SUBJECT TO COMPLETION, DATED JUNE 10, 2002
THIS PROSPECTUS SUPPLEMENT RELATES TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 AND IS SUBJECT TO COMPLETION OR AMENDMENT. THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE
OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD
BE UNLAWFUL PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY STATE.
Filed Pursuant to Rule 424(b)(2)
Registration No. 333-62056
Prospectus Supplement to Prospectus dated July 3, 2001
$400,000,000
ENERGY EAST CORPORATION
% NOTES DUE , 2012
----------------
The Notes will bear interest from their date of issuance at the rate of
% per annum. Interest on the Notes will be payable semi-annually on
and of each year, beginning , 2002. The Notes will be our
unsecured and unsubordinated obligations. We may elect to redeem the Notes at
any time, in whole or in part, at the "make-whole" redemption prices described
in this prospectus supplement.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS ARE TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
PER SECURITY TOTAL
------------ --------
Public Offering Price(1).................................... % $
Underwriting Commissions to be Paid by Energy East.......... % $
Proceeds, before expenses, to Energy East................... % $
---------
(1) Plus accrued interest, if any, from , 2002.
------------------------
The underwriters are offering the Notes subject to various conditions. The
underwriters expect to deliver the Notes in book-entry form only through the
facilities of The Depository Trust Company on or about , 2002.
------------------------
JOINT LEAD BOOK-RUNNING MANAGERS
JPMORGAN MORGAN STANLEY UBS WARBURG
-------------
BNY CAPITAL MARKETS, INC.
FLEET SECURITIES, INC.
GOLDMAN, SACHS & CO.
SALOMON SMITH BARNEY
----------------
This Prospectus Supplement is dated , 2002.
SUMMARY
THE FOLLOWING INFORMATION SUPPLEMENTS, AND SHOULD BE READ TOGETHER WITH, THE
INFORMATION CONTAINED IN THE ACCOMPANYING PROSPECTUS. THIS SUMMARY HIGHLIGHTS
SELECTED INFORMATION FROM THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS TO HELP YOU UNDERSTAND THE NOTES. YOU SHOULD CAREFULLY READ THE
ENTIRE PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, AS WELL AS THE
DOCUMENTS THAT HAVE BEEN INCORPORATED INTO THE PROSPECTUS, BEFORE MAKING AN
INVESTMENT DECISION. IN THIS PROSPECTUS SUPPLEMENT, REFERENCES TO "WE," "US" AND
"OUR" REFER TO ENERGY EAST CORPORATION, UNLESS THE CONTEXT INDICATES THAT "WE,"
"US" OR "OUR" REFERS TO ENERGY EAST CORPORATION TOGETHER WITH ITS CONSOLIDATED
SUBSIDIARIES.
ENERGY EAST CORPORATION
We are a public utility holding company organized under the laws of the
State of New York in 1997 and became the parent of New York State Electric & Gas
Corporation in May 1998. We are a super-regional energy services and delivery
company with operations in New York, Connecticut, Massachusetts, Maine and New
Hampshire and corporate offices in New York and Maine. On February 8, 2000, we
completed our merger with Connecticut Energy Corporation, which is a holding
company primarily engaged in the retail distribution of natural gas in
Connecticut through its wholly-owned subsidiary, The Southern Connecticut Gas
Company. On September 1, 2000, we completed our mergers with CMP Group, Inc.,
CTG Resources, Inc. and Berkshire Energy Resources. CMP Group is a holding
company and its principal operating subsidiary, Central Maine Power Company, is
primarily engaged in transmitting and distributing electricity generated by
others to retail customers in Maine. CTG Resources, also a holding company, is
the parent company of Connecticut Natural Gas Corporation, a regulated natural
gas distribution company in Connecticut. Berkshire Energy is a holding company
and the parent company of The Berkshire Gas Company, a regulated natural gas
distribution company that operates in western Massachusetts. In February 2001,
we entered into a merger agreement with RGS Energy Group, Inc., under which all
of the outstanding common stock of RGS Energy would be exchanged for a
combination of cash and our common stock valued at approximately $1.4 billion in
the aggregate. We will assume approximately $1 billion of RGS Energy's long-term
debt. On June 15, 2001, RGS Energy shareholders approved the merger and our
shareholders approved the issuance of our common stock to the RGS Energy
shareholders. We have made all required regulatory filings and we expect to
complete the merger in late June 2002.
Our principal energy delivery business is transmitting and distributing
electricity in upstate New York and Maine and transporting, storing and
distributing natural gas in upstate New York, Connecticut, Maine and
Massachusetts. We also generate electricity from our several hydroelectric and
two internal combustion stations and serve approximately 1.4 million electricity
customers and 600,000 natural gas customers. Our service territories reflect
diversified economies, including high-tech firms, insurance, light industry,
pulp and paper industry, ship building, colleges and universities, agriculture,
fishing and recreational facilities. No customer accounts for more than 5% of
either electric or natural gas revenues.
Our address is P.O. Box 12904, Albany, New York 12212-2904 and our telephone
number is (518) 434-3049.
S-2
THE OFFERING
Issuer.................................... Energy East Corporation
Offered Securities........................ We will issue $400,000,000 aggregate principal amount of
Notes. The Notes will mature on , 2012.
Ranking................................... The Notes will be unsecured and unsubordinated
obligations ranking equally with our other outstanding
unsecured and unsubordinated indebtedness.
Use of Proceeds........................... We intend to use the net proceeds from the sale of the
Notes to help fund the cash portion of the consideration
for the pending acquisition of RGS Energy. We will
invest funds not immediately required for such purpose
in liquid, money market securities.
Interest Rate............................. The Notes will bear interest at the rate of % per
annum from their date of issuance to, but excluding,
, 2012.
Interest Payment Dates.................... Interest on the Notes will be payable on and
of each year beginning on , 2002 and
continuing to , 2012.
Optional Redemption....................... We may redeem some or all of the Notes at any time at
the "make-whole" redemption prices, plus accrued and
unpaid interest, if any, to the redemption date, as
described in "DESCRIPTION OF THE NOTES."
Further Issues............................ The Notes will be limited to $400,000,000 in aggregate
principal amount. We may, however, "reopen" the series
of Notes and issue an unlimited principal amount of
additional Notes in the future.
S-3
SELECTED FINANCIAL DATA AND CAPITALIZATION
The following material, which is presented in this prospectus supplement
solely to furnish limited introductory information, is qualified by, and should
be considered in conjunction with, the more detailed information appearing in
the accompanying prospectus and the documents incorporated by reference in the
prospectus. In our opinion, all adjustments (constituting only normal recurring
accruals) necessary for a fair statement of the results of operations for the
three months ended March 31, 2002, have been made.
THREE MONTHS YEAR ENDED DECEMBER 31,
ENDED --------------------------------------------------------------------------
MARCH 31, 2002(1) 2001 2000(2) 1999 1998 1997
----------------- ---------- ---------- ---------- ---------- ----------
Operating Revenues
(000).................. $1,028,578 $3,759,787 $2,959,520 $2,278,608 $2,499,568 $2,170,102
Net Income (000)......... $105,570(3) $187,607(3) $235,034(4) $218,751(5) $194,205 $175,211(6)
Earnings Per Share, basic
and diluted(7)......... $.90(3) $1.61(3) $2.06(4) $1.88(5) $1.51 $1.29(6)
Dividends Paid Per
Share(7)............... $.24 $.92 $.88 $.84 $.78 $.70
Ratio of Earnings to
Fixed Charges(8)....... 3.61(9) 2.43(10) 3.48 4.40(11) 3.34 3.07
Total Assets (000)....... $7,262,099 $7,269,232 $7,013,728 $3,773,171 $4,902,085 $5,044,914
Long-term Obligations,
Capital Leases and
Redeemable Preferred
Stock (000)............ $2,632,824 $2,816,278 $2,346,814 $1,235,089 $1,460,120 $1,475,224
AS OF MARCH 31, 2002 AS ADJUSTED(12)
----------------------- -----------------------
(THOUSANDS OF DOLLARS) (THOUSANDS OF DOLLARS)
Long-term Debt (includes current maturities)................ $2,694,275 54.2% $3,094,275 57.6%
Company-obligated Mandatorily Redeemable Trust Preferred
Securities of Subsidiary Holding Solely Parent
Debentures................................................ 345,000 6.9 345,000 6.4
Preferred Stock of Subsidiaries............................. 43,420 0.9 43,420 0.8
Common Stock Equity......................................... 1,891,104 38.0 1,891,104 35.2
---------- ----- ---------- -----
Total Capitalization (includes current maturities)........ $4,973,799 100.0% $5,373,799 100.0%
========== ===== ========== =====
------------------------------
(1) Due to the seasonal nature of our operations, financial results for interim
periods are not necessarily indicative of trends for a twelve-month period.
We adopted Statement of Financial Accounting Standards No. 142, Goodwill and
Other Intangible Assets on January 1, 2002. As required by Statement 142 we
no longer amortize goodwill and are not amortizing intangible assets with
indefinite lives.
(2) Due to the completion of our merger transactions during 2000, the
consolidated financial statements include Connecticut Energy's results
beginning with February 2000 and include CMP Group's, CTG Resources' and
Berkshire Energy's results beginning with September 2000.
(3) Includes the effect of writedowns of CMP Group's investment in NEON
Communications, Inc. as follows: a writedown during the three months ended
March 31, 2002, that decreased net income by $6 million and earnings per
share by 5 cents, and a writedown in 2001 that decreased net income by
$46 million and earnings per share by 39 cents.
(4) Includes the effects of the nonrecurring benefit from the sale of our
coal-fired generation assets that increased net income by $8 million and
earnings per share by 7 cents and the nonrecurring loss from the sale of
XENERGY, Inc. that decreased net income by $4 million and earnings per share
by 4 cents.
(5) Includes the effect of the extraordinary loss related to the early
extinguishment of debt that decreased net income by $18 million and earnings
per share by 15 cents and the nonrecurring benefit from the sale of our
coal-fired generation assets net of the writeoff of Nine Mile Point 2 that
increased net income by $14 million and earnings per share by 12 cents.
(6) Includes the effect of fees related to an unsolicited tender offer that
decreased net income by $17 million and earnings per share by 12 cents.
S-4
(7) All per share amounts prior to 1999 have been restated to reflect the
two-for-one common stock split effective April 1, 1999.
(8) The ratio of earnings to fixed charges is calculated by dividing earnings by
fixed charges. For this purpose earnings means income from continuing
operations before income taxes and fixed charges. Fixed charges means all
interest charges, the interest component of rentals and preferred stock
dividends of subsidiaries.
(9) Earnings before income taxes and fixed charges include a $10 million
writedown of an investment in NEON Communications, Inc. Excluding the
$10 million writedown, the ratio of earnings to fixed charges would have
been 3.77.
(10) Earnings before income taxes and fixed charges include a $78 million
writedown of an investment in NEON Communications, Inc. Excluding the
$78 million writedown, the ratio of earnings to fixed charges would have
been 2.76.
(11) Earnings before income taxes and fixed charges includes $84 million that we
paid in federal income taxes as a result of the sale of our coal-fired
generation assets. Excluding the $84 million, the ratio of earnings to fixed
charges would have been 3.79.
(12) Adjusted for the sale of our Notes.
S-5
USE OF PROCEEDS
We intend to use the net proceeds from the sale of the Notes to help fund
the cash portion of the consideration for the pending acquisition of RGS Energy.
We will invest funds not immediately required for such purpose in liquid, money
market securities.
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma combined condensed financial statements
have been prepared to reflect our merger with RGS Energy, which we expect to be
completed in late June 2002. The unaudited pro forma combined condensed
statements of income for the year ended December 31, 2001, and for the three
months ended March 31, 2002, give effect to the RGS Energy merger as if that
event occurred on January 1, 2001. The unaudited pro forma combined condensed
balance sheet gives effect to the RGS Energy merger as if it occurred on
March 31, 2002.
S-6
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
ENERGY EAST CORPORATION COMBINED CONDENSED BALANCE SHEET
GIVING EFFECT TO THE RGS ENERGY MERGER
AT MARCH 31, 2002
ACTUAL AND PRO FORMA
(UNAUDITED)
ENERGY EAST RGS ENERGY PRO FORMA PRO FORMA
ACTUAL ACTUAL ADJUSTMENTS ENERGY EAST
----------- ---------- ----------- -----------
(IN THOUSANDS)
Assets
Current Assets
Cash and cash equivalents................. $ 533,824 $ 13,557 $(303,352)(4) $ 244,029
Special deposits.......................... 1,939 1,939
Accounts receivable, net.................. 589,337 176,289 765,626
Other..................................... 196,199 130,630 326,829
---------- ---------- --------- -----------
Total Current Assets.................... 1,321,299 320,476 (303,352) 1,338,423
---------- ---------- --------- -----------
Utility Plant, at Original Cost............. 5,879,901 2,574,659 8,454,560
Less accumulated depreciation............. 2,302,563 1,494,734 3,797,297
---------- ---------- --------- -----------
Net utility plant in service............ 3,577,338 1,079,925 4,657,263
Construction work in progress............. 26,058 150,182 176,240
---------- ---------- --------- -----------
Total Utility Plant..................... 3,603,396 1,230,107 4,833,503
---------- ---------- --------- -----------
Other Property and Investments, Net......... 201,030 229,367 430,397
Regulatory Assets........................... 670,824 644,048 30,447(5) 1,345,319
Other Assets................................ 567,709 73,842 133,976(6) 775,527
Goodwill.................................... 897,841 18,468 591,806(7)(8) 1,508,115
---------- ---------- --------- -----------
Total Assets............................ $7,262,099 $2,516,308 $ 452,877 $10,231,284
========== ========== ========= ===========
The notes on pages S-11 to S-13 are an integral part
of the pro forma combined condensed financial statements.
S-7
ENERGY EAST CORPORATION COMBINED CONDENSED BALANCE SHEET
GIVING EFFECT TO THE RGS ENERGY MERGER
AT MARCH 31, 2002
ACTUAL AND PRO FORMA
(UNAUDITED)
ENERGY EAST RGS ENERGY PRO FORMA PRO FORMA
ACTUAL ACTUAL ADJUSTMENTS ENERGY EAST
----------- ---------- ----------- -----------
(IN THOUSANDS)
Liabilities
Current Liabilities
Current portion of long-term debt............ $ 406,451 $ 12,337 $ 418,788
Notes payable................................ 88,700 59,500 $ 50,000(9) 198,200
Other........................................ 456,480 196,609 9,500(7)(8) 662,589
---------- ---------- --------- -----------
Total Current Liabilities.................... 951,631 268,446 59,500 1,279,577
---------- ---------- --------- -----------
Regulatory Liabilities
Gain on sale of generation assets............ 197,100 197,100
Other........................................ 255,718 26,117 133,976(6) 415,811
---------- ---------- --------- -----------
Total Regulatory Liabilities................. 452,818 26,117 133,976 612,911
Deferred income taxes.......................... 495,487 265,378 760,865
Nuclear waste disposal......................... 101,562 101,562
Other.......................................... 794,815 206,612 30,447(5) 1,031,874
Long-term debt................................. 2,287,824 788,769 400,000(10) 3,476,593
---------- ---------- --------- -----------
Total Liabilities............................ 4,982,575 1,656,884 623,923 7,263,382
Commitments.................................... -- -- --
Company-obligated mandatorily redeemable trust
preferred securities of subsidiary holding
solely parent debentures..................... 345,000 345,000
Preferred stock redeemable solely at the option
of subsidiary................................ 43,420 47,000 90,420
Preferred stock subject to mandatory redemption
requirements................................. 25,000 25,000
Common Stock Equity
Energy East common stock ($.01 par value,
300,000 shares authorized and 116,822 shares
outstanding at March 31, 2002)............... 1,181 275(11) 1,456
RGS Energy common stock ($.01 par value,
100,000 shares authorized and 34,677 shares
outstanding at March 31, 2002)............... 391 (391)(11)
Capital in excess of par value................. 840,198 708,365 (92,262)(11) 1,456,301
Retained earnings.............................. 1,075,848 195,906 (195,906)(11) 1,075,848
Accumulated other comprehensive income......... 7,850 -- 7,850
Treasury stock, at cost (1,230 Energy East
shares and 4,379 RGS Energy shares
outstanding at March 31, 2002)............... (33,973) (117,238) 117,238 (33,973)
---------- ---------- --------- -----------
Total Common Stock Equity.................... 1,891,104 787,424 (171,046) 2,507,482
---------- ---------- --------- -----------
Total Liabilities and Shareholders' Equity... $7,262,099 $2,516,308 $ 452,877 $10,231,284
========== ========== ========= ===========
The notes on pages S-11 to S-13 are an integral part
of the pro forma combined condensed financial statements.
S-8
ENERGY EAST CORPORATION COMBINED CONDENSED STATEMENT OF INCOME
GIVING EFFECT TO THE RGS ENERGY MERGER
12 MONTHS ENDED DECEMBER 31, 2001
ACTUAL AND PRO FORMA
(UNAUDITED)
ENERGY RGS ENERGY PRO FORMA PRO FORMA
EAST ACTUAL ACTUAL ADJUSTMENTS ENERGY EAST
----------- ---------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Operating Revenues
Sales and services.......................... $3,759,787 $1,530,492 $5,290,279
Operating Expenses
Electricity purchased and fuel used in
generation................................ 1,334,507 151,346 1,485,853
Natural gas purchased....................... 694,038 230,507 924,545
Gasoline, propane and oil purchased......... 384,320 384,320
Other operating expenses.................... 570,186 309,645 879,831
Maintenance................................. 139,395 50,524 189,919
Depreciation and amortization............... 204,281 120,547 324,828
Other taxes................................. 192,772 90,885 283,657
Gain on sale of generation asset............ (84,083) (84,083)
Deferral of asset sale gain................. 71,803 71,803
---------- ---------- -------- ----------
Total Operating Expenses.................... 3,122,899 1,337,774 4,460,673
---------- ---------- -------- ----------
Operating Income.............................. 636,888 192,718 829,606
Writedown of Investment....................... 78,422 78,422
Other (Income)................................ (15,003) (1,253) (16,256)
Interest Charges, Net......................... 217,028 65,541 $ 33,286(9)(10) 315,855
Preferred Stock Dividends of Subsidiaries..... 14,455 3,700 15,923(12) 34,078
---------- ---------- -------- ----------
Income Before Income Taxes.................... 341,986 124,730 (49,209) 417,507
Income Taxes.................................. 154,379 55,390 (19,684)(13) 190,085
---------- ---------- -------- ----------
Net Income.................................... $ 187,607 $ 69,340 $(29,525) $ 227,422
========== ========== ======== ==========
Earnings Per Share, basic and diluted....... $ 1.61 $ 1.58
Average Common Shares Outstanding........... 116,708 27,505(14) 144,213
The notes on pages S-11 to S-13 are an integral part
of the pro forma combined condensed financial statements.
