money Market Yield of the arithmetic
mean of the offered rates as of 11:00 A.M., New York City time, on the
Interest Determination Date of three leading dealers of U.S. dollar
commercial paper in New York City (which may include the Agents or their
affiliates) selected by the Calculation Agent for commercial paper of the
specified Index Maturity, placed for an industrial issuer whose bond rating
is "AA," or the equivalent, from a nationally recognized statistical rating
organization.
S-16
. If the dealers selected by the Calculation Agent are not quoting offered
rates as mentioned above, the Commercial Paper Rate in effect for the
applicable period will be the same as the Commercial Paper Rate for the
immediately preceding Interest Reset Period (or, if there was no Interest
Reset Period, the rate of interest payable on the Commercial Paper Rate
Notes for which the Commercial Paper Rate is being determined shall be the
Initial Interest Rate).
Money Market Yield shall be a yield calculated in accordance with the
following formula and expressed as a percentage:
Money Market Yield =
D x 360 x 100
-------------
360 - (D x M)
D = the applicable per annum rate for commercial paper quoted on a bank
discount basis and expressed as a decimal,
M = the actual number of days for which interest is being calculated.
Federal Funds Rate Notes
Federal Funds Rate Notes will bear interest at the interest rate (calculated
with reference to the Federal Funds Rate and the Spread and/or Spread
Multiplier, if any, and subject to the Minimum Interest Rate and the Maximum
Interest Rate, if any) specified in the Federal Funds Rate Notes and in the
applicable pricing supplement.
Unless otherwise specified in the applicable pricing supplement, the Federal
Funds Rate means, with respect to any Interest Determination Date, the rate on
that date for U.S. dollar federal funds as published in H.15(519) under the
heading "Federal Funds (Effective)," as that rate is displayed on Bridge
Telerate, Inc. (or any successor service) (the Telerate) on page 120 (or any
other page as may replace that page on the service) (Telerate Page 120).
The following procedures will be followed if the Federal Funds Rate cannot be
determined as set forth above:
. If the rate does not appear on Telerate Page 120 or is not so published by
3:00 P.M., New York City time, on the Calculation Date pertaining to the
Interest Determination Date, the Federal Funds Rate will be the rate on the
applicable Interest Determination Date as published in the H.15 Daily Update
under the heading "Federal Funds/Effective Rate," or another recognized
electronic source used for the purpose of displaying that rate, under the
caption "Federal Funds (Effective)."
. If the rate does not appear on Telerate Page 120, or is not yet published in
either H.15(519), the H.15 Daily Update, or another recognized electronic
source by 3:00 P.M., New York City time, on the Calculation Date pertaining
to the Interest Determination Date, the Federal Funds Rate for the
applicable Interest Determination Date will be calculated by the Calculation
Agent and will be the arithmetic mean of the rates for the last transaction
in overnight U.S. dollar federal funds, as of 9:00 A.M., New York City time,
on the Interest Determination Date, arranged by three leading brokers of
federal funds transactions in New York City (which may include the Agents or
their affiliates) selected by the Calculation Agent.
. If the brokers selected by the Calculation Agent are not quoting as set
forth above,
S-17
the Federal Funds Rate in effect for the applicable period will be the same
as the Federal Funds Rate in effect on the particular Interest Determination
Date.
LIBOR Notes
LIBOR Notes will bear interest at the interest rate (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the LIBOR Notes and in the applicable pricing supplement.
Unless otherwise specified in the applicable pricing supplement, LIBOR for
each Interest Determination Date will be determined by the Calculation Agent
as follows:
. If "LIBOR Reuters" is specified in the applicable pricing supplement, LIBOR
will be the arithmetic mean of the offered rates for deposits in the Index
Currency (as defined below) having the Index Maturity designated in the
applicable pricing supplement, commencing on the second London Business Day
immediately following the applicable Interest Determination Date, that
appear on the Designated LIBOR Page (as defined below) as of 11:00 A.M.,
London time, on that Interest Determination Date. If no such rate appears,
then LIBOR will be determined by the alternative method described below. If
the Designated LIBOR Page by its terms provides for a single rate, then the
single rate shall be used. If, however, the terms of the Designated LIBOR
Page provide for multiple rates and fewer than two such rates appear, then
LIBOR will be determined by the alternative method described below. If
"LIBOR Telerate" is specified in the applicable pricing supplement, LIBOR
will be the rate for deposits in the Index Currency having the Index
Maturity designated in the applicable pricing supplement, commencing on the
second London Business Day immediately following the applicable Interest
Determination Date (or, if pounds sterling is the Index Currency,
commencing on that Interest Determination Date) that appears on the
Designated LIBOR Page as of 11:00 A.M., London time, on that Interest
Determination Date. If no such rate appears, then LIBOR will be determined
by the alternative method described below.
. Alternatively as referenced above, the Calculation Agent will request the
principal London offices of each of four major reference banks (which may
include affiliates of the Agents) in the London interbank market, as
selected by the Calculation Agent, to provide the Calculation Agent with
its offered quotation for deposits in the Index Currency for the period of
the Index Maturity designated in the applicable pricing supplement,
commencing on the second London Business Day immediately following the
applicable Interest Determination Date (or, if pounds sterling is the Index
Currency, commencing on that Interest Determination Date) to prime banks in
the London interbank market at approximately 11:00 A.M., London time, on
the Interest Determination Date and in a principal amount of not less than
$1,000,000 (or the equivalent in the Index Currency, if the Index Currency
is not the U.S. dollar) that is representative for a single transaction in
the Index Currency in the market at that time. If at
S-18
least two quotations are provided, LIBOR determined on that Interest
Determination Date will be the arithmetic mean of the quotations. If fewer
than two quotations are provided, LIBOR determined on that Interest
Determination Date will be the arithmetic mean of the rates quoted at
approximately 11:00 A.M. (or any other time specified in the applicable
pricing supplement), in the applicable Principal Financial Center for the
country of the Index Currency on the Interest Determination Date, by three
major banks (which may include affiliates of the Agents) in the Principal
Financial Center selected by the Calculation Agent for loans in the Index
Currency to leading European banks, having the Index Maturity designated in
the applicable pricing supplement and in a principal amount of not less than
$1,000,000 (or the equivalent in the Index Currency, if the Index Currency is
not the U.S. dollar) that is representative for a single transaction in the
Index Currency in the market at that time; provided, however, that if the
banks selected by the Calculation Agent are not quoting as mentioned in this
sentence, LIBOR in effect for the applicable period will be the same as LIBOR
for the immediately preceding Interest Reset Period (or, if there was no
Interest Reset Period, the rate of interest payable on the LIBOR Notes for
which LIBOR is being determined shall be the Initial Interest Rate).
Index Currency means the currency (including composite currencies) specified
in the applicable pricing supplement as the currency for which LIBOR shall be
calculated or if the euro is substituted for that currency, the Index Currency
will be the euro. If no currency is specified in the applicable pricing
supplement, the Index Currency shall be U.S. dollars.
Designated LIBOR Page means either (a) if "LIBOR Reuters" is designated in
the applicable pricing supplement, 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 applicable Index Currency, or (b)
if "LIBOR Telerate" is designated (or if neither "LIBOR Reuters" or "LIBOR
Telerate" is designated) in the applicable pricing supplement, the display on
the Telerate for the purpose of displaying the London interbank rates of major
banks for the applicable Index Currency.
Prime Rate Notes
Prime Rate Notes will bear interest at the interest rate (calculated with
reference to the Prime Rate and the Spread and/or Spread Multiplier, if any,
and subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the Prime Rate Notes and in the applicable pricing supplement.
Unless otherwise specified in the applicable pricing supplement, Prime Rate
means, with respect to any Interest Determination Date, the rate set forth in
H.15(519) for that date under the caption "Bank Prime Loan."
The following procedures will be followed if the Prime Rate cannot be
determined as set forth above:
. If the rate above is not yet published by 3:00 P.M. New York City time, on
the Calculation Date pertaining to the applicable Interest Determination
Date, the Prime Rate will be the rate on the
S-19
applicable Interest Determination Date as published in the H.15 Daily
Update, or such other recognized electronic source used for the purpose of
displaying such rate, under the caption "Bank Prime Loan."
. If by 3:00 P.M., New York City time, on the Calculation Date the rate is not
yet available in either H.15(519) or H.15 Daily Update or another recognized
electronic source, then the Prime Rate for that Interest Determination Date
will be the arithmetic mean of the rates of interest publicly announced by
each bank named on the Reuters Screen US PRIME 1 Page (as defined below) as
that bank's prime rate or base lending rate as of 11:00 A.M., New York City
time, on the Interest Determination Date as quoted on the Reuters Screen US
PRIME 1 Page on the Interest Determination Date.
. If fewer than four rates appear on the Reuters Screen US PRIME 1 Page for
any Interest Determination Date, the rate shall be the arithmetic mean of
the prime rates or base lending 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
applicable Interest Determination Date by three major money center banks in
New York City (which may include affiliates of the Agents) selected by the
Calculation Agent from which quotations are requested. If fewer than two
quotations are provided, the Prime Rate shall be calculated by the
Calculation Agent and shall be determined as the arithmetic mean on the
basis of the prime rates in New York City by the appropriate number of
substitute banks or 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 to quote the rate or rates.
. If the banks or trust companies selected by the Calculation Agent are not
quoting as set forth above, the Prime Rate in effect for the applicable
period will be the same as the Prime Rate for the immediately preceding
Interest Reset Period (or, if there was no Interest Reset Period, the rate
of interest payable on the Prime Rate Notes for which the Prime Rate is
being determined shall be the Initial Interest Rate).
Reuters Screen US PRIME 1 Page means the display designated as Page "US PRIME
1" on the Reuters Monitor Money Rates Service (or any other page as may replace
the US PRIME 1 Page on that service for the purpose of displaying prime rates
or base lending rates of major United States banks).
Treasury Rate Notes
Treasury Rate Notes will bear interest at the interest rate (calculated with
reference to the Treasury Rate and the Spread and/or Spread Multiplier, if any,
and subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the Treasury Rate Notes and in the applicable pricing supplement.
Unless otherwise specified in the applicable pricing supplement, the Treasury
Rate means, with respect to any Interest Determination Date, the rate for the
auction held on that date of direct obligations of the United States (Treasury
Bills) having the Index Maturity designated in the applicable pricing
supplement under the heading "Investment Rate" on the Telerate display
S-20
on page 56 or any other page as may replace that page on the service (Telerate
Page 56) or page 57 or any other page as may replace that page on the service)
(Telerate Page 57).
The following procedures will be followed if the Treasury Rate cannot be
determined as set forth above:
. If the rate above is not published by 3:00 P.M., New York City time, on the
Calculation Date pertaining to the applicable Interest Determination Date,
the Treasury Rate for the Interest Determination Date will be the 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 rate for the
applicable Treasury Bills, published in the H.15 Daily Update, or any other
recognized electronic source used for the purpose of displaying the rate,
under the caption "U.S. Government Securities/Treasury Bills/Auction High"
on the Interest Determination Date, or if not so published by 3:00 P.M.,
New York City time, on the Calculation Date, the 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 auction rate of the
applicable Treasury Bills as otherwise announced by the United States
Department of the Treasury.
. In the event that the results of the auction of Treasury Bills having the
Index Maturity designated in the applicable pricing supplement are not
published or reported as provided above by 3:00 P.M., New York City time,
on the Calculation Date or if no auction is held on the Interest
Determination Date, then the Treasury Rate will be the 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 rate on the Interest
Determination Date of Treasury Bills having the Index Maturity designated
in the applicable pricing supplement as published in H.15(519), or such
other recognized electronic source used for the purpose of displaying that
rate, under the caption "U.S. Government Securities/Treasury
Bills/Secondary Market."
. If the rate above is not published by 3:00 P.M., New York City time, on the
Calculation Date pertaining to the applicable Interest Determination Date,
the Treasury Rate shall be the 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 rate on the Interest Determination Date of
such Treasury Bills as published in the H.15 Daily Update, or other
recognized electronic source used for the purpose of displaying that rate,
under the caption "U.S. Government Securities/Treasury Bills/Secondary
Market."
. If the rate above is not published in H.15(519), H.15 Daily Update, or
another recognized electronic source, by 3:00 P.M., New York City time, on
the Calculation Date pertaining to the applicable Interest Determination
Date, the Treasury Rate shall be calculated by the Calculation Agent and
shall be 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)
calculated using the arithmetic mean of the secondary market bid rates, as
of approximately 3:30 P.M.,
S-21
New York City time, on the Interest Determination Date, of three primary
United States government securities dealers (which may include the Agents or
their affiliates) selected by the Calculation Agent for the issue of
Treasury Bills with a remaining maturity closest to the Index Maturity
designated in the applicable pricing supplement.
. If the dealers selected by the Calculation Agent are not quoting bid rates
as mentioned in the preceding paragraph, the Treasury Rate for the affected
Interest Reset Date will be the same as the Treasury Rate for the
immediately preceding Interest Reset Period (or, if there was no Interest
Reset Period, the rate of interest payable on the Treasury Rate Notes for
which the Treasury Rate is being determined shall be the Initial Interest
Rate).
CMT Rate Notes
CMT Rate Notes will bear interest at the interest rate (calculated with
reference to the CMT Rate and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the CMT Rate Notes and in the applicable pricing supplement.
Unless otherwise indicated in an applicable pricing supplement, if CMT
Telerate Page 7051 is specified in the applicable pricing supplement, the CMT
Rate means the percentage equal to the yield for U.S. Treasury securities at
"constant maturity" having the Index Maturity specified in the applicable
pricing supplement as published in H.15(519) under the caption "Treasury
Constant Maturities," as the yield is displayed on the Telerate on page 7051
(or any other page as may replace the specified page on that service) (Telerate
Page 7051), for the particular Interest Determination Date. The following
paragraphs detail the procedures to be followed in the event that CMT Telerate
Page 7051 is specified in the applicable pricing supplement, but the foregoing
method for determining the CMT Rate is not available.
. If the rate referred to in the preceding paragraph does not so appear on
Telerate Page 7051 by 3:30 P.M., New York City time, on the Calculation Date
for the applicable Interest Determination Date, the CMT Rate will be the
percentage equal to the yield for U.S. Treasury securities at "constant
maturity" having the particular Index Maturity and for the particular
Interest Determination Date as published in H.15(519) under the caption
"Treasury Constant Maturities."
. If the rate referred to in the preceding paragraph does not so appear in
H.15(519) by 3:30 P.M., New York City time, on the Calculation Date for the
applicable Interest Determination Date, the CMT Rate will be the rate on the
particular Interest Determination Date for the period of the particular
Index Maturity as may then be published by either the Federal Reserve System
Board of Governors or the U.S. Department of the Treasury that the
Calculation Agent determines to be comparable to the rate which would
otherwise have been published in H.15(519).
. If the rate referred to in the preceding paragraph is not so published by
3:30 P.M., New York City time, on the Calculation Date for the applicable
Interest Determination Date, the CMT Rate will be the rate on the particular
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Interest Determination Date calculated by the Calculation Agent as a yield
to maturity based on the arithmetic mean of the secondary market bid prices
at approximately 3:30 P.M., New York City time, on that Interest
Determination Date of three leading primary U.S. government securities
dealers in New York City (which may include the Agents or their affiliates)
(each, a Reference Dealer), selected by the Calculation Agent from five
Reference Dealers selected by the Calculation Agent 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 U.S.
Treasury securities with an original maturity equal to the particular Index
Maturity, a remaining term to maturity no more than one year shorter than
that Index Maturity and in a principal amount that is representative for a
single transaction in the securities in that market at that time.
. If fewer than five but more than two of the prices referred to in the
preceding paragraph are provided as requested, the CMT Rate will be the rate
on the particular Interest Determination Date calculated by the Calculation
Agent based on the arithmetic mean of the bid prices obtained and neither
the highest nor the lowest of the quotations shall be eliminated.
. If fewer than three of the prices referred to two paragraphs above are
provided as requested, the CMT Rate will be the rate on the particular
Interest Determination Date calculated by the Calculation Agent as a yield
to maturity based on the arithmetic mean of the secondary market bid prices
as of approximately 3:30 P.M., New York City time, on that Interest
Determination Date of three Reference Dealers selected by the Calculation
Agent from five Reference Dealers selected by the Calculation Agent 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 U.S. Treasury securities with an original maturity greater than
the particular Index Maturity, a remaining term to maturity closest to that
Index Maturity and in a principal amount that is representative for a single
transaction in the securities in that market at that time.
. If fewer than five but more than two prices referred to in the preceding
paragraph are provided as requested, the CMT Rate will be the rate on the
particular Interest Determination Date calculated by the Calculation Agent
based on the arithmetic mean of the bid prices obtained and neither the
highest nor the lowest of the quotations will be eliminated.
. If fewer than three prices referred to two paragraphs above are provided as
requested, the CMT Rate for the applicable Interest Reset Date will be the
same as the CMT Rate for the immediately preceding Interest Reset Period
(or, if there was no Interest Reset Period, the rate of interest payable on
the CMT Rate Notes for which the CMT Rate is being determined shall be the
Initial Interest Rate).
Unless otherwise indicated in an applicable pricing supplement, if CMT
Telerate Page 7052 is specified in the applicable pricing supplement, CMT Rate
means the percentage equal to the one-week or one-month, as specified in the
applicable
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pricing supplement, average yield for U.S. Treasury securities at "constant
maturity" having the Index Maturity specified in the applicable pricing
supplement as published in H.15(519) opposite the caption "Treasury Constant
Maturities," as the yield is displayed on the Telerate on page 7052 (or any
other page as may replace the specified page on that service) (Telerate Page
7052), for the week or month, as applicable, ended immediately preceding the
week or month, as applicable, in which the particular Interest Determination
Date falls. The following paragraphs detail the procedures to be followed in
the event that CMT Telerate Page 7052 is specified in the applicable pricing
supplement, but the foregoing method for determining the CMT Rate is not
available.
. If the rate referred to in the preceding paragraph does not so appear on
Telerate Page 7052 by 3:30 P.M., New York City time, on the Calculation Date
for the applicable Interest Determination Date, the CMT Rate will be the
percentage equal to the one-week or one-month, as specified in the
applicable pricing supplement, average yield for U.S. Treasury securities at
"constant maturity" having the particular Index Maturity and for the week or
month, as applicable, preceding the particular Interest Determination Date
as published in H.15(519) opposite the caption "Treasury Constant
Maturities."
. If the rate referred to in the preceding paragraph does not so appear in
H.15(519) by 3:30 P.M., New York City time, on the Calculation Date for the
applicable Interest Determination Date, the CMT Rate will be the one-week or
one-month, as specified in the applicable pricing supplement, average yield
for U.S. Treasury securities at "constant maturity" having the particular
Index Maturity as otherwise announced by the Federal Reserve Bank of New
York for the week or month, as applicable, ended immediately preceding the
week or month, as applicable, in which the particular Interest Determination
Date falls.
. If the rate referred to in the preceding paragraph is not so published by
3:30 P.M., New York City time, on the Calculation Date for the applicable
Interest Determination Date, the CMT Rate will be the rate on the particular
Interest Determination Date calculated by the Calculation Agent as a yield
to maturity based on the arithmetic mean of the secondary market bid prices
at approximately 3:30 P.M., New York City time, on that Interest
Determination Date of three Reference Dealers selected by the Calculation
Agent from five Reference Dealers selected by the Calculation Agent 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 U.S. Treasury securities with an original maturity equal to the
particular Index Maturity, a remaining term to maturity no more than one
year shorter than that Index Maturity and in a principal amount that is
representative for a single transaction in the securities in that market at
that time.
. If fewer than five but more than two of the prices referred to in the
preceding paragraph are provided as requested, the CMT Rate will be the rate
on the particular Interest Determination Date calculated by the Calculation
Agent based on the arithmetic mean of the bid prices obtained and neither
the highest
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nor the lowest of the quotations shall be eliminated.
. If fewer than three prices referred to two paragraphs above are provided as
requested, the CMT Rate will be the rate on the particular Interest
Determination Date calculated by the Calculation Agent as a yield to
maturity based on the arithmetic mean of the secondary market bid prices as
of approximately 3:30 P.M., New York City time, on that Interest
Determination Date of three Reference Dealers selected by the Calculation
Agent from five Reference Dealers selected by the Calculation Agent 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 U.S. Treasury securities with an original maturity greater than
the particular Index Maturity, a remaining term to maturity closest to that
Index Maturity and in a principal amount that is representative for a
single transaction in the securities in that market at that time.
. If fewer than five but more than two prices referred to in the preceding
paragraph are provided as requested, the CMT Rate will be the rate on the
particular Interest Determination Date calculated by the Calculation Agent
based on the arithmetic mean of the bid prices obtained and neither the
highest or the lowest of the quotations will be eliminated.
