As filed with the Securities and
Exchange Commission on December 5, 2001
Registration No. 333-74568
PROSPECTUS
DPL INC.
EXCHANGE OFFER
DPL INC. IS OFFERING TO ISSUE ITS
6 7/8% SENIOR NOTES DUE 2011
(REGISTERED)
IN EXCHANGE FOR ITS
6 7/8% SENIOR NOTES DUE 2011
(UNREGISTERED)
THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.
NEW YORK CITY TIME, FEBRUARY 4, 2002 UNLESS EXTENDED
o The 6 7/8% Senior Notes Due 2011, referred to in this prospectus as the
exchange notes, will
o bear interest at 6 7/8% per annum,
o mature on September 1, 2011, and
o be redeemable, at the option of DPL Inc., as described in this
prospectus.
These terms are the same as the terms of the 6 7/8% Senior Notes Due 2011
for which we are making the exchange offer described in this prospectus and
which are referred to in this prospectus as the old notes. The exchange
notes will not be subject to any restrictions on transfer, except in
certain circumstances relating to broker-dealers described in this
prospectus.
o DPL Inc. will accept all old notes that noteholders properly tender and do
not withdraw before the expiration of the exchange offer.
o You will not recognize any income, gain or loss for U.S. federal income tax
purposes as a result of the exchange.
o Like the old notes, the exchange notes will be unsecured.
o The exchange offer is not conditioned on the tender of any minimum
principal amount of old notes.
o There will likely be no public market for the exchange notes.
This prospectus and the letter of transmittal, which together constitute the
exchange offer, are first being mailed to all holders of the old notes on or
about December 20, 2001.
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved of these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
December 14, 2001
This prospectus incorporates by reference important business and financial
information about DPL Inc. that is not included in or delivered with this
prospectus. See "Where You Can Find More Information". You may obtain copies of
documents containing such information from us, without charge, by either calling
or writing to us at:
DPL Inc.
Financial Activities
Box 8825
Dayton, Ohio 45401
(937) 259-7150
In order to obtain timely delivery, you must request documents from us no later
than January 30, 2002, which is five days before the expiration date of the
exchange offer on February 4, 2002.
TABLE OF CONTENTS
PAGE PAGE
---- ----
FORWARD-LOOKING STATEMENTS..........................3 THE EXCHANGE OFFER.................................10
SUMMARY INFORMATION.................................4 DESCRIPTION OF THE EXCHANGE NOTES..................16
DPL INC.............................................8 ERISA MATTERS......................................31
RATIOS OF EARNINGS TO FIXED CHARGES.................8 PLAN OF DISTRIBUTION...............................32
CAPITALIZATION......................................9 LEGAL MATTERS......................................33
WHERE YOU CAN FIND MORE INFORMATION.................9 EXPERTS............................................33
USE OF PROCEEDS....................................10
2
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS OR IN THE LETTER OF TRANSMITTAL IN CONNECTION WITH
THE EXCHANGE OFFER.
WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION OTHER THAN THIS
PROSPECTUS. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED OR INCORPORATED
IN THIS PROSPECTUS IS ACCURATE AS OF ANY DATE AFTER THE DATE OF THIS PROSPECTUS.
THIS PROSPECTUS IS NOT AN OFFER TO EXCHANGE THE OLD NOTES FOR THE EXCHANGE NOTES
AND IT IS NOT SOLICITING AN OFFER TO EXCHANGE THE OLD NOTES IN ANY JURISDICTION
IN WHICH THE EXCHANGE OFFER IS NOT PERMITTED.
FORWARD-LOOKING STATEMENTS
We caution you that this prospectus and the periodic reports and other
documents that are incorporated by reference in this prospectus contain
forward-looking statements. They are statements about future performance or
results (such as statements including, but not limited to, the terms
"potential," "estimate," "believe," "expect" and "anticipate" and similar words)
when we discuss our financial condition, results of operations and business.
Investors are cautioned that actual outcomes and results may vary materially
from those projected due to various factors beyond our control, including
abnormal weather, unusual maintenance or repair requirements, changes in fuel
costs, increased competition, regulatory changes and decisions, changes in
accounting rules, litigation affecting us and our subsidiaries (including with
respect to environmental matters) and adverse economic or capital markets
conditions.
3
SUMMARY INFORMATION
The following summary contains basic information about this exchange offer.
It may not contain all the information that is important to you in making your
investment decision. Therefore, you should read the entire document carefully
before deciding to exchange the old notes.
The "Description of Exchange Notes" section of this prospectus contains
more detailed information regarding the terms and conditions of the exchange
notes. Unless the context indicates otherwise, the words "we," "our," "ours,"
"us" and "DPL" refer to DPL Inc. and its consolidated subsidiaries.
SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
------------------------------------------
On August 31, 2001, we completed the private offering of the old notes. We
and the initial purchasers executed a registration rights agreement in the
private offering of the old notes in which we agreed to deliver to you this
prospectus and agreed to:
- file an exchange offer registration statement with the Commission within
120 days after the date of issuance of the old notes;
- use our reasonable best efforts to have the exchange offer registration
statement declared effective by the Commission within 180 days of the date of
issuance of the old notes; and
- mail to each holders of the old notes a copy of the exchange offer
prospectus and consummate the exchange offer within 30 days after the date on
which the holders are mailed a copy of the exchange offer prospectus.