S-9
ENERGY EAST CORPORATION COMBINED CONDENSED STATEMENT OF INCOME
GIVING EFFECT TO THE RGS ENERGY MERGER
THREE MONTHS ENDED MARCH 31, 2002
ACTUAL AND PRO FORMA
(UNAUDITED)
ENERGY EAST RGS ENERGY PRO FORMA PRO FORMA
ACTUAL ACTUAL ADJUSTMENTS ENERGY EAST
----------- ---------- ------------------- ----------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Operating Revenues
Sales and services.................... $1,028,578 $379,133 $1,407,711
Operating Expenses
Electricity purchased and fuel used in
generation.......................... 305,953 44,517 350,470
Natural gas purchased................. 209,730 77,287 287,017
Gasoline, propane and oil purchased... 65,742 65,742
Other operating expenses.............. 142,452 67,690 210,142
Maintenance........................... 34,825 16,281 51,106
Depreciation and amortization......... 46,143 26,866 73,009
Other taxes........................... 50,606 27,079 77,685
---------- -------- -------- ----------
Total Operating Expenses.............. 789,709 325,462 1,115,171
---------- -------- -------- ----------
Operating Income........................ 238,869 53,671 292,540
Writedown of Investment................. 10,115 10,115
Other (Income).......................... (5,434) (2,203) (7,637)
Interest Charges, Net................... 55,910 14,869 $ 7,625(9)(10) 78,404
Preferred Stock Dividends of
Subsidiaries.......................... 7,592 925 8,517
---------- -------- -------- ----------
Income Before Income Taxes.............. 170,686 40,080 (7,625) 203,141
Income Taxes............................ 65,116 15,972 (3,050)(13) 78,038
---------- -------- -------- ----------
Net Income.............................. $ 105,570 $ 24,108 $ (4,575) $ 125,103
========== ======== ======== ==========
Earnings Per Share, basic and diluted... $ .90 $ .87
Average Common Shares Outstanding....... 116,720 27,505(14) 144,225
The notes on pages S-11 to S-13 are an integral part
of the pro forma combined condensed financial statements.
S-10
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
GIVING EFFECT TO THE RGS ENERGY MERGER
NOTE 1. UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS.
The unaudited pro forma combined condensed financial statements reflect
preliminary purchase accounting adjustments in compliance with generally
accepted accounting principles. Estimates relating to the fair value of some
assets and liabilities and other events are more fully described below. Actual
adjustments will be made on the basis of actual assets, liabilities and other
items as of the closing date of the merger on the basis of appraisals and
evaluations. Therefore, actual amounts may differ from those reflected in the
pro forma financial statements.
The unaudited pro forma combined condensed financial statements should be
read in conjunction with the consolidated historical financial statements and
the related notes of Energy East and RGS Energy. The pro forma statements are
for illustrative purposes only. They are not necessarily indicative of the
financial position or operating results that would have occurred had the mergers
been completed on March 31, 2002, or January 1, 2001, as assumed above, nor is
the information necessarily indicative of future financial position or operating
results.
NOTE 2. ACCOUNTING METHOD.
The RGS Energy merger will be accounted for as an acquisition of RGS Energy
by Energy East under the purchase method of accounting in accordance with
generally accepted accounting principles. The amount of goodwill recorded will
reflect the excess of the purchase price over the estimated net fair value of
assets and liabilities of RGS Energy's utility and nonutility businesses at the
time of closing, plus Energy East's estimated transaction costs related to the
merger. The assets and liabilities of RGS Energy's nonutility businesses will be
revalued to fair value, including an allocation of goodwill, if appropriate.
NOTE 3. EARNINGS PER SHARE AND AVERAGE SHARES OUTSTANDING.
The pro forma earnings per share and number of average shares outstanding
have been restated to reflect the average number of shares that would have been
outstanding if the merger occurred at the beginning of the periods presented
assuming a conversion of 45% of the RGS Energy shares into 1.7626 Energy East
shares per RGS Energy share. The exchange ratio of 1.7626 is based on a value of
$39.50 per RGS Energy share and a market price of $22.41 per Energy East share.
If the Average Market Price is between $16.57 per share and $22.41 per share,
then each RGS Energy share converted into stock will be exchanged for $39.50
worth of Energy East shares. If the Average Market Price is less than or equal
to $16.57, then each RGS Energy share converted into stock will be exchanged for
2.3838 Energy East shares, irrespective of the value of the Energy East shares.
Finally, if the Average Market Price is greater than or equal to $22.41 per
share, then each RGS Energy share will be exchanged for 1.7626 Energy East
shares, again irrespective of the value of the Energy East shares. The following
table presents the range of shares that could be issued based on various
potential conversion ratios provided under the merger agreement:
Conversion ratio............................................ 1.7626 2.3838
Number of shares (thousands)................................ 27,505 37,198
S-11
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
GIVING EFFECT TO THE RGS ENERGY MERGER (CONTINUED)
NOTE 4. CASH CONSIDERATION.
This amount reflects the cash consideration paid to RGS Energy shareholders
based on a purchase price per share of $39.50 for 55% of the shares outstanding
at March 31, 2002, and the cash received from the issuance of the long-term debt
and notes payable.
NOTE 5. REGULATORY ASSETS AND RELATED LIABILITY.
This amount reflects the recognition of a regulatory asset and a liability
for the estimated difference between RGS Energy's net other postretirement
benefit obligation and the previously recognized liability.
NOTE 6. OTHER ASSETS AND RELATED REGULATORY LIABILITY.
This amount reflects the recognition of an other asset and a regulatory
liability for the estimated difference between RGS Energy's net pension benefit
and the previously recognized liability.
NOTE 7. GOODWILL.
This amount reflects the recognition of goodwill equal to the excess of the
estimated purchase price of $1,369.7 million over the estimated net fair value
of the assets and liabilities of RGS Energy acquired of $787.4 million, plus
estimated transaction costs of $9.5 million related to the merger. For every one
dollar increase in the Average Market Price above $22.41 per share, the purchase
price will increase by approximately $28 million. For every one dollar decrease
in the Average Market Price below $16.57, the purchase price will decrease by
approximately $37 million.
Since the acquisition of RGS Energy will occur after June 30, 2001, the
resulting goodwill will not be amortized as prescribed by Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets. Goodwill
will be tested at least annually for impairment.
NOTE 8. MERGER-RELATED COSTS.
Energy East and RGS Energy will incur direct expenses related to the merger,
including financial advisor, legal and accounting fees. The pro forma
adjustments include an estimate for Energy East's merger-related costs of
$9.5 million, which is included in goodwill. RGS Energy expects to incur
approximately $18 million of merger-related costs, which it will expense as
incurred. The actual amount of merger-related costs may differ from the amounts
reflected in the unaudited pro forma combined condensed financial statements.
NOTE 9. NOTES PAYABLE
This amount reflects the issuance of $50 million of notes payable with an
assumed average interest rate of 3%, the proceeds of which will be used for
general corporate purposes.
NOTE 10. LONG-TERM DEBT.
This amount reflects the issuance of $400 million principal amount of Notes
with an assumed fixed interest rate of 7.25%, the proceeds of which will be used
to fund the consideration paid to RGS Energy shareholders. Interest expense for
the 12 months ended December 31, 2001, was adjusted for the effect of the
issuance of $250 million of notes payable in 2001 and the effect of
$327 million of
S-12
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
GIVING EFFECT TO THE RGS ENERGY MERGER (CONTINUED)
NOTE 10. LONG-TERM DEBT. (CONTINUED)
debt redeemed in 2001. A 1/8 of 1% change in interest rate will increase or
decrease interest expense $0.5 million.
NOTE 11. COMMON STOCK.
This amount reflects the Energy East shares to be issued to RGS Energy
shareholders in exchange for 45% of their RGS Energy shares, assuming a
conversion ratio of 1.7626 Energy East shares per RGS Energy share, and the
exchange of 55% of their RGS Energy shares for cash.
NOTE 12. TRUST PREFERRED SECURITIES.
This amount adjusts dividends of subsidiaries for the twelve month period to
reflect dividends related to $345 million of a business trust subsidiary's
preferred securities, with a dividend rate of 8 1/4%, that were sold in
July 2001. The proceeds were used by the Trust to purchase our 8 1/4% junior
subordinated debt securities issued in July 2001.
NOTE 13. INCOME TAXES.
Income taxes on the pro forma combined condensed income statements have been
based on the statutory rate.
NOTE 14. ENERGY EAST SHARES ISSUED.
This amount reflects the number of Energy East shares to be issued in the
merger assuming a conversion of 45% of the RGS Energy shares into 1.7626 Energy
East shares per RGS Energy share.
S-13
DESCRIPTION OF THE NOTES
The following description of the particular terms of the Notes, which are
referred to in the accompanying prospectus as "senior debt securities," is not
complete and should be read together with the "DESCRIPTION OF
SECURITIES--DESCRIPTION OF SENIOR DEBT SECURITIES" in the accompanying
prospectus. This description supplements and, to the extent it is inconsistent
with the description in the accompanying prospectus, replaces the description of
the general terms and provisions of the debt securities in the prospectus. The
Notes will be issued under an existing senior indenture, dated as of August 31,
2000, between us and JPMorgan Chase Bank (formerly known as The Chase Manhattan
Bank), as supplemented by six supplemental indentures and references in this
prospectus supplement to the senior indenture will mean the senior indenture as
so supplemented. This summary is qualified in its entirety by reference to the
senior indenture.
The Notes will be our unsecured and unsubordinated obligations ranking
equally with our other outstanding unsecured and unsubordinated indebtedness. At
March 31, 2002, we had $750,000,000 of unsecured and unsubordinated indebtedness
outstanding. The senior indenture contains no restrictions on the amount of
additional indebtedness that we may issue.
The Notes will mature on , 2012. The Notes will bear interest
from their date of issuance at the rate of % per annum. Interest will be
payable semi-annually on and of each year, beginning , 2002,
to the persons in whose names the Notes are registered at the close of business
on the preceding and , respectively, subject to certain exceptions.
Interest on the Notes will be computed on the basis of a 360-day year comprised
of twelve 30-day months.
The Notes will be redeemable, in whole or in part, at any time, at our
option, at a redemption price equal to the greater of:
- 100% of the principal amount of the Notes then outstanding to be redeemed,
or
- the sum of the present values of the remaining scheduled payments of
principal and interest thereon from the redemption date to the maturity
date computed by discounting such payments to the redemption date on a
semi-annual basis (assuming a 360-day year consisting of twelve 30-day
months) at a rate equal to the sum of basis points plus the Adjusted
Treasury Rate on the third Business Day prior to the redemption date, as
calculated by an Independent Investment Banker, plus, in each case, any
accrued and unpaid interest on the Notes to the redemption date.
"Adjusted Treasury Rate" means, with respect to any redemption date:
- the yield, under the heading which represents the average for the
immediately preceding week, appearing in the most recently published
statistical release designated "H.15(519)" or any successor publication
which is published weekly by the Board of Governors of the Federal Reserve
System and which establishes yields on actively traded U.S. Treasury
securities adjusted to constant maturity under the caption "Treasury
Constant Maturities," for the maturity corresponding to the Comparable
Treasury Issue (if no maturity is within three months before or after the
Remaining Life, yields for the two published maturities most closely
corresponding to the Comparable Treasury Issue will be determined and the
Adjusted Treasury Rate will be interpolated or extrapolated from such
yields on a straight line basis, rounding to the nearest month); or
- if such release (or any successor release) is not published during the
week preceding the calculation date or does not contain such yields, the
rate per annum equal to the semi-annual equivalent yield to maturity of
the Comparable Treasury Issue, calculated using a price for the Comparable
Treasury Issue (expressed as a percentage of its principal amount) equal
to the Comparable Treasury Price for such redemption date.
S-14
"Business Day" means any day other than a Saturday or Sunday or a day on
which banking institutions in New York City are authorized or obligated by law
or executive order to close.
"Comparable Treasury Issue" means the U.S. Treasury security selected by an
Independent Investment Banker as having a maturity comparable to the remaining
term of the Notes to be redeemed that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining term
of such Notes ("Remaining Life") or, if, in the reasonable judgment of the
Independent Investment Banker, there is no such security, then the Comparable
Treasury Issue will mean the U.S. Treasury security or securities selected by an
Independent Investment Banker as having an actual or interpolated maturity or
maturities comparable to the remaining term of the Notes.
"Comparable Treasury Price" means (1) the average of the Reference Treasury
Dealer Quotations for the applicable redemption date, after excluding the
highest and lowest Reference Treasury Dealer Quotations, or (2) if the
Independent Investment Banker obtains fewer than five such Reference Treasury
Dealer Quotations, the average of all such quotations.
"Independent Investment Banker" means one of the Reference Treasury Dealers
selected by us, or if any such firm is unwilling or unable to serve as such, an
independent investment and banking institution of national standing appointed by
us.
"Reference Treasury Dealer" means each of J.P. Morgan Securities Inc.,
Morgan Stanley & Co. Incorporated, UBS Warburg LLC, BNY Capital Markets, Inc.,
Fleet Securities, Inc., Goldman, Sachs & Co. and Salomon Smith Barney Inc. and
their respective successors; provided that if any of the foregoing ceases to be,
and has no affiliate that is, a primary U.S. Government securities dealer
("Primary Treasury Dealer"), we will substitute for it another Primary Treasury
Dealer.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any redemption date for the Notes, the average, as
determined by the Independent Investment Banker, of the bid and asked prices for
the Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Independent Investment Banker at
5:00 p.m., New York City time, on the third Business Day preceding such
redemption date.
We will mail notice of redemption at least 30 days but not more than
60 days before the applicable redemption date to each holder of the Notes to be
redeemed. If we elect to partially redeem the Notes, the Trustee will select in
a fair and appropriate manner the Notes to be redeemed.
Upon the payment of the redemption price, plus accrued and unpaid interest,
if any, to the date of redemption, interest will cease to accrue on and after
the applicable redemption date on the Notes or portions thereof called for
redemption.
We may, without the consent of the holders of the Notes, issue additional
notes having the same ranking and the same interest rate, maturity and other
terms as the Notes. Any additional notes will, together with the Notes,
constitute a single series of the Notes under the senior indenture. No
additional notes may be issued if an event of default has occurred with respect
to the Notes.
The Notes will initially be issued only in registered, book-entry form, in
denominations of $1,000 and any integral multiples of $1,000 as described under
"--BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY" below. We will issue
global securities in denominations that together equal the total principal
amount of the outstanding Notes.
BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
Upon issuance, all book-entry Notes will be represented by one or more fully
registered global certificates. Each global security will be deposited with DTC
or its custodian and will be registered in the name of DTC or a nominee of DTC.
DTC will thus be the only registered holder of these securities.
S-15
The following is based on information furnished to us by DTC that we believe
to be reliable, but we accept no responsibility for its accuracy:
DTC is a limited-purpose trust company organized under the laws of the State
of New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. DTC was created to hold securities that its participants ("Direct
Participants") deposit with DTC. DTC facilitates the clearance and settlement of
securities transactions among its Direct Participants in these securities
through electronic book-entry changes in accounts of the Direct Participants,
thereby eliminating the need for physical movement of securities certificates.
DTC's Direct Participants include securities brokers and dealers (including the
underwriters), banks, trust companies, clearing corporations and certain other
organizations, some of whom (and/or their representatives) own DTC. Persons who
are not Direct Participants may beneficially own securities held by DTC only
through Indirect Participants (as defined below).
DTC is owned by a number of its Direct Participants and by the New York
Stock Exchange, Inc., the American Stock Exchange LLC and the National
Association of Securities Dealers, Inc. Access to DTC's system is also available
to others including securities brokers and dealers, banks and trust companies
that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Direct and Indirect Participants are on file with the
SEC.
Purchases of securities within the DTC system must be made by or through
Direct Participants, which will receive a credit for such securities on DTC's
records. The ownership interest of each actual purchaser of securities
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchases, but Beneficial Owners are expected to receive
written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participants through
which the Beneficial Owners entered into the transaction. Transfers of ownership
interests in the securities are to be accomplished by entries made on the books
of Direct and Indirect Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificates representing their ownership
interests in securities, except in the event that use of the book-entry system
for the securities is discontinued.
To facilitate subsequent transfers, all securities deposited by Direct
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co., or such other name as may be requested by an authorized
representative of DTC. The deposit of securities with DTC and their registration
in the name of Cede & Co. or such other nominee do not effect any change in
beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of
the securities. DTC's records reflect only the identity of the Direct
Participants to whose accounts the securities are credited, which may or may not
be the Beneficial Owners. The Direct and Indirect Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Although voting with respect to the Notes is limited, in those cases where a
vote is required, neither DTC nor Cede & Co. will itself consent or vote with
respect to the Notes. Under its usual procedures, DTC would mail an Omnibus
Proxy to us as soon as possible after the record date. The Omnibus Proxy assigns
Cede & Co.'s consenting or voting rights to those Direct Participants to whose
accounts the Notes are credited on the record date (identified in a listing
attached to the Omnibus Proxy).