. If fewer than three prices referred to two paragraphs above are provided as
requested, the CMT Rate for the applicable Interest Reset Date will be the
same as the CMT Rate for the immediately preceding Interest Reset Period
(or, if there was no Interest Reset Period, the rate of interest payable on
the CMT Rate Notes for which the CMT Rate is being determined shall be the
Initial Interest Rate).
For purposes of the above calculations (whether CMT Telerate Page 7051 or
CMT Telerate Page 7052 is specified in the applicable pricing supplement), if
two U.S. Treasury securities with an original maturity greater than the Index
Maturity specified in the applicable pricing supplement have remaining terms
to maturity equally close to the particular Index Maturity, the quotes for the
U.S. Treasury security with the shorter remaining term to maturity will be
used.
If no CMT Telerate Page is specified in the applicable pricing supplement
CMT Telerate Page 7052, for the most recent week, shall be deemed specified.
Purchase Price; Registered Form; Minimum Denomination
Each Note will be issued for a purchase price equal to 100% of the principal
amount thereof (unless otherwise provided in the applicable pricing
supplement) in fully registered certificated or book-entry form. Unless
otherwise specified in the applicable pricing supplement, each Note will be
issued in a minimum denomination of $25 or $1,000 in U.S. dollars as specified
in the applicable pricing supplement, and integral multiples of such
denomination in excess thereof. In the case of a Note denominated in a
Specified Currency other than U.S. dollars, unless otherwise specified in the
applicable pricing supplement, the minimum denomination will be the equivalent
of $25 or $1,000 in U.S. dollars as specified in the applicable pricing
supplement, in the Specified Currency, as determined by
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application of the Market Exchange Rate on the Business Day immediately
preceding the trade date for the Notes.
Redemption or Conversion
No Note will be subject to conversion, amortization, or any sinking fund,
unless otherwise provided in the applicable pricing supplement. The Notes will
be subject to redemption by the Company on and after their respective
Redemption Dates, if any. Redemption Dates and the applicable Redemption
Prices, if any, will be fixed at the time of sale and set forth in the
applicable pricing supplement and on the applicable Note. If no Redemption Date
or Redemption Price is indicated with respect to a Note, the Note will not be
redeemable prior to its Stated Maturity Date. On and after the Redemption Date,
the applicable Note will be redeemable in whole or in part (provided that any
remaining principal amount of the Note shall be equal to an authorized
denomination thereof) at the option of the Company at the applicable Redemption
Price, together with interest thereon payable to the date of redemption, on
notice given not more than 60 nor less than 20 calendar days prior to the date
of redemption.
Notwithstanding the foregoing, if a date prior to which the Company may not
redeem the Note as a part of, or in anticipation of, a refunding operation
(Limitation Date) is specified in the applicable pricing supplement and on the
applicable Note, the Company may not redeem the Note prior to the Limitation
Date as a part of, or in anticipation of, any refunding operation by the
application, directly or indirectly, of monies borrowed having an interest cost
to the Company of less than the rate (Refunding Rate) specified in the pricing
supplement and on the applicable Note.
Repayment at the Option of the Holder; Repurchases by the Company
The Notes will be repayable by the Company at the option of the Holders
thereof prior to the Stated Maturity Date only if one or more Repayment Dates
are specified in the applicable pricing supplement. If so specified, the Notes
will be subject to repayment at the option of the Holders thereof on any
Repayment Date in whole or in part from time to time in increments of $1,000 or
any other integral multiple of an authorized denomination specified in the
applicable pricing supplement (provided that any remaining principal amount
thereof shall be at least $1,000 or any other minimum authorized denomination
applicable thereto), at a repayment price equal to 100% of the unpaid principal
amount to be repaid, together with unpaid interest accrued thereon to the date
of repayment. For any Note to be repaid, the Trustee must receive, at its
office maintained for that purpose in the Borough of Manhattan, The City of New
York (currently located at 55 Water Street, New York, New York 10041) not more
than 60 nor less than 30 calendar days prior to the date of repayment, (i) in
the case of a certificated Note, the certificated Note and the form thereon
entitled "Option to Elect Repayment" duly completed or (ii) in the case of a
Book-Entry Note, instructions to that effect from the applicable Beneficial
Owner (as hereinafter defined) to the Depositary and forwarded by the
Depositary. Exercise of the repayment option by the Holder will be irrevocable.
Only the Depositary may exercise the repayment option in respect of
beneficial interests in the Book-Entry Notes. Accordingly, Beneficial Owners
that desire repayment in respect of all or any portion
S-26
of their beneficial interests must instruct the Participant (as hereinafter
defined) through which they own their interests to direct the Depositary to
exercise the repayment option on their behalf. In order to ensure that the
instructions are received by the Trustee on a particular day, the applicable
Beneficial Owner must so instruct the Participant through which it owns its
interest before the Participant's deadline for accepting instructions for that
day. Different firms may have different deadlines for accepting instructions
from their customers. Accordingly, Beneficial Owners should consult the
Participants through which they own their interests for the respective
deadlines for each of the applicable Participants. All instructions given to
Participants from Beneficial Owners relating to the option to elect repayment
shall be irrevocable. In addition, at the time the instructions are given, each
Beneficial Owner shall cause the Participant through which it owns its interest
to transfer its interest in the Book-Entry Notes or Securities representing the
related Book-Entry Notes, on the Depositary's records, to the Trustee. See
DESCRIPTION OF THE NOTES--Book-Entry Notes.
If applicable, the Company will comply with the requirements of Section 14(e)
of the Exchange Act, and the rules promulgated thereunder, and any other
securities laws or regulations in connection with any repayment.
The Company may at any time purchase Notes at any price or prices in the open
market or otherwise. Notes purchased by the Company in this manner may, at the
discretion of the Company, be held, resold or surrendered to the Trustee for
cancellation.
Payment of Principal, Premium and Interest
Payments of principal, any premium, and interest on all Notes will be made by
the Company to the registered owners of the Notes, which in the case of Book-
Entry Notes is the Depositary or its nominee. Neither the Company nor the
Trustee will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in a
Book-Entry Note, or for maintaining, supervising or reviewing any records
relating to the beneficial ownership interests. The Company expects that the
Depositary, upon receipt of any payment of principal, any premium or interest
in respect of a Book-Entry Note, will credit immediately the accounts of the
related Participants with payment in amounts proportionate to their respective
holdings in principal amount of beneficial interest in the Book-Entry Note as
shown on the records of the Depositary. The Company also expects that payments
by Participants to Beneficial Owners will be governed by standing customer
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name,"
and will be the responsibility of the Participants.
Payments of principal, any premium and interest on all Notes will be made in
the applicable Specified Currency. Any amounts payable by the Company in a
Specified Currency other than U.S. dollars will be converted by the exchange
rate agent named in the applicable pricing supplement (Exchange Rate Agent)
into U.S. dollars for payment to Holders unless otherwise specified in the
applicable pricing supplement or the Holder of the Note elects, in the manner
described below, to
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receive those amounts in the Specified Currency. Payments of principal of and
interest on Notes made in a Specified Currency other than U.S. dollars will be
made by wire transfer to an account designated by the Holder at a bank outside
of the United States. Payments of principal, any premium and interest on Notes
paid in U.S. dollars and issued in certificated form will be made by wire
transfer to an account designated by the Holder or, in the absence of a
designation, by check mailed to the address of the Holder as it appears on the
Security Register maintained by the Trustee acting in its capacity as Security
Registrar for the Notes. The Holder shall make its designation by filing the
appropriate information with the Trustee at its Corporate Trust Office in New
York City on or prior to the Record Date for an Interest Payment Date or at
least 16 days prior to the Maturity Date, or with respect to Notes denominated
in a currency other than U.S. dollars, in connection with any transfer after
the 16th day prior to the Maturity Date. Until a Note is transferred or until
the Trustee receives notice to the contrary, the Trustee will make the payment
and all succeeding payments to the Holders of Notes by wire transfer to the
designated account. Payments of interest with respect to Notes will be made to
the Holder appearing on the Security Register on the applicable Record Date or,
in the case of interest payable at the Maturity Date, to the person to whom
principal is payable.
In the case of a Note issued between a Record Date and the Interest Payment
Date relating to that Record Date, interest for the period beginning on the
date of issue and ending on that Interest Payment Date will be paid to the
Holder appearing on the Security Register on the next succeeding Record Date.
Payments of the principal, any premium and interest on a Note at the Maturity
Date will be made in immediately available funds (at a bank outside the United
States, in the case of payments made in a Specified Currency other than U.S.
dollars) in the Specified Currency, upon surrender of the Note to the Trustee.
See IMPORTANT CURRENCY INFORMATION and RISK FACTORS.
The Trustee maintains in the Borough of Manhattan, the City of New York, an
office where Notes may be presented for payment and may be transferred or
exchanged. Principal, any premium and interest at the Maturity Date will be
payable, and Notes will be transferable, at the Corporate Trust Office of the
Trustee, which presently is located at 55 Water Street, New York, New York
10041.
Book-Entry Notes
The Company has established a depository arrangement with the Depositary with
respect to the Book-Entry Notes, the terms of which are summarized below. If
there are any additional or differing terms of the depository arrangement with
respect to the Book-Entry Notes, they will be described in the applicable
pricing supplement.
Book-Entry Notes of like tenor and terms up to $400,000,000 aggregate
principal amount may be represented by a single global security. Each global
security will be deposited with, or on behalf of, the Depositary and registered
in the name of the Depositary or its nominee. Except as described below, a
global security may not be transferred unless it is transferred as a whole by
the Depositary to a nominee, or by a nominee to either (i) the Depositary, or
(ii) another nominee, or (iii) successors of the Depositary or nominee.
S-28
So long as the Depositary or its nominee is the registered owner of a global
security representing Book-Entry Notes, the Depositary or its nominee, as the
case may be, will be the sole holder of the Book-Entry Notes represented by
that global security for all purposes under the Indenture. Except as provided
below, Beneficial Owners will not be entitled to have Notes registered in
their names, will not receive or be entitled to receive physical delivery of
Notes in certificated form and will not be considered the owners or holders
thereof for any purpose under the Indenture, and no global security
representing Book-Entry Notes will be exchangeable or transferable.
Accordingly, each Beneficial Owner must rely on the procedures of the
Depositary, and if a Beneficial Owner is not a Participant, on the procedures
of the Participant through which that Beneficial Owner owns its interest in
order to exercise any rights of a holder under the global security or the
Indenture. The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in certificated form. These
limits and laws may impair the ability to transfer beneficial interests in a
global security representing Book-Entry Notes.
Unless otherwise specified in the applicable pricing supplement, each global
security representing Book-Entry Notes will be exchangeable for certificated
Notes of like tenor and terms and of differing authorized denominations in a
like aggregate principal amount, only if:
. the Depositary notifies the Company that it is unwilling or unable to
continue as Depositary for the global securities or the Company is aware
that the Depositary has ceased to be a clearing agency registered under the
Exchange Act and, in any case, the Company shall not have appointed a
successor to the Depositary within 90 calendar days thereafter; or
. the Company, in its sole discretion, determines that the global securities
shall be exchangeable for certificated Notes.
Upon any exchange, the certificated Notes shall be registered in the names
of the Beneficial Owners of the global security or securities representing
Book-Entry Notes, which names shall be provided by the Depositary's relevant
Participants (as identified by the Depositary to the Trustee).
The following is based on information furnished to the Company and the
Agents by the Depositary:
The Depositary will act as securities depository for the Book-Entry Notes.
The Book-Entry Notes will be issued as fully registered securities
registered in the name of Cede & Co., the Depository's partnership nominee.
One fully registered global security will be issued for each issue of Book-
Entry Notes, each in the aggregate principal amount of the issue, and will
be deposited with the Depositary. If, however, the aggregate principal
amount of any issue exceeds $400,000,000, one global security will be issued
with respect to each $400,000,000 of principal amount and an additional
global security will be issued with respect to any remaining principal
amount of the issue.
The Depositary is a limited-purpose trust company organized under the laws
of the State of New York, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the Uniform Commercial Code and
a "clearing agency" registered pursuant to the provisions of Section 17A of
the
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Exchange Act. The Depositary was created to hold securities of its
participants (Participants) and to facilitate the clearance and settlement
of securities transactions among its Participants in these securities
through electronic book-entry changes in accounts of the Participants,
thereby eliminating the need for physical movement of securities
certificates. The Depositary's Direct Participants (Direct Participants)
include securities brokers and dealers (including the Agents), banks, trust
companies, clearing corporations and certain other organizations, some of
whom (and/or their representatives) own the Depositary. Persons who are not
Participants may beneficially own securities held by the Depositary only
through Participants.
The Depositary is owned by a number of its Direct Participants and by the
New York Stock Exchange, Inc., the American Stock Exchange LLC, and the
National Association of Securities Dealers, Inc. Access to the Depositary's
system is also available to others including securities brokers and dealers,
banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly
(Indirect Participants). The rules applicable to the Depositary and its
Participants are on file with the SEC.
Purchases of Book-Entry Notes under the Depositary's system must be made
by or through Direct Participants, which will receive a credit for the
applicable Book-Entry Notes on the Depositary's records. The ownership
interest of each actual purchaser of each Book-Entry Note represented by a
global security (Beneficial Owner) is in turn to be recorded on the records
of Direct Participants and Indirect Participants. Beneficial Owners will not
receive written confirmation from the Depositary of their purchase, but
Beneficial Owners are expected to receive written confirmations providing
details of the transaction, as well as periodic statements of their
holdings, from the Direct Participants or Indirect Participants through
which the Beneficial Owner entered into the transaction. Transfers of
ownership interests in Book-Entry Notes are to be accomplished by entries
made on the books of Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificated Notes representing their
ownership interests therein, except in the event that use of the book-entry
system for the Book-Entry Notes is discontinued.
To facilitate subsequent transfers, all global securities representing
Book-Entry Notes which are deposited with, or on behalf of, the Depositary
are registered in the name of Cede & Co. The deposit of global securities
with, or on behalf of, the Depositary and their registration in the name of
Cede & Co. effect no change in beneficial ownership. The Depositary has no
knowledge of the actual Beneficial Owners; the Depositary's records reflect
only the identity of the Direct Participants to whose accounts the Book-
Entry Notes are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings
on behalf of their customers.
Conveyance of notices and other communications by the Depositary to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by
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arrangements among them, subject to any statutory or regulatory requirements
as may be in effect from time to time.
Neither the Depositary nor Cede & Co. will consent or vote with respect to
the global securities representing the Book-Entry Notes. Under its usual
procedures, the Depositary mails an Omnibus Proxy to the Company as soon as
possible after the applicable record date. The Omnibus Proxy assigns Cede &
Co.'s consenting or voting rights to those Direct Participants to whose
accounts the Book-Entry Notes are credited on the applicable record date
(identified in a listing attached to the Omnibus Proxy).
Principal, any premium and interest payments on the global securities
representing the Book-Entry Notes will be made in immediately available
funds to the Depositary. The Depositary's practice is to credit Direct
Participants' accounts on the applicable payment date in accordance with
their respective holdings shown on the Depositary's records unless the
Depositary has reason to believe that it will not receive payment on that
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 the Participant and not
of the Depositary, the Trustee or the Company, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
principal, any premium and/or interest to the Depositary is the
responsibility of the Company and the Trustee, disbursement of the payments
to Direct Participants shall be the responsibility of the Depositary, and
disbursement of the payments to the Beneficial Owners shall be the
responsibility of Direct Participants and Indirect Participants.
If applicable, redemption notices shall be sent to Cede & Co. If less than
all of the Book-Entry Notes of like tenor and terms are being redeemed, the
Depositary's practice is to determine by lot the amount of the interest of
each Direct Participant in the affected issue to be redeemed.
A Beneficial Owner shall give notice of any option to elect to have its
Book-Entry Notes repaid by the Company, through its Participant, to the
Trustee, and shall effect delivery of the Book-Entry Notes to be repaid by
causing the Direct Participant to transfer the Participant's interest in the
Book-Entry Notes, on the Depositary's records, to the Trustee. The
requirement for physical delivery of Book-Entry Notes in connection with a
demand for repayment will be deemed satisfied when the ownership rights in
the global security or securities representing the applicable Book-Entry
Notes are transferred by Direct Participants on the Depositary's records.
According to the Depositary, the information in the preceding paragraphs
with respect to the Depositary has been provided to the Industry for
informational purposes only and is not intended to serve as a
representation, warranty, or contract modification of any kind.
The Depositary may discontinue providing its services as securities
depository with respect to the Book-Entry Notes at any time by giving
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reasonable notice to the Company or the Trustee. In the event that a
successor securities depository is not obtained, certificated Notes are
required to be printed and delivered. The Company may decide to discontinue
use of the system of book-entry transfers through the Depositary (or a
successor securities depository). In that event, certificated Notes will be
printed and delivered. Unless otherwise specified in the applicable pricing
supplement, Notes issued in this manner in certificated form will be issued
in denominations of U.S. $1,000 and integral multiples of U.S. $1,000 in
excess thereof and will be issued in registered form only, without coupons.
The information in this section concerning the Depositary and the
Depositary's system has been obtained from sources that the Company believes to
be reliable, but neither the Company nor any Agent takes any responsibility for
the accuracy thereof.
The Trustee
The trustee under the Senior Indenture is The Chase Manhattan Bank. The Chase
Manhattan Bank is also the property and guarantee trustee for Dominion
Resources Capital Trust I, Dominion Resources Capital Trust II and Dominion
Resources Capital Trust III and the trustee under the indenture related to our
Junior Subordinated Debentures. The Chase Manhattan Bank also serves as trustee
under other indentures pursuant to which securities of certain of Dominion's
affiliates are outstanding.
Listing
The Notes will not be listed on any national or regional securities exchange.
Limitations on Liens
While any of the Notes are outstanding, we are not permitted to create liens
upon any Principal Property (as defined below) or upon any shares of stock of
any Material Subsidiary (as defined below), which we now own or own in the
future, to secure any of our debt, unless at the same time we provide that the
Notes will also be secured by that lien on an equal and ratable basis. However,
we are generally permitted to create the following types of liens:
(1) purchase money liens on future property acquired by us; liens of any kind
existing on property or shares of stock at the time they are acquired by us;
conditional sales agreements and other title retention agreements on future
property acquired by us (as long as none of those liens cover any of our other
properties);
(2) liens on our property or any shares of stock of any Material Subsidiary
that exists as of the date the Notes are first issued; liens on the shares of
stock of any corporation, which liens existed at the time that corporation
became a Material Subsidiary; certain liens typically incurred in the ordinary
course of business;
(3) liens in favor of the United States (or any State), any foreign country
or any department, agency or instrumentality or political subdivision of those
jurisdictions, to secure payments pursuant to any contract or statute or to
secure any debt incurred for the purpose of financing the purchase price or the
cost of constructing or improving the property subject to those liens,
including, for example, liens to secure debt of the pollution control or
industrial revenue bond type;
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(4) debt that we may issue in connection with a consolidation or merger of
Dominion or any Material Subsidiary with or into any other company (including
any of our affiliates or Material Subsidiaries) in exchange for secured debt of
that company (Third Party Debt) as long as that debt (i) is secured by a
mortgage on all or a portion of the property of that company, (ii) prohibits
secured debt from being incurred by that company, unless the Third Party Debt
is secured on an equal and ratable basis or (iii) prohibits secured debt from
being incurred by that company;
(5) debt of another company that we must assume in connection with a
consolidation or merger of that company, with respect to which any of our
property is subjected to a lien;
(6) liens on any property that we acquire, construct, develop or improve
after the date the Notes are first issued that are created before or within 18
months after the acquisition, construction, development or improvement of the
property and secure the payment of the purchase price or related costs;
(7) liens in favor of Dominion, our Material Subsidiaries or our wholly-owned
subsidiaries;
(8) the replacement, extension or renewal of any lien referred to above in
clauses (1) through (7) as long as the amount secured by the liens or the
property subject to the liens is not increased; and
(9) any other lien not covered by clauses (1) through (8) above as long as
immediately after the creation of the lien the aggregate principal amount of
debt secured by all liens created or assumed under this clause (9) does not
exceed 10% of our common shareholder's equity.
When we use the term "lien" in this section, we mean any mortgage, lien,
pledge, security interest or other encumbrance of any kind; "Material
Subsidiary" means each of our subsidiaries (excluding Dominion Capital, Inc.)
whose total assets (as determined in accordance with GAAP) represent at least
20% of Dominion's total assets on a consolidated basis; and "Principal
Property" means any of Dominion's plants or facilities located in the United
States that in the opinion of our Board of Directors or management is of
material importance to the business conducted by Dominion and our consolidated
subsidiaries taken as whole.