You are entitled to exchange your old notes for exchange notes which are
identical in all material respects to the old notes except that the exchange
notes have been registered under the Securities Act.
THE EXCHANGE OFFER
EXCHANGE NOTES............... $400,000,000 principal amount of 6 7/8% Senior
Notes due 2011.
THE EXCHANGE OFFER........... We are offering to issue the exchange notes in
exchange for a like principal amount of the
outstanding 6 7/8% Senior Notes due 2011,
issued by us in a private placement on August
31, 2001. We are offering to issue the
exchange notes to satisfy our obligations
contained in the registration rights agreement
entered into when we sold the old notes in
transactions exempt from registration under
the Securities Act. The terms of the exchange
notes will be substantially identical to the
terms of the old notes, except that the
exchange notes will be registered and the
transfer restrictions, registration rights and
provisions for additional interest relating to
the old notes will not apply to the exchange
notes.
RESALES OF EXCHANGE NOTES.... Based on Commission no-action letters, we
believe that after the exchange offer you may
offer and sell the exchange notes without
registration under the Securities Act so long
as:
- You acquired the exchange notes in the
ordinary course of business.
- When the exchange offer begins you do
not have an arrangement with another
person to participate in a distribution
of the exchange notes.
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- You are not engaged in a distribution
of, nor do you intend to distribute, the
exchange notes.
When you tender the outstanding notes, we will
ask you to represent to us that:
- You are not an affiliate of DPL.
- You will acquire the exchange notes in
the ordinary course of business.
- When the exchange offer begins you are
not engaged in, nor do you have plans
with another person to be engaged in, a
distribution of the exchange notes.
If you are unable to make these
representations, you will be required to
comply with the registration and prospectus
delivery requirements under the Securities Act
in connection with a resale transaction.
If you are a broker-dealer and receive
exchange notes for your own account, you must
acknowledge that you will deliver a prospectus
if you resell the exchange notes. By
acknowledging your intent and delivering a
prospectus you will not be deemed to admit
that you are an "underwriter" under the
Securities Act. You may use this prospectus as
it is amended from time to time when you
resell exchange notes which were acquired from
market-making or trading activities. For a
year after the expiration date we will make
this prospectus available to any broker-dealer
in connection with such a resale. See "Plan of
Distribution."
CONDITIONS TO THE
EXCHANGE OFFER............... The exchange offer is subject to conditions,
some of which we may waive. These conditions
are more fully described later in this
prospectus under "The Exchange Offer-Certain
Conditions to the Exchange Offer."
PROCEDURES FOR
TENDERING OLD NOTES.......... If you wish to participate in the exchange
offer, you must complete, sign and date the
accompanying letter of transmittal or a
facsimile copy and mail it or deliver it to
the exchange agent along with any necessary
documentation. Instructions and the address of
the exchange agent are on the letter of
transmittal and in this prospectus. See "The
Exchange Offer - Procedures for Tendering Old
Notes- Exchange Agent." You may also effect a
tender of outstanding notes pursuant to the
procedures for book-entry transfer as
described in this prospectus. See "Exchange
Offer - Procedures for Tendering Old Notes."
STATED MATURITY DATE......... The exchange notes will mature on September 1,
2011
INTEREST PAYMENT DATES....... Interest on the exchange notes is payable on
March 1 and September 1 of each year,
commencing March 1, 2002.
INTEREST ACCRUAL............. Interest on the exchange notes will accrue
from the last interest payment date on which
we paid interest on the old notes.
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ABSENCE OF PUBLIC
MARKET FOR THE
EXCHANGE NOTES We do not intend to apply for a listing of the
exchange notes on any securities exchange. We
do not know if an active public market for the
exchange notes will develop or, if developed,
will continue. If an active public market does
not develop or is not maintained, the market
price and liquidity of the exchange notes may
be adversely affected. We cannot make any
assurances regarding the liquidity of the
market for the exchange notes, the ability of
holders to sell their exchange notes or the
price at which holders may sell their exchange
notes.
OPTIONAL REDEMPTION.......... We may redeem the exchange notes, in whole or
in part, at any time prior to maturity at a
redemption price equal to the Make-Whole
Amount plus accrued interest to the redemption
date. The Make-Whole Amount equals the greater
of (i) 100% of the principal amount of the
notes being redeemed or (ii) as determined by
a Quotation Agent as of the redemption date,
the sum of the present value of the scheduled
payments of principal and interest on such
notes from the redemption date to September 1,
2011 discounted to the redemption date on a
semi-annual basis (assuming a 360-day year
consisting of twelve 30-day months) at a
discount rate equal to the Treasury Rate plus
25 basis points. See "Description of the
Exchange Notes --Optional Redemption."
PRIORITY..................... The exchange notes will be unsecured
obligations and, so long as they are
unsecured, will rank equally with all of our
other senior unsecured indebtedness. The
indenture under which we will issue the
exchange notes does not limit the amount of
debt we or any of our subsidiaries may incur.
Because we are a holding company that derives
substantially all of our income from our
operating subsidiaries, the exchange notes
will be effectively subordinated to debt and
preferred stock at the subsidiary level. See
"Description of the Exchange Notes --
General."
USE OF PROCEEDS.............. There will be no proceeds payable to us from
the issuance