S-16
Payments on the Notes will be made to DTC in immediately available funds.
DTC's practice is to credit Direct Participants' accounts on the relevant
payment date in accordance with their respective holdings shown on DTC's records
unless DTC has reason to believe that it will not receive payments on the
relevant payment date. Payments by Direct and Indirect Participants to
Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the account of customers in
bearer form or registered in "street name," and will be the responsibility of
the Direct or Indirect Participant and not of DTC or us, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment to DTC is the responsibility of us and the property trustee,
disbursement of the payments to Direct Participants is the responsibility of
DTC, and disbursement of the payments to the Beneficial Owners is the
responsibility of Direct and Indirect Participants.
Except as provided in this prospectus supplement, a Beneficial Owner of
Notes will not be entitled to receive physical delivery of securities.
Accordingly, each Beneficial Owner must rely on the procedures of DTC to
exercise any rights under the Notes. The laws of some jurisdictions require that
certain purchasers of securities take physical delivery of securities in
definitive form. These laws may impair the ability to transfer beneficial
interests in a global security.
DTC may discontinue providing its services as securities depository with
respect to the securities at any time by giving reasonable notice to us or the
sponsor. Under those circumstances, in the event that a successor securities
depository is not obtained, Notes certificates will be printed and delivered to
the holders of record. Additionally, we may decide to discontinue use of the
system of book-entry transfers through DTC (or a successor depositary) with
respect to the Notes. In that event, certificates for the Notes will be printed
and delivered to the holders of record.
We have no responsibility for the performance by DTC or its Direct and
Indirect Participants of their respective obligations as described in this
prospectus supplement or under the rules and procedures governing their
respective operations.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
dated the date of this prospectus supplement among us and the underwriters named
below, we have agreed to sell to the underwriters, and the underwriters have
severally agreed to purchase from us, the following respective principal amounts
of the Notes:
PRINCIPAL AMOUNT
UNDERWRITER OF NOTES
----------- ----------------
J.P. Morgan Securities Inc..................................
Morgan Stanley & Co. Incorporated...........................
UBS Warburg LLC.............................................
BNY Capital Markets, Inc....................................
Fleet Securities, Inc.......................................
Goldman, Sachs & Co.........................................
Salomon Smith Barney Inc....................................
------------
Total..................................................... $400,000,000
============
In the underwriting agreement, the underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Notes offered
hereby if any Notes are purchased. The underwriters have advised us that they
propose to offer the Notes to the public initially at the offering price set
forth on the cover page of this prospectus supplement, and to certain dealers
initially at that price less a discount not in excess of % of the
principal amount of the Notes. The underwriters may allow, and those dealers may
reallow, a concession to certain other dealers not in excess of
S-17
% of the principal amount of the Notes. After the initial offering of the
Notes to the public, the public offering prices and these concessions may be
changed.
We have agreed to indemnify the underwriters against, or contribute to
payments the underwriters may be required to make in respect of, certain
liabilities, including liabilities under the Securities Act.
The Notes have no established trading market. We have been advised by the
underwriters that they intend to make a market in the Notes as permitted by
applicable laws and regulations. The underwriters are not obligated, however, to
make a market in the Notes, and any market making may be discontinued at any
time without notice. No assurance can be given as to the liquidity of the
trading market for the Notes.
In connection with the offering the underwriters may purchase and sell the
Notes in the open market. These transactions may include over-allotment,
syndicate covering transactions and stabilizing transactions. Over-allotment
involves syndicate sales of Notes in excess of the principal amount of the Notes
creating a syndicate short position. Syndicate covering transactions involve
purchases of the Notes in the open market after the distribution has been
completed in order to cover syndicate short positions. Stabilizing transactions
consist of certain bids or purchases of Notes made for the purpose of preventing
or retarding a decline in the market price of the Notes while the offering is in
progress.
The underwriters may also impose a penalty bid. A penalty bid permits the
underwriters to reclaim a selling concession from a syndicate member when the
Notes originally sold by that syndicate member are purchased in a syndicate
transaction.
Any of these activities may cause the price of the Notes to be higher than
the price that otherwise would exist in the open market in the absence of such
transactions. Neither we nor the underwriters make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Notes. In addition, neither we nor
the underwriters make any representation that the underwriters will engage in
such transactions or that such transactions, once commenced, will not be
discontinued without notice.
Certain underwriters will make the Notes available for distribution on the
Internet through a proprietary Web site and/or a third-party system operated by
Market Axess Inc., an Internet-based communications technology provider. Market
Axess Inc. is providing the system as a conduit for communications between these
underwriters and its customers and is not a party to any transactions. Market
Axess Inc., a registered broker-dealer, will receive compensation from these
underwriters based on transactions the underwriters conduct through the system.
These underwriters will make the Notes available to its customers through the
Internet distributions, whether made through a proprietary or third party
system, on the same terms as distributions made through other channels.
We estimate that our total expenses of this offering will be $300,000.
The underwriters and their affiliates engaged in, and may from time to time
in the future engage in, and performed, and may from time to time in the future
perform, services on our behalf and on behalf of our subsidiaries in the
ordinary course of business. JPMorgan Chase Bank, Trustee under the senior
indenture, is an affiliate of J.P. Morgan Securities Inc. UBS Warburg LLC is
acting as our financial advisor in connection with the RGS Energy transaction,
for which it will receive customary compensation.
LEGAL MATTERS
The validity of the Notes and certain other matters will be passed upon for
us by Huber Lawrence & Abell, New York, New York, and for the underwriters by
Shearman & Sterling, New York, New York. As of June 5, 2002, members of Huber
Lawrence & Abell owned 5,199 shares of our common stock.
S-18
PROSPECTUS
$1,000,000,000
ENERGY EAST CORPORATION
SENIOR DEBT SECURITIES
JUNIOR SUBORDINATED DEBT SECURITIES
ENERGY EAST CAPITAL TRUST I
ENERGY EAST CAPITAL TRUST II
TRUST PREFERRED SECURITIES
GUARANTEED, TO THE EXTENT DESCRIBED HEREIN, BY
ENERGY EAST CORPORATION
---------------
This prospectus contains summaries of the general terms of these securities.
Energy East or the applicable Energy East Capital Trust will provide the
specific terms of these securities, and the manner in which they are being
offered, in supplements to this prospectus. You should read this prospectus and
the applicable prospectus supplement carefully before you invest.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATOR HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
This prospectus may not be used to sell securities unless accompanied by a
prospectus supplement. Any statement contained in this prospectus will be deemed
to be modified or superseded by any inconsistent statement contained in an
accompanying prospectus supplement.
------------------------
The date of this prospectus is July 3, 2001
TABLE OF CONTENTS
PAGE
--------
ABOUT THIS PROSPECTUS....................................... 3
WHERE YOU CAN FIND MORE INFORMATION......................... 3
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS... 5
ENERGY EAST CORPORATION..................................... 6
RECENT DEVELOPMENTS......................................... 7
THE TRUSTS.................................................. 7
USE OF PROCEEDS............................................. 8
RATIO OF EARNINGS TO FIXED CHARGES.......................... 8
DESCRIPTION OF SECURITIES................................... 9
Description of Senior Debt Securities..................... 9
Description of Junior Subordinated Debt Securities........ 17
Description of Trust Preferred Securities................. 27
Description of the Guarantees............................. 36
Agreement as to Expenses and Liabilities.................. 39
Relationship Among the Trust Preferred Securities, the
Guarantees and the Junior Subordinated Debt Securities
held by the Trusts...................................... 39
Accounting Treatment...................................... 40
PLAN OF DISTRIBUTION........................................ 40
EXPERTS..................................................... 41
LEGAL MATTERS............................................... 41
------------------------
In this prospectus, references to "we," "us," "our" and "Energy East" refer
to Energy East Corporation.
------------------------
2
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that Energy East, Energy
East Capital Trust I and Energy East Capital Trust II filed with the SEC
utilizing a "shelf" registration process. Under this shelf registration process,
any combination of the securities described in this prospectus may be sold from
time to time in one or more offerings of one or more series up to a total dollar
amount of $1,000,000,000. This prospectus only provides you with a general
description of the securities that may be offered. Each time securities are
sold, a "prospectus supplement" will be provided which will contain specific
information about the terms of that offering. Material United States Federal
income tax considerations that may be applicable to the offered securities will
also be discussed in the applicable prospectus supplement. A 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 the additional information described below under the heading
"WHERE YOU CAN FIND MORE INFORMATION."
We believe that we have included or incorporated by reference in this
prospectus all information material to investors, but certain details that may
be important for specific investment purposes have not been included. For more
detail, you should read the exhibits filed with or incorporated by reference
into the registration statement.
WHERE YOU CAN FIND MORE INFORMATION
AVAILABLE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy this information at the SEC's
Public Reference Room and at its Regional Offices at:
Public Reference Room New York Regional Office Chicago Regional Office
Room 1024 Suite 1300 Citicorp Center
Judiciary Plaza 7 World Trade Center Suite 1400
450 Fifth Street, N.W. New York, NY 10048 500 West Madison Street
Washington, DC 20549 Chicago, IL 60661-2511
You may call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Our SEC filings are also available to the public from
commercial document retrieval services and at the Internet world wide website
that the SEC maintains at http://www.sec.gov. In addition, materials and
information concerning us can be inspected at the New York Stock Exchange, 20
Broad Street, 7th Floor, New York, New York 10005, where our common stock is
listed.
This prospectus is part of a registration statement that we filed with the
SEC. The full registration statement may be obtained from the SEC or us, as
indicated below. Forms of the indentures, trust agreements and any other
document establishing the terms of the offered securities are filed as exhibits
to the registration statement. Statements in this prospectus about these
documents are summaries. You should refer to the actual documents for a more
complete description of the relevant matters.
INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" information into this
prospectus, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this prospectus. The
information filed with the SEC in the future will automatically update and
supersede this information.
3
We incorporate by reference the documents listed below and any future
filings made by us with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, until all of the securities being offered under
this prospectus or any prospectus supplement are sold:
- Our Annual Report on Form 10-K for the year ended December 31, 2000.
- Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2001.
- Our Current Report on Form 8-K dated February 16, 2001.
Documents that we file and which are incorporated by reference are available
from us without charge, excluding all exhibits unless we have specifically
incorporated by reference an exhibit into this prospectus. You may obtain
documents that we file and which are incorporated by reference in this
prospectus by writing or telephoning:
ENERGY EAST CORPORATION
Shareholder Services
P.O. Box 3200
Ithaca, New York 14852-3200
(800) 225-5643
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. THIS PROSPECTUS IS
DATED JULY 3, 2001. WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN ANY STATE
WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION
CONTAINED IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT IS ACCURATE AS OF ANY
DATE OTHER THAN THE DATE OF SUCH DOCUMENTS.
4
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, any accompanying prospectus supplement and the additional
information described under the heading "WHERE YOU CAN FIND MORE INFORMATION"
may contain some forward-looking statements that involve risks and
uncertainties. We may make these statements about our financial condition,
results of operations and business. These statements may be made directly in
this prospectus or any accompanying prospectus supplement, or may be
"incorporated by reference" from other documents filed with the SEC. You can
find many of these statements by looking for words such as "believes,"
"expects," "anticipates," "estimates" or similar expressions. These
forward-looking statements are subject to numerous assumptions, risks and
uncertainties. Factors that may cause actual results to differ from those
indicated by such forward-looking statements include, among others, the
following:
- the risk of a significant delay in the expected completion of, and
unexpected consequences and integration complications resulting from, our
merger with RGS Energy Group, Inc.;
- the highly competitive nature of the electric, natural gas and energy
marketing industries, including the speed and degree to which competition
enters these industries and the risk that other companies will further
expand into markets in which we operate;
- the risk that fluctuating wholesale energy prices may affect earnings;
- the risk of favorable customer contracts expiring or being renewed on less
attractive terms;
- the risks associated with future weather conditions;
- the risks associated with changes in customer demographics in our service
territories and the pursuit of new markets;
- the risk that expected synergies from the RGS Energy Group merger, and our
prior mergers, may not be obtained and retained;
- changes in terms of regulation by state public service commissions;
- regulatory issues, including the pace of deregulation of the retail
natural gas and electricity markets in the United States;
- the availability and cost of capital;
- inflation;
- exposure to environmental issues and liabilities, as well as potential
changes in environmental regulations; and
- other considerations that may be disclosed from time to time in our
publicly disseminated documents or filings.
You should not place undue reliance on the forward-looking statements, which
speak only as of the date of this prospectus or any prospectus supplement, or,
in the case of a document incorporated by reference, the date of that document.
The cautionary statements in this section expressly qualify, in their
entirety, all subsequent forward-looking statements attributable to us or any
person acting on our behalf. We do not undertake any obligation to release
publicly any revisions to the forward-looking statements to reflect events or
circumstances occurring after the date of this prospectus, any prospectus
supplement or documents incorporated by reference.
5
ENERGY EAST CORPORATION
We are a New York public utility holding company organized in 1997. We are a
super-regional energy services and delivery company with operations in New York,
Connecticut, Massachusetts, Maine, New Hampshire and New Jersey and corporate
offices in New York and Maine. On February 8, 2000, we completed our merger with
Connecticut Energy Corporation, which is a holding company primarily engaged in
the retail distribution of natural gas in Connecticut through its wholly-owned
subsidiary, The Southern Connecticut Gas Company. On September 1, 2000, we
completed our mergers with CMP Group, Inc., CTG Resources, Inc. and Berkshire
Energy Resources. CMP Group is a holding company and its principal operating
subsidiary, Central Maine Power Company, is primarily engaged in transmitting
and distributing electricity generated by others to retail customers in Maine.
CTG Resources, also a holding company, is the parent company of Connecticut
Natural Gas Corporation, a regulated natural gas distribution company in
Connecticut. Berkshire Energy is a holding company and the parent company of The
Berkshire Gas Company, a regulated local natural gas distribution company that
operates in western Massachusetts.
Our principal energy delivery business is transmitting and distributing
electricity in New York and Maine and transporting, storing and distributing
natural gas in New York, Connecticut, Maine, Massachusetts and New Hampshire. We
also generate electricity from our share of a nuclear plant and our several
hydroelectric stations and serve approximately 1.4 million electricity customers
and 600,000 natural gas customers. Our service territories reflect diversified
economies, including high-tech firms, insurance, light industry, pulp and paper
industry, ship building, colleges and universities, agriculture, fishing and
recreational facilities. No customer accounts for 1% or more of either electric
or natural gas revenues.
Our address is P.O. Box 12904, Albany, New York 12212-2904 and our telephone
number is (518) 434-3049.
UTILITY OPERATIONS
NEW YORK STATE ELECTRIC & GAS CORPORATION. New York State Electric & Gas
Corporation ("NYSEG") is a public utility company engaged in transmitting and
distributing electricity and transporting, storing and distributing natural gas.
NYSEG also generates electricity from its share of a nuclear plant and its
several hydroelectric stations. NYSEG's service territory, 99% of which is
located outside the corporate limits of cities, is in the central, eastern and
western parts of the State of New York. NYSEG's service territory has an area of
approximately 20,000 square miles and a population of 2,500,000. The larger
cities in New York in which NYSEG serves both electricity and natural gas
customers are Binghamton, Elmira, Auburn, Geneva, Ithaca and Lockport. NYSEG
provides delivery service to approximately 824,000 electricity customers and
248,000 natural gas customers.
CENTRAL MAINE POWER COMPANY. Central Maine Power is the largest electric
utility in Maine and functions as an electric transmission and distribution
utility. Central Maine Power serves over 544,000 customers in its 11,000
square-mile service area in the southern and central areas of Maine. Central
Maine Power's service area contains most of Maine's industrial and commercial
centers, including the city of Portland (Maine's largest city), and the
Lewiston-Auburn, Augusta-Waterville and Bath-Brunswick areas. These areas
encompass approximately 1,000,000 people, representing about 80% of the total
population of Maine.
THE SOUTHERN CONNECTICUT GAS COMPANY. Southern Connecticut Gas is engaged
in the retail distribution of natural gas for residential, commercial and
industrial users and the transportation of natural gas for commercial and
industrial users. Southern Connecticut Gas serves approximately 167,000
customers in the State of Connecticut, in primarily 22 towns along the southern
Connecticut coast from Westport to Old Saybrook, which include the urban
communities of Bridgeport and New
6
Haven. Southern Connecticut Gas is the sole distributor of natural gas other
than bottled gas in its service area.
CONNECTICUT NATURAL GAS CORPORATION. Connecticut Natural Gas is engaged in
the retail distribution of natural gas for residential, commercial and
industrial users and the transportation of natural gas for commercial and
industrial users. Connecticut Natural Gas currently serves approximately 147,000
customers in 22 Connecticut communities, principally in the Hartford-New Britain
area and Greenwich, covering an area of approximately 533 square miles with a
population of approximately 679,000.
THE BERKSHIRE GAS COMPANY. Berkshire Gas sells and distributes natural gas
to approximately 35,000 retail customers in 19 communities in western
Massachusetts. The population of the area served is approximately 190,000 and is
primarily residential in character, but the territory also includes industrial,
agricultural, educational, cultural and resort facilities. Berkshire Gas
operates a natural gas distribution system comprising some 694 miles of natural
gas distribution mains.
OTHER OPERATIONS
We have operationally organized our non-utility businesses under THE ENERGY
NETWORK, INC. Those businesses own assets and operate facilities in peaking
electric generation, peaking gas storage, energy services, district heating and
cooling, gas transmission, propane distribution and telecommunications. ENERGY
EAST ENTERPRISES, INC. owns two small natural gas delivery companies and is
developing high deliverability gas storage in upstate New York.