SPECIAL PROVISIONS RELATING TO NOTES DENOMINATED IN A SPECIFIED CURRENCY OTHER
THAN U.S. DOLLARS
General
Unless otherwise specified in the applicable pricing supplement, Notes
denominated in a Specified Currency other than U.S. dollars will not be sold
in, or to residents of, the country issuing the Specified Currency. The
information set forth in this prospectus is directed to prospective purchasers
who are United States residents and, with respect to Notes denominated in a
Specified Currency other than U.S. dollars, is by necessity incomplete. The
Company and the Agents disclaim any responsibility to advise prospective
purchasers who are residents of countries other than the United States with
respect to any matters that may affect the purchase, holding or receipt of
payments of principal, any premium and interest on Notes denominated in a
Specified Currency other than U.S. dollars. These persons should consult their
own financial and legal
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advisors with regard to these matters. See RISK FACTORS and IMPORTANT CURRENCY
INFORMATION.
Payment of Principal, Premium and Interest
Unless otherwise specified in the applicable pricing supplement, the Company
is obligated to make payments of principal, any premium and interest on a Note
in the Specified Currency. Any amounts payable by the Company in a Specified
Currency other than U.S. dollars will be converted by the Exchange Rate Agent
into U.S. dollars for payment to Holders unless otherwise specified in the
applicable pricing supplement or the Holder of the Note elects, in the manner
described below, to receive those amounts in the Specified Currency.
The U.S. dollar amount to be received by a Holder of a Note denominated in a
Specified Currency other than U.S. dollars who does not elect to receive one or
more payments of principal, any premium and interest in the Specified Currency
will be based on a bid quotation in New York City received by the Exchange Rate
Agent as of 11:00 A.M., New York City time, on the second Business Day
preceding the applicable payment date from a recognized foreign exchange dealer
(which may be the Exchange Rate Agent) for the purchase by the quoting dealer
of the Specified Currency for U.S. dollars for settlement on the applicable
payment date in the aggregate amount of the U.S. dollars payable to all Holders
of Notes scheduled to receive U.S. dollar payments and at which the applicable
dealer commits to execute a contract. If a bid quotation is not available,
payments will be made in the Specified Currency. All currency exchange costs in
respect of any payment will be borne by the Holder of the Note to which the
payment relates by deduction from that payment.
The Holder of a Note denominated in a Specified Currency other than U.S.
dollars may elect to receive payment of the principal, any premium and interest
on the Note in the Specified Currency by transmitting a written request for
payment to the Trustee at its Corporate Trust Office in New York City on or
prior to the Regular Record Date or at least 16 calendar days prior to the
Maturity Date. The written request may be mailed or hand delivered or sent by
cable, telex or other form of facsimile transmission. The Holder of a Note
denominated in a Specified Currency other than U.S. dollars may elect to
receive payment in the Specified Currency for all principal any premium and
interest payments and need not file a separate election for each payment. This
election will remain in effect until the Note is transferred or until the
election is changed by written notice to the Trustee, but written notice of any
change must be received by the Trustee on or prior to the Record Date or at
least 16 calendar days prior to the Maturity Date. Holders of Notes denominated
in a Specified Currency other than U.S. dollars whose Notes are to be held in
the name of a broker or nominee should contact that broker or nominee to
determine whether and how an election to receive payments in U.S. dollars may
be made.
Unless otherwise specified in the applicable pricing supplement, if the
Specified Currency is other than U.S. dollars, a Beneficial Owner which elects
to receive payments of principal, any premium and/or interest in the Specified
Currency must notify the Participant through which it
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owns its interest on or prior to the applicable Record Date or at least 15
calendar days prior to the Maturity Date, as the case may be, of its election.
The applicable Participant must notify the Depositary of the election on or
prior to the third Business Day after the applicable Record Date or at least 12
calendar days prior to the Maturity Date, as the case may be, and the
Depositary will notify the Trustee of the election on or prior to the fifth
Business Day after the Record Date or at least 10 calendar days prior to the
Maturity Date, as the case may be. If complete instructions are received by the
Participant from the Beneficial Owner and forwarded by the Participant to the
Depositary, and by the Depositary to the Trustee, on or prior to the applicable
dates, then the affected Beneficial Owner will receive payments in the
Specified Currency.
In order for a Holder of a Note who has elected to receive payments of
principal, any premium and interest in a Specified Currency other than U.S.
dollars to receive payments by wire transfer, the Holder must designate an
appropriate account with a bank located in the country of the Specified
Currency. The designation should be made by filing the appropriate information
with the Trustee at its Corporate Trust Office in New York City on or prior to
the Record Date for an Interest Payment Date or at least 16 calendar days prior
to the Maturity Date or in connection with any transfer after the 16th day.
Until the Note is transferred or until the Trustee receives notice to the
contrary, the Trustee will make the payments to the Holder by wire transfer to
the designated account. If a payment cannot be made by wire transfer because
the required information has not been received by the Trustee on or before the
requisite date, a notice will be mailed to the Holder at its registered address
requesting the relevant information, and no payment will be made until a
designation is made. The Company will pay any administrative costs imposed by
banks in connection with making wire transfers of payments, but any tax,
assessment, governmental or other charges imposed upon the payments will be
borne by the Holder of the Note in respect of which the payment is made and
deducted from the payment.
Availability of Specified Currency
If the Specified Currency for a Note denominated in a Specified Currency
other than U.S. dollars is not available for the required payment of principal,
any premium and/or interest in respect thereof due to the imposition of
exchange controls or other circumstances beyond the control of the Company, the
Company will be entitled to satisfy its obligations to the Holder of the Note
by making the payment in U.S. dollars on the basis of the Market Exchange Rate,
computed by the Exchange Rate Agent, on the second Business Day prior to
payment or, if the Market Exchange Rate is not then available, on the basis of
the most recently available Market Exchange Rate, or as otherwise specified in
the applicable pricing supplement.
The Market Exchange Rate for a Specified Currency other than U.S. dollars
means the noon dollar buying rate in The City of New York for cable transfers
for the Specified Currency as certified for customs purposes (or, if not so
certified, as otherwise determined) by the Federal Reserve Bank of New York.
Any payment made in U.S. dollars under those circumstances where the required
payment is in a Specified Currency other than U.S. dollars will not constitute
an Event of
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Default under the Indenture with respect to the Notes.
All determinations referred to above made by the Exchange Rate Agent shall be
at its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on the Holders of Notes denominated in
a Specified Currency other than U.S. dollars. See RISK FACTORS and IMPORTANT
CURRENCY INFORMATION.
Judgments
Under current New York law, a state court in the State of New York rendering
a judgment in respect of a Note denominated in a Specified Currency other than
U.S. dollars would be required to render the judgment in the Specified
Currency, and the judgment would be converted into U.S. dollars at the exchange
rate prevailing on the date of entry of the judgment. Accordingly, the Holder
of the Note would be subject to exchange rate fluctuations between the date of
entry of a judgment in a foreign currency and the time the amount of the
foreign currency judgment is paid to the Holder in U.S. dollars and converted
by the Holder into the Specified Currency. It is not certain, however, whether
a non-New York state court would follow the same rules and procedures with
respect to conversions of foreign currency judgments.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion represents the opinion of McGuireWoods, LLP, counsel
to the Company, regarding certain United States Federal income tax consequences
of the purchase, ownership and disposition of the Notes. This discussion is
based upon laws, regulations, rulings and decisions now in effect, all of which
are subject to change possibly with retroactive effect or possible differing
interpretations. This discussion deals only with Notes held as capital assets
by original purchasers who are U.S. Holders (as defined below) and does not
purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, tax-exempt organizations regulated
investment companies, dealers in securities or currencies, traders in
securities that elect to use a mark-to-market method of accounting for
securities holdings, persons holding Notes as a hedge or that are hedged
against interest rate or against currency risks or as a position in a straddle
for tax purposes, or persons whose functional currency is not the United States
dollar.
Persons considering the purchase of the Notes should consult their own tax
advisors concerning the application of United States federal income tax laws to
their particular situations as well as any consequences of the purchase,
ownership and disposition of the Notes arising under the laws of any other
taxing jurisdiction.
As used herein, the term U.S. Holder means a beneficial owner of a Note that
is for United States federal income tax purposes (i) a citizen or resident of
the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States, any state thereof or the
District of Columbia (other than a partnership that is not treated as a United
States person under any applicable Treasury regulations), (iii) an estate whose
income is subject to United States federal income tax regardless of its source
or (iv) a trust if a court within the
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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. Notwithstanding the preceding
clause (iv), to the extent provided in regulations, certain trusts in existence
on August 20, 1996 and treated as United States persons prior to that date that
elect to continue to be so treated also shall be considered U.S. Holders. As
used herein, the term non-U.S. Holder means a beneficial owner of a Note that
is not a U.S. Holder.
Payments of Interest
Except as provided below under Original Issue Discount, payments of interest
on a Note generally will be taxable to a U.S. Holder as ordinary interest
income at the time the payments are accrued or are received (in accordance with
the U.S. Holder's regular method of tax accounting).
Original Issue Discount
Certain Notes may be issued with original issue discount (Original Issue
Discount) within the meaning of section 1273(a) of the Internal Revenue Code of
1986, as amended (the Code). The following summary is a general discussion of
the United States federal income tax consequences to U.S. Holders of the
purchase, ownership and disposition of Notes issued with original issue
discount. The following summary is based upon final Treasury regulations (the
OID Regulations) released by the Internal Revenue Service (IRS) under the
original issue discount provisions of the Code.
For United States federal income tax purposes, original issue discount is the
excess of the stated redemption price at maturity of a Note over its issue
price, if the excess equals or exceeds a de minimis amount (generally 1/4 of 1%
of the Note's stated redemption price at maturity multiplied by the number of
complete years to its maturity from its issue date or, in the case of a Note
providing for the payment of any amount other than qualified stated interest
(as defined below) prior to maturity, multiplied by the weighted average
maturity of that Note). The issue price of each Note in an issue of Notes
equals the first price at which a substantial amount of the Notes of that issue
has been sold (ignoring sales 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 of a Note is the sum of
all payments provided by the Note other than qualified stated interest
payments. The term qualified stated interest generally means stated interest
that is unconditionally payable in cash or property (other than debt
instruments of the issuer) at least annually at a single fixed rate. In
addition, under the OID Regulations, if a Note bears interest for one or more
accrual periods at a rate below the rate applicable for the remaining term of
that Note (e.g., Notes with teaser rates or interest holidays), and if the
greater of either the resulting foregone interest on that Note or any "true"
discount on that Note (i.e., the excess of the Note's stated principal amount
over its issue price) equals or exceeds a specified de minimis amount, then the
stated interest on the Note would be treated as original issue discount rather
than qualified stated interest.
Payments of qualified stated interest on a Note are taxable to a U.S. Holder
as ordinary interest income at the time the payments are accrued or are
received (in accordance with the U.S. Holder's regular
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method of tax accounting). A U.S. Holder of an Original Issue Discount Note
must include original issue discount in income as ordinary interest for United
States federal income tax purposes as it accrues under a constant yield method
in advance of receipt of the cash payments attributable to that income,
regardless of the U.S. Holder's regular method of tax accounting. In general,
the amount of original issue discount included in income by the initial U.S.
Holder of an Original Issue Discount Note is the sum of the daily portions of
original issue discount with respect to the Original Issue Discount Note for
each day during the taxable year (or portion of the taxable year) on which the
U.S. Holder held the Original Issue Discount Note. The daily portion of
original issue discount on any Original Issue Discount Note is determined by
allocating to each day in any accrual period a ratable portion of the original
issue discount allocable to that accrual period. An accrual period may be of
any length and the accrual periods may vary in length over the term of the
Original Issue Discount Note, provided that each accrual period is no longer
than one year and each scheduled payment of principal or interest occurs either
on the final day of an accrual period or on the first day of an accrual period.
The amount of original issue discount allocable to each accrual period is
generally equal to the difference between (i) the product of the Original Issue
Discount Note's adjusted issue price at the beginning of the applicable accrual
period and its yield to maturity (determined on the basis of compounding at the
close of each accrual period and appropriately adjusted to take into account
the length of the particular accrual period) and (ii) the amount of any
qualified stated interest payments allocable to the applicable accrual period.
The adjusted issue price of an Original Issue Discount Note at the beginning of
any accrual period is the sum of the issue price of the Original Issue Discount
Note plus the amount of original issue discount allocable to all prior accrual
periods minus the amount of any prior payments on the Original Issue Discount
Note that were not qualified stated interest payments. Under these rules, U.S.
Holders generally will have to include in income increasingly greater amounts
of original issue discount in successive accrual periods.
A U.S. Holder who purchases an Original Issue Discount Note for an amount
that is greater than its adjusted issue price as of the purchase date and less
than or equal to the sum of all amounts payable on the Original Issue Discount
Note after the purchase date other than payments of qualified stated interest,
will be considered to have purchased the Original Issue Discount Note at an
acquisition premium. Under the acquisition premium rules, the amount of
original issue discount which the U.S. Holder generally must include in its
gross income with respect to the Original Issue Discount Note for any taxable
year (or portion thereof in which the U.S. Holder holds the Original Issue
Discount Note) will be reduced (but not below zero) by the portion of the
acquisition premium properly allocable to the period.
Under the OID Regulations, Floating Rate Notes and Indexed Notes (Variable
Notes) are subject to special rules whereby a Variable Note will qualify as a
variable rate debt instrument if, among other things, (a) its issue price does
not exceed the total noncontingent principal payments due under the Variable
Note by more than a specified de minimis amount and (b) it provides for stated
interest, paid or
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compounded at least annually, at current values of (i) one or more qualified
floating rates, (ii) a single fixed rate and one or more qualified floating
rates, (iii) a single objective rate, or (iv) a single fixed rate and a single
objective rate that is a qualified inverse floating rate.
A qualified floating rate is any variable rate where 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 Variable Note is
denominated. Although a multiple of a qualified floating rate will generally
not itself constitute a qualified floating rate, a variable rate equal to the
product of a qualified floating rate and a fixed multiple that is greater than
.65 but not more than 1.35 will constitute a qualified floating rate. A
variable rate equal to the product of a qualified floating rate and a fixed
multiple that is greater than .65 but not more than 1.35, increased or
decreased by a fixed rate, will also constitute a qualified floating rate. In
addition, under the OID Regulations, two or more qualified floating rates that
can reasonably be expected to have approximately the same values throughout the
term of the Variable Note (e.g., two or more qualified floating rates with
values within 25 basis points of each other as determined on the Variable
Note's issue date) will be treated as a single qualified floating rate.
Notwithstanding the foregoing, a variable rate that would otherwise constitute
a qualified floating rate but which is subject to one or more restrictions such
as a maximum numerical limitation (i.e., a cap) or a minimum numerical
limitation (i.e., a floor) may, under certain circumstances, fail to be treated
as a qualified floating rate under the OID Regulations unless the cap or floor
is fixed throughout the term of the Note or is not reasonably expected to
affect significantly the yield on the note. An objective rate is a rate that is
not itself a qualified floating rate but which is determined using a single
fixed formula and that is based on objective financial or economic information.
A rate will not qualify as an objective rate if it is based on information that
is within the control of the issuer (or a related party) or that is unique to
the circumstances of the issuer (or a related party), such as dividends,
profits, or the value of the issuer's stock (although a rate does not fail to
be an objective rate merely because it is based on the credit quality of the
issuer). A qualified inverse floating rate is any objective rate where the rate
is equal to a fixed rate minus a qualified floating rate, as long as variations
in the rate can reasonably be expected to inversely reflect contemporaneous
variations in the qualified floating rate.
The OID Regulations also provide that if a Variable Note provides for stated
interest at a fixed rate for an initial period of one year or less followed by
a variable rate that is either a qualified floating rate or an objective rate
and if the variable rate on the Variable Note's issue date is intended to
approximate the fixed rate (e.g., the value of the variable rate on the issue
date does not differ from the value of the fixed rate by more than 25 basis
points), then the fixed rate and the variable rate together will constitute
either a single qualified floating rate or objective rate, as the case may be.
If a Variable Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
qualifies as a variable rate debt instrument under the OID Regulations and if
the interest on the Note is unconditionally payable in cash or
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property (other than debt instruments of the issuer) at least annually, then
all stated interest on the Note will constitute qualified stated interest and
will be taxed accordingly. Thus, a Variable Note that provides for stated
interest at either a single qualified floating rate or a single objective rate
throughout the term thereof and that qualifies as a variable rate debt
instrument under the OID Regulations will generally not be treated as having
been issued with original issue discount unless the Variable Note is issued at
a "true" discount (i.e., at a price below the Note's stated principal amount)
in excess of a specified de minimis amount. The amount of qualified stated
interest and the amount of original issue discount, if any, that accrues during
an accrual period on a Variable Note is determined under the rules applicable
to fixed rate debt instruments by assuming that the variable rate is a fixed
rate equal to (i) 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 (ii) in the case of an objective rate
(other than a qualified inverse floating rate), a fixed rate that reflects the
yield that is reasonably expected for the Variable Note. The qualified stated
interest allocable to an accrual period is increased (or decreased) if the
interest actually paid during an accrual period exceeds (or is less than) the
interest assumed to be paid during the accrual period pursuant to the foregoing
rules.
In general, any other Variable 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 original issue discount
and qualified stated interest on this type of Variable Note. The OID
Regulations generally require that a Variable Note be converted into an
"equivalent" fixed rate debt instrument by substituting any qualified floating
rate or qualified inverse floating rate provided for under the terms of that
Variable Note with a fixed rate equal to the value of the qualified floating
rate or qualified inverse floating rate, as the case may be, as of the Variable
Note's issue date. Any objective rate (other than a qualified inverse floating
rate) provided for under the terms of the Variable Note is converted into a
fixed rate that reflects the yield that is reasonably expected for the Variable
Note. In the case of a Variable Note that qualifies as a variable rate debt
instrument and provides for stated interest at a fixed rate in addition to
either one or more qualified floating rates or a qualified inverse floating
rate, the fixed rate generally is initially converted into a qualified floating
rate (or a qualified inverse floating rate, if the Variable Note provides for a
qualified inverse floating rate). Under these circumstances, the qualified
floating rate or qualified inverse floating rate that replaces the fixed rate
must be a figure so that the fair market value of the Variable Note as of the
Variable Note's issue date is approximately the same as the fair market value
of an otherwise identical debt instrument that provides for either the
qualified floating rate or qualified inverse floating rate rather than the
fixed rate. Subsequent to converting the fixed rate into either a qualified
floating rate or a qualified inverse floating rate, the Variable Note is then
converted into an "equivalent" fixed rate debt instrument in the manner
described above. Once the Variable Note is converted into an "equivalent" fixed
rate debt instrument pursuant to the foregoing rules, the amount of original
issue discount and qualified stated interest, if any, are determined for the
"equivalent" fixed rate
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debt instrument by applying the general original issue discount rules to the
"equivalent" fixed rate debt instrument and a U.S. Holder of the Variable Note
will account for the original issue discount and qualified stated interest as
if the U.S. Holder held the "equivalent" fixed rate debt instrument.
Appropriate adjustments will be made for each accrual period to the amount of
qualified stated interest or original issue discount assumed to have been
accrued or paid with respect to the "equivalent" fixed rate debt instrument in
the event that those amounts differ from the actual amount of interest accrued
or paid on the Variable Note during the accrual period.
If a Variable Note does not qualify as a variable rate debt instrument under
the OID Regulations, then the Variable Note would be treated as a contingent
payment debt obligation. U.S. Holders should be aware that on June 11, 1996,
the Treasury Department issued final regulations (the CPDI Regulations)
concerning the proper United States federal income tax treatment of contingent
payment debt instruments. In general, the CPDI Regulations would cause the
timing and character of income, gain or loss reported on a contingent payment
debt instrument to substantially differ from the timing and character of
income, gain or loss reported on a contingent payment debt instrument under
general principles of current United States federal income tax law. The CPDI
Regulations generally require a U.S. Holder of this type of instrument to
include future contingent and noncontingent interest payments in income as the
interest accrues based upon a projected payment schedule with adjustments for
differences between actual and projected contingent payments. Moreover, in
general, under the CPDI Regulations, any gain recognized by a U.S. Holder on
the sale, exchange, or retirement of a contingent payment debt instrument will
be treated as ordinary income and all or a portion of any loss realized could
be treated as ordinary loss as opposed to capital loss (depending upon the
circumstances). The CPDI Regulations apply to debt instruments issued on or
after August 13, 1996. The proper United States federal income tax treatment of
any Variable Notes that are treated as contingent payment debt obligations will
be more fully described in the applicable pricing supplement. Furthermore, any
other special United States federal income tax considerations, not otherwise
discussed herein, which are applicable to any particular issue of Notes will be
discussed in the applicable pricing supplement.
Certain of the Notes (i) may be redeemable at the option of the Company prior
to their Stated Maturity Date (a call option) and/or (ii) may be repayable at
the option of the holder prior to their Stated Maturity Date (a put option).