RECENT DEVELOPMENTS
We entered into a merger agreement with RGS Energy Group during the first
quarter of 2001. After completion of the merger, RGS Energy Group will become
our wholly-owned subsidiary. We expect this merger to be completed in the first
quarter of 2002. In this merger, 45% of the common stock of RGS Energy Group
will be converted into our common stock with a value of $39.50 per RGS Energy
Group share, and 55% will be converted into $39.50 in cash per RGS Energy Group
share, subject to restrictions on the minimum and maximum number of our shares
to be issued. RGS Energy Group shareholders will be able to specify the
percentage of the consideration they wish to receive in stock and in cash,
subject to proration. The merger has an equity market value of approximately
$1.4 billion and we will assume approximately $1 billion of RGS Energy Group's
long-term debt. The shareholders of RGS Energy Group will vote on the merger and
our shareholders will vote on the issuance of our common stock to the RGS Energy
Group shareholders at meetings to be held on June 15, 2001. All necessary
regulatory filings in connection with this merger transaction have been or will
be made.
THE TRUSTS
Each trust is a statutory business trust newly formed under Delaware law by
us, as sponsor for the trusts, 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 each trust will be amended and restated when trust preferred
securities are issued by the respective trust and will be in substantially the
form filed as an exhibit to the registration statement, of which this prospectus
is a part. Each of the amended trust agreements will be qualified as an
indenture under the Trust Indenture Act of 1939.
Each trust exists for the exclusive purposes of:
- issuing two classes of trust securities--trust preferred securities and
trust common securities--which together represent undivided beneficial
interests in the assets of that trust;
- investing the gross proceeds of the trust securities in our junior
subordinated debt securities;
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- making distributions; and
- engaging in only those other activities necessary, advisable or incidental
to the purposes listed above.
Our junior subordinated debt securities will constitute substantially all of
the assets of the trusts, and our payments under the junior subordinated debt
securities and the related agreement as to expenses and liabilities will
constitute substantially all of the revenue of the trusts.
Separate financial statements for the trusts are not included in this
prospectus. We do not believe that those financial statements would be material
to holders of the trust preferred securities because neither trust has any
independent operations and the sole purpose of each trust is as described above.
We do not expect that either trust will file annual, quarterly or special
reports with the SEC.
The address of the trusts is c/o Energy East Corporation, P.O. Box 12904,
Albany, NY 12212-2904.
USE OF PROCEEDS
Unless we indicate differently in the applicable prospectus supplement which
accompanies this prospectus, we intend to use the net proceeds from the sale of
the offered securities to fund the cash portion of the merger consideration for
the pending merger with RGS Energy Group. In addition, we, or one of our
subsidiaries, may use a portion of the proceeds for general corporate purposes,
which may include, among other things, reduction of short-term debt, financing
the development and construction of new facilities, additions to working capital
and repurchases of securities. We may also invest funds not immediately required
for such purposes in short-term investment grade securities. The amount and
timing of sales of the offered securities will depend on market conditions and
the availability of other funds.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our consolidated ratio of earnings to fixed
charges for the three months ended March 31, 2001, and the five most recent
fiscal years:
THREE MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, --------------------------------------------------------
2001 2000 1999 1998 1997 1996
------------ -------- -------- -------- -------- --------
Ratio of earnings to fixed charges(1).......... 4.53(2) 3.48 4.40(3) 3.34 3.07 2.94
------------------------
(1) The ratio of earnings to fixed charges is calculated by dividing earnings by
fixed charges. For this purpose earnings means income from continuing
operations before income taxes and fixed charges. Fixed charges means all
interest charges, the interest component of rentals and preferred stock
dividends of subsidiaries.
(2) Due to the seasonal nature of the businesses of the companies that merged
with us in 2000, our earnings for 2001 are expected to be stronger in the
first and fourth quarters and weaker in the second and third quarters as
compared to prior years. Also, financial results for interim periods are not
necessarily indicative of trends for a 12-month period.
(3) Earnings before income taxes and fixed charges includes $84 million that we
paid in Federal income taxes as a result of the sale of our coal-fired
generation assets. Excluding the $84 million, the ratio of earnings to fixed
charges would have been 3.79.
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DESCRIPTION OF SECURITIES
DESCRIPTION OF SENIOR DEBT SECURITIES
The following description sets forth the general terms and provisions of the
senior debt securities that we may offer by this prospectus. The senior debt
securities will rank equally with all of our other unsecured and unsubordinated
debt.
The senior debt securities will be issued under an existing senior indenture
between us and The Chase Manhattan Bank, as trustee. The senior indenture is an
exhibit to the registration statement, of which this prospectus forms a part,
and is incorporated by reference. The senior indenture gives us broad authority
to set the particular terms of each series of senior debt securities, including
the right to modify certain of the terms contained in the senior indenture. The
particular terms of a series of senior debt securities and the extent, if any,
to which the particular terms of the issue modify the terms of the senior
indenture will be described in the applicable prospectus supplement relating to
the senior debt securities.
The senior indenture contains the full text of the matters described in this
section. Because this section is a summary, it does not describe every aspect of
the senior debt securities or the senior indenture. This summary is subject to
and qualified in its entirety by reference to all the provisions of the senior
indenture, including definitions of terms used in that indenture. We also
include references in parentheses to certain sections of the senior indenture.
Whenever we refer to particular sections of, or defined terms used in, the
senior indenture in this prospectus or in the applicable prospectus supplement,
these sections or defined terms are incorporated by reference herein or in the
prospectus supplement. This summary also is subject to and qualified by
reference to the description of the particular terms of the senior debt
securities described in the applicable prospectus supplement or supplements.
Prospective purchasers of senior debt securities should be aware that
special U.S. Federal income tax, accounting and other considerations may be
applicable to the senior debt securities of a particular series. The applicable
prospectus supplement will describe these considerations, if they apply.
There is no requirement under the senior indenture that future issues of our
senior debt securities be issued under that indenture. We will be free to use
other indentures or documentation, containing provisions different from those
included in the senior indenture or applicable to one or more issues of senior
debt securities, in connection with future issues of other debt securities.
GENERAL
The senior indenture does not limit the aggregate principal amount of senior
debt securities that we may issue under that indenture. The senior indenture
provides that the senior debt securities may be issued in one or more series.
The senior debt securities may be issued at various times and may have differing
maturity dates and may bear interest at differing rates. We need not issue all
senior debt securities of one series at the same time and, unless otherwise
provided, we may reopen a series, without the consent of the holders of
securities of that series, for issuances of additional senior debt securities of
that series.
Prior to the issuance of each series of senior debt securities, the
particular terms will be specified in a supplemental indenture, a board
resolution or in one or more officer's certificates authorized pursuant to a
board resolution. We refer you to the applicable prospectus supplement for a
description of the following terms of the series of senior debt securities:
- title of the senior debt securities;
- any limit on the aggregate principal amount of the senior debt securities;
- the person to whom any interest on the senior debt securities shall be
payable, if other than the person in whose name those securities are
registered at the close of business on the regular record date;
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- the date or dates on which the principal of the senior debt securities
will be payable or how the date or dates will be determined;
- the rate or rates at which the senior debt securities will bear interest,
or how the rate or rates will be determined and the date or dates from
which interest will accrue;
- the dates on which interest will be payable;
- the record dates for payments of interest;
- the place or places, if any, in addition to the office of the senior
indenture trustee, where the principal of, and premium, if any, and
interest, if any, on the senior debt securities will be payable;
- the period or periods within which, the price or prices at which, and the
terms and conditions upon which, the senior debt securities may be repaid,
in whole or in part, at the option of the holder thereof;
- any sinking fund or other provisions or options held by holders of the
senior debt securities that would obligate us to repurchase or redeem
those securities;
- the percentage, if less than 100%, of the principal amount of the senior
debt securities that will be payable if the maturity of those securities
is accelerated;
- any changes or additions to the events of default under the senior
indenture or changes or additions to our covenants under that indenture;
- any collateral, security, assurance or guarantee for the senior debt
securities; and
- any other specific terms applicable to the senior debt securities.
Unless we indicate differently in the applicable prospectus supplement, the
senior debt securities will be denominated in United States currency in minimum
denominations of $1,000 and multiples of $1,000.
Unless we indicate differently in the applicable prospectus supplement,
there are no provisions in the senior indenture or the senior debt securities
that require us to redeem, or permit the holders to cause a redemption of, the
senior debt securities or that otherwise protect the holders in the event that
we incur substantial additional indebtedness, whether or not in connection with
a change in control of our company.
SECURITY AND RANKING
We conduct our operations primarily through our subsidiaries and
substantially all of our consolidated assets are held by our subsidiaries.
Accordingly, our cash flow and our ability to meet our obligations under the
senior debt securities are largely dependent upon the earnings of our
subsidiaries and the distribution or other payment of these earnings to us in
the form of dividends or loans or advances and repayment of loans and advances
from us. Our subsidiaries are separate and distinct legal entities and have no
obligation to pay any amounts due on our senior debt securities or to make any
funds available for payment of amounts due on our senior debt securities.
Because we are a holding company, our obligations under the senior debt
securities will be effectively subordinated to all existing and future
liabilities of our subsidiaries. Therefore, our rights and the rights of our
creditors, including the rights of the holders of our senior debt securities, to
participate in any distribution of assets of any of our subsidiaries, when such
subsidiary is liquidated or reorganized, is subject to the prior claims of the
subsidiary's creditors. To the extent that we may be a creditor with recognized
claims against any of our subsidiaries, our claims would still be effectively
subordinated to any security interest in, or mortgages or other liens on, the
assets of the subsidiary and would be subordinated to any indebtedness or other
liabilities of the subsidiary that are senior to that held by us.
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PAYMENT AND PAYING AGENTS
Unless we indicate differently in the applicable prospectus supplement, we
will pay interest on our senior debt securities on each interest payment date by
check mailed to the person in whose name that security is registered as of the
close of business on the regular record date relating to the interest payment
date, except that interest payable at stated maturity, upon redemption or
otherwise, will be paid to the person to whom principal is paid. However, if we
default in paying interest on a senior debt security, we will pay defaulted
interest to the registered owner of that security in one of the following ways:
- we will first propose to the senior indenture trustee a payment date for
the defaulted interest. Next, the senior indenture trustee will choose a
special record date for determining which registered holders are entitled
to the payment. The special record date will be between 10 and 15 days
before the payment date we propose. Finally, we will pay the defaulted
interest on the payment date to the registered holder of the senior debt
security as of the close of business on the special record date; or
- we can propose to the senior indenture trustee any other lawful manner of
payment that is consistent with the requirements of any securities
exchange on which the senior debt securities may be listed for trading. If
the senior indenture trustee thinks the proposal is practicable, payment
will be made as proposed.
REDEMPTION
We will set forth any terms for the redemption of senior debt securities in
a prospectus supplement. Unless we indicate differently in the applicable
prospectus supplement, and except with respect to senior debt securities
redeemable at the option of the registered holder, senior debt securities will
be redeemable upon notice by mail between 30 and 60 days prior to the redemption
date. If less than all of the senior debt securities of any series or any
tranche of a series are to be redeemed, the senior indenture trustee will select
the senior debt securities to be redeemed and will choose the method of random
selection it deems fair and appropriate. (See sections 301, 1103 and 1104 of the
senior indenture.)
Senior debt securities will cease to bear interest on the redemption date.
We will pay the redemption price and any accrued interest to the redemption date
once you surrender those securities for redemption. (See section 1106 of the
senior indenture.) If only part of a senior debt security is redeemed, the
senior indenture trustee will deliver to you a new senior debt security of the
same series for the remaining portion without charge. (See section 1107 of the
senior indenture.)
We may make any redemption conditional upon the receipt by the paying agent,
on or prior to the date fixed for redemption, of money sufficient to pay the
redemption price. If the paying agent has not received the money by the date
fixed for redemption, we will not be required to redeem the senior debt
securities. (See section 1104 of the senior indenture.)
REGISTRATION, TRANSFER, EXCHANGE AND FORM
The senior debt securities will be issued only in fully registered form,
without interest coupons and in denominations that are even multiples of $1,000.
Senior debt securities of any series will be exchangeable for other senior debt
securities of the same series of any authorized denominations and of a like
aggregate principal amount and tenor. (See section 305 of the senior indenture.)
Unless we indicate differently in the applicable prospectus supplement,
senior debt securities may be presented for registration of transfer, duly
endorsed or accompanied by a duly executed written instrument of transfer, at
the office or agency maintained for such purpose, without service charge except
for reimbursement of taxes and other governmental charges as described in the
senior indenture. (See section 305 of the senior indenture.)
In the event of any redemption of senior debt securities of any series, the
senior indenture trustee will not be required to exchange or register a transfer
of any senior debt security of the series selected,
11
called or being called for redemption except the unredeemed portion of any
senior debt security being redeemed in part. (See section 305 of the senior
indenture.)
BOOK-ENTRY ONLY SYSTEM
The following discussion pertains to senior debt securities that are issued
in book-entry only form.
One or more global notes would be issued to DTC, The Depository Trust
Company, or its nominee. DTC would keep a computerized record of its
participants (for example, your broker) whose clients have purchased the senior
debt securities. The participant would then keep a record of its clients who
purchased those securities. A global note may not be transferred, except that
DTC, its nominees and their successors may transfer an entire global note to one
another.
Under book-entry only, we will not issue certificates to individual holders
of the senior debt securities. Beneficial interests in global notes will be
shown on, and transfers of beneficial interests in global notes will be made
only through, records maintained by DTC and its participants.
DTC has advised us that it is:
- a limited-purpose trust company organized under the New York Banking Law;
- a "banking organization" within the meaning of the New York Banking Law;
- a member of the Federal Reserve System;
- a "clearing corporation" within the meaning of the New York Uniform
Commercial Code; and
- a "clearing agency" registered pursuant to the provisions of Section 17A
of the Securities Exchange Act.
DTC holds securities that its participants deposit with DTC. DTC also
facilitates the settlement among direct participants of securities transactions,
such as transfers and pledges, in deposited securities through computerized
records for direct participants' accounts. This eliminates the need to exchange
certificates. Direct participants include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations.
DTC's book-entry system is also used by other organizations such as
securities brokers and dealers, banks and trust companies that work through a
direct participant. The rules that apply to DTC and its participants are on file
with the SEC.
DTC is owned by a number of its direct participants and by the New York
Stock Exchange, Inc., the American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc.
We will wire principal and interest payments to DTC's nominee. We and the
senior indenture trustee will treat DTC's nominee as the owner of the global
notes for all purposes. Accordingly, we and the senior indenture trustee will
have no direct responsibility or liability to pay amounts due on the senior debt
securities to owners of beneficial interests in the global notes.
It is DTC's current practice, upon receipt of any payment of principal or
interest, to credit direct participants' accounts on the payment date according
to their respective holdings of beneficial interests in the global notes as
shown on DTC's records as of the record date for such payment. In addition, it
is DTC's current practice to assign any consenting or voting rights to direct
participants whose accounts are credited with securities on a record date, by
using an omnibus proxy. Payments by participants to owners of beneficial
interests in the global notes, and voting by participants, will be governed by
the customary practices between the participants and owners of beneficial
interests, as is the case with securities held for the account of customers
registered in "street name." However, these payments will be the responsibility
of the participants and not of ours, DTC or the senior indenture trustee.
Senior debt securities represented by a global note will be exchangeable for
senior debt securities certificates with the same terms in authorized
denominations only if:
- DTC notifies us that it is unwilling or unable to continue as depository
or if DTC ceases to be a clearing agency registered under applicable law;
12
- we instruct the senior indenture trustee that the global note is now
exchangeable; or
- an event of default has occurred and is continuing.
According to DTC, the foregoing information with respect to DTC has been
provided to the financial community for informational purposes only and is not
intended to serve as a representation, warranty, or contract modification of any
kind.
CONSOLIDATION, MERGER, CONVEYANCE, SALE OR TRANSFER
We have agreed not to consolidate with or merge into any other entity or
convey, transfer, or lease our properties and assets substantially as an
entirety to any entity unless:
- the successor is an entity organized and existing under the laws of the
United States of America or any State or the District of Columbia;
- the successor expressly assumes by a supplemental indenture the due and
punctual payment of the principal of, and premium, if any, and interest on
all the outstanding senior debt securities and the performance of every
covenant of the senior indenture that we would otherwise have to perform;
and
- immediately after giving effect to the transactions, no event of default
and no event which after notice or lapse of time or both would become an
event of default, will have occurred and be continuing. (See section 801
of the senior indenture.)
LIMITATION ON SECURED DEBT
If this covenant is made applicable to the senior debt securities of any
particular series, we have agreed that we will not create, issue, incur or
assume any Secured Debt (as defined below) without the consent of the holders of
a majority in principal amount of the outstanding senior debt securities of all
series with respect to which this covenant is made (for purposes of this
section, we refer to all such senior debt securities as "BENEFITTED
SECURITIES"), considered as one class; provided, however, that the foregoing
covenant will not prohibit the creation, issuance, incurrence or assumption of
any senior debt securities by us if either:
- we secure all Benefitted Securities then outstanding equally and ratably
with the Secured Debt; or
- we deliver to the senior indenture trustee bonds, notes or other evidences
of indebtedness secured by a Lien (as defined below) which secures the
Secured Debt in an aggregate principal amount equal to the aggregate
principal amount of the Benefitted Securities then outstanding and meeting
certain other requirements in the senior indenture.
"DEBT," for purposes of this section, means:
- indebtedness for borrowed money evidenced by a bond, debenture, note or
other written instrument or agreement by which we are obligated to repay
such borrowed money; and
- any guaranty by us of any such indebtedness of another person.
"LIEN," for purposes of this section, means any lien, deed of trust, pledge
or security interest.
"SECURED DEBT," for purposes of this section, means Debt created, issued,
incurred or assumed by us which is secured by a Lien upon any shares of stock of
any Significant Subsidiary, as defined in Regulation S-X of the rules and
regulations under the Securities Act of 1933, whether owned at the date of the
initial authentication and delivery of the senior debt securities of any series
or thereafter acquired. (See section 1007 of the senior indenture.)
MODIFICATION OF THE SENIOR INDENTURE
Under the senior indenture or any indenture supplemental thereto, our rights
and the rights of the holders of senior debt securities may be changed with the
consent of the holders representing a majority in principal amount of the
outstanding senior debt securities of all series affected by the
13
change, voting as one class, provided that the following changes may not be made
without the consent of the holders of each outstanding senior debt security
affected thereby:
- change the fixed date upon which the principal of or the interest on any
senior debt security is due and payable, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, or reduce the amount of the principal of an original
issue discount senior debt security that would be payable upon a
declaration of acceleration of the maturity thereof, or change any place
of payment where, or the currency in which, any senior debt security or
any premium, if any, or the interest thereon is payable, or impair the
right to institute suit for the enforcement of any payment on or after the
date such payment is due or, in the case of redemption, on or after the
date fixed for such redemption;
- reduce the stated percentage of senior debt securities, the consent of the
holders of which is required for any modification of the senior indenture
or for waiver by the holders of certain of their rights; or
- modify certain provisions of the senior indenture. (See section 902 of the
senior indenture.)
An original issue discount senior debt security means any security
authenticated and delivered under the senior indenture which provides for an
amount less than the principal amount thereof to be due and payable upon the
declaration of acceleration of the maturity thereof.
The senior indenture also contains provisions permitting us and the senior
indenture trustee to amend the senior indenture in certain circumstances,
without the consent of the holders of any senior debt securities, to evidence a
merger, the replacement of the senior indenture trustee and for certain other
purposes. (See section 901 of the senior indenture.)
EVENTS OF DEFAULT
An event of default with respect to any series of senior debt securities is
defined in the senior indenture as being any one of the following:
- failure to pay interest on the senior debt securities of that series for
30 days after payment is due;
- failure to pay principal or any premium on the senior debt securities of
that series when due;
- failure to perform other covenants in the senior indenture for 60 days
after we are given written notice from the senior indenture trustee or the
senior indenture trustee receives written notice from the registered
owners of at least 25% in principal amount of the senior debt securities
of that series;
- failure to pay any sinking fund installment when due;
- default occurs under any bond, note, debenture or other instrument
evidencing any indebtedness for money borrowed by us, excluding any of our
subsidiaries (including a default with respect to any other series of
senior debt securities issued under the senior indenture), or under any
mortgage, indenture or other instrument under which there may be issued or
by which there may be secured or evidenced any indebtedness for money
borrowed by us (or the payment of which is guaranteed by us), excluding
any of our subsidiaries, whether such indebtedness or guarantee exists on
the date of the senior indenture or is issued or entered into following
the date of the senior indenture, if:
- either:
- such default results from failure to pay any such indebtedness when
due; or
- as a result of such default the maturity of such indebtedness has
been accelerated prior to its expressed maturity; and
- the principal amount of such indebtedness, together with the principal
amount of any other such indebtedness in default for failure to pay any
such indebtedness when due or the maturity of which has been so
accelerated, aggregates at least $40 million; and
14
- certain events of bankruptcy, insolvency, reorganization, receivership or
liquidation relating to us. (See section 501 of the senior indenture.)
An event of default regarding a particular series of senior debt securities
does not necessarily constitute an event of default for any other series of
senior debt securities.
We will be required to file with the senior indenture trustee annually an
officers' certificate as to the absence of default in performance of certain
covenants in the senior indenture. (See section 1008 of the senior indenture.)
The senior indenture provides that the senior indenture trustee may withhold
notice to the holders of the senior debt securities of any default, except in
payment of principal of, or premium, if any, or interest on, those securities or
in the payment of any sinking fund installment with respect to those securities,
if the senior indenture trustee in good faith determines that it is in the
interest of the holders of those securities to do so. (See section 602 of the
senior indenture.)
The senior indenture provides that, if an event of default with respect to
the senior debt securities specified therein shall have happened and be
continuing, either the senior indenture trustee or the holders of 25% or more in
aggregate principal amount of the senior debt securities may declare the
principal amount of all the senior debt securities to be due and payable
immediately. However, if we shall cure all defaults and certain other conditions
are met, such declaration may be annulled and past defaults may be waived by the
holders of a majority in aggregate principal amount of the senior debt
securities. (See section 502 of the senior indenture.)
Subject to the provisions of the senior indenture relating to the duties of
the senior indenture trustee, the senior indenture trustee will be under no
obligation to exercise any of its rights or powers under the senior indenture at
the request or direction of any of the holders of the senior debt securities,
unless those holders shall have offered to the senior indenture trustee
reasonable indemnity. (See section 603 of the senior indenture.)
Subject to the provision for indemnification, the holders of a majority in
principal amount of the senior debt securities will have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the senior indenture trustee, or exercising any trust or power conferred on the
senior indenture trustee with respect to the senior debt securities. However,
the senior indenture trustee shall have the right to decline to follow any
direction if that trustee shall determine that the action so directed conflicts
with any law or the provisions of the senior indenture or if that trustee shall
determine that the action so directed would be prejudicial to holders not taking
part in the direction. (See section 512 of the senior indenture.)
DEFEASANCE
The senior indenture provides that, with respect to a particular series of
senior debt securities, we may elect either (a) to be discharged from all of our
obligations with respect to the senior debt securities of any series, except for
obligations to register the transfer or exchange of senior debt securities,
replace stolen, lost or mutilated senior debt securities, to maintain paying
agencies and to hold moneys for payment in trust which we refer to as
"DEFEASANCE," or (b) to be released from our obligations under sections of the
senior indenture described under "--CONSOLIDATION, MERGER, CONVEYANCE, SALE OR
TRANSFER" and "--LIMITATION ON SECURED DEBT" or to certain covenants relating to
corporate existence and maintenance of properties and insurance, in each case,
which we refer to as "COVENANT DEFEASANCE," if:
- we deposit with the senior indenture trustee, in trust, money, or in
certain cases, U.S. government obligations sufficient to pay and discharge
(i) the principal of, and premium, if any, and interest, if any, on the
outstanding senior debt securities on the dates such payments are due, in
accordance with the terms of those securities and (ii) any mandatory
sinking fund payments applicable to the senior debt securities on the day
on which payments are due and payable in accordance with the terms of the
senior indenture and of those securities;
15
- no event of default or event which with notice or lapse of time would
become an event of default, including by reason of such deposit, with
respect to the senior debt securities shall have occurred and be
continuing on the date of such deposit;
- we deliver to the senior indenture trustee an opinion of counsel to the
effect that the holders will not recognize income, gain or loss for
Federal income tax purposes as a result of such deposit and defeasance of
certain obligations; and
- we have delivered to the senior indenture trustee an officers' certificate
and an opinion of counsel, each stating that all conditions precedent
provided for in the senior indenture relating to the satisfaction and
discharge of the senior debt securities have been complied with. (See
sections 403 and 1009 of the senior indenture.)
Discharged means, with respect to the senior debt securities of any series,
the discharge of the entire indebtedness represented by, and our obligations
under, the senior debt securities of such series and in the satisfaction of all
of our obligations under the senior indenture relating to the senior debt
securities of such series, except (a) the rights of holders of the senior debt
securities of such series to receive, from the trust fund established pursuant
to the senior indenture, payment of the principal of and interest and premium,
if any, on the senior debt securities of such series when such payments are due,
(b) our obligations with respect to the senior debt securities of such series
with respect to registration, transfer, exchange and maintenance of a place of
payment and (c) the rights, powers, trusts, duties, protections and immunities
of the senior indenture trustee under the senior indenture. (See section 101 of
the senior indenture.)
If we have deposited or caused to be deposited money or U.S. government
obligations to pay or discharge the principal of, and premium, if any, and
interest, if any, on the outstanding senior debt securities to and including a
redemption date on which all of the outstanding senior debt securities are to be
redeemed, such redemption date shall be irrevocably designated by a board of
directors resolution delivered to the senior indenture trustee on or prior to
the date of deposit of such money or U.S. government obligations, and such board
of directors resolution shall be accompanied by an irrevocable company request
that the senior indenture trustee give notice of such redemption in our name and
at our expense not less than 30 nor more than 60 days prior to such redemption
date in accordance with the senior indenture. (See section 403 of the senior
indenture.)
U.S. government obligations means direct obligations of the United States
for the payment of which its full faith and credit is pledged, or obligations of
a person controlled or supervised by and acting as an agency or instrumentality
of the United States and the payment of which is unconditionally guaranteed by
the United States. U.S. government obligations shall also include a depositary
receipt issued by a bank or trust company as custodian with respect to any such
U.S. government obligation or a specific payment of interest on or principal of
any such U.S. government obligation held by such custodian for the account of a
holder of a depositary receipt. However, except as required by law, such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depositary receipt from any amount received by the custodian in
respect of the U.S. government obligation or the specific payment of interest on
or principal of the U.S. government obligation evidenced by such depositary
receipt. (See section 101 of the senior indenture.)
RESIGNATION OR REMOVAL OF SENIOR INDENTURE TRUSTEE
The senior indenture trustee may resign at any time by giving written notice
to us specifying the day upon which the resignation is to take effect. The
resignation will take effect immediately upon the later of the appointment of a
successor senior indenture trustee and such specified day. (See section 610 of
the senior indenture.)
The senior indenture trustee may be removed at any time by an instrument or
concurrent instruments in writing delivered to the senior indenture trustee and
us and signed by the holders, or their attorneys-in-fact, representing at least
a majority in principal amount of the then outstanding senior debt securities.
In addition, under certain circumstances, we may remove the senior indenture
16
trustee upon notice to the holder of each senior debt security outstanding and
the senior indenture trustee, and appointment of a successor senior indenture
trustee. (See section 610 of the senior indenture.)
CONCERNING THE SENIOR INDENTURE TRUSTEE
The Chase Manhattan Bank is the trustee under the senior indenture and the
subordinated indenture. The Chase Manhattan Bank also serves as the trustee
under the first mortgage bond indenture with respect to the first mortgage bonds
issued by our subsidiary, NYSEG. We maintain other banking relationships in the
ordinary course of business with the senior indenture trustee and its
affiliates.
GOVERNING LAW
The senior indenture and the senior debt securities will be governed by and
construed in accordance with the laws of the State of New York.
DESCRIPTION OF JUNIOR SUBORDINATED DEBT SECURITIES
The following description sets forth the general terms and provisions of the
junior subordinated debt securities that we may offer by this prospectus. The
junior subordinated debt securities will be unsecured and subordinate and junior
in right of payment to all of our senior debt securities as provided in the
subordinated indenture.
The junior subordinated debt securities will be issued under a subordinated
indenture between us and The Chase Manhattan Bank, as trustee. The subordinated
indenture is an exhibit to the registration statement, of which this prospectus
forms a part, and is incorporated by reference.
The subordinated indenture contains the full text of the matters described
in this section. Because this section is a summary, it does not describe certain
exceptions and qualifications contained in the subordinated indenture or the
junior subordinated debt securities. This summary is subject to and qualified in
its entirety by reference to all the provisions of the subordinated indenture,
including definitions of terms used in that indenture. We also include
references in parentheses to certain sections of the subordinated indenture.
Whenever we refer to particular sections of, or defined terms used in, the
subordinated indenture in this prospectus or in the applicable prospectus
supplement, these sections or defined terms are incorporated by reference herein
or in the prospectus supplement. This summary also is subject to and qualified
by reference to the description of the particular terms of the junior
subordinated debt securities described in the applicable prospectus supplement
or supplements.
Prospective purchasers of junior subordinated debt securities should be
aware that such securities may be sold at a substantial discount below their
stated principal amount and may bear no interest or below market rate interest.
In addition, special U.S. Federal income tax, accounting and other
considerations may be applicable to any junior subordinated debt securities. The
applicable prospectus supplement will describe these considerations, if they
apply.
GENERAL
The junior subordinated debt securities may be issued in one or more series
under the subordinated indenture with terms corresponding to the terms of a
series of related trust preferred securities. In that event, concurrently with
the issuance and sale of a particular trust's preferred securities, such trust
will invest the proceeds of such sale, and the consideration paid by us for such
trust's common securities, in the related series of junior subordinated debt
securities. Each series of junior subordinated debt securities held by a
particular trust will be in an aggregate principal amount equal to the aggregate
stated liquidation amount of such trust's preferred securities and common
securities.
Because we are a holding company, our rights and the rights of our
creditors, including the rights of the holders of our junior subordinated debt
securities, to participate in any distribution of assets of any of our
subsidiaries when such subsidiary is liquidated or reorganized are subject to
the prior claims
17
of the subsidiary's creditors. Accordingly, the junior subordinated debt
securities will be effectively subordinated to all existing and future
liabilities of our subsidiaries, and the applicable trusts, as holders of junior
subordinated debt securities, should look only to our assets for payments on the
junior subordinated debt securities.
The subordinated indenture does not limit the aggregate principal amount of
junior subordinated debt securities that we may issue under that indenture. The
subordinated indenture provides that the junior subordinated debt securities may
be issued in one or more series pursuant to a supplemental indenture or a board
resolution and officers' certificates.
We refer you to the applicable prospectus supplement for a description of
the following terms of the junior subordinated debt securities, including the
method for determining such terms, the persons authorized to determine such
terms and the limits, if any, within which any such determination of such terms
is to be made:
- the title;
- any limit on the aggregate principal amount;
- the maturity date on which principal is payable;
- the interest rate or rates and date or dates from which interest shall
accrue;
- the interest payment dates;
- the record dates for each corresponding interest payment date;
- our right to defer or extend an interest payment date;
- the place where (i) principal, any premium and any interest are payable,
(ii) junior subordinated debt securities may be presented for registration
of transfer or exchange, and (iii) notices and demands to us may be made;
- the terms and conditions of redemption;
- issuable denominations;
- the portion (if less than all) of the principal amount payable upon
acceleration of maturity;
- the currency or currencies in which the principal, any premium and any
interest are payable or in which the junior subordinated debt securities
will be denominated;
- any additions, modifications or deletions to the events of default or
covenants in the subordinated indenture;
- the index or indices and applicable calculations used to determine the
amount of principal, premium, if any, or interest payments;
- the terms and conditions for issuance of a temporary global security
representing all such junior subordinated debt securities and the exchange
of a temporary global security for definitive junior subordinated debt
securities;
- whether issuance will be in the form of one or more global securities and
the depositary for global securities;
- appointment of any paying agent or agents;
- the form of trust agreement and guarantee; and
- any other terms not inconsistent with the subordinated indenture.
If (i) the purchase price of any of the junior subordinated debt securities
is payable in one or more foreign currencies or currency units, (ii) any junior
subordinated debt securities are denominated in one or more foreign currencies
or currency units or (iii) the principal, any premium or any interest on any
junior subordinated debt securities is payable in one or more foreign currencies
or currency units, then the restrictions, elections, certain U.S. Federal income
tax consequences, specific terms and other
18
information with respect to such series of junior subordinated debt securities
and such foreign currency or currency units will be set forth in the applicable
prospectus supplement.
If any index is used to determine the amount of payments of principal, any
premium or any interest on any series of junior subordinated debt securities,
special U.S. Federal income tax, accounting and other applicable considerations
will be described in the applicable prospectus supplement.
DENOMINATIONS, REGISTRATION AND TRANSFER
The junior subordinated debt securities will be issuable only in registered
form without coupons, unless we indicate differently in the applicable
prospectus supplement. Junior subordinated debt securities of any series will be
exchangeable for other junior subordinated debt securities of the same series,
in authorized denominations, with the same aggregate principal amount, original
issue date and maturity and bearing the same interest rate. (See sections 2.3
and 2.5 of the subordinated indenture.)
The junior subordinated debt securities may be presented for exchange, and
may be presented for registration of transfer (with the form of transfer
endorsed, or a duly executed satisfactory written instrument of transfer), at
the office of the appropriate securities registrar or at the office of any
transfer agent designated by us for such purpose and referred to in the
applicable prospectus supplement. There will be no service charge for any
exchange or registration of transfer, although payment of certain taxes and
other governmental charges as described in the subordinated indenture may be
required. We will appoint the subordinated indenture trustee as securities
registrar under the subordinated indenture. If we designate any transfer agents
(in addition to the securities registrar) with respect to any series of junior
subordinated debt securities in the applicable prospectus supplement, we may
rescind that designation or approve a change in the location where such transfer
agent acts at any time, provided that we maintain a transfer agent in each place
of payment for such series. We may designate additional transfer agents with
respect to any series of junior subordinated debt securities at any time. (See
section 2.5 of the subordinated indenture.)
If a redemption occurs, neither we nor the subordinated indenture trustee
will be required to (i) exchange or register the transfer of junior subordinated
debt securities of any series during a period beginning at the opening of
business 15 days before the mailing of a notice of redemption of junior
subordinated debt securities of that series and ending at the close of business
on the relevant redemption date or (ii) exchange or transfer any junior
subordinated debt securities so selected for redemption, except any portion of
junior subordinated debt securities not being redeemed in a partial redemption.
(See section 2.5 of the subordinated indenture.)
GLOBAL JUNIOR SUBORDINATED DEBT SECURITIES
Unless we indicate differently in the applicable prospectus supplement, all
or a part of each series of junior subordinated debt securities may be issued in
the form of one or more global junior subordinated debt securities that will be
deposited with, or on behalf of, a depositary identified in the applicable
prospectus supplement. Global junior subordinated debt securities will be issued
only in fully registered form, but may be in either temporary or permanent form.
Unless and until it is exchanged for certificated junior subordinated debt
securities, a global junior subordinated debt security may be transferred only
as a whole. Transfers of global junior subordinated debt securities are
permitted between the following entities:
- by the depositary for such global junior subordinated debt security to a
nominee of such depositary;
- by a nominee of such depositary to such depositary or another nominee of
such depositary; or
- by the depositary or any nominee to a successor depositary or any nominee
of such successor. (See section 2.5 of the subordinated indenture.)