Notes containing these features may be subject to rules that differ from the
general rules discussed above. Investors intending to purchase Notes with these
features should consult their own tax advisors, since the original issue
discount consequences will depend, in part, on the particular terms and
features of the purchased Notes.
U.S. Holders may generally, upon election, include in income all interest
(including stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount,
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium) that accrues on a debt instrument by using the constant
yield method
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applicable to original issue discount, subject to certain limitations and
exceptions.
Short-Term Notes
In general, an individual or other cash method U.S. Holder is not required to
accrue original issue discount on Notes that have a fixed maturity of one year
or less (Short-Term Notes) unless the U.S. Holder elects to do so. If the
election is not made, any gain recognized by the U.S. Holder on the sale,
exchange or maturity of the Short-Term Note will be ordinary income to the
extent of the original issue discount accrued on a straight-line basis, or upon
election under the constant yield method (based on daily compounding), through
the date of sale, exchange or maturity, and a portion of the deductions
otherwise allowable to the U.S. Holder for interest on borrowings allocable to
the Short-Term Note will be deferred until a corresponding amount of income is
realized. U.S. Holders who report income for United States federal income tax
purposes under the accrual method, and certain other holders including banks
and dealers in securities, are required to accrue original issue discount on a
Short-Term Note on a straight-line basis unless an election is made to accrue
the original issue discount under a constant yield method (based on daily
compounding).
Market Discount
If a U.S. Holder purchases a Note, other than an Original Issue Discount
Note, for an amount that is less than its stated redemption price at maturity)
or, in the case of an Original Issue Discount Note, for an amount that is less
than its revised issue price as of the purchase date, the U.S. Holder will be
treated as having purchased the Note at a market discount, unless the market
discount is less than a specified de minimis amount.
Under the market discount rules, a U.S. Holder will be required to treat any
partial principal payment (or, in the case of an Original Issue Discount Note,
any payment that does not constitute qualified stated interest) on, or any gain
realized on the sale, exchange, retirement or other disposition of, a Note as
ordinary income to the extent of the lesser of (i) the amount of the payment or
realized gain or (ii) the market discount which has not previously been
included in income and is treated as having accrued on the Note at the time of
the payment or disposition. Market discount will be considered to accrue
ratably during the period from the date of acquisition to the maturity date of
the Note, unless the U.S. Holder elects to accrue market discount on the basis
of semiannual compounding. A U.S. Holder may be required to defer the deduction
of all or a portion of the interest paid or accrued on any indebtedness
incurred or maintained to purchase or carry a Note with market discount until
the maturity of the Note or certain earlier dispositions, because a current
deduction is only allowed to the extent the interest expense exceeds an
allocable portion of market discount. A U.S. Holder may elect to include market
discount in income currently as it accrues (on either a ratable or semiannual
compounding basis), in which case the rules described above regarding the
treatment as ordinary income of gain upon the disposition of the Note and upon
the receipt of certain cash payments and regarding the deferral of interest
deductions will not apply. Generally, this currently included market discount
is treated as ordinary interest for United States federal income tax purposes.
This election will apply to all
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debt instruments acquired by the U.S. Holder on or after the first day of the
first taxable year to which the election applies and may be revoked only with
the consent of the IRS.
Premium
If a U.S. Holder purchases a Note for an amount that is greater than the sum
of all amounts payable on the Note after the purchase date other than payments
of qualified stated interest, the U.S. Holder will be considered to have
purchased the Note with amortizable bond premium equal in amount to the excess.
A U.S. Holder may elect to amortize the premium using a constant yield method
over the remaining term of the Note and may offset interest otherwise required
to be included in respect of the Note during any taxable year by the amortized
amount of the excess for the taxable year. However, if the Note may be
optionally redeemed after the U.S. Holder acquires it at a price in excess of
its stated redemption price at maturity, special rules would apply which could
result in a deferral of the amortization of some bond premium until later in
the term of the Note. Any election to amortize bond premium applies to all
taxable debt instruments acquired by the U.S. Holder on or after the first day
of the first taxable year to which the election applies and may be revoked only
with the consent of the IRS.
Disposition of a Note
Except as discussed above, upon the sale, exchange or retirement of a Note, a
U.S. Holder generally will recognize taxable gain or loss equal to the
difference between the amount realized on the sale, exchange or retirement
(other than amounts representing accrued and unpaid interest) and the U.S.
Holder's adjusted tax basis in the Note. A U.S. Holder's adjusted tax basis in
a Note generally will equal the U.S. Holder's initial investment in the Note
increased by any original issue discount included in income (and accrued market
discount, if any, if the U.S. Holder has included that market discount in
income) and decreased by the amount of any payments, other than qualified
stated interest payments, received and amortizable bond premium taken with
respect to the Note. This gain or loss generally will be long-term capital gain
or loss if the Note were held for more than one year. Non-corporate taxpayers
are subject to reduced maximum rates on long-term capital gains and are
generally subject to tax at ordinary income rates on net short-term capital
gains. The deductibility of capital losses is subject to certain limitations.
Prospective investors should consult their own tax advisors concerning these
tax law provisions.
Notes Payable in a Currency other than U.S. Dollars
Cash Method
A U.S. Holder who uses the cash method of accounting for United States
federal income tax purposes and who receives a payment of interest on a Note
(other than original issue discount or market discount) will be required to
include in income the U.S. dollar value of the foreign currency payment
(determined on the date the payment is received) regardless of whether the
payment is in fact converted to U.S. dollars at that time, and the U.S. dollar
value will be the U.S. Holder's tax basis in the foreign currency.
S-43
Accrual Method
A U.S. Holder who uses the accrual method of accounting for United States
federal income tax purposes, or who otherwise is required to accrue interest
prior to receipt, will be required to include in income the U.S. dollar value
of the amount of interest income (including original issue discount or market
discount and reduced by amortizable bond premium to the extent applicable) that
has accrued and is otherwise required to be taken into account with respect to
a Note during an accrual period. The U.S. dollar value of the accrued income
will be determined by translating the income at the average rate of exchange
for the accrual period or, with respect to an accrual period that spans two
taxable years, at the average rate for the partial period within the taxable
year. A U.S. Holder may elect, however, to translate the accrued interest
income using the rate of exchange on the last day of the accrual period or,
with respect to an accrual period that spans two taxable years, using the rate
of exchange on the last day of the taxable year. If the last day of an accrual
period is within five business days of the date of receipt of the accrued
interest, a U.S. Holder may translate the interest using the rate of exchange
on the date of receipt. The above election will apply to all debt instruments
held by the U.S. Holder at the beginning of the taxable year to which the
election applies and to all debt instruments subsequently acquired by the U.S.
Holder. The election may not be changed without the consent of the IRS. A U.S.
Holder should consult a tax advisor before making the above election. A U.S.
Holder will recognize exchange gain or loss (which will be treated as ordinary
income or loss) with respect to accrued interest income on the date the income
is received (regardless of whether the payment is actually converted to U.S.
dollars). The amount of ordinary income or loss recognized will equal the
difference, if any, between the U.S. dollar value of the foreign currency
payment received (determined on the date the payment is received) in respect of
the applicable accrual period and the U.S. dollar value of interest income that
has accrued during the accrual period (as determined above).
Purchase, Sale and Retirement of Notes
A U.S. Holder who purchases a Note with previously owned foreign currency
will recognize ordinary income or loss in an amount equal to the difference, if
any, between the U.S. Holder's tax basis in the foreign currency and the U.S.
dollar fair market value of the foreign currency used to purchase the Note,
determined on the date of purchase.
Except as discussed above with respect to Short-Term Notes, upon the sale,
exchange or retirement of a Note, a U.S. Holder will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement and the U.S. Holder's adjusted tax basis in the Note. This gain
or loss generally will be capital gain or loss (except to the extent of any
accrued market discount not previously included in the U.S. Holder's income)
and will be long-term capital gain or loss if at the time of sale, exchange or
retirement the Note has been held by the U.S. Holder for more than one year. To
the extent the amount realized represents accrued but unpaid interest, however,
these amounts must be taken into account as interest income (to the extent not
previously taken into income under the accrual method), with exchange gain or
loss computed as described in "--Notes Payable In A
S-44
Currency Other Than U.S. Dollars--Accrual Method" above. If a U.S. Holder
receives foreign currency on this type of sale, exchange or retirement the
amount realized will be based on the U.S. dollar value of the foreign currency
on the date the payment is received or the Note is disposed of (or deemed
disposed of as a result of a material change in the terms of the Note),
depending on the U.S. Holder's method of accounting. In the case of a Note that
is denominated in foreign currency and is traded on an established securities
market, a cash basis U.S. Holder (or, upon election, an accrual basis U.S.
Holder) will determine the U.S. dollar value of the amount realized by
translating the foreign currency payment at the spot rate of exchange on the
settlement date of the sale. A U.S. Holder's adjusted tax basis in a Note
generally will equal the cost of the Note to that holder, increased by the
amounts of any market discount or original issue discount previously included
in income by the holder with respect to the Note and reduced by any amortized
acquisition or other premium and any principal payments received by the holder.
A U.S. Holder's tax basis in a Note, and the amount of any subsequent
adjustments to the holder's tax basis, will be the U.S. dollar value of the
foreign currency amount paid for the Note, or of the foreign currency amount of
the adjustment, determined on the date of the purchase or adjustment.
Gain or loss realized upon the sale, exchange or retirement of a Note that is
attributable to fluctuations in currency exchange rates will be ordinary income
or loss which will not be treated as interest income or expense. Gain or loss
attributable to fluctuations in exchange rates (exclusive of exchange gain or
loss, if any, with respect to accrued interest) will equal the difference
between the U.S. dollar value of the foreign currency principal amount of the
Note, determined on the date the payment is received or the Note is disposed
of, and the U.S. dollar value of the foreign currency principal amount of the
Note, determined on the date the U.S. Holder acquired the Note. Such foreign
currency gain or loss will be recognized only to the extent of the total gain
or loss realized by the U.S. Holder on the sale, exchange or retirement of the
Note.
Original Issue Discount
In the case of an Original Issue Discount Note or Short-Term Note,
(i) original issue discount is determined in units of the foreign currency,
(ii) accrued original issue discount is translated into U.S. dollars as
described in "--Notes Payable In A Currency Other Than U.S. Dollars--Accrual
Method" above and (iii) the amount of foreign currency gain or loss on the
accrued original issue discount is determined by comparing the amount of income
received attributable to the discount (either upon payment, maturity or an
earlier disposition), as translated into U.S. dollars at the rate of exchange
on the date of the receipt, with the amount of original issue discount accrued,
as translated above.
Premium and Market Discount
In the case of a Note with market discount, (i) market discount is determined
in units of the foreign currency, (ii) accrued market discount taken into
account upon the receipt of any partial principal payment or upon the sale,
exchange, retirement or other disposition of the Note (other than accrued
market discount required to be taken into account currently) is translated into
U.S. dollars at the exchange rate on the disposition date (and no part of the
accrued
S-45
market discount is treated as exchange gain or loss) and (iii) accrued market
discount currently includible in income by a U.S. Holder for any accrual period
is translated into U.S. dollars on the basis of the average exchange rate in
effect during the applicable accrual period, and the exchange gain or loss is
determined upon the receipt of any partial principal payment or upon the sale,
exchange, retirement or other disposition of the Note in the manner described
in "--Notes Payable In A Currency Other Than U.S. Dollars--Accrual Method"
above with respect to computation of exchange gain or loss on accrued interest.
With respect to a Note acquired with amortizable bond premium, the premium is
determined in the relevant foreign currency and reduces interest income in
units of the foreign currency. Although not entirely clear, a U.S. Holder
should recognize exchange gain or loss equal to the difference between the U.S.
dollar value of the bond premium amortized with respect to a period, determined
on the date the interest attributable to that period is received, and the U.S.
dollar value of the bond premium determined on the date of the acquisition of
the Note.
Exchange of Foreign Currencies
A U.S. Holder will have a tax basis in any foreign currency received as
interest or on the sale, exchange or retirement of a Note equal to the U.S.
dollar value of that foreign currency, determined at the time the interest is
received or at the time of the sale, exchange or retirement. Any gain or loss
realized by a U.S. Holder on a sale or other disposition of foreign currency
(including its exchange for U.S. dollars or its use to purchase Notes) will be
ordinary income or loss.
Backup Withholding
Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments made in respect of the Notes to registered owners who are not
exempt recipients and who fail to provide certain identifying information (such
as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the Notes to a U.S. Holder as well as the accrual of interest on
Original Issue Discount Notes, must generally be reported to the IRS, unless
the U.S. Holder is an exempt recipient.
In addition, upon the sale of a Note by a U.S. Holder to (or through) a
broker, the broker must withhold 31% of the entire purchase price, unless
either (i) the broker determines that the seller is a corporation or other
exempt recipient or (ii) the seller provides, in the required manner, certain
identifying information. This type of sale must also generally be reported by
the broker to the IRS, unless either the broker determines that the seller is
an exempt recipient.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against the
beneficial owner's United States federal income tax provided the required
information is furnished to the IRS.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuing basis for sale by the Company
through Merrill Lynch, Pierce, Fenner &
S-46
Smith Incorporated, Banc of America Securities LLC, Credit Suisse First Boston
Corporation, J.P. Morgan Securities Inc., Lehman Brothers Inc. and Morgan
Stanley & Co. Incorporated (the Agents), who have agreed to use their best
efforts to solicit purchases of the Notes.
The Agents, individually or in a syndicate, may purchase Notes, as principal,
from us from time to time for resale to investors and other purchasers at
varying prices relating to prevailing market prices at the time of resale as
determined by the applicable Agent or, if so specified in the applicable
pricing supplement, for resale at a fixed offering price. However, we may agree
with an Agent for that Agent to utilize its best efforts on an agency basis on
our behalf to solicit offers to purchase Notes at 100% of the principal amount
thereof, unless otherwise specified in the applicable pricing supplement. We
will pay a commission to an Agent, ranging from 0.125% to 0.750% of the
principal amount of each Note, depending upon its stated maturity, sold through
that Agent as our agent. We will negotiate commissions with respect to Notes
with stated maturities in excess of 30 years that are sold through an Agent as
our agent at the time of the related sale.
In addition, we estimate our expenses incurred in connection with the
offering and sale of the Notes, including reimbursement of certain of the
Agents' expenses, will total approximately $150,000.
Unless otherwise specified in the applicable pricing supplement, any Note
sold to an Agent as principal will be purchased by that Agent at a price equal
to 100% of the principal amount thereof less a percentage of the principal
amount equal to the commission applicable to an agency sale of a Note of
identical maturity. An Agent may sell Notes it has purchased from us as
principal to certain dealers less a concession equal to all or any portion of
the discount received in connection with that purchase. An Agent may allow, and
dealers may reallow, a discount to certain other dealers. After the initial
offering of Notes, the offering price (in the case of Notes to be resold on a
fixed offering price basis), the concession and the reallowance may be changed.
The Company reserves the right to withdraw, cancel or modify the offering of
Notes at any time without notice and may reject orders in whole or in part
whether placed directly with the Company or through the Agents. Each Agent will
have the right, exercisable in its reasonable discretion, to reject any
proposed purchase of Notes in whole or in part.
The Notes are a new issue of securities with no established trading market.
The Notes will not be listed on any national or regional securities exchange.
The Agents have informed the Company that they intend to make a market in the
Notes, but are under no obligation to do so and any Agent may cease making a
market in the Notes at any time. Therefore, no assurance can be given that a
trading market for the Notes will exist in the future.
In connection with an offering of Notes purchased by one or more Agents as
principal on a fixed offering price basis, the applicable Agent(s) will be
permitted to engage in certain transactions that stabilize the price of Notes.
These transactions may consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of Notes. If the Agent creates or the Agents
create, as the case may be, a short position
S-47
in Notes, i.e., if it sells or they sell Notes in an aggregate principal amount
exceeding that set forth in the applicable pricing supplement, the applicable
Agent(s) may reduce that short position by purchasing Notes in the open market.
In general, purchases of Notes for the purpose of stabilization or to reduce a
short position could cause the price of Notes to be higher than it might be in
the absence of those purchases.
Neither the Company nor any of the Agents makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described in the immediately preceding paragraph may have on the price of
Notes. In addition, neither the Company nor any of the Agents makes any
representation that the Agents will engage in any stabilizing transactions or
that these transactions, once commenced, will not be discontinued without
notice.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933. The Company has agreed to indemnify the Agents against
certain liabilities, including liabilities under the Securities Act of 1933, or
to contribute to payments the Agents may be required to make in respect
thereof. The Company has agreed to reimburse the Agents for certain other
expenses.
Each of the Agents from time to time has acted as a financial advisor to the
Company and has underwritten certain of the Company's public securities
offerings, and may do so in the future.
Some of the Agents or their affiliates hold and may in the future hold our
commercial paper and may receive a portion of the net proceeds of an offering
of Notes where we use such proceeds to refund commercial paper. See USE OF
PROCEEDS. If more than 10% of the net proceeds of an offering of the Notes is
to be paid to such Agents or their affiliates, the NASD Conduct Rules require
that the offering be conducted by the Agents in compliance with NASD Rule
2710(c)(8).
The Chase Manhattan Bank, the Trustee under the Indenture, is an affiliate of
J.P. Morgan Securities Inc.
From time to time, we may sell other securities referred to in the
accompanying prospectus, and the amount of Notes offered hereby may be reduced
as a result of these sales.
EXPERTS
This section supersedes and replaces the "Experts" section found in the
accompanying prospectus in its entirety.
The financial statements and the related financial statement schedules
incorporated in this prospectus supplement by reference from the Company's
Annual Report on Form 10-K for the year ended December 31, 2000 have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports, which are incorporated herein by reference (which reports express an
unqualified opinion and include an explanatory paragraph referring to a change
in the method of accounting used to develop the market-related value of pension
plan assets and a change in the method of accounting for oil and gas
exploration and production activities to the full cost method of accounting),
and have been so incorporated in reliance upon the reports of such firm given
upon their authority as experts in accounting and auditing.
S-48
LEGAL OPINIONS
Certain legal matters in connection with the Notes will be passed upon for
the Company by McGuireWoods LLP, Richmond, Virginia, and for any underwriters,
dealers or agents, by Troutman Sanders Mays & Valentine LLP, Richmond,
Virginia, which also performs certain legal services for the Company and its
affiliates on other matters.
S-49
Prospectus
[LOGO OF DOMINION RESOURCES INC.]
DOMINION RESOURCES, INC.
120 Tredegar Street
Richmond, Virginia 23219
(804) 819-2000
$2,000,000,000
Senior Debt Securities
Junior Subordinated Debentures
Trust Preferred Securities, Related Guarantee and Agreement as to Expenses and
Liabilities
Common Stock
Preferred Stock
Stock Purchase Contracts
Stock Purchase Units
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this Prospectus. Any representation to the contrary is
a criminal offense.
This prospectus is dated March 2, 2001.
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission utilizing a shelf registration process.
Under this shelf process, we may, from time to time, sell any combination of
the securities described in this prospectus in one or more offerings up to a
total dollar amount of $2,000,000,000. This prospectus provides you with a
general description of the securities we may offer. Each time we sell
securities, we will provide a prospectus supplement that will contain specific
information about the terms of that offering. Material United States federal
income tax considerations applicable to the offered securities will also be
discussed in the applicable prospectus supplement. The prospectus supplement
may also add, update or change information contained in this prospectus. You
should read both this prospectus and any prospectus supplement together with
additional information described under the heading WHERE YOU CAN FIND MORE
INFORMATION.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and
copy any document we file at the SEC's public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the SEC at 1-800-
SEC-0330 for further information on the public reference rooms. You may also
read and copy these documents at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005.
The SEC allows us to incorporate by reference the information we file with
them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings made
with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934 until we sell all of the securities.
. Annual Report on Form 10-K and Forms 10-K/A for the year ended December 31,
1999;
. Quarterly Reports on Form 10-Q for the quarters ended March 31, 2000, June
30, 2000 and September 30, 2000;
. Current Reports on Form 8-K and Forms 8-K/A filed January 3, 2000, February
1, 2000, March 23, 2000, June 21, 2000, June 22, 2000, July 11, 2000,
September 11, 2000, October 12, 2000, November 2, 2000, November 16, 2000,
November 22, 2000, January 12, 2000, and January 24, 2001; and
. The description of our common stock contained in Form 8-B (Item 4) dated
April 29, 1983.
You may request a copy of these filings at no cost, by writing or telephoning
us at the following address:
Corporate Secretary
Dominion
120 Tredegar Street
Richmond, Virginia 23219
(804) 819-2000
You should rely only on the information incorporated by reference or provided
in this prospectus or any prospectus supplement. We have not authorized anyone
else to provide you with
2
different information. We are not making an offer of these securities in any
state where the offer is not permitted. You should not assume that the
information in this prospectus or any prospectus supplement is accurate as of
any date other than the date on the front of those documents.