Each prospectus supplement will describe the terms of the depositary
arrangement with respect to each series of junior subordinated debt securities.
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PAYMENT AND PAYING AGENTS
Payment of principal, any premium and any interest on junior subordinated
debt securities will be made at the office of the subordinated indenture trustee
in the City of New York or at the office of such paying agent(s) as we may
periodically designate, unless we indicate differently in the applicable
prospectus supplement. However, at our option, payment of any interest may be
made (i) except in the case of global junior subordinated debt securities, by
check mailed to the address in the securities register of the person entitled to
such payment or (ii) by transfer to an account specified in the securities
register maintained by the person entitled to such payment, provided that proper
transfer instructions have been received by the preceding record date. Unless we
indicate differently in the applicable prospectus supplement, payment of any
interest on junior subordinated debt securities will be made to the person in
whose name such junior subordinated debt securities are registered at the close
of business on the record date for such interest, except in the case of
defaulted interest. We may at any time designate additional paying agents or
rescind the designation of any paying agent; however, we will at all times be
required to maintain a paying agent in each place of payment for each series of
junior subordinated debt securities. (See sections 4.1 and 4.2 of the
subordinated indenture.)
Any moneys deposited with the subordinated indenture trustee or any paying
agent in trust for the payment of principal, any premium or any interest on any
junior subordinated debt security and remaining unclaimed for two years after
such payment has become due and payable shall, at our request, be repaid to us.
After that time, the holder of such junior subordinated debt security will be a
general unsecured creditor of ours and may only look to us for payment of such
moneys. (See section 12.4 of the subordinated indenture.)
OPTION TO DEFER INTEREST PAYMENTS
If provided in the applicable prospectus supplement, we will have the right
to periodically defer payment of interest for an extension period of up to the
number of consecutive interest payment periods specified in the applicable
prospectus supplement. The interest payment deferment will be subject to the
terms, conditions and any covenants specified in the applicable prospectus
supplement. The extension period may not extend beyond the maturity of such
series of junior subordinated debt securities as provided in the applicable
prospectus supplement. (See section 2.10 of the subordinated indenture.) Certain
U.S. Federal income tax consequences and other applicable considerations to any
such junior subordinated debt securities will be described in the applicable
prospectus supplement.
REDEMPTION AND PREPAYMENT
The junior subordinated debt securities will not be subject to any sinking
fund, unless we indicate differently in the applicable prospectus supplement.
We may redeem all (at any time) or a part (at particular times) of the
junior subordinated debt securities of any series, unless we indicate
differently in the applicable prospectus supplement. If the junior subordinated
debt securities of any series are redeemable beginning on a specified date or
upon the satisfaction of additional conditions, the applicable prospectus
supplement will specify such date or describe such conditions. The redemption
price for any junior subordinated debt security so redeemed will equal any
accrued and unpaid interest to the redemption date, plus 100% of the outstanding
principal amount, unless we indicate differently in the applicable prospectus
supplement.
Unless we indicate differently in the applicable prospectus supplement, if a
Special Event (as defined in "DESCRIPTION OF TRUST PREFERRED SECURITIES--SPECIAL
EVENT REDEMPTION") regarding a particular trust occurs and is continuing, we
have the option to prepay all (but not a part) of the corresponding series of
junior subordinated debt securities held by such trust at any time within
90 days of the date of such Special Event, subject to the provisions of the
subordinated indenture and whether or not such junior subordinated debt
securities are then otherwise redeemable at our option. The prepayment price for
such junior subordinated debt securities will be described in the applicable
prospectus supplement. For so long as such trust is the holder of all the
outstanding junior subordinated debt securities of such
20
series, the proceeds of any such prepayment will be used by such trust to redeem
its trust securities in accordance with their terms.
Notice of any redemption will be mailed at least 20 days but not more than
60 days before the redemption date to each holder of junior subordinated debt
securities to be redeemed at its registered address. Unless we default in
payment of the redemption price and any interest accrued to the redemption date,
interest will stop accruing on such junior subordinated debt securities (or the
part called for redemption) as of the redemption date. (See sections 3.2 and 3.3
of the subordinated indenture.)
OPTION TO CHANGE OR EXTEND MATURITY DATE
If provided in the applicable prospectus supplement, we will have the right
to:
- shorten the maturity of the junior subordinated debt securities of any
series at any time to a date no earlier than the first date on which we
may redeem those securities; or
- extend the maturity of the junior subordinated debt securities of any
series at any time to a date no later than the forty-ninth anniversary of
the first interest payment date following the original issue date of those
securities.
Our right to shorten or extend the maturity of a particular series of junior
subordinated debt securities will be subject to the terms, conditions and any
covenants specified in the applicable prospectus supplement. (See section 2.12
of the subordinated indenture.)
RESTRICTIONS ON CERTAIN PAYMENTS
We will covenant that we will not, and will not permit any of our
subsidiaries to:
- declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of our capital
stock,
- make any payment of principal, any premium or any interest on or repay,
repurchase or redeem any of our debt securities (including other series of
junior subordinated debt securities) that rank equally with or junior in
interest to the junior subordinated debt securities, or
- make any guarantee payments on any guarantee by us of the debt securities
of any subsidiary if such guarantee ranks equally with or junior in
interest to the junior subordinated debt securities
whenever any of the following payment restriction events occur:
- we have actual knowledge of the occurrence of any event (i) that with the
giving of notice or the lapse of time or both would constitute an event of
default under the subordinated indenture with respect to the junior
subordinated debt securities of any series and (ii) that we have not taken
reasonable steps to cure,
- if such junior subordinated debt securities are held by a trust of a
series of related trust preferred securities and we have defaulted on the
payment of any obligations under the guarantee relating to such related
trust preferred securities, or
- we have given notice of our election of an extension period as provided in
the subordinated indenture with respect to the junior subordinated debt
securities of such series and have not rescinded such notice, or such
extension period, or any extension thereof, is continuing.
We will be permitted to make:
- dividends or distributions in our common stock,
- any declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of capital stock under any such
plan in the future, or the redemption or repurchase of any such rights
pursuant to such plan,
- payments under any guarantee with respect to the series of related trust
preferred securities, and
21
- purchases of common stock related to the issuance of common stock under
any of our benefit plans for our directors, officers or employees or our
dividend reinvestment plan. (See section 4.9 of the subordinated
indenture.)
MODIFICATION OF SUBORDINATED INDENTURE
We and the subordinated indenture trustee may modify the subordinated
indenture without the consent of the applicable trusts as holders of any series
of junior subordinated debt securities to cure ambiguities, defects or
inconsistencies (so long as the interests of such trusts or, in the case of
junior subordinated debt securities, the holders of the related trust preferred
securities are not materially adversely affected) and qualify, or maintain the
qualification of, the subordinated indenture under the Trust Indenture Act of
1939, among other things. (See section 10.1 of the subordinated indenture.)
We and the subordinated indenture trustee may execute any supplemental
indenture to create any new series of junior subordinated debt securities
without the consent of any trust as a holder of junior subordinated debt
securities. (See section 10.1 of the subordinated indenture.)
The subordinated indenture permits us and the subordinated indenture trustee
to modify the subordinated indenture in a manner that materially adversely
affects the rights of the applicable trusts as holders of a series of junior
subordinated debt securities so long as the holders of at least a majority in
principal amount of such series of junior subordinated debt securities consents.
The consent of all affected holders of a series of junior subordinated debt
securities is required to, among other things: (i) change the maturity of such
series of junior subordinated debt securities; (ii) reduce the principal amount
of, or reduce the rate or extend the time of payment of interest on, such series
of junior subordinated debt securities; or (iii) modify the provisions regarding
subordination of the junior subordinated debt securities in a manner that
adversely affects the rights of holders of such series of junior subordinated
debt securities. The consent of all holders of a series of junior subordinated
debt securities is required to reduce the percentage of principal amount of
junior subordinated debt securities of such series, the holders of which are
required to consent to any such modification of the subordinated indenture. (See
section 10.2 of the subordinated indenture.)
In the case of junior subordinated debt securities, so long as any related
trust preferred securities remain outstanding, unless the principal and any
premium of the junior subordinated debt securities and all accrued and unpaid
interest on such junior subordinated debt securities have been paid in full:
(i) no modification may be made that materially adversely affects you as a
holder of such trust preferred securities, and no termination of the
subordinated indenture may occur, and no waiver of any event of default under
the subordinated indenture or compliance with any covenant under the
subordinated indenture with respect to such junior subordinated debt securities
may be effective, without the prior consent of the holders of at least a
majority of the liquidation amount of all outstanding related trust preferred
securities affected; and (ii) no modification may impair your rights as a holder
of trust preferred securities to institute suit directly against us when certain
events of default occur under the subordinated indenture, without the prior
consent of the holders of all related trust preferred securities then
outstanding. (See section 10.2 of the subordinated indenture.)
JUNIOR SUBORDINATED DEBT SECURITY EVENTS OF DEFAULT
An "event of default" will occur under the subordinated indenture if any of
the following events occurs:
- failure for 30 days by us to pay any interest when due (subject to the
deferral of any due date in the case of an extension period under the
subordinated indenture); or
- failure by us to pay any principal when due at maturity, upon redemption,
by declaration or otherwise; or
- failure by us to observe or perform any other covenant contained in the
junior subordinated debt securities or the subordinated indenture (other
than those specifically relating to another series) for 60 days after
written notice to us from the subordinated indenture trustee or the
22
holders of at least 25% in principal amount of such series of junior
subordinated debt securities; or
- certain events of bankruptcy, insolvency or reorganization by us. (See
section 6.1 of the subordinated indenture.)
The applicable prospectus supplement will describe any other events of
default relating to the junior subordinated debt securities. The holders of a
majority of the outstanding principal amount of junior subordinated debt
securities of each series affected have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the subordinated
indenture trustee. (See section 6.6 of the subordinated indenture.)
The subordinated indenture trustee or the holders of at least 25% of the
outstanding principal amount of junior subordinated debt securities of each
series affected may declare the principal due and payable immediately when an
event of default under the subordinated indenture occurs. If the subordinated
indenture trustee or holders of at least 25% of the outstanding principal amount
of junior subordinated debt securities fail to make such declaration, the
holders of at least 25% of the liquidation amount of the related trust preferred
securities will have such right. If the event of default under the subordinated
indenture has been cured, the holders of a majority of the outstanding principal
amount of junior subordinated debt securities of each series affected may annul
such declaration. If the holders of such junior subordinated debt securities
fail to annul such declaration and waive such default, the holders of a majority
of the liquidation amount of the related trust preferred securities affected
will have such right. (See section 6.1 of the subordinated indenture.)
The holders of a majority of the outstanding principal amount of each series
of the junior subordinated debt securities affected, and the holders of a
majority of the liquidation amount of the corresponding trust preferred
securities, may, on behalf of the holders of all the junior subordinated debt
securities of such series or the corresponding trust preferred securities (as
applicable), waive any default, except a default in the payment of principal or
interest or a default regarding a covenant or provision which under the
subordinated indenture cannot be modified or amended without the consent of the
holder of each outstanding junior subordinated debt security. We are required to
file an annual certificate with the subordinated indenture trustee stating
whether we are in compliance with all the applicable conditions and covenants
under the subordinated indenture. (See sections 5.3 and 6.6 of the subordinated
indenture.)
If an event of default under the subordinated indenture occurs and is
continuing as to a series of junior subordinated debt securities, then the
property trustee may declare the principal and any interest on such junior
subordinated debt securities to be immediately due and payable and to enforce
its other rights as a creditor with respect to such junior subordinated debt
securities. (See section 6.1 of the subordinated indenture.)
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF TRUST PREFERRED SECURITIES
If an event of default under the subordinated indenture relating to the
failure to pay interest or principal on a series of junior subordinated debt
securities has occurred and is continuing, as a holder of related trust
preferred securities, you may institute a suit directly against us to enforce
payment of the principal or interest on such junior subordinated debt securities
having a principal amount equal to the liquidation amount of your related trust
preferred securities. We may not amend the subordinated indenture to remove your
right to bring such suit without the prior written consent of the holders of all
of the outstanding trust preferred securities. If the right to bring such suit
is removed, the applicable trust may become subject to the reporting obligations
of the Securities Exchange Act of 1934. We will have the right under the
subordinated indenture to set-off any payment made to you as a holder of trust
preferred securities in connection with a suit directly against us or under the
related guarantee. (See sections 2.11, 6.4 and 6.5 of the subordinated
indenture.)
You will not be able to directly exercise any remedies other than those
described in the preceding paragraph available to the applicable trust as
holders of the junior subordinated debt securities unless
23
there has been an event of default under the applicable amended trust agreement.
(See "DESCRIPTION OF TRUST PREFERRED SECURITIES--TRUST ENFORCEMENT EVENTS.")
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The subordinated indenture permits us to consolidate or merge with another
person or to sell or convey all or substantially all its assets to any person
if:
- either (i) we are the successor person or (ii) the successor person is
organized under the laws of the United States or any state or the District
of Columbia, and such successor person expressly assumes our obligations
on the junior subordinated debt securities and under the subordinated
indenture;
- immediately after the consolidation, merger, sale or conveyance, no
default in the performance of any covenant or condition under the
subordinated indenture has occurred; and
- in the case of junior subordinated debt securities, such consolidation,
merger, sale or conveyance is permitted and does not cause a breach or
violation under the related trust agreement and guarantee. (See
section 11.1 of the subordinated indenture.)
The general provisions of the subordinated indenture do not afford the
applicable trusts, as holders of the junior subordinated debt securities,
protection in the event of a transaction involving us that may adversely affect
holders of the junior subordinated debt securities.
SATISFACTION AND DISCHARGE
The subordinated indenture will cease to be of further effect when:
- all outstanding junior subordinated debt securities are delivered to the
subordinated indenture trustee for cancellation or
- all outstanding junior subordinated debt securities are due and payable or
will become due and payable or will be called for redemption within one
year, and we deposit with the subordinated indenture trustee funds in
trust in an amount sufficient to pay at maturity or upon redemption all of
such outstanding junior subordinated debt securities, including principal
and any interest to the date of maturity or redemption (as applicable) and
we have paid all other amounts payable under the subordinated indenture.
(See section 12.1 of the subordinated indenture.)
The following rights will survive such satisfaction and discharge:
- remaining rights of registration of transfer, substitution and exchange
and our optional redemption right,
- rights of holders to receive principal and interest and other amounts
deposited with the subordinated indenture trustee, and
- the rights, obligations and immunities of the subordinated indenture
trustee under the subordinated indenture. (See sections 7.6 and 12.1 of
the subordinated indenture.)
SUBORDINATION
In the subordinated indenture, we have covenanted and agreed that any junior
subordinated debt securities will be subordinate and junior in right of payment
to all Senior Debt, as defined below. When any payment or distribution of our
assets is made due to any insolvency event of ours, the holders of Senior Debt
will first be entitled to receive payment in full of principal, any premium and
any interest on such Senior Debt before any payment of principal or interest on
the junior subordinated debt securities. (See section 14.1 of the subordinated
indenture.)
If the maturity of any junior subordinated debt securities is accelerated,
the holders of all outstanding Senior Debt will first be entitled to receive
payment in full of all amounts due on such Senior Debt before the holders of
junior subordinated debt securities will be entitled to receive or retain any
payment regarding principal or interest on the junior subordinated debt
securities. No payments on account of principal, any premium or any interest on
the junior subordinated debt
24
securities may be made if a default in any payment with respect to Senior Debt
has occurred and is continuing or an event of default with respect to any Senior
Debt resulting in its acceleration, or if any judicial proceeding is pending
with respect to any such default. (See sections 14.1 and 14.9 of the
subordinated indenture.)
"SENIOR DEBT," for purposes of this section, means:
- any indebtedness of ours for borrowed or purchased money, whether or not
evidenced by bonds, debentures, notes or other written instruments;
- obligations of ours for reimbursement under letters of credit, banker's
acceptances, security purchase facilities or similar facilities issued for
our account;
- any indebtedness or other obligations of ours with respect to commodity
contracts, interest rate commodity and currency swap agreements, cap,
floor and collar agreements, currency spot and forward contracts, and
other similar agreements or arrangements; and
- any guarantees, endorsements (other than by endorsement of negotiable
instruments for collection in the ordinary course of business) or other
similar contingent obligations in respect of obligations of others of a
type described above, whether or not such obligation is classified as a
liability on a balance sheet prepared in accordance with generally
accepted accounting principles;
in each case above whether outstanding on the date of execution of the
subordinated indenture or thereafter incurred, other than obligations ranking on
a parity with the subordinated debt securities or ranking junior to the
subordinated debt securities. Senior Debt, for purposes of this section, does
not include (a) obligations to trade creditors or (b) any indebtedness of ours
to any of our subsidiaries.
The subordinated indenture places no limitation on the amount of Senior Debt
that we may incur. We expect to periodically incur additional indebtedness and
other obligations constituting Senior Debt.
Senior Debt will be entitled to the benefits of the subordination provisions
in the subordinated indenture irrespective of the amendment, modification or
waiver of any terms of the Senior Debt. We may not amend the subordinated
indenture to change the subordination of any outstanding junior subordinated
debt securities without the consent of each holder of Senior Debt that the
amendment would adversely affect.
The subordinated indenture provides that the foregoing subordination
provisions may be changed before issuance with respect to the junior
subordinated debt securities to be issued. Any such change would be described in
the applicable prospectus supplement.
RIGHTS OF HOLDERS OF TRUST PREFERRED SECURITIES
As a holder of the related trust preferred securities for a series of junior
subordinated debt securities, you will have the rights, in connection with
modifications to the subordinated indenture or when events of default under the
subordinated indenture occur, as described under "--MODIFICATION OF SUBORDINATED
INDENTURE," "--JUNIOR SUBORDINATED DEBT SECURITY EVENTS OF DEFAULT" and
"--ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF TRUST PREFERRED SECURITIES,"
unless we indicate differently in the applicable prospectus supplement.
We will covenant, as to each series of junior subordinated debt securities:
- to maintain directly or indirectly 100% ownership of the trust common
securities of the trust to which such junior subordinated debt securities
have been issued, provided that certain successors which are permitted
pursuant to the subordinated indenture may succeed to our ownership of the
trust common securities,
- not to voluntarily terminate, wind up or liquidate any trust, except
(a) in connection with a prepayment in full or a distribution of junior
subordinated debt securities to you as a holder of the trust preferred
securities in exchange for such trust preferred securities on liquidation
of such trust, or (b) in connection with certain mergers, consolidations
or amalgamations permitted by the related trust agreement, and
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- to use our reasonable efforts, consistent with the terms and provisions of
the related trust agreement, to cause such trust to remain classified as a
grantor trust and not as an association taxable as a corporation for U.S.
Federal income tax purposes. (See section 4.9 of the subordinated
indenture.)
TRUST EXPENSES
Pursuant to the subordinated indenture, we have agreed to pay all debts and
other obligations (other than with respect to the trust preferred securities)
and all costs and expenses of each trust (including costs and expenses relating
to the organization of each trust, the fees and expenses of the trustees of each
such trust and the costs and expenses relating to the operation of each trust)
and the offering of the trust preferred securities and to pay any and all taxes
and all related costs and expenses (other than U.S. Federal withholding taxes)
to which each trust might become subject.
CONCERNING THE SUBORDINATED INDENTURE TRUSTEE
The subordinated indenture trustee will have all the duties and
responsibilities specified with respect to a subordinated indenture trustee
under the Trust Indenture Act. Subject to the provisions of the Trust Indenture
Act, the subordinated indenture trustee is not under any obligation to exercise
any of the powers vested in it by the subordinated indenture at the request of
any holder of junior subordinated debt securities, unless it is offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred. The subordinated indenture trustee is not required to
expend or risk its own funds or otherwise incur personal financial liability in
the performance of its duties if the subordinated indenture trustee reasonably
believes that repayment or adequate indemnity is not reasonably assured to it.
The Chase Manhattan Bank is the trustee under the senior indenture and the
subordinated indenture. The Chase Manhattan Bank also serves as the trustee
under the first mortgage bond indenture with respect to the first mortgage bonds
issued by our subsidiary, NYSEG. We maintain other banking relationships in the
ordinary course of business with the subordinated indenture trustee and its
affiliates.
GOVERNING LAW
The subordinated indenture is, and the junior subordinated debt securities
will be, governed by and construed in accordance with the laws of the State of
New York.
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DESCRIPTION OF TRUST PREFERRED SECURITIES
The following is a summary of the principal terms of the trust preferred
securities. The form of amended trust agreement for each trust is filed as an
exhibit to the registration statement, of which this prospectus forms a part,
and is incorporated by reference. The terms of the trust preferred securities
will include those stated in the amended trust agreement relating to a
particular trust and those made part of such amended trust agreement by the
Trust Indenture Act and the Delaware Business Trust Act.
GENERAL
Each trust may issue only one series of trust preferred securities and will
exist until terminated as provided in its amended trust agreement. Except under
certain circumstances, we will be entitled to appoint, remove, or replace the
trustees for the trusts, who will conduct the respective business and affairs of
each trust. The trustees of each trust will consist of:
- two of our employees, officers or affiliates acting as administrative
trustees;
- The Chase Manhattan Bank will act as property trustee and as indenture
trustee for purposes of the Trust Indenture Act, under the terms set forth
in the applicable prospectus supplement; 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 the
applicable prospectus supplement.
Each amended trust agreement will authorize its administrative trustees to
issue, on its behalf, two classes of trust securities--preferred securities and
common securities--each of which will have the terms described in this
prospectus and in the applicable prospectus supplement. We will own all of the
trust common securities. The trust common securities will rank equally in right
of payment, and payments will be made on trust common securities
proportionately, with the related trust preferred securities of each respective
trust. However, if an event of default occurs and is continuing under a
particular trust's amended trust agreement, the rights of the holders of such
trust's common securities to payment for distributions and payments upon
liquidation, redemption and otherwise, will be subordinated to the rights of the
holders of such trust's preferred securities. We will acquire, directly or
indirectly, trust common securities in a total liquidation amount of
approximately 3% of the total capital of each trust.
The proceeds from the sale of each trust's securities will be used by each
respective trust to purchase our junior subordinated debt securities. These
junior subordinated debt securities will be held in trust by the property
trustees, for the benefit of the trust and the holders of the respective trust's
securities. We will guarantee on a subordinated basis the payments of
distributions and payments on redemption or liquidation with respect to the
trust preferred securities, but only to the extent the applicable trust has
funds available to make those payments and has not made the payments. (See
"DESCRIPTION OF THE GUARANTEES.")
The assets available for distribution to the holders of each respective
trust's preferred securities will be limited to payments from us under the
related junior subordinated debt securities held by such trust. If we fail to
make a payment on the junior subordinated debt securities held by a particular
trust, such 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 debt
securities held by a particular trust, the subordinated indenture and the
amended trust agreement relating to such trust, will provide a full and
unconditional guarantee of amounts due on the trust preferred securities issued
by such trust. (See "RELATIONSHIP AMONG THE TRUST PREFERRED SECURITIES, THE
GUARANTEES AND THE JUNIOR SUBORDINATED DEBT SECURITIES HELD BY THE TRUSTS.")
The trust preferred securities of a particular trust 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 relating to such trust or made part of
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such amended trust agreement by the Trust Indenture Act or the Delaware Business
Trust Act. The terms of a particular trust's preferred securities will mirror
the terms of the related junior subordinated debt securities held by such trust.
In other words, the distribution rate and the distribution payment dates and
other payment dates for the trust preferred securities of each trust will
correspond to the interest rate and interest payment dates and other payment
dates for the junior subordinated debt securities held by that trust. Holders of
trust preferred securities have no preemptive or similar rights.
PROVISIONS OF A PARTICULAR SERIES
Each trust may issue only one series of trust preferred securities. The
applicable prospectus supplement will set forth the principal terms of the trust
preferred securities that will be offered, including:
- the name of the trust preferred securities;
- the liquidation amount and number of trust preferred securities issued;
- the annual distribution rate(s) or method of determining such rate(s), the
payment date(s) and the record dates used to determine the holders who are
to receive distributions;
- the date or dates from which distributions will be cumulative or the
method of determining such date or dates;
- 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 related junior
subordinated debt securities and guarantee may be distributed to holders
of trust preferred securities;
- 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
depositary 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. (See article 7 of the
amended trust agreement.)
The interest rates and interest and other payment dates of the junior
subordinated debt securities issued to the trusts will correspond to the
respective rates at which distributions will be paid and the respective
distribution and other payment dates of the trust preferred securities of each
trust.
EXTENSIONS
We have the right under the subordinated indenture to defer payments of
interest on the junior subordinated debt securities by extending the interest
payment period from time to time. The administrative trustees of a particular
trust will give the holders of its trust preferred securities notice of any
extension period upon their receipt of notice from us. If distributions are
deferred, the deferred distributions and accrued interest will be paid to
holders of record of such trust preferred securities as they appear on the books
and records of such trust on the record date next following the termination of
such deferral period. (See "DESCRIPTION OF JUNIOR SUBORDINATED DEBT
SECURITIES--OPTION TO DEFER INTEREST PAYMENTS.")
DISTRIBUTIONS
Distributions on a particular trust's preferred securities will be made on
the dates payable to the extent that such trust has funds available for the
payment of distributions in the property account held by its property trustee.
Such trust's funds available for distribution to the holders of its trust
securities will be limited to payments received from us on the corresponding
junior subordinated debt securities.
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We have guaranteed the payment of distributions out of monies held by the trusts
to the extent set forth under "DESCRIPTION OF THE GUARANTEES."
Distributions on a particular trust's preferred securities will be payable
to the holders named on its securities register at the close of business on the
relevant record dates, which, as long as those trust preferred securities remain
in global form, will be one business day prior to the relevant payment dates.
Such distributions will be paid through the property trustee for such trust, who
will hold amounts received in respect of the corresponding junior subordinated
debt securities in the property account for the benefit of the holders of its
trust securities. In the event that trust preferred securities do not continue
to remain in global form, the relevant record dates will conform to the rules of
any securities exchange on which those 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 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 such payment date. (See
section 7.2 of the amended trust agreement.)
MANDATORY REDEMPTION OF TRUST PREFERRED SECURITIES
The trust preferred securities of a particular trust will have no stated
maturity date, but will be redeemed upon the maturity of the related junior
subordinated debt securities held by such trust or to the extent such junior
subordinated debt securities are redeemed prior to maturity. The junior
subordinated debt securities 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 below under "--SPECIAL EVENT REDEMPTION."
Upon the repayment or redemption of the junior subordinated debt securities
held by a particular trust, the proceeds of their repayment or redemption will
simultaneously be applied to redeem all the outstanding trust securities of such
trust at the redemption price. Upon the redemption of the junior subordinated
debt securities held by a particular trust, 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 the trust securities of such trust
having a total liquidation amount equal to the total principal amount of such
junior subordinated debt securities so redeemed at the redemption price;
provided, that holders of such 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, such trust
securities will be redeemed proportionately. (See sections 7.3 and 7.4 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 of a particular trust
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
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- 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 of such trust are issued and sold, there is more than an
insubstantial risk that:
- such 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
debt securities held by such trust,
- interest payable to such trust on such junior subordinated debt securities
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
- such 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 of a
particular trust 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 of 1940 or regulations thereunder on or after the date
the trust preferred securities of such trust are issued and sold, there is more
than an insubstantial risk that such trust is, or will be considered to be, an
investment company and be required to be registered under the Investment Company
Act.
REDEMPTION PROCEDURES
Neither trust may redeem fewer than all of its outstanding trust securities
unless all accrued and unpaid distributions have been paid on all of its trust
securities for all distribution periods terminating on or before the date of
redemption. In the event that fewer than all of its outstanding trust securities
are to be redeemed, such trust securities will be redeemed proportionately.
If either trust gives a notice of redemption in respect of its trust
preferred securities represented in global form (which notice will be
irrevocable), then, by 2:00 p.m., New York City time, on the redemption date,
and so long as we have paid to the applicable property trustee a sufficient
amount of cash in connection with the related redemption or maturity of the
junior subordinated debt securities held by such trust, the applicable property
trustee will irrevocably deposit with the depositary or its nominee 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 such trust's preferred securities. If either trust gives a notice of
redemption in respect of its trust securities not represented in global form,
and so long as we have paid to the applicable property trustee a sufficient
amount of cash in connection with the related redemption or maturity of the
junior subordinated debt securities held by such trust, the paying agent will
pay the applicable redemption price to the holders of such trust's preferred
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 or payment, 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
applicable 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,
30
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. (See section 7.4 of the
amended trust agreement.)
DISTRIBUTION OF THE JUNIOR SUBORDINATED DEBT SECURITIES
We will have the right at any time to dissolve either trust and, after
satisfaction of the liabilities of creditors of that trust to be dissolved as
provided by applicable law, to cause the junior subordinated debt securities
held by such trust to be distributed to the holders of the trust preferred
securities of such trust in a total stated principal amount equal to the total
stated liquidation amount of such trust preferred securities then outstanding
plus accumulated and unpaid distributions. Prior to any such dissolution, we
will obtain any required regulatory approvals. The right to dissolve the trusts
and distribute the junior subordinated debt securities held by such trusts will
be conditioned on our receipt of an opinion rendered by an independent tax
counsel that such distribution would not result in the recognition of gain or
loss for Federal income tax purposes by the applicable holders. (See sections
8.1 and 8.2 of the amended trust agreement.)
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
The amended trust agreement for a particular trust will state that such
trust will be dissolved:
- upon our bankruptcy;
- upon the filing of a certificate of dissolution or its equivalent with
respect to us;
- after obtaining the consent of at least a majority entitled to receive the
liquidation amount of such trust's 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 junior subordinated debt securities held by
such trust directly to the holders of its trust securities;
- upon the redemption of all of the trust securities of such trust; or
- upon entry of a court order for the dissolution of us or such trust. (See
section 8.1 of the amended trust agreement.)
In the event of a dissolution, after such trust pays all amounts owed to its
creditors, the holders of its trust preferred securities will be entitled to
receive:
- cash equal to the total liquidation amount of each such related trust
preferred security specified in an accompanying prospectus supplement,
plus accumulated and unpaid distributions to the date of payment, or
- junior subordinated debt securities in a total principal amount equal to
the total liquidation amount of such trust preferred securities.
If such trust cannot pay the full amount due on its trust securities because
insufficient assets are available for payment, then the amounts payable by such
trust on its trust securities will be paid proportionately. However, if an event
of default under the amended trust agreement relating to such trust occurs, the
total amounts due on such trust's preferred securities will be paid before any
distribution on such trust's common securities. Under certain circumstances
involving the dissolution of such trust, subject to obtaining any required
regulatory approval, junior subordinated debt securities will be distributed to
the holders of the trust securities in liquidation of such trust. (See
section 8.2 of the amended trust agreement.)
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TRUST ENFORCEMENT EVENTS
An event of default under the subordinated indenture relating to the junior
subordinated debt securities held by a particular trust will be an event of
default under the amended trust agreement for such trust (a Trust Enforcement
Event). (See "DESCRIPTION OF JUNIOR SUBORDINATED DEBT SECURITIES--JUNIOR
SUBORDINATED DEBT SECURITY EVENTS OF DEFAULT.")
In addition, the voluntary or involuntary dissolution, winding up or
termination of a particular trust is also a Trust Enforcement Event, except in
connection with:
- the distribution of the junior subordinated debt securities to holders of
the trust securities of such trust,
- the redemption of all of the trust securities of such trust, and
- mergers, consolidations or amalgamations permitted by the amended trust
agreement relating to such trust.
Under the amended trust agreement relating to a particular trust, the holder
of such trust's common securities will be deemed to have waived any Trust
Enforcement Event with respect to such trust's common securities until all Trust
Enforcement Events with respect to such trust's preferred securities have been
cured, waived or otherwise eliminated. Until all Trust Enforcement Events with
respect to such trust's 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 such trust's preferred securities and only those
holders will have the right to direct such property trustee with respect to
certain matters under the applicable amended trust agreement and the
subordinated indenture. In the event that any Trust Enforcement Event with
respect to such trust's preferred securities is waived by the holders of such
preferred securities as provided in the applicable amended trust agreement,
under that amended trust agreement the holders of such trust's common securities
have agreed that the waiver also constitutes a waiver of the Trust Enforcement
Event with respect to such 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 of such trust. (See section 2.6 of the amended trust
agreement.)
We and the administrative trustees must file annually with the applicable
property trustee a certificate evidencing compliance with all the applicable
conditions and covenants under the applicable amended trust agreement.
Upon the occurrence of a Trust Enforcement Event the property trustee of a
particular trust, as the sole holder of the junior subordinated debt securities,
will have the right under the subordinated indenture to declare the principal
of, interest and premium, if any, on the junior subordinated debt securities
held by such trust to be immediately due and payable.
If the property trustee of a particular trust fails to enforce its rights
under the applicable amended trust agreement or the subordinated indenture to
the fullest extent permitted by law and subject to the terms of the applicable
amended trust agreement and the subordinated indenture, any holder of trust
preferred securities of such trust may sue us, or seek other remedies, to
enforce such property trustee's rights under the applicable amended trust
agreement or the subordinated indenture without first instituting a legal
proceeding against such property trustee or any other person. If a Trust
Enforcement Event occurs and is continuing as a result of our failure to pay,
when applicable, principal of or interest or premium, if any, on the junior
subordinated debt securities held by a particular trust, then a holder of such
trust's preferred securities may directly sue us or seek other remedies, to
collect its proportionate share of payments owed. (See "RELATIONSHIP AMONG THE
TRUST PREFERRED SECURITIES, THE GUARANTEES AND THE JUNIOR SUBORDINATED DEBT
SECURITIES HELD BY THE TRUSTS.")
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REMOVAL AND REPLACEMENT OF TRUSTEES
Generally, the holders of trust common securities of a particular trust have
the right to remove or replace the trustees of such trust, except that while an
event of default in respect of the junior subordinated debt securities held by
such trust has occurred and is continuing, the holders of a majority of the
liquidation amount of all outstanding trust preferred securities of such trust
will have this right. However, in the case of administrative trustees, the
holders of a majority of the liquidation amount of trust common securities may
still appoint or remove these trustees at a meeting or by written consent. The
resignation or removal of the property trustee or the Delaware trustee and the
appointment of a successor trustee will be effective only on the acceptance of
appointment by such successor trustee in accordance with the provisions of the
applicable amended trust agreement. (See section 6.6 of the amended trust
agreement.)
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS OF THE TRUST
Neither trust may 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. A particular 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 such 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 such trust, as the holder of the
junior subordinated debt securities;
- the trust preferred securities of such trust are listed, or any successor
securities will be listed, upon notice of issuance, on any national
securities exchange or the same securities exchange or other organization
that such trust's preferred securities are then listed;
- the Merger Event does not cause the trust preferred securities or
successor securities of such trust 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 preferred securities or successor
securities of such trust in any material respect;
- the successor entity has a purpose identical to that of such trust;
- prior to the Merger Event, we have received an opinion of counsel stating
that:
- the Merger Event does not adversely affect the rights of the holders of
the trust preferred securities or any successor securities of such
trust in any material respect, and
- following the Merger Event, neither such trust nor the successor entity
will be required to register as an investment company under the
Investment Company Act;
- we own all of the trust common securities and guarantee the obligations of
the successor entity under the successor securities at least to the same
extent provided by the guarantee; and
- the successor entity expressly assumes all of the obligations of such
trust owed to the trustee of such trust.