DOMINION
Dominion is a fully integrated gas and electric energy holding company
headquartered in Richmond, Virginia. As of December 31, 2000, we had
approximately 28.7 billion in assets.
Primary Operating Segments
Dominion's primary operating segments are:
Dominion Energy--Dominion Energy manages Dominion's 19,000 megawatt portfolio
of electric power generation, its 7,600 miles of gas transmission pipeline and
a 959 billion cubic foot natural gas storage network. It also guides Dominion's
generation growth strategy and its commodity trading, marketing and risk
management activities. Dominion currently operates generation facilities in
Virginia, West Virginia, North Carolina and Illinois.
Dominion Delivery--Dominion Delivery manages Dominion's local electric and
gas distribution systems serving 3.8 million customers, its 6,000 miles of
electric transmission lines and its customer service operations. Dominion
currently operates transmission and distribution systems in Virginia, West
Virginia, North Carolina, Pennsylvania and Ohio. Dominion Delivery also
includes Dominion Telecom with its 3,620 route-mile fiber optic network and
related telecommunications and advanced data services located principally in
the northeast quadrant of the United States.
Dominion Exploration & Production --Dominion Exploration & Production manages
Dominion's onshore and offshore oil and gas exploration and production
activities. With approximately 2.8 trillion cubic feet of natural gas
equivalent reserves and 320 billion cubic feet of annual production, Dominion
Exploration & Production is one of the nation's largest independent oil and gas
operators. It operates on the outer continental shelf and deep water areas of
the Gulf of Mexico, western Canada, the Appalachian Basin and other selected
regions in the continental United States.
Principal Legal Subsidiaries
Dominion's principal legal subsidiaries include Virginia Electric and Power
Company (Dominion Virginia Power), a regulated public utility engaged in the
generation, transmission, distribution and sale of electric energy in Virginia
and northeastern North Carolina, and Consolidated Natural Gas Company, a
producer, transporter, distributor and retail marketer of natural gas serving
customers in Pennsylvania, Ohio, West Virginia, New York and various cities in
the Northeast and Mid-Atlantic. Dominion's other major legal subsidiaries
include Dominion Energy, Inc., an independent power and natural gas subsidiary,
and Dominion Capital, Inc., a financial services subsidiary.
Dominion's address and telephone number are 120 Tredegar Street, Richmond,
Virginia 23219, telephone (804) 819-2100.
For additional information about Dominion, see WHERE YOU CAN FIND MORE
INFORMATION on page 2.
THE TRUST
Dominion Resources Capital Trust IV is a statutory business trust newly
formed under Delaware law by us, as sponsor for
3
the Trust, and Chase Manhattan Bank USA, National Association, who will serve
as trustee in the State of Delaware for the purpose of complying with the
provisions of the Delaware Business Trust Act. The trust agreement for the
Trust will be amended and restated substantially in the form filed as an
exhibit to the registration statement, effective when securities of the Trust
are initially issued. The amended trust agreement will be qualified as an
indenture under the Trust Indenture Act of 1939.
The Trust exists for the exclusive purposes of
. issuing two classes of trust securities, Trust Preferred Securities and trust
common securities, which together represent undivided beneficial interests in
the assets of the Trust;
. investing the gross proceeds of the trust securities in our Junior
Subordinated Debentures;
. making distributions; and
. engaging in only those other activities necessary, advisable or incidental to
the purposes listed above.
The Junior Subordinated Debentures will be the sole assets of the Trust, and
our payments under the Junior Subordinated Debentures and the Agreement as to
Expenses and Liabilities will be the sole revenue of the Trust.
No separate financial statements of any Trust are included in this
prospectus. We consider that these financial statements would not be material
to holders of the Trust Preferred Securities because the Trust has no
independent operations and the purpose of the Trust is as described above. The
Trust is not required to file annual, quarterly or special reports with the
SEC.
The principal place of business of the Trust will be c/o Dominion Resources,
Inc., 120 Tredegar Street, Richmond, VA 23219.
USE OF PROCEEDS
The net proceeds from the sale of the offered securities will be used for
financing our $1.3 billion acquisition of the approximately 2,000 megawatt
Millstone Nuclear facility in Connecticut, and for other general corporate
purposes including financing future acquisitions.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for each of the periods indicated is
as follows:
Twelve Months ended Dec. 31,
Nine Months ended ----------------------------------
Sept. 30, 2000(/1/) 1995 1996 1997(/3/) 1998 1999(/2/)
------------------- ---- ---- --------- ---- ---------
1.64 2.55 2.71 1.97 2.36 2.02
These computations reflect Dominion's consolidated earnings and consolidated
fixed charges including proportionate interests in the earnings and fixed
charges of certain other companies in which we hold an equity interest. For
these ratios, earnings is determined by adding total fixed charges (excluding
interest capitalized), income taxes, minority common stockholders equity in net
income and amortization of interest capitalized to income from continuing
operations after eliminating equity in undistributed earnings and adding back
losses of companies in which at least 20% but less than 50% equity is owned by
Dominion. For this purpose, total fixed charges consists of (1) interest on all
indebtedness and amortization of debt discount and expense, (2) interest
capitalized and (3) an interest factor attributable to rentals.
--------
(1) If Dominion had completed the CNG acquisition as of January 1, 2000, the
pro forma ratio of earnings to fixed charges for the nine months ended
September 30, 2000 would be 1.18x.
4
Net income for the nine months ended September 30, 2000 includes $411
million in restructuring and other acquisition-related costs resulting
from the CNG acquisition and a write-down at Dominion Capital, Inc.
Dominion is required to divest its financial services business as a result
of the acquisition of CNG. Excluding this charge, from the calculation
above results in a ratio of earnings to fixed charges for the nine months
ended September 30, 2000 of 2.17x.
(2) Net income for the twelve months ended December 31, 1999 includes the one-
time after-tax charge of $255 million resulting from the discontinued
application by Virginia Power of Statement of Financial Accounting
Standards No. 71, "Accounting for the Effects of Certain Types of
Regulation," to its generation operations. Excluding this charge from the
calculation above results in a ratio of earnings to fixed charges for the
twelve months ended December 31, 1999 of 2.48x.
(3) Net income for the twelve months ended December 31, 1997 includes the one-
time charge of $157 million for the windfall profits tax levied by the
United Kingdom government. Excluding this charge from the calculation
above results in a ratio of earnings to fixed charges for the twelve
months ended December 31, 1997 of 2.22x.
DESCRIPTION OF DEBT SECURITIES
The term Debt Securities includes the Senior Debt Securities and the Junior
Subordinated Debentures. We will issue the Senior Debt Securities in one or
more series under our Senior Indenture dated as of June 1, 2000 between us and
The Chase Manhattan Bank as Trustee, as supplemented from time to time. We will
issue the Junior Subordinated Debentures in one or more series under our Junior
Subordinated Indenture dated as of December 1, 1997 between us and The Chase
Manhattan Bank as Trustee, as supplemented from time to time. The indenture
related to the Junior Subordinated Debentures is called the Subordinated
Indenture in this prospectus, and together, the Senior Indenture and the
Subordinated Indenture are called Indentures. We have summarized selected
provisions of the Indentures below. The Senior Indenture and the Subordinated
Indenture have been filed as exhibits to the registration statement and you
should read the Indentures for provisions that may be important to you. In the
summary below, we have included references to section numbers of the Indentures
so that you can easily locate these provisions. Capitalized terms used in the
summary have the meanings specified in the Indentures.
General
The Senior Debt Securities will be our direct, unsecured obligations and will
rank equally with all of our other senior and unsubordinated debt. The Junior
Subordinated Debentures will be our unsecured obligations and are junior in
right of payment to our Senior Indebtedness, as described under the caption
ADDITIONAL TERMS OF THE JUNIOR SUBORDINATED DEBENTURES--SUBORDINATION.
Because we are a holding company that conducts all of our operations through
our subsidiaries, our ability to meet our obligations under the Debt Securities
is dependent on the earnings and cash flows of those subsidiaries and the
ability of those subsidiaries to pay dividends or to advance or repay funds to
us. Holders of Debt Securities will generally have a junior
5
position to claims of creditors of our subsidiaries, including trade creditors,
debtholders, secured creditors, taxing authorities, guarantee holders and any
preferred stockholders. Dominion Virginia Power has approximately 5.1 million
issued and outstanding shares of preferred stock. In addition to trade debt,
all of our operating subsidiaries have ongoing corporate debt programs used to
finance their business activities. As of December 31, 2000, our subsidiaries
had approximately $8.9 billion of outstanding debt.
Neither of the Indentures limits the amount of Debt Securites that we may
issue under it. We may issue Debt Securities from time to time under the
Indentures in one or more series by entering into supplemental indentures or by
our Board of Directors or duly authorized officers authorizing the issuance. A
form of supplemental indenture to each of the Indentures is an exhibit to the
registration statement.
The Indentures do not protect the holders of Debt Securities if we engage in
a highly leveraged transaction.
Provisions of a Particular Series
The Debt Securities of a series need not be issued at the same time, bear
interest at the same rate or mature on the same date. Unless otherwise provided
in the terms of a series, a series may be reopened, without notice to or
consent of any holder of outstanding Debt Securities, for issuances of
additional Debt Securities of that series. The prospectus supplement for a
particular series of Debt Securities will specify the terms of that series,
including, if applicable, some or all of the following:
. the title and type of the Debt Securities;
. the total principal amount of the Debt Securities;
. the portion of the principal payable upon acceleration of maturity, if other
than the entire principal;
. the date or dates on which principal is payable or the method for determining
the date or dates, and any right that we have to change the date on which
principal is payable;
. the interest rate or rates, if any, or the method for determining the rate or
rates, and the date or dates from which interest will accrue;
. any interest payment dates and the regular record date for the interest
payable on each interest payment date, if any;
. any payments due if the maturity of the Debt Securities is accelerated;
. any optional redemption terms, or, with respect to the Senior Debt
Securities, any repayment terms;
. any provisions that would obligate us to repurchase or otherwise redeem the
Debt Securities, or, with respect to the Senior Debt Securities, any sinking
fund provisions;
. the currency in which payments will be made if other than U.S. dollars, and
the manner of determining the equivalent of those amounts in U.S. dollars;
. if payments may be made, at our election or at the holder's election, in a
currency other than that in which the Debt Securities are stated to be
payable, then the currency in which those payments may be made, the terms and
conditions of the election and the manner of determining those amounts;
6
. any index or formula used for determining principal, interest, or premium,
if any;
. the percentage of the principal amount at which the Debt Securities will be
issued, if other than 100% of the principal amount;
. whether the Debt Securities will be issued in fully registered certificated
form or book-entry form, represented by certificates deposited with, or on
behalf of, a securities depositary and registered in the name of the
depositary's nominee (Book-Entry Debt Securities);
. denominations, if other than $1,000 each or multiples of $1,000;
. any changes to events of defaults or covenants; and
. any other terms of the Debt Securities. (Sections 201 & 301 of the Senior
Indenture & Sections 2.1 & 2.3 of the Subordinated Indenture.)
The prospectus supplement will also indicate any special tax implications of
the Debt Securities and any provisions granting special rights to holders when
a specified event occurs.
Conversion or Redemption
No Debt Security will be subject to conversion, amortization, or redemption,
unless otherwise provided in the applicable prospectus supplement. Any
provisions relating to the conversion or redemption of Debt Securities will be
set forth in the applicable prospectus supplement, including whether
conversion is mandatory or at our option. If no redemption date or redemption
price is indicated with respect to a Debt Security, we may not redeem the Debt
Security prior to its stated maturity. Debt Securities subject to redemption
by us will be subject to the following terms:
. redeemable on and after the applicable redemption dates;
. redemption dates and redemption prices fixed at the time of sale and set
forth on the Debt Security; and
. redeemable in whole or in part (provided that any remaining principal amount
of the Debt Security will be equal to an authorized denomination) at our
option at the applicable redemption price, together with interest, payable
to the date of redemption, on notice given not more than 60 nor less than 20
days prior to the date of redemption. (Section 1104 of the Senior Indenture
& Section 3.2 of the Subordinated Indenture.)
We will not be required to:
. issue, register the transfer of, or exchange any Debt Securities of a series
during the period beginning 15 days before the date the notice is mailed
identifying the Debt Securities of that series that have been selected for
redemption; or
. register the transfer of, or exchange any Debt Security of that series
selected for redemption except the unredeemed portion of a Debt Security
being partially redeemed. (Section 305 of the Senior Indenture & Section 2.5
of the Subordinated Indenture.)
Payment and Transfer; Paying Agent
The paying agent will pay the principal of any Debt Securities only if those
Debt Securities are surrendered to it. Unless we state otherwise in the
applicable prospectus supplement, the paying agent will pay principal,
interest and premium, if any, on Debt Securities, subject to such surrender,
where applicable, at its office or, at our option:
7
. by wire transfer to an account at a banking institution in the United States
that is designated in writing to the Trustee prior to the deadline set forth
in the applicable prospectus supplement by the person entitled to that
payment (which in the case of Book-Entry Debt Securities is the securities
depositary or its nominee); or
. by check mailed to the address of the person entitled to that interest as
that address appears in the security register for those Debt Securities.
(Sections 307 & 1001 of the Senior Indenture & Section 4.1 of the
Subordinated Indenture.)
Neither we nor the Trustee will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in a Book-Entry Debt Security, or for maintaining,
supervising or reviewing any records relating to the beneficial ownership
interests. We expect that the securities depositary, upon receipt of any
payment of principal, interest or premium, if any, in a Book-Entry Debt
Security, will credit immediately the accounts of the related participants with
payment in amounts proportionate to their respective holdings in principal
amount of beneficial interest in the Book-Entry Debt Security as shown on the
records of the securities depositary. We also expect that payments by
participants to owners of beneficial interests in a Book-Entry Debt Security
will be governed by standing customer instructions and customary practices, as
is now the case with securities held for the accounts of customers in bearer
form or registered in "street name" and will be the responsibility of the
participants.
Unless we state otherwise in the applicable prospectus supplement, the
Trustee will act as paying agent for the Debt Securities, and the principal
corporate trust office of the Trustee will be the office through which the
paying agent acts. We may, however, change or add paying agents or approve a
change in the office through which a paying agent acts. (Section 1002 of the
Senior Indenture & Section 4.4 of the Subordinated Indenture.)
Any money that we have paid to a paying agent for principal or interest on
any Debt Securities which remains unclaimed at the end of two years after that
principal or interest has become due will be repaid to us at our request. After
any repayment, holders should look only to us for those payments. (Section 1003
of the Senior Indenture & Section 12.4 of the Subordinated Indenture.)
Fully registered securities may be transferred or exchanged at the corporate
trust office of the Trustee or at any other office or agency we maintain for
those purposes, without the payment of any service charge except for any tax or
governmental charge. (Section 1002 of the Senior Indenture & Section 2.5 of the
Subordinated Indenture.)
Global Securities
We may issue some or all of the Debt Securities as Book-Entry Debt
Securities. Book-Entry Debt Securities will be represented by one or more fully
registered global certificates. Book-Entry Debt Securities of like tenor and
terms up to $400,000,000 aggregate principal amount may be represented by a
single global certificate. Each global certificate will be deposited and
registered with the securities depositary or its nominee or a custodian for the
securities depositary. Unless it is exchanged in whole or in part for Debt
Securities in definitive form, a global certificate may generally be
transferred only
8
as a whole unless it is being transferred to certain nominees of the
depositary. (Section 305 of the Senior Indenture & Section 2.5 of the
Subordinated Indenture.)
Unless otherwise stated in any prospectus supplement, The Depository Trust
Company will act as the securities depositary. Beneficial interests in global
certificates will be shown on, and transfers of global certificates will be
effected only through, records maintained by the securities depositary and its
participants. If there are any additional or differing terms of the depositary
arrangement with respect to the Book-Entry Debt Securities, we will describe
them in the applicable prospectus supplement.
Holders of beneficial interests in Book-Entry Debt Securities represented by
a global certificate are referred to as beneficial owners. Beneficial owners
will be limited to institutions having accounts with the securities depositary
or its nominee, which are called participants in this discussion, and to
persons that hold beneficial interests through participants. When a global
certificate representing Book-Entry Debt Securities is issued, the securities
depositary will credit on its book-entry, registration and transfer system the
principal amounts of Book-Entry Debt Securities the global certificate
represents to the accounts of its participants. Ownership of beneficial
interests in a global certificate will be shown only on, and the transfer of
those ownership interests will be effected only through, records maintained by:
. the securities depositary, with respect to participants' interests; and
. any participant, with respect to interests the participant holds on behalf of
other persons.
As long as the securities depositary or its nominee is the registered holder
of a global certificate representing Book-Entry Debt Securities, that person
will be considered the sole owner and holder of the global certificate and the
Book-Entry Debt Securities it represents for all purposes. Except in limited
circumstances, beneficial owners:
. may not have the global certificate or any Book-Entry Debt Securities it
represents registered in their names;
. may not receive or be entitled to receive physical delivery of certificated
Book-Entry Debt Securities in exchange for the global certificate; and
. will not be considered the owners or holders of the global certificate or any
Book-Entry Debt Securities it represents for any purposes under the Debt
Securities or the Indentures. (Section 2.2 of the Subordinated Indenture.)
We will make all payments of principal, interest and premium, if any, on a
Book-Entry Debt Security to the securities depositary or its nominee as the
holder of the global certificate. The laws of some jurisdictions require that
certain purchasers of securities take physical delivery of securities in
definitive form. These laws may impair the ability to transfer beneficial
interests in a global certificate.
Payments participants make to beneficial owners holding interests through
those participants will be the responsibility of those participants. The
securities depositary may from time to time adopt various policies and
procedures governing payments, transfers, exchanges and other matters relating
to beneficial interests in a global certificate. None of the following will
have any responsibility or liability for any aspect of the securities
depositary's or
9
any participant's records relating to beneficial interests in a global
certificate representing Book-Entry Debt Securities, for payments made on
account of those beneficial interests or for maintaining, supervising or
reviewing any records relating to those beneficial interests:
. Dominion;
. the Trustee;
. the Trust (only with respect to the Junior Subordinated Debentures if the
Junior Subordinated Debentures are issued to a Trust); or
. any agent of any of the above.
Covenants
Under the Indentures we will:
. pay the principal, interest and premium, if any, on the Debt Securities when
due;
. maintain a place of payment;
. deliver an officer's certificate to the Trustee at the end of each fiscal
year confirming our compliance with our obligations under each of the
Indentures; and
. deposit sufficient funds with any paying agent on or before the due date for
any principal, interest or premium, if any. (Sections 1001, 1002, 1003 & 1006
of the Senior Indenture & Sections 4.1, 4.2 4.4 & 4.6 of the Subordinated
Indenture.)
Consolidation, Merger or Sale
The Indentures provide that we may consolidate or merge with or into, or sell
all or substantially all of our properties and assets to, another corporation
or other entity, provided that any successor assumes our obligations under the
Indentures and the Debt Securities issued under the Indentures. We must also
deliver an opinion of counsel to the Trustee affirming our compliance with all
conditions in the applicable Indenture relating to the transaction. When the
conditions are satisfied, the successor will succeed to and be substituted for
us under the Senior Indenture, and we will be relieved of our obligations under
the Senior Indenture and the Debt Securities issued under them. (Sections 801 &
802 of the Senior Indenture & Sections 11.1, 11.2 & 11.3 of the Subordinated
Indenture.)
Events of Default
Event of Default when used in each of the Indentures, will mean any of the
following:
. failure to pay the principal or any premium on any Debt Security when due;
. with respect to the Senior Debt Securities, failure to deposit any sinking
fund payment when due that continues for 60 days;
. failure to pay any interest on any Debt Securities of that series, when due,
that continues for 60 days (or for 30 days in the case of any Junior
Subordinated Debentures); provided that, if applicable, for this purpose, the
date on which interest is due is the date on which we are required to make
payment following any deferral of interest payments by us under the terms of
Junior Subordinated Debentures that permit such deferrals;
. failure to perform any other covenant in the Indentures (other than a
covenant expressly included solely for the benefit of other series) that
continues for 90 days after the Trustee or the holders of at least 33% of the
outstanding Debt Securities (25% in the case of the Junior Subordinated
Debentures) of that series give us written notice of the default;
. certain events in bankruptcy, insolvency or reorganization of Dominion; or
. any other Event of Default included in the Indentures or any supplemental
indenture.
10
(Section 501 of the Senior Indenture & Section 6.1 of the Subordinated
Indenture.)
In the case of a general covenant default described above, the Trustee may
extend the grace period. In addition, if holders of a particular series have
given a notice of default, then holders of at least the same percentage of Debt
Securities of that series, together with the Trustee, may also extend the grace
period. The grace period will be automatically extended if we have initiated
and are diligently pursuing corrective action.