In addition, unless all of the holders of the trust preferred securities and
trust common securities of a particular trust approve otherwise, such trust will
not consolidate, amalgamate, merge with or into,
33
or be replaced by any other entity or permit any other entity to consolidate,
amalgamate, merge with or into, or replace it, if, in the opinion of a
nationally recognized tax counsel experienced in such matters, the transaction
would cause such trust or the successor entity to be classified other than as a
grantor trust for U.S. Federal income tax purposes. (See section 3.15 of the
amended trust agreement.)
VOTING RIGHTS; AMENDMENT OF TRUST AGREEMENT
The holders of trust preferred securities have no voting rights except as
discussed under "--MERGERS, CONSOLIDATIONS OR AMALGAMATIONS OF THE TRUST" and
"DESCRIPTION OF THE GUARANTEES--AMENDMENTS," and as otherwise required by law
and the applicable amended trust agreement.
The amended trust agreement relating to a particular trust may be amended if
approved by us and a majority of the administrative trustees and the property
trustee of such 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 of such trust, whether by way of amendment
to the applicable amended trust agreement or otherwise, or
- the dissolution, winding-up or termination of such trust other than under
the terms of its amended trust agreement,
then the holders of the corresponding 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 related 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 applicable property
trustee; or
- cause the related trust to be deemed to be an investment company which is
required to be registered under the Investment Company Act. (See
section 11.1 of the amended trust agreement.)
The holders of a majority of the total liquidation amount of the trust
preferred securities of a particular trust have the right to:
- direct the time, method and place of conducting any proceeding for any
remedy available to the property trustee for such trust; or
- direct the exercise of any power conferred upon such property trustee
under the applicable amended trust agreement, including the right to
direct such property trustee, as the holder of the junior subordinated
debt securities, to:
- exercise the remedies available under the subordinated indenture with
respect to the junior subordinated debt securities held by such trust;
- consent to any amendment of the subordinated indenture with respect to
the junior subordinated debt securities held by such trust or of such
securities where consent is required;
- waive any event of default under the subordinated indenture that is
waivable; or
- cancel an acceleration of the principal of the junior subordinated debt
securities held by such trust.
In addition, before taking any of the foregoing actions, such property
trustee must obtain an opinion of counsel stating that, as a result of that
action, such trust will continue to be classified as a grantor trust for U.S.
Federal income tax purposes. (See section 7.5 of the amended trust agreement.)
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If a vote by the holders of trust preferred securities of such trust is
taken or a consent is obtained, any trust preferred securities of such trust
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 of such trust; and
- any trust preferred securities of such trust 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. (See section 7.5 of the
amended trust agreement.)
CONCERNING THE PROPERTY TRUSTEE
The Chase Manhattan Bank is the property trustee and the guarantee trustee.
The Chase Manhattan Bank is also the trustee under the senior indenture and the
subordinated indenture. The Chase Manhattan Bank also serves as the trustee
under the first mortgage bond indenture with respect to the first mortgage bonds
issued by our subsidiary, NYSEG. We maintain other banking relationships in the
ordinary course of business with the property trustee and its affiliates.
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
applicable 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 of a trust will not be required to
offer such an indemnity where such holders, by exercising their voting rights,
direct the property trustee to take any action following a Trust Enforcement
Event. (See sections 3.9 and 3.10 of the amended trust agreement.)
CONCERNING THE DELAWARE TRUSTEE
Chase Manhattan Bank USA, National Association, will serve as trustee of
each 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 "--CONCERNING THE PROPERTY TRUSTEE."
CONCERNING THE ADMINISTRATIVE TRUSTEES
The administrative trustees are authorized and directed to conduct the
affairs of and to operate each of the trusts in a way that:
- will not cause the trusts to be deemed to be an investment company
required to be registered under the Investment Company Act;
- will cause the trusts to be classified as grantor trusts for U.S. Federal
income tax purposes; and
- will cause the junior subordinated debt securities that each trust 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 applicable certificate of
trust or amended trust agreement, that we and the administrative trustees
determine to be necessary or desirable for those purposes. (See section 3.6 of
the amended trust agreement.)
35
DESCRIPTION OF THE GUARANTEES
We will execute the guarantees 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 each guarantee. The guarantee trustee will hold each
guarantee for the benefit of the holders of the trust preferred securities to
which it relates. The following description of the guarantee is only a summary.
The form of guarantees is filed as an exhibit to the registration statement, of
which this prospectus forms a part, and is incorporated by reference.
GENERAL
We will irrevocably and unconditionally agree under each guarantee to pay on
a subordinated basis the guarantee payments that are defined below, to the
extent specified in that guarantee, to the holders of the trust preferred
securities to which the guarantee relates, to the extent that the guarantee
payments are not paid by or on behalf of the related trust. We are required to
pay the guarantee payments to the extent specified in the related guarantee
regardless of any defense, right of set-off or counterclaim that we may have or
may assert against any person.
The following payments and distributions on the trust preferred securities
of a particular trust are guarantee payments:
- any accumulated and unpaid distributions required to be paid on the trust
preferred securities, but only to the extent that the applicable trust has
funds legally and immediately available for those distributions;
- the redemption price for any trust preferred securities, including all
accumulated and unpaid distributions to the redemption date, but only to
the extent that the applicable trust has funds legally and immediately
available for the payment; and
- upon a dissolution, winding-up or termination of the applicable trust,
other than in connection with the distribution of junior subordinated debt
securities to the holders of trust securities of such trust or the
redemption of all the trust preferred securities of such trust, the lesser
of:
- the sum of the liquidation amount and all accumulated and unpaid
distributions on the trust preferred securities of such trust to the
payment date, to the extent that such trust has funds legally and
immediately available for the payment, and
- the amount of assets of such trust remaining available for distribution to
holders of the trust preferred securities of such trust in liquidation of
such trust.
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 applicable trust to make the payment to those holders. (See
section 5.1 of the guarantee.)
Each guarantee will be a full and unconditional guarantee, subject to
certain subordination provisions, of the guarantee payments with respect to the
related trust preferred securities from the time of issuance of 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
applicable 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 debt
securities that the property trustee holds under the applicable trust, such
trust will not make the related payments on its trust preferred securities.
36
SUBORDINATION
Our obligations under the guarantees 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 debt securities that we may
issue and similar guarantees; and
- senior to our common stock.
We have common stock outstanding that will rank junior to the guarantees. We
do not have junior subordinated debt securities outstanding.
Each guarantee will be a guarantee of payment and not of collection. This
means that the guaranteed party may institute a legal proceeding directly
against us, as guarantor, to enforce its rights under the guarantee without
first instituting a legal proceeding against any other person or entity. (See
sections 5.4 and 5.5 of the guarantee.)
The terms of the trust preferred securities will provide that each holder of
the trust preferred securities, by accepting those trust preferred securities,
agrees to the subordination provisions and other terms of the related guarantee.
AMENDMENTS
We may amend each guarantee without the consent of any holder of the trust
preferred securities of the applicable trust 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 that
guarantee relates. (See section 9.2 of the guarantee.)
TERMINATION
Each guarantee will terminate and be of no further effect when:
- the redemption price of the trust preferred securities of the trust to
which the guarantee relates is fully paid;
- we distribute the related junior subordinated debt securities to the
holders of those trust preferred securities; or
- the amounts payable upon liquidation of the related trust are fully paid.
(See section 7.1 of the guarantee.)
Each guarantee will remain in effect or will be reinstated if at any time
any holder of the related trust preferred securities must restore payment of any
sums paid to that holder with respect to those trust preferred securities or
under that guarantee.
MATERIAL COVENANTS
We will covenant that, so long as any trust preferred securities remain
outstanding, if there is an event of default under any guarantee or, the
subordinated indenture, or if we give notice of our election to extend the
interest payment period on the junior subordinated debt securities:
- we will not make distributions related to our debt securities that rank
equally with or junior to the junior subordinated debt securities,
including any payment of interest, principal or premium, or repayments,
repurchases or redemptions; and
37
- 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 shareholders' rights
plan;
- payments to a trust holding securities of the same series under a
guarantee; and
- purchases of our common stock in connection with the issuance of our
common stock or rights under any benefit plan or other similar arrangement
with or for the benefit of employees, officers or directors or our
dividend reinvestment plan. (See 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. Each
trust, as a holder of a guarantee and the junior subordinated debt securities,
will generally have a junior position to claims of creditors of our
subsidiaries, including trade creditors, debtholders, secured creditors, taxing
authorities and any guarantee holders.
EVENTS OF DEFAULT
An event of default will occur under a guarantee if we fail to perform any
of our payment obligations under such guarantee. The holders of a majority in
liquidation amount 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
those trust preferred securities of that series. The guarantee trustee is
entitled to enforce the guarantee for the benefit of the holders of the
applicable trust preferred securities of a series if an event of default occurs
under the related guarantee. (See sections 2.6 and 3.1 of the guarantee.)
The holders of a majority of the trust preferred securities to which a
guarantee relates have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the guarantee trustee with
respect to that guarantee or to direct the exercise of any trust or power that
the guarantee trustee holds under that guarantee. If the guarantee trustee fails
to enforce the guarantee, any holder of the related trust preferred securities
may institute a legal proceeding directly against us to enforce the guarantee
trustee's rights under the guarantee without first instituting a legal
proceeding against the applicable trust, guarantee trustee or any other person
or entity. (See 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.
The Chase Manhattan Bank also serves as the trustee under the first mortgage
bond indenture with respect to the first mortgage bonds issued by our
subsidiary, NYSEG. We maintain other banking relationships in the ordinary
course of business with the guarantee trustee and its affiliates.
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. 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
38
indemnity to the guarantee trustee against the costs, expenses and liabilities
which it might incur as a result. (See sections 3.1 and 3.2 of the guarantee.)
GOVERNING LAW
Each guarantee will be governed by and construed in accordance with the laws
of the State of New York.
AGREEMENT AS TO EXPENSES AND LIABILITIES
We will enter into an agreement as to expenses and liabilities as required
under the applicable amended trust agreement. Each agreement as to expenses and
liabilities will provide that we will, with certain exceptions, irrevocably and
unconditionally guarantee the full payment of any indebtedness, expenses or
liabilities of the trusts to each person or entity to whom the trusts become
indebted or liable. The exceptions are the obligations of the trusts to pay to
the holders of the related trust securities or other similar interests in that
trust the amounts due to the holders under the terms of those trust securities
or those similar interests.
RELATIONSHIP AMONG THE TRUST PREFERRED SECURITIES, THE GUARANTEES AND THE JUNIOR
SUBORDINATED DEBT SECURITIES HELD BY THE TRUSTS
We will guarantee payments of distributions and redemption and liquidation
payments due on the trust preferred securities of a trust, to the extent that
trust has funds available for the payments, to the extent described under
"DESCRIPTION OF THE GUARANTEES." No single document executed by us in connection
with the issuance of those trust preferred securities will provide for our full,
irrevocable and unconditional guarantee of those trust preferred securities. It
is only the combined operation of our obligations under the applicable
guarantee, the applicable amended trust agreement and the subordinated indenture
that has the effect of providing a full, irrevocable and unconditional guarantee
of that trust's obligations under those trust preferred securities.
As long as we make payments of interest and other payments when due on the
junior subordinated debt securities held by a 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 that trust, primarily
because:
- the total principal amount of the junior subordinated debt securities will
be equal to the sum of the total liquidation amount of those trust
preferred securities;
- the interest rate and interest and other payment dates on the junior
subordinated debt securities will match the distribution rate and
distribution and other payment dates for those trust preferred securities;
- we will pay for any and all costs, expenses and liabilities of a trust
except its obligations under its trust securities; and
- the applicable amended trust agreement will provide that that trust will
not engage in any activity that is not consistent with the limited
purposes of that trust.
If and to the extent that we do not make payments on the junior subordinated
debt securities held by a trust, that 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 those
trust preferred securities under the applicable amended trust agreement to the
extent we make a payment to you in any such legal action.
39
ACCOUNTING TREATMENT
Each trust will be treated as a subsidiary of ours for financial reporting
purposes. Accordingly, our consolidated financial statements will include the
accounts of each trust. The trust preferred securities for each trust, 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 applicable
guarantee and the junior subordinated debt securities will be included in the
notes to the consolidated financial statements. We will record distributions
that each trust pays on its trust preferred securities as an expense in our
consolidated statement of income.
PLAN OF DISTRIBUTION
We and the trusts may use the following methods to sell the securities:
- through negotiation with one or more underwriters;
- through one or more agents or dealers designated from time to time;
- directly to purchasers; or
- through any combination of the above.
The distribution of the securities may be effected from time to time in one
or more transactions at a fixed price or prices which may be changed, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. A prospectus supplement or a supplement
thereto will describe the method of distribution of any series of securities.
If we, and the trusts, if applicable, use any underwriters in the sale of
securities, we and the trusts, if applicable, will enter into an underwriting
agreement, distribution agreement or similar agreement with such underwriters
prior to the time of sale, and the names of the underwriters used in the
transaction will be set forth in a prospectus supplement or a supplement thereto
relating to such sale. If an underwriting agreement is executed, the securities
will be acquired by the underwriters for their own account and may be resold
from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of the sale. Unless we otherwise indicate in the prospectus
supplement, the underwriting or purchase agreement will provide that the
underwriter or underwriters are obligated to purchase all of the securities
offered in the prospectus supplement if any are purchased.
If any securities are sold through agents designated by us from time to
time, the prospectus supplement or a supplement thereto will name any such
agent, set forth any commissions payable by us to any such agent and the
obligations of such agent with respect to the securities. Unless otherwise
indicated in the prospectus supplement or a supplement thereto, any such agent
will be acting on a best efforts basis for the period of its appointment.
Certain persons participating in an offering of the securities may engage in
transactions that stabilize, maintain or otherwise affect the price of the
securities. Specifically, the underwriters, if any, may overallot in connection
with the offering, and may bid for, and purchase, the securities in the open
market.
No series of securities, when first issued, will have an established trading
market. Any underwriters or agents to or through whom securities are sold by us
for public offering and sale may make a market in such securities, but
underwriters and agents will not be obligated to do so and may discontinue any
market making at any time without notice. We cannot assure you as to the
liquidity of the trading market for any securities.
40
In connection with the sale of the securities, any purchasers, underwriters
or agents may receive compensation from us or from purchasers in the form of
concessions or commissions. The underwriters will be, and any agents and any
dealers participating in the distribution of the securities may be, deemed to be
underwriters within the meaning of the Securities Act of 1933. The agreement
between us, and the trusts, if applicable, and any purchasers, underwriters or
agents will contain reciprocal covenants of indemnity, and will provide for
contribution by us in respect of our indemnity obligations, between us, and the
trusts, if applicable, and the purchasers, underwriters, or agents against
certain liabilities, including liabilities under the Securities Act of 1933.
Underwriters, dealers and agents may engage in transactions with, or perform
services for, us and our affiliates in the ordinary course of business.
EXPERTS
The consolidated financial statements of Energy East incorporated in this
prospectus by reference to Energy East's Annual Report on Form 10-K for the year
ended December 31, 2000 have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on authority of that
firm as experts in auditing and accounting.
LEGAL MATTERS
The validity of the debt securities and certain other matters will be passed
upon for us by Huber Lawrence & Abell, New York, New York, and for any
underwriters, dealers or agents by Shearman & Sterling, New York, New York.
Certain matters relating to the formation of the trusts and issuance of the
trust preferred securities under Delaware law and the amended trust agreement
will be passed upon by Richards, Layton & Finger, P.A., special Delaware counsel
to the trusts and us. As of May 25, 2001, members of Huber Lawrence & Abell
owned 4,870 Energy East shares.
41
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NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION
OR TO REPRESENT ANYTHING NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS SUPPLEMENT AND THE ATTACHED PROSPECTUS. YOU MUST NOT RELY ON ANY
UNAUTHORIZED INFORMATION OR REPRESENTATIONS. THIS PROSPECTUS SUPPLEMENT, AND THE
ATTACHED PROSPECTUS, IS AN OFFER TO SELL ONLY THE NOTES OFFERED HEREBY, AND ONLY
UNDER CIRCUMSTANCES AND IN JURISDICTIONS WHERE IT IS LAWFUL TO DO SO. THE
INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND IN THE ATTACHED
PROSPECTUS IS CURRENT ONLY AS OF THEIR RESPECTIVE DATES.
------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
--------
Summary................................. S-2
Selected Financial Data and
Capitalization........................ S-4
Use of Proceeds......................... S-6
Pro Forma Financial Information......... S-6
Description of the Notes................ S-14
Underwriting............................ S-17
Legal Matters........................... S-18
PROSPECTUS
About This Prospectus................... 3
Where You Can Find More Information..... 3
Cautionary Statement Regarding Forward-
Looking Statements.................... 5
Energy East Corporation................. 6
Recent Developments..................... 7
The Trusts.............................. 7
Use of Proceeds......................... 8
Ratio of Earnings to Fixed Charges...... 8
Description of Securities............... 9
Description of Senior Debt
Securities.......................... 9
Description of Junior Subordinated
Debt Securities..................... 17
Description of Trust Preferred
Securities.......................... 27
Description of the Guarantees......... 36
Agreement as to Expenses and
Liabilities......................... 39
Relationship Among the Trust Preferred
Securities, the Guarantees and the
Junior Subordinated Debt Securities
held by the Trusts.................. 39
Accounting Treatment.................. 40
Plan of Distribution.................... 40
Experts................................. 41
Legal Matters........................... 41
$400,000,000
ENERGY EAST CORPORATION
% NOTES DUE , 2012
------------------------------
PROSPECTUS SUPPLEMENT
------------------------------
JOINT LEAD BOOK-RUNNING MANAGERS
JPMORGAN
MORGAN STANLEY
UBS WARBURG
---------------
BNY CAPITAL MARKETS, INC.
FLEET SECURITIES, INC.
GOLDMAN, SACHS & CO.
SALOMON SMITH BARNEY
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