An Event of Default for a particular series of Debt Securities does not
necessarily constitute an Event of Default for any other series of Debt
Securities issued under the Indentures. Additional events of default may be
established for a particular series and, if established, will be described in
the applicable prospectus supplement.
If an Event of Default for any series of Debt Securities occurs and
continues, the Trustee or the holders of at least 33% (25%, in the case of the
Junior Subordinated Debentures) in aggregate principal amount of the Debt
Securities of the series may declare the entire principal of all the Debt
Securities of that series to be due and payable immediately. If this happens,
subject to certain conditions, the holders of a majority of the aggregate
principal amount of the Debt Securities of that series can void the trust
agreement. (Section 502 of the Senior Indenture & Section 6.1 of the
Subordinated Indenture.)
The Trustee may withhold notice to the holders of Debt Securities of any
default (except in the payment of principal or interest) if it considers the
withholding of notice to be in the best interests of the holders. Other than
its duties in case of a default, a Trustee is not obligated to exercise any of
its rights or powers under the Indentures at the request, order or direction of
any holders, unless the holders offer the Trustee reasonable indemnity. If they
provide this reasonable indemnification, the holders of a majority in principal
amount of any series of Debt Securities may direct the time, method and place
of conducting any proceeding or any remedy available to the Trustee, or
exercising any power conferred upon the Trustee, for any series of Debt
Securities. (Sections 512, 601 & 602 of the Senior Indenture & Sections 6.6,
7.1 & 7.2 of the Subordinated Indenture.)
The holder of any Debt Security will have an absolute and unconditional right
to receive payment of the principal, any premium and, within certain
limitations, any interest on that Debt Security on its maturity date or
redemption date and to enforce those payments. (Section 508 of the Senior
Indenture & Section 14.2 of the Subordinated Indenture.)
Satisfaction; Discharge
We may discharge all our obligations (except those described below) to
holders of the Debt Securities issued under the Indentures, which Debt
Securities have not already been delivered to the Trustee for cancellation and
which either have become due and payable or are by their terms due and payable
within one year, or are to be called for redemption within one year, by
depositing with the Trustee an amount certified to be sufficient to pay when
due the principal, interest and premium, if any, on all outstanding Debt
Securities. However, certain of our obligations under the Indentures will
survive, including with respect to the following:
11
. remaining rights to register the transfer, conversion, substitution or
exchange of Debt Securities of the applicable series;
. rights of holders to receive payments of principal of, and any interest on,
the Debt Securities of the applicable series, and other rights, duties and
obligations of the holders of Debt Securities with respect to any amounts
deposited with the Trustee; and
. the rights, obligations and immunities of the Trustee under the Indentures.
(Section 401 of Senior Indenture & Section 12.1 of Subordinated Indenture.)
Modification of Indentures; Waiver
Under the Indentures our rights and obligations and the rights of the holders
may be modified with the consent of the holders of a majority in aggregate
principal amount of the outstanding Debt Securities of each series affected by
the modification. No modification of the principal or interest payment terms,
and no modification reducing the percentage required for modifications, is
effective against any holder without its consent. (Section 902 of the Senior
Indenture & Section 10.2 of the Subordinated Indenture.) In addition, we may
supplement the Indentures to create new series of Debt Securities and for
certain other purposes, without the consent of any holders of Debt Securities.
(Section 901 of the Senior Indenture & Section 10.1 of the Subordinated
Indenture.)
The holders of a majority of the outstanding Debt Securities of all series
under the applicable Indenture with respect to which a default has occurred and
is continuing may waive a default for all those series, except a default in the
payment of principal or interest, or any premium, on any Debt Securities or a
default with respect to a covenant or provision which cannot be amended or
modified without the consent of the holder of each outstanding Debt Security of
the series affected. (Section 513 of the Senior Indenture & Section 6.6 of the
Subordinated Indenture.)
In addition, under certain circumstances, the holders of a majority of the
outstanding Junior Subordinated Debentures of any series may waive in advance,
for that series, our compliance with certain restrictive provisions of the
Subordinated Indenture under which those Junior Subordinated Debentures were
issued. (Section 4.7 of the Subordinated Indenture.)
Concerning the Trustee
The Chase Manhattan Bank is the Subordinated Indenture Trustee and the
Trustee under the Senior Indenture. We and certain of our affiliates maintain
deposit accounts and banking relationships with The Chase Manhattan Bank. The
Chase Manhattan Bank also serves as trustee under other indentures pursuant to
which securities of ours and of certain of our affiliates are outstanding. It
has purchased, and is likely to purchase in the future, our securities and
securities of our affiliates.
The Trustee will perform only those duties that are specifically set forth in
the Indentures unless an event of default under an Indenture occurs and is
continuing. The Trustee is under no obligation to exercise any of its powers
under the Indentures at the request of any holder of Debt Securities unless
that holder offers reasonable indemnity to the Trustee against the costs,
expenses and liabilities which it might incur as a result. (Section 601 of the
Senior Indenture & Section 7.1 of the Subordinated Indenture.)
12
The Trustee administers its corporate trust business at 450 West 33rd
Street, New York, New York 10001 (Attention: Institutional Trust Services).
ADDITIONAL TERMS OF SENIOR DEBT SECURITIES
Repayment at the Option of the Holder; Repurchases by Dominion
We must repay the Senior Debt Securities at the option of the holders prior
to the Stated Maturity Date only if specified in the applicable prospectus
supplement. Unless otherwise provided in the prospectus supplement, the Senior
Debt Securities subject to repayment at the option of the holder will be
subject to repayment:
. on the specified Repayment Dates; and
. at a repayment price equal to 100% of the unpaid principal amount to be
repaid, together with unpaid interest accrued to the Repayment Date.
(Section 1302 of the Senior Indenture.)
For any Senior Debt Security to be repaid, the Trustee must receive, at its
office maintained for that purpose in the Borough of Manhattan, New York City
not more than 60 nor less than 30 calendar days prior to the date of
repayment:
. in the case of a certificated Senior Debt Security, the certificated Senior
Debt Security and the form in the Senior Debt Security entitled Option of
Holder to Elect Purchase duly completed; or
. in the case of a book-entry Senior Debt Security, instructions to that
effect from the beneficial owner to the securities depositary and forwarded
by the securities depositary. Exercise of the repayment option by the holder
will be irrevocable. (Section 1303 of the Senior Indenture.)
Only the securities depositary may exercise the repayment option in respect
of beneficial interests in the book-entry Senior Debt Securities. Accordingly,
beneficial owners that desire repayment in respect of all or any portion of
their beneficial interests must instruct the participants through which they
own their interests to direct the securities depositary to exercise the
repayment option on their behalf. All instructions given to participants from
beneficial owners relating to the option to elect repayment will be
irrevocable. In addition, at the time the instructions are given, each
beneficial owner will cause the participant through which it owns its interest
to transfer its interest in the book-entry Senior Debt Securites or the global
certificate representing the related book-entry Senior Debt Securities, on the
securities depositary's records, to the Trustee. See DESCRIPTION OF DEBT
SECURITIES--GLOBAL SECURITIES.
Defeasance
We will be discharged from our obligations on the Senior Debt Securities of
any series at any time if we deposit with the Trustee sufficient cash or
government securities to pay the principal, interest, any premium and any
other sums due to the stated maturity date or a redemption date of the Senior
Debt Securities of the series. If this happens, the holders of the Senior Debt
Securities of the series will not be entitled to the benefits of the Senior
Indenture except for registration of transfer and exchange of Senior Debt
Securities and replacement of lost, stolen or mutilated Senior Debt
Securities. (Section 402 of the Senior Indenture.)
13
Under federal income tax law as of the date of this prospectus, a discharge
may be treated as an exchange of the related Senior Debt Securities. Each
holder might be required to recognize gain or loss equal to the difference
between the holder's cost or other tax basis for the Senior Debt Securities
and the value of the holder's interest in the trust. Holders might be required
to include as income a different amount than would be includable without the
discharge. We urge prospective investors to consult their own tax advisers as
to the consequences of a discharge, including the applicability and effect of
tax laws other than the federal income tax law.
ADDITIONAL TERMS OF THE JUNIOR SUBORDINATED DEBENTURES
Additional Covenants Applicable to Junior Subordinated Debentures
Under the Subordinated Indenture, we will:
. maintain 100% ownership of any Trust to which the Junior Subordinated
Debentures have been issued while the Junior Subordinated Debentures remain
outstanding; and
. pay to any Trust to which the Junior Subordinated Debentures have been
issued any taxes, duties, assessments or governmental charges of whatever
nature (other than withholding taxes) imposed by the United States or any
other taxing authority on that Trust, so that the net amounts received and
retained by that Trust (after paying any taxes, duties, assessments or other
governmental charges) will be not less than the Trust would have received
had no such taxes, duties, assessments or other governmental charges been
imposed. (Sections 4.8 & 4.9 of the Subordinated Indenture.)
Option to Extend Interest Payment Period
We can defer interest payments by extending the interest payment period for
the number of consecutive extension periods specified in the applicable
prospectus supplement (each, an Extension Period). Other details regarding the
Extension Period will also be specified in the applicable prospectus
supplement. No Extension Period may extend beyond the maturity of the Junior
Subordinated Debentures. At the end of the Extension Period(s), we will pay
all interest then accrued and unpaid, together with interest compounded
quarterly at the rate for the Junior Subordinated Debentures, to the extent
permitted by applicable law. (Section 2.10 of the Subordinated Indenture.)
During any Extension Period, we will not make distributions related to our
capital stock, including dividends, redemptions, repurchases, liquidation
payments, or guarantee payments. Also we will not make any payments, redeem or
repurchase any debt securities of equal or junior rank to the Junior
Subordinated Debentures or make any guarantee payments on any such debt
securities. We may, however, make the following types of distributions:
. dividends paid in common stock;
. dividends in connection with the implementation of a shareholder rights
plan;
. payments to a trust holding securities of the same series under a guarantee;
or
14
. repurchases, redemptions or other acquisitions of shares of our capital stock
in connection with any employment contract, benefit plan or other similar
arrangement with or for the benefit of employees, officers, directors or
consultants.
Subordination
Each series of Junior Subordinated Debentures will be subordinate and junior
in right of payment, to the extent set forth in the Subordinated Indenture, to
all Senior Indebtedness as defined below. If:
. we make a payment or distribution of any of our assets to creditors upon our
dissolution, winding-up, liquidation or reorganization, whether in
bankruptcy, insolvency or otherwise;
. a default beyond any grace period has occurred and is continuing with respect
to the payment of principal, interest or any other monetary amounts due and
payable on any Senior Indebtedness; or
. the maturity of any Senior Indebtedness has been accelerated because of a
default on that Senior Indebtedness,
then the holders of Senior Indebtedness generally will have the right to
receive payment, in the case of the first instance, of all amounts due or to
become due upon that Senior Indebtedness, and, in the case of the second and
third instances, of all amounts due on that Senior Indebtedness, or we will
make provision for those payments, before the holders of any Junior
Subordinated Debentures have the right to receive any payments of principal or
interest on their Junior Subordinated Debentures. (Sections 14.1 and 14.9 of
the Subordinated Indenture.)
Senior Indebtedness means, with respect to any series of Junior Subordinated
Debentures, the principal, premium, interest and any other payment in respect
of any of the following:
. all of our indebtedness for borrowed or purchased money that is evidenced by
notes, debentures, bonds or other written instruments;
. our obligations for reimbursement under letters of credit, banker's
acceptances, security purchase facilities or similar facilities issued for
our account;
. any of our other indebtedness or obligations with respect to commodity
contracts, interest rate commodity and currency swap agreements and other
similar agreements or arrangements; and
. all indebtedness of others of the kinds described in the preceding categories
which we have assumed or guaranteed.
Senior Indebtedness will not include our obligations to trade creditors or
indebtedness to our subsidiaries. (Section 1.1 of the Subordinated Indenture.)
Senior Indebtedness will be entitled to the benefits of the subordination
provisions in the Subordinated Indenture irrespective of the amendment,
modification or waiver of any term of the Senior Indebtedness. We may not amend
the Subordinated Indenture to change the subordination of any outstanding
Junior Subordinated Debentures without the consent of each holder of Senior
Indebtedness that the amendment would adversely affect. (Sections 10.2 & 14.7
of the Subordinated Indenture.)
The Subordinated Indenture does not limit the amount of Senior Indebtedness
that we may issue.
DESCRIPTION OF THE TRUST PREFERRED SECURITIES
The following is a summary of the principal terms of the Trust Preferred
15
Securities. The form of amended trust agreement is filed as an exhibit to the
registration statement of which this prospectus forms a part, or is
incorporated by reference. The terms of the Trust Preferred Securities will
include those stated in the amended trust agreement and those made part of the
amended trust agreement by the Trust Indenture Act.
General
The Trust will exist until terminated as provided in its amended trust
agreement. Except under certain circumstances, we will be entitled to appoint,
remove, or replace trustees, who will conduct the business and affairs of the
Trust. The trustees of the Trust will consist of:
. two employees, officers or affiliates of the Company as Administrative
Trustees;
. a financial institution unaffiliated with us that will act as property
trustee and as indenture trustee for purposes of the Trust Indenture Act,
under the terms set forth in a prospectus supplement (the Property Trustee);
and
. one trustee with its principal place of business or who resides in the State
of Delaware and who will act under the terms set forth in a prospectus
supplement. (Sections 6.1 through 6.5 of the Amended Trust Agreement.)
The amended trust agreement will authorize the Administrative Trustees to
issue, on behalf of the Trust, two classes of trust securities, Trust Preferred
Securities and trust common securities, each of which will have the terms
described in this prospectus and in the prospectus supplement. We will own all
of the trust common securities. The trust common securities will rank equally
in right of payment, and payments will be made on the trust common securities,
proportionately with the Trust Preferred Securities. However, if an event of
default occurs and is continuing under the amended trust agreement, the rights
of the holders of the trust common securities to payment for distributions and
payments upon liquidation, redemption and otherwise, will be subordinated to
the rights of the holders of the Trust Preferred Securities. We will acquire,
directly or indirectly, trust common securities in a total liquidation amount
of approximately 3% of the total capital of the Trust. (Sections 3.6, 5.1, 5.2
and 7.1 of the Amended Trust Agreement.)
The proceeds from the sale of the Trust Preferred Securities will be used by
the Trust to purchase our Junior Subordinated Debentures. These Junior
Subordinated Debentures will be held in trust by the Property Trustee for the
benefit of the holders of the trust securities. We will guarantee the payments
of distributions and payments on redemption or liquidation with respect to the
Trust Preferred Securities, but only to the extent the Trust has funds
available to make those payments and has not made the payments. See DESCRIPTION
OF THE GUARANTEE.
The assets of the Trust available for distribution to the holders of Trust
Preferred Securities will be limited to payments from us under the Junior
Subordinated Debentures held by the Trust. If we fail to make a payment on the
Junior Subordinated Debentures, the Trust will not have sufficient funds to
make related payments, including distributions, on its Trust Preferred
Securities.
The Guarantee, when taken together with our obligations under the Junior
Subordinated Debentures, the Subordinated
16
Indenture and the amended trust agreement, will provide a full and
unconditional guarantee of amounts due on the Trust Preferred Securities issued
by the Trust.
The Trust Preferred Securities will have the terms, including distributions,
redemption, voting, liquidation rights and other preferred, deferred or other
special rights or restrictions that will be described in the amended trust
agreement or made part of the amended trust agreement by the Trust Indenture
Act or the Delaware Business Trust Act. The terms of the Trust Preferred
Securities will mirror the terms of the Junior Subordinated Debentures held by
the Trust. In other words, the distribution rate and the distribution payment
dates and other payment dates for the Trust Preferred Securities will
correspond to the interest rate and interest payment dates and other payment
dates on the Junior Subordinated Debentures. Holders of Trust Preferred
Securities have no preemptive or similar rights. (Section 7.1 of the Amended
Trust Agreement.)
Provisions of a Particular Series
The Trust may issue only one series of Trust Preferred Securities. The
applicable prospectus supplement will set forth the principal terms of the
Trust Preferred Securities that will be offered, including:
. the name of the Trust Preferred Securities;
. the liquidation amount and number of Trust Preferred Securities issued;
. the annual distribution rate(s) or method of determining such rate(s), the
payment date(s) and the record dates used to determine the holders who are to
receive distributions;
. the date from which distributions will be cumulative;
. the optional redemption provisions, if any, including the prices, time
periods and other terms and conditions on which the Trust Preferred
Securities will be purchased or redeemed, in whole or in part;
. the terms and conditions, if any, upon which the Junior Subordinated
Debentures and the related Guarantee may be distributed to holders of those
Trust Preferred Securities;
. any securities exchange on which the Trust Preferred Securities will be
listed;
. whether the Trust Preferred Securities are to be issued in book-entry form
and represented by one or more global certificates, and if so, the depository
for those global certificates and the specific terms of the depositary
arrangements; and
. any other relevant rights, preferences, privileges, limitations or
restrictions of the Trust Preferred Securities. (Article 7 of the Amended
Trust Agreement.)
The interest rate and interest and other payment dates of each series of
Junior Subordinated Debentures issued to a Trust will correspond to the rate at
which distributions will be paid and the distribution and other payment dates
of the Trust Preferred Securities of the Trust.
Extensions
We have the right under the Subordinated Indenture to defer payments of
interest on the Junior Subordinated Debentures by extending the interest
payment period from time to time on the Junior Subordinated Debentures. The
Administrative Trustees will give the holders of the Trust Preferred Securities
notice of any Extension Period upon their receipt of notice from us. If
distributions
17
are deferred, the deferred distributions and accrued interest will be paid to
holders of record of the Trust Preferred Securities as they appear on the books
and records of the Trust on the record date next following the termination of
such deferral period. See ADDITIONAL TERMS OF THE JUNIOR SUBORDINATED
DEBENTURES--OPTION TO EXTEND INTEREST PAYMENT PERIOD.
Distributions
Distributions on the Trust Preferred Securities will be made on the dates
payable to the extent that the Trust has funds available for the payment of
distributions in the Property Account held by the Property Trustee. The Trust's
funds available for distribution to the holders of the trust securities will be
limited to payments received from us on the Junior Subordinated Debentures. We
have guaranteed the payment of distributions out of monies held by the Trust to
the extent set forth under DESCRIPTION OF THE GUARANTEE.
Distributions on the Trust Preferred Securities will be payable to the
holders named on the securities register of the Trust at the close of business
on the record dates, which, as long as the Trust Preferred Securities remain in
book-entry only form, will be one business day prior to the relevant payment
dates. Distributions will be paid through the Property Trustee who will hold
amounts received in respect of the Junior Subordinated Debentures in the
Property Account for the benefit of the holders of the trust securities. In the
event that the Trust Preferred Securities do not continue to remain in book-
entry only form, the relevant record dates will conform to the rules of any
securities exchange on which the Trust Preferred Securities are listed and, if
none, the Administrative Trustees will have the right to select relevant record
dates, which will be more than 14 days but less than 60 days prior to the
relevant payment dates. In the event that any date on which distributions are
to be made on the Trust Preferred Securities is not a business day, then
payment of the distributions payable on that date will be made on the next
succeeding day which is a business day and without any interest or other
payment in respect of that delay, except that, if that business day is in the
next succeeding calendar year, the payment will be made on the immediately
preceding business day, in each case with the same force and effect as if made
on the record date. (Section 7.2 of the Amended Trust Agreement.)
Mandatory Redemption of Trust Preferred Securities
The Trust Preferred Securities have no stated maturity date, but will be
redeemed upon the maturity of the Junior Subordinated Debentures or to the
extent the Junior Subordinated Debentures are redeemed prior to maturity. The
Junior Subordinated Debentures will mature on the date specified in the
applicable prospectus supplement and may be redeemed at any time, in whole but
not in part, in certain circumstances upon the occurrence of a Tax Event or an
Investment Company Event as described under SPECIAL EVENT REDEMPTION.
Upon the maturity of the Junior Subordinated Debentures, the proceeds of
their repayment will simultaneously be applied to redeem all the outstanding
trust securities at the Redemption Price. Upon the redemption of the Junior
Subordinated
18
Debentures, either at our option or as a result of a Tax Event or an Investment
Company Event, the proceeds from the redemption will simultaneously be applied
to redeem trust securities having a total liquidation amount equal to the total
principal amount of the Junior Subordinated Debentures so redeemed at the
redemption price; provided, that holders of trust securities will be given not
less than 20 nor more than 60 days' notice of the redemption. In the event that
fewer than all of the outstanding trust securities are to be redeemed, the
trust securities will be redeemed proportionately. (Section 7.3 of the Amended
Trust Agreement.)
Special Event Redemption
Both a Tax Event and an Investment Company Act Event constitute Special
Events for purposes of the redemption provisions described in the preceding
paragraph.
A Tax Event means that the Administrative Trustees have received an opinion
of independent tax counsel experienced in those matters to the effect that, as
a result of any amendment to, change or announced proposed change in:
. the laws or regulations of the United States or any of its political
subdivisions or taxing authorities, or
. any official administrative pronouncement, action or judicial decision
interpreting or applying those laws or regulations,
which amendment or change becomes effective or proposed change, pronouncement,
action or decision is announced on or after the date the Trust Preferred
Securities are issued and sold, there is more than an insubstantial risk that:
. the Trust is or within 90 days would be subject to U.S. federal income tax
with respect to income accrued or received on the Junior Subordinated
Debentures,
. interest payable to the Trust on the Junior Subordinated Debentures is not or
within 90 days would not be deductible, in whole or in part, by us for U.S.
federal income tax purposes, or
. the Trust is or within 90 days would be subject to a material amount of other
taxes, duties or other governmental charges.
An Investment Company Event means that the Administrative Trustees have
received an opinion of a nationally recognized independent counsel to the
effect that, as a result of an amendment to or change in the Investment Company
Act or regulations thereunder on or after the date the Trust Preferred
Securities are issued and sold, there is more than an insubstantial risk that
the Trust is or will be considered an investment company and be required to be
registered under the Investment Company Act. (Section 1.1 of the Amended Trust
Agreement.)
Redemption Procedures
The Trust may not redeem fewer than all the outstanding trust securities
unless all accrued and unpaid distributions have been paid on all trust
securities for all distribution periods terminating on or before the date of
redemption. In the event that fewer than all of the outstanding trust
securities are to be redeemed, the trust securities will be redeemed
proportionately.
If the Trust gives a notice of redemption in respect of the trust securities
(which notice will be irrevocable), then, by 12:00 noon, New York City time, on
the redemption date, and if we have paid to the
19
Property Trustee a sufficient amount of cash in connection with the related
redemption or maturity of the Junior Subordinated Debentures, the Property
Trustee will irrevocably deposit with the depositary funds sufficient to pay
the applicable redemption price and will give the depositary irrevocable
instructions and authority to pay the redemption price to the holders of the
Trust Preferred Securities, and the paying agent will pay the applicable
redemption price to the holders of the trust common securities by check. If
notice of redemption has been given and funds deposited as required, then,
immediately prior to the close of business on the date of the deposit,
distributions will cease to accrue and all rights of holders of Trust Preferred
Securities called for redemption will cease, except the right of the holders of
the Trust Preferred Securities to receive the redemption price but without
interest on the redemption price. In the event that any date fixed for
redemption of Trust Preferred Securities is not a business day, then payment of
the redemption price payable on that date will be made on the next succeeding
day that is a business day, without any interest or other payment in respect of
any such delay, except that, if that business day falls in the next calendar
year, payment will be made on the immediately preceding business day. In the
event that payment of the redemption price in respect of Trust Preferred
Securities is improperly withheld or refused and not paid either by the Trust
or by us under the Guarantee, distributions on the Trust Preferred Securities
will continue to accrue at the then applicable rate from the original
redemption date to the date of payment, in which case the actual payment date
will be considered the date fixed for redemption for purposes of calculating
the redemption price.
Subject to the foregoing and applicable law, including, without limitation,
U.S. federal securities laws, we or our subsidiaries may at any time, and from
time to time, purchase outstanding Trust Preferred Securities by tender, in the
open market or by private agreement. (Section 7.4 of the Amended Trust
Agreement.)
Conversion or Exchange Rights
The terms on which the Trust Preferred Securities are convertible into or
exchangeable for common stock or our other securities will be contained in the
applicable prospectus supplement. Those terms will include provisions as to
whether conversion or exchange is mandatory, at the option of the holder or at
our option, and may include provisions under which the number of shares of
common stock or our other securities to be received by the holders of Trust
Preferred Securities would be subject to adjustment.
Distribution of the Junior Subordinated Debentures
We will have the right at any time to dissolve the Trust and, after
satisfaction of the liabilities of creditors of the Trust as provided by
applicable law, to cause Junior Subordinated Debentures to be distributed to
the holders of the Trust Preferred Securities in a total stated principal
amount equal to the total stated liquidation amount of the Trust Preferred
Securities then outstanding. Prior to any such dissolution, we will obtain any
required regulatory approvals. The right to dissolve the trust and distribute
the Junior Subordinated Debentures will be conditioned on our receipt of an
opinion rendered by an independent tax counsel that the distribution would not
result in the
20
recognition of gain or loss for federal income tax purposes by the holders.
(Section 8.1 of the Amended Trust Agreement.)
Liquidation Distribution Upon Dissolution
The amended trust agreement will state that the Trust will be dissolved:
. upon our bankruptcy;
. upon the filing of a certificate of dissolution or its equivalent with
respect to us;
. upon the filing of a certificate of cancellation with respect to the Trust
after obtaining the consent of at least a majority in liquidation amount of
the Trust Preferred Securities, voting together as a single class;
. 90 days after the revocation of our charter, but only if the charter is not
reinstated during that 90-day period;
. upon the distribution of the related Junior Subordinated Debentures directly
to the holders of the trust securities;
. upon the redemption of all of the trust securities; or
. upon entry of a court order for the dissolution of us or the Trust. (Section
8.1 of the Amended Trust Agreement.)
In the event of a dissolution, after the Trust pays all amounts owed to
creditors, the holders of the Trust Preferred Securities will be entitled to
receive:
. cash equal to the total liquidation amount of each Trust Preferred Security
specified in an accompanying prospectus supplement, plus accumulated and
unpaid distributions to the date of payment, or
. Junior Subordinated Debentures in a total principal amount equal to the total
liquidation amount of the Trust Preferred Securities.
If the Trust cannot pay the full amount due on its trust securities because
insufficient assets are available for payment, then the amounts payable by the
Trust on its trust securities will be paid proportionately. However, if an
event of default under the related amended trust agreement occurs, the total
amounts due on the Trust Preferred Securities will be paid before any
distribution on the trust common securities. Under certain circumstances
involving the dissolution of the Trust, subject to obtaining any required
regulatory approval, Junior Subordinated Debentures will be distributed to the
holders of the trust securities in liquidation of the Trust. (Section 8.2 of
the Amended Trust Agreement.)
Trust Enforcement Events
An event of default under the Subordinated Indenture relating to the Junior
Subordinated Debentures will be an event of default under the amended trust
agreement (a Trust Enforcement Event). See DESCRIPTION OF DEBT SECURITIES--
EVENTS OF DEFAULT.
In addition, the voluntary or involuntary dissolution, winding up or
termination of the Trust is also a Trust Enforcement Event, except in
connection with:
. the distribution of the Junior Subordinated Debentures to holders of the
trust securities of the Trust,
. the redemption of all of the trust securities of the Trust, and
21
. mergers, consolidations or amalgamations permitted by the amended trust
agreement of the Trust.
Under the amended trust agreement, the holder of the trust common securities
will be deemed to have waived any Trust Enforcement Event with respect to the
trust common securities until all Trust Enforcement Events with respect to the
Trust Preferred Securities have been cured, waived or otherwise eliminated.
Until all Trust Enforcement Events with respect to the Trust Preferred
Securities have been so cured, waived, or otherwise eliminated, the Property
Trustee will be deemed to be acting solely on behalf of the holders of the
Trust Preferred Securities and only the holders of the Trust Preferred
Securities will have the right to direct the Property Trustee with respect to
certain matters under the amended trust agreement and the Subordinated
Indenture. In the event that any Trust Enforcement Event with respect to the
Trust Preferred Securities is waived by the holders of the Trust Preferred
Securities as provided in the amended trust agreement, under the amended trust
agreement the holders of trust common securities have agreed that the waiver
also constitutes a waiver of the Trust Enforcement Event with respect to the
trust common securities for all purposes under the amended trust agreement
without any further act, vote or consent of the holders of trust common
securities. (Section 2.6 of the Amended Trust Agreement.)
We and the Administrative Trustees must file annually with the Property
Trustee a certificate evidencing compliance with all the applicable conditions
and covenants under the amended trust agreement. (Section 2.4 of the Amended
Trust Agreement.)
Upon the occurrence of a Trust Enforcement Event the Property Trustee, as the
sole holder of the Junior Subordinated Debentures, will have the right under
the Subordinated Indenture to declare the principal of, interest and premium,
if any, on the Junior Subordinated Debentures to be immediately due and
payable.
If a Property Trustee fails to enforce its rights under the amended trust
agreement or the Subordinated Indenture to the fullest extent permitted by law
and subject to the terms of the amended trust agreement and the Subordinated
Indenture, any holder of Trust Preferred Securities may sue us, or seek other
remedies, to enforce the Property Trustee's rights under the amended trust
agreement or the Subordinated Indenture without first instituting a legal
proceeding against the Property Trustee or any other person. If a Trust
Enforcement Event occurs and is continuing as a result of our failure to pay
principal of or interest or premium, if any, on the Junior Subordinated
Debentures when payable, then a holder of the Trust Preferred Securities may
directly sue us or seek other remedies, to collect its proportionate share of
payments owned. See RELATIONSHIP AMONG THE TRUST PREFERRED SECURITIES, THE
GUARANTEE AND THE JUNIOR SUBORDINATED DEBENTURES HELD BY THE TRUST.
Removal and Replacement of Trustees
Only the holders of trust common securities have the right to remove or
replace the trustees of the Trust, except that while an event of default in
respect of the Junior Subordinated Debentures has occurred or is continuing,
the holders of a majority of the Trust Preferred Securities
22
will have this right. The resignation or removal of any trustee and the
appointment of a successor trustee will be effective only on the acceptance of
appointment by the successor trustee in accordance with the provisions of the
amended trust agreement. (Section 6.6 of the Amended Trust Agreement.)
Mergers, Consolidations or Amalgamations of the Trust
The Trust may not consolidate, amalgamate, merge with or into, or be replaced
by or convey, transfer or lease its properties and assets substantially as an
entirety to any other corporation or other body (each, a Merger Event), except
as described below. The Trust may, with the consent of a majority of its
Administrative Trustees and without the consent of the holders of its trust
securities, consolidate, amalgamate, merge with or into, or be replaced by
another trust, provided that:
. the successor entity either
. assumes all of the obligations of the Trust relating to its trust
securities, or
. substitutes other securities for the trust securities that are
substantially similar to the trust securities, so long as the successor
securities rank the same as the trust securities for distributions and
payments upon liquidation, redemption and otherwise;
. we acknowledge a trustee of the successor entity who has the same powers and
duties as the Property Trustee of the Trust, as the holder of the Junior
Subordinated Debentures;
. the Trust Preferred Securities are listed, or any successor securities will
be listed, upon notice of issuance, on the same securities exchange or other
organization that the Trust Preferred Securities are then listed;
. the Merger Event does not cause the Trust Preferred Securities or successor
securities to be downgraded by any nationally recognized rating agency;
. the Merger Event does not adversely affect the rights, preferences and
privileges of the holders of the trust securities or successor securities in
any material way, other than with respect to any dilution of the holders'
interest in the new entity;
. the successor entity has a purpose identical to that of the Trust;
. prior to the Merger Event, we have received an opinion of counsel from a
nationally recognized law firm stating that
. the Merger Event does not adversely affect the rights of the holders of the
Trust Preferred Securities or any successor securities in any material way,
other than with respect to any dilution of the holders' interest in the new
entity, and
. following the Merger Event, neither the Trust nor the successor entity will
be required to register as an investment company under the Investment
Company Act; and
. we guarantee the obligations of the successor entity under the successor
securities in the same manner as in the Guarantee.
In addition, unless all of the holders of the Trust Preferred Securities and
trust common securities approve otherwise, the Trust will not consolidate,
amalgamate, merge with or into, or be replaced by any other entity or permit
any other entity to consolidate, amalgamate, merge with or into, or replace it,
if, in the opinion of a nationally recognized tax counsel experienced in such
matters, the transaction
23
would cause the Trust or the successor entity to be classified other than as a
grantor trust for U.S. federal income tax purposes. (Section 3.15 of the
Amended Trust Agreement.)
Voting Rights; Amendment of Trust Agreement
The holders of Trust Preferred Securities have no voting rights except as
discussed under MERGERS, CONSOLIDATIONS OR AMALGAMATIONS OF THE TRUST and
DESCRIPTION OF THE GUARANTEE--AMENDMENTS, and as otherwise required by law and
the amended trust agreement.
The amended trust agreement may be amended if approved by a majority of the
Administrative Trustees of the Trust. However, if any proposed amendment
provides for, or the Administrative Trustees otherwise propose to effect,
. any action that would adversely affect the powers, preferences or special
rights of the trust securities, whether by way of amendment to the amended
trust agreement or otherwise, or
. the dissolution, winding-up or termination of the Trust other than under the
terms of its amended trust agreement,
then the holders of the Trust Preferred Securities as a single class will be
entitled to vote on the amendment or proposal. In that case, the amendment or
proposal will only be effective if approved by at least a majority in
liquidation amount of the Trust Preferred Securities affected by the amendment
or proposal.
No amendment may be made to an amended trust agreement if that amendment
would:
. cause the Trust to be characterized as other than a grantor trust for U.S.
federal income tax purposes;
. reduce or otherwise adversely affect the powers of the Property Trustee; or
. cause the Trust to be deemed to be an investment company which is required to
be registered under the Investment Company Act. (Section 11.1 of the Amended
Trust Agreement.)
The holders of a majority of the total liquidation amount of the Trust
Preferred Securities have the right to:
. direct the time, method and place of conducting any proceeding for any remedy
available to the Property Trustee; or
. direct the exercise of any power conferred upon the Property Trustee under
the amended trust agreement, including the right to direct the Property
Trustee, as the holder of the Junior Subordinated Debentures, to:
. exercise the remedies available under the Subordinated Indenture with
respect to the Junior Subordinated Debentures,
. waive any event of default under the Subordinated Indenture that is
waivable, or
. cancel an acceleration of the principal of the Junior Subordinated
Debentures.
In addition, before taking any of the foregoing actions, the Property Trustee
must obtain an opinion of counsel stating that, as a result of that action, the
Trust will continue to be classified as a grantor trust for U.S. federal income
tax purposes. (Section 7.5 of the Amended Trust Agreement.)
24
As described in the form of amended trust agreement, the Property Trustee may
hold a meeting to have holders of Trust Preferred Securities vote on a change
or have them approve a change by written consent.
If a vote by the holders of Trust Preferred Securities is taken or a consent
is obtained, any Trust Preferred Securities owned by us or any of our
affiliates will, for purposes of the vote or consent, be treated as if they
were not outstanding, which will have the following consequences:
. we and any of our affiliates will not be able to vote on or consent to
matters requiring the vote or consent of holders of Trust Preferred
Securities; and
. any Trust Preferred Securities owned by us or any of our affiliates will not
be counted in determining whether the required percentage of votes or
consents has been obtained. Section 7.5 of the Amended Trust Agreement.)
Information Concerning the Property Trustee
The Chase Manhattan Bank is the Property Trustee. It is also the Guarantee
Trustee, the Subordinated Indenture Trustee and the Senior Indenture Trustee.
Dominion and certain of it affiliates maintain deposit accounts and banking
relationships with The Chase Manhattan Bank. The Chase Manhattan Bank also
serves as trustee under other indentures pursuant to which Dominion securities
and securities of certain of its affiliates are outstanding.
For matters relating to compliance with the Trust Indenture Act, the Property
Trustee will have all of the duties and responsibilities of an indenture
trustee under the Trust Indenture Act. The Property Trustee, other than during
the occurrence and continuance of a Trust Enforcement Event, undertakes to
perform only the duties that are specifically described in the amended trust
agreement and, upon a Trust Enforcement Event, must use the same degree of care
and skill as a prudent person would exercise or use in the conduct of his or
her own affairs. Subject to this provision, the Property Trustee is under no
obligation to exercise any of the powers given it by the applicable amended
trust agreement at the request of any holder of Trust Preferred Securities
unless it is offered reasonable security or indemnity against the costs,
expenses and liabilities that it might incur. However, the holders of the Trust
Preferred Securities will not be required to offer such an indemnity where the
holders, by exercising their voting rights, direct the Property Trustee to take
any action following a Trust Enforcement Event. (Section 3.9 of the Amended
Trust Agreement.)
Information Concerning the Delaware Trustee
Chase Manhattan Bank USA, National Association, will serve as trustee of the
Trust in the State of Delaware for the purpose of complying with the provisions
of the Delaware Business Trust Act. It is an affiliate of The Chase Manhattan
Bank which serves as Property Trustee and in the other capacities described
above under "Information Concerning the Property Trustee."
Information Concerning the Administrative Trustees
The Administrative Trustees are authorized and directed to conduct the
25
affairs of and to operate the Trust in a way that:
. will not cause it to be deemed to be an investment company required to be
registered under the Investment Company Act;
. will cause it to be classified as a grantor trust for U.S. federal income tax
purposes; and
. will cause the Junior Subordinated Debentures it holds to be treated as our
indebtedness for U.S. federal income tax purposes.
We and the Administrative Trustees are authorized to take any action, so long
as it is consistent with applicable law or the certificate of trust or amended
trust agreement, that we and the Administrative Trustees determine to be
necessary or desirable for those purposes. (Section 3.6 of the Amended Trust
Agreement.)
DESCRIPTION OF THE GUARANTEE
We will execute the Guarantee from time to time for the benefit of the
holders of the Trust Preferred Securities.
The Chase Manhattan Bank will act as Guarantee Trustee under the Guarantee.
The Guarantee Trustee will hold the Guarantee for the benefit of the holders of
the Trust Preferred Securities.
The following description of the Guarantee is only a summary. The form of
Guarantee is an exhibit to the registration statement.
General
We will irrevocably and unconditionally agree under the Guarantee to pay the
Guarantee Payments that are defined below, to the extent specified in the
Guarantee, to the holders of the Trust Preferred Securities, to the extent that
the Guarantee Payments are not paid by or on behalf of the Trust. We are
required to pay the Guarantee Payments to the extent specified in the Guarantee
regardless of any defense, right of set-off or counterclaim that we may have or
may assert against any person. (Section 5.1 of the Guarantee.)
The following payments and distributions on the Trust Preferred Securities of
the Trust are Guarantee Payments:
. any accrued and unpaid distributions required to be paid on the Trust
Preferred Securities of the Trust, but only to the extent that the Trust has
funds legally and immediately available for those distributions;
. the redemption price for any Trust Preferred Securities that the Trust calls
for redemption, including all accrued and unpaid distributions to the
redemption date, but only to the extent that the Trust has funds legally and
immediately available for the payment; and
. upon a dissolution, winding-up or termination of the Trust, other than in
connection with the distribution of Junior Subordinated Debentures to the
holders of Trust Securities of the Trust or the redemption of all the Trust
Preferred Securities of the Trust, the lesser of:
. the sum of the liquidation amount and all accrued and unpaid distributions
on the Trust Preferred Securities of the Trust to the payment date, to the
extent that the Trust has funds legally and immediately available for the
payment; and
. the amount of assets of the Trust remaining available for distribution to
26
holders of the Trust Preferred Securities of the Trust in liquidation of
the Trust. (Section 1.1 of the Guarantee.)
We may satisfy our obligation to make a Guarantee Payment by making that
payment directly to the holders of the related Trust Preferred Securities or by
causing the Trust to make the payment to those holders. (Section 5.1 of the
Guarantee.)
The Guarantee will be a full and unconditional guarantee, subject to certain
subordination provisions, of the Guarantee Payments with respect to the Trust
Preferred Securities from the time of issuance of the Trust Preferred
Securities, except that the Guarantee will only apply to the payment of
distributions and other payments on the Trust Preferred Securities when the
Trust has sufficient funds legally and immediately available to make those
distributions or other payments.
If we do not make the required payments on the Junior Subordinated Debentures
that the Property Trustee holds under the Trust, the Trust will not make the
related payments on the Trust Preferred Securities.
Subordination
Our obligations under the Guarantee will be unsecured obligations. Those
obligations will rank:
. subordinate and junior in right of payment to all of our other liabilities,
other than obligations or liabilities that rank equal in priority or
subordinate by their terms;
. equal in priority with the Junior Subordinated Debentures that we may issue
and similar guarantees; and
. senior to our preferred and common stock. (Section 6.2 of the Guarantee.)
We have approximately $825 million in Junior Subordinated Debentures
outstanding that will rank equal in priority with the Guarantee. We have common
stock outstanding that will rank junior to the Guarantee.
The Guarantee will be a guarantee of payment and not of collection. This
means that the guaranteed party may institute a legal proceeding directly
against us, as guarantor, to enforce its rights under the Guarantee without
first instituting a legal proceeding against any other person or entity.
(Section 5.4 of the Guarantee.)
The terms of the Trust Preferred Securities will provide that each holder of
the Trust Preferred Securities, by accepting those Trust Preferred Securities,
agrees to the subordination provisions and other terms of the Guarantee.
Amendments
We may amend the Guarantee without the consent of any holder of the Trust
Preferred Securities to which the Guarantee relates if the amendment does not
materially and adversely affect the rights of those holders. We may otherwise
amend the Guarantee with the approval of the holders of at least 50% of the
outstanding Trust Preferred Securities to which the Guarantee relates. (Section
9.2 of the Guarantee.)
Termination
The Guarantee will terminate and be of no further effect when:
. the redemption price of the Trust Preferred Securities to which the Guarantee
relates is fully paid;
. we distribute the related Junior Subordinated Debentures to the holders of
those Trust Preferred Securities; or
27
. the amounts payable upon liquidation of the related Trust are fully paid.
(Section 7.1 of the Guarantee.)
The Guarantee will remain in effect or will be reinstated if at any time any
holder of the related Trust Preferred Securities must restore payment of any
sums paid to that holder with respect to those Trust Preferred Securities or
under the Guarantee.
Material Covenants
We will covenant that, so long as any Trust Preferred Securities remain
outstanding, if there is an event of default under the Guarantee or the amended
trust agreement:
. we will not make distributions related to our debt securities that rank
equally with or junior to the Junior Subordinated Debentures, including any
payment of interest, principal or premium, or repayments, repurchases or
redemptions; and
. we will not make distributions related to our capital stock, including
dividends, redemptions, repurchases, liquidation payments, or guarantee
payments. We may, however, make the following types of distributions:
. dividends paid in common stock;
. dividends in connection with the implementation of a shareholder rights
plan;
. payments to a trust holding securities of the same series under a
guarantee; and
. repurchases, redemptions or other acquisitions of shares of our capital
stock in connection with any benefit plan or other similar arrangement with
or for the benefit of employees, officers, directors or consultants.
(Section 6.1 of the Guarantee.)
Because we are a holding company that conducts all of our operations through
our subsidiaries, our ability to meet our obligations under the Guarantee is
dependent on the earnings and cash flows of those subsidiaries and the ability
of those subsidiaries to pay dividends or to advance or repay funds to us. The
Trust, as holder of the Guarantee and the Junior Subordinated Debentures will
generally have a junior position to claims of creditors of our subsidiaries,
including trade creditors, debtholders, secured creditors, taxing authorities,
guarantee holders and any preferred stockholders.
Events of Default
An event of default will occur under the Guarantee if we fail to perform any
of our payment obligations under the Guarantee. The holders of a majority of
the Trust Preferred Securities of any series may waive any such event of
default and its consequences on behalf of all of the holders of the Trust
Preferred Securities of that series. (Section 2.6 of the Guarantee.) The
Guarantee Trustee is entitled to enforce the Guarantee for the benefit of the
holders of the Trust Preferred Securities of a series if an event of default
occurs under the related Guarantee. (Section 3.1 of the Guarantee.)
The holders of a majority of the Trust Preferred Securities to which the
Guarantee relates have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee
with respect to the Guarantee or to direct the exercise of any trust or power
that the Guarantee Trustee holds under the Guarantee. Any holder of the related
Trust Preferred Securities may institute a legal proceeding directly against us
to enforce that holder's rights under the
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Guarantee without first instituting a legal proceeding against the Guarantee
Trustee or any other person or entity. (Section 5.4 of the Guarantee.)
Concerning the Guarantee Trustee
The Chase Manhattan Bank is the Guarantee Trustee. It is also the Property
Trustee, the Subordinated Indenture Trustee and the Senior Indenture Trustee.
We and certain of our affiliates maintain deposit accounts and banking
relationships with The Chase Manhattan Bank. The Chase Manhattan Bank also
serves as trustee under other indentures pursuant to which securities of ours
and certain of our affiliates are outstanding.
The Guarantee Trustee will perform only those duties that are specifically
set forth in each Guarantee unless an event of default under the Guarantee
occurs and is continuing. In case an event of default occurs and is continuing,
the Guarantee Trustee will exercise the same degree of care as a prudent
individual would exercise in the conduct of his or her own affairs. (Section
3.1 of the Guarantee.) Subject to those provisions, the Guarantee Trustee is
under no obligation to exercise any of its powers under any Guarantee at the
request of any holder of the related Trust Preferred Securities unless that
holder offers reasonable indemnity to the Guarantee Trustee against the costs,
expenses and liabilities which it might incur as a result. (Section 3.2 of the
Guarantee.)
Agreement as to Expenses and Liabilities
We will enter into an Agreement as to Expenses and Liabilities as required
under the Trust Agreement. The Agreement as to Expenses and Liabilities will
provide that we will, with certain exceptions, irrevocably and unconditionally
guarantee the full payment of any indebtedness, expenses or liabilities of the
Trust to each person or entity to whom the Trust becomes indebted or liable.
The exceptions are the obligations of the Trust to pay to the holders of the
trust common securities or other similar interests in the Trust the amounts due
to the holders under the terms of the trust common securities or the similar
interests.
RELATIONSHIP AMONG THE TRUST PREFERRED SECURITIES, THE GUARANTEE AND THE JUNIOR
SUBORDINATED DEBENTURES HELD BY THE TRUST
We will guarantee payments of distributions and redemption and liquidation
payments due on the Trust Preferred Securities, to the extent the Trust has
funds available for the payments, to the extent described under DESCRIPTION OF
THE GUARANTEE. No single document executed by us in connection with the
issuance of the Trust Preferred Securities will provide for our full,
irrevocable and unconditional guarantee of the Trust Preferred Securities. It
is only the combined operation of our obligations under the Guarantee, the
amended trust agreement and the Subordinated Indenture that has the effect of
providing a full, irrevocable and unconditional guarantee of the Trust's
obligations under the Trust Preferred Securities.
As long as we make payments of interest and other payments when due on the
Junior Subordinated Debentures held by the Trust, those payments will be
sufficient to cover the payment of distributions and redemption and liquidation
payments due on the Trust Preferred Securities issued by the Trust, primarily
because:
. the total principal amount of the Junior Subordinated Debentures will be
equal to
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the sum of the total liquidation amount of the trust securities;
. the interest rate and interest and other payment dates on the Junior
Subordinated Debentures will match the distribution rate and distribution and
other payment dates for the Trust Preferred Securities;
. we will pay for any and all costs, expenses and liabilities of the Trust
except its obligations under its Trust Preferred Securities; and
. the amended trust agreement will provide that the Trust will not engage in
any activity that is not consistent with the limited purposes of the Trust.
If and to the extent that we do not make payments on the Junior Subordinated
Debentures, the Trust will not have funds available to make payments of
distributions or other amounts due on its Trust Preferred Securities. In those
circumstances, you will not be able to rely upon the Guarantee for payment of
these amounts. Instead, you may directly sue us or seek other remedies to
collect your proportionate share of payments owed. If you sue us to collect
payment, then we will assume your rights as a holder of Trust Preferred
Securities under the amended trust agreement to the extent we make a payment to
you in any such legal action.
ACCOUNTING TREATMENT
The Trust will be treated as a subsidiary of ours for financial reporting
purposes. Accordingly, our consolidated financial statements will include the
accounts of the Trust. The Trust Preferred Securities, along with other trust
preferred securities that we guarantee on an equivalent basis, will be
presented as a separate line item in our consolidated balance sheets, and
appropriate disclosures about the Trust Preferred Securities, the Guarantee and
the Junior Subordinated Debentures will be included in the notes to the
consolidated financial statements. We will record distributions that the Trust
pays on the Trust Preferred Securities as an expense in our consolidated
statement of income.
DESCRIPTION OF CAPITAL STOCK
As of December 31, 2000, our authorized capital stock was 520,000,000 shares.
Those shares consisted of: (a) 20,000,000 shares of preferred stock, none of
which were outstanding; and (b) 500,000,000 shares of common stock, of which
approximately 245,800,000 shares were outstanding as of December 31, 2000. On
February 16, 2001 our Board of Directors established the terms of and
authorized the issuance of at least 665,000 shares of Series A Preferred Stock
in connection with a proposed financing of Dominion Telecom's capital expansion
program. No holder of shares of common stock or preferred stock has any
preemptive rights.
Common Stock
Listing
Our outstanding shares of common stock are listed on the New York Stock
Exchange under the symbol "D". Any additional common stock we issue will also
be listed on the NYSE.
Dividends
Common shareholders may receive dividends when declared by the Board of
Directors. Dividends may be paid in cash, stock or other form. In certain
cases, common shareholders may not receive dividends until we have satisfied
our obligations to any preferred shareholders.
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Under certain circumstances, the Subordinated Indenture also restricts our
ability to pay cash dividends.
Fully Paid
All outstanding shares of common stock are fully paid and non-assessable. Any
additional common stock we issue will also be fully paid and non-assessable.
Voting Rights
Each share of common stock is entitled to one vote in the election of
directors and other matters. Common shareholders are not entitled to cumulative
voting rights.
Other Rights
We will notify common shareholders of any shareholders' meetings according to
applicable law. If we liquidate, dissolve or wind up our business, either
voluntarily or not, common shareholders will share equally in the assets
remaining after we pay our creditors and preferred shareholders.
Transfer Agents and Registrars
We, along with Continental Stock Transfer & Trust Company, are transfer agent
and registrar. You may contact us at the address listed on page 2 or
Continental located in New York, New York.
Preferred Stock
The following description of the terms of the preferred stock sets forth
certain general terms and provisions of our authorized preferred stock. If we
issue preferred stock, the specific designations and rights will be described
in the prospectus supplement and a description will be filed with the SEC.
Our Board of Directors can, without approval of shareholders, issue one or
more series of preferred stock. The Board can also determine the number of
shares of each series and the rights, preferences and limitations of each
series including the dividend rights, voting rights, conversion rights,
redemption rights and any liquidation preferences of any wholly unissued series
of preferred stock, the number of shares constituting each series and the terms
and conditions of issue. In some cases, the issuance of preferred stock could
delay a change in control of the Company and make it harder to remove present
management. Under certain circumstances, preferred stock could also restrict
dividend payments to holders of our common stock.
The preferred stock will, when issued, be fully paid and non-assessable.
Unless otherwise specified in the applicable prospectus supplement, the
preferred stock will rank on a parity in all respects with any outstanding
preferred stock we may have and will have priority over our common stock as to
dividends and distributions of assets. Therefore, the rights of any preferred
stock that may subsequently be issued may limit the rights of the holders of
our common stock and preferred stock.
The transfer agent, registrar, and dividend disbursement agent for a series
of preferred stock will be named in a prospectus supplement. The registrar for
shares of preferred stock will send notices to shareholders of any meetings at
which holders of the preferred stock have the right to elect directors or to
vote on any other matter.
VIRGINIA STOCK CORPORATION ACT AND THE ARTICLES AND THE BYLAWS
General
We are a Virginia corporation subject to the Virginia Stock Corporation Act
(the Virginia Act). Provisions of the Virginia Act, in addition to provisions
of our
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Articles of Incorporation and Bylaws, address corporate governance issues,
including the rights of shareholders. Some of these provisions could hinder
management changes while others could have an anti-takeover effect. This anti-
takeover effect may, in some circumstances, reduce the control premium that
might otherwise be reflected in the value of our common stock. If you are
buying this stock as part of a short-term investment strategy, this might be
especially important to you.
We have summarized the key provisions below. You should read the actual
provisions of our Articles and Bylaws and the Virginia Act that relate to your
individual investment strategy.
Business Combinations
Our Articles require that any merger, share exchange or sale of substantially
all of the assets of the Company be approved by a plurality of the shares
represented at a meeting where a quorum is present. Abstentions and broker non-
votes have the same effect as a vote against the matter.
Section 13.1-725 of the Virginia Act contains several provisions relating to
transactions with interested shareholders. Interested shareholders are holders
of more than 10% of any class of a corporation's outstanding voting shares.
Transactions between a corporation and an interested shareholder are referred
to as affiliated transactions. The Virginia Act requires that material
affiliated transactions must be approved by at least two-thirds of the
shareholders not including the interested shareholder. Affiliated transactions
requiring this two-thirds approval include mergers, share exchanges, material
dispositions of corporate assets, dissolution or any reclassification of the
corporation with its subsidiaries which increases the percentage of voting
shares owned by an interested shareholder by more than five percent.
For three years following the time that a shareholder becomes an interested
shareholder, a Virginia corporation cannot engage in an affiliated transaction
with the interested shareholder without approval of two-thirds of the
disinterested voting shares, and majority approval of disinterested directors.
A disinterested director is a director who was a director on the date on which
an interested shareholder became an interested shareholder and was recommended
for election or elected by a majority of the disinterested directors then on
the board. After three years, the approval of the disinterested directors is no
longer required.
The provisions of the Virginia Act relating to affiliated transactions do not
apply if a majority of disinterested directors approve the acquisition of
shares making a person an interested shareholder.
The Virginia Act permits corporations to opt out of the affiliated
transactions provisions. We have not opted out.
The Virginia Act also contains provisions regulating certain control share
acquisitions, which are transactions causing the voting strength of any person
acquiring beneficial ownership of shares of a public corporation in Virginia to
meet or exceed certain threshold voting percentages (20%, 33 1/3%, or 50%).
Shares acquired in a control share acquisition have no voting rights unless the
voting rights are granted by a majority vote of all outstanding shares other
than those held by the acquiring person or any officer or employee-director of
the corporation. The acquiring person may require that a special meeting of the
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shareholders be held to consider the grant of voting rights to the shares
acquired in the control share acquisition.
Our Bylaws give us the right to redeem the shares purchased by an acquiring
person in a control share acquisition. We can do this if the acquiring person
fails to deliver a statement to us listing information required by the Virginia
Act or if our shareholders vote not to grant voting rights to the acquiring
person.
The Virginia Act permits corporations to opt out of the control share
acquisition provisions. We have not opted out.
Directors' Duties
The standards of conduct for directors of Virginia corporations are listed in
Section 13.1-690 of the Virginia Act. Directors must discharge their duties in
accordance with their good faith business judgement of the best interest of the
corporation. Directors may rely on the advice or acts of others, including
officers, employees, attorneys, accountants and board committees if they have a
good faith belief in their competence. Directors' actions are not subject to a
reasonableness or prudent person standard. Virginia's federal and state courts
have focused on the process involved with directors' decision-making and are
generally supportive of directors if they have based their decision on an
informed process. These elements of Virginia law could make it more difficult
to take over a Virginia corporation than corporations in other states.
Board of Directors
Members of our Board of Directors serve one-year terms and are elected
annually. Directors may be removed from office for cause by the vote of two-
thirds of the outstanding shares entitled to vote.
Shareholder Proposals and Director Nominations
Our shareholders can submit shareholder proposals and nominate candidates for
the Board of Directors if the shareholders follow advance notice procedures
described in our Bylaws.
To nominate directors, shareholders must submit a written notice to our
corporate secretary at least 60 days before a scheduled meeting. The notice
must include the name and address of the shareholder and of the nominee, a
description of any arrangements between the shareholder and the nominee,
information about the nominee required by the SEC, the written consent of the
nominee to serve as a director and other information.
Shareholder proposals must be submitted to our corporate secretary at least
90 days before the first anniversary of the date of our last annual meeting.
The notice must include a description of the proposal, the reasons for
presenting the proposal at the annual meeting, the text of any resolutions to
be presented, the shareholder's name and address and number of shares held and
any material interest of the shareholder in the proposal.
Director nominations and shareholder proposals that are late or that do not
include all required information may be rejected. This could prevent
shareholders from bringing certain matters before an annual or special meeting,
including making nominations for directors.
Meetings of Shareholders
Under our Bylaws, meetings of the shareholders may be called only by the
chairman of the board, the president or a majority of the Board of Directors.
This provision could have the effect of delaying
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until the next annual shareholders' meeting shareholder actions which are
favored by the holders of a majority of our outstanding voting securities,
because such person or entity, even if it acquired a majority of our
outstanding voting securities, would be able to take action as a shareholder,
such as electing new directors or approving a merger, only at a duly called
shareholders' meeting.
Amendment of Articles
Generally, our Articles may be amended by a plurality of the shares
represented at a meeting where a quorum is present. Some provisions of the
Articles, however, may only be amended or repealed by a vote of at least two-
thirds of the outstanding shares entitled to vote.
Indemnification
We indemnify our officers and directors to the fullest extent permitted under
Virginia law against all liabilities incurred in connection with their service
to us.
Limitation of Liability
Our Articles provide that our directors and officers will not be personally
liable for monetary damages to us for breaches of their fiduciary duty as
directors or officers, unless they violated their duty of loyalty to us or our
shareholders, acted in bad faith, knowingly or intentionally violated the law,
authorized illegal dividends or redemptions or derived an improper personal
benefit from their action as directors or officers. This provision applies only
to claims against directors or officers arising out of their role as directors
or officers and not in any other capacity. Directors and officers remain liable
for violations of the federal securities laws and we retain the right to pursue
legal remedies other than monetary damages, such as an injunction or rescission
for breach of the officer's or director's duty of care.
DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS
We may issue stock purchase contracts, including contracts obligating holders
to purchase from us, and us to sell to the holders, a specified number of
shares of common stock at a future date or dates, which we refer to in this
prospectus as stock purchase contracts. The price per share of common stock and
the number of shares of common stock may be fixed at the time the stock
purchase contracts are issued or may be determined by reference to a specific
formula set forth in the stock purchase contracts. The stock purchase contracts
may be issued separately or as part of units consisting of a stock purchase
contract and beneficial interests in debt securities, trust preferred
securities, preferred stock or debt obligations of third parties, including
U.S. treasury securities, securing the holders' obligations to purchase the
common stock under the stock purchase contracts, which we refer to in this
prospectus as stock purchase units. The stock purchase contracts may require us
to make periodic payments to the holders of the stock purchase units or vice
versa, and these payments may be unsecured or refunded on some basis. The stock
purchase contracts may require holders to secure their obligations under those
contracts in a specified manner.
The applicable prospectus supplement will describe the terms of the stock
purchase contracts or stock purchase units, including, if applicable,
collateral or depositary arrangements, relating to the stock purchase contracts
or stock purchase units.
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We currently have 8,250,000 stock purchase units outstanding. These stock
purchase units trade on the NYSE under the symbol "DCP." They obligate holders
to purchase up to 8,088,300 shares of our common stock from us by November 16,
2004.
PLAN OF DISTRIBUTION
We may sell the offered securities (a) through agents; (b) through
underwriters or dealers; or (c) directly to one or more purchasers.
By Agents
Offered securities may be sold through agents that we designate. The agents
agree to use their reasonable best efforts to solicit purchases for the period
of their appointment.
By Underwriters
If underwriters are used in the sale, the offered securities will be acquired
by the underwriters for their own account. The underwriters may resell the
securities in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of
sale. The obligations of the underwriters to purchase the securities will be
subject to certain conditions. The underwriters will be obligated to purchase
all the securities of the series offered if any of the securities are
purchased. Any initial public offering price and any discounts or concessions
allowed or re-allowed or paid to dealers may be changed from time to time.
Direct Sales
We may also sell offered securities directly. This may include sales of our
common stock to holders of our stock purchase units. In this case, no
underwriters or agents would be involved.
General Information
Underwriters, dealers and agents that participate in the distribution of the
offered securities may be underwriters as defined in the Securities Act of 1933
(the Act), and any discounts or commissions received by them from us and any
profit on the resale of the offered securities by them may be treated as
underwriting discounts and commissions under the Act. Any underwriters or
agents will be identified and their compensation described in a prospectus
supplement.
We may have agreements with the underwriters, dealers and agents to indemnify
them against certain civil liabilities, including liabilities under the Act, or
to contribute with respect to payments which the underwriters, dealers or
agents may be required to make.
Underwriters, dealers and agents may engage in transactions with, or perform
services for, us or our subsidiaries in the ordinary course of their
businesses.
LEGAL OPINIONS
McGuireWoods LLP, counsel to the Company, will issue an opinion about the
legality of the offered securities for us. As of December 31, 2000, partners of
McGuireWoods LLP own less than one half of one percent of our common stock.
Certain matters relating to the formation of the Trust and the issuance of the
Trust Preferred Securities under Delaware law and the Trust Agreements will be
passed upon by Richards, Layton & Finger, special Delaware counsel to the
Trusts and the Company. Any underwriters will be advised about other issues
relating to any offering by their own legal counsel.
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EXPERTS
The financial statements incorporated in this prospectus by reference from
the Company's Annual Report on Form 10-K for the year ended December 31, 1999
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report, which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The audited historical consolidated financial statements of CNG incorporated
by reference in Dominion's Form 8-K filed with the SEC on February 1, 2000,
incorporated by reference in this prospectus, have been so incorporated in
reliance of the report of PricewaterhouseCoopers LLP, independent accountants,
given the authority of said firm as experts in auditing and accounting.
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[LOGO OF DOMINION RESOURCES INC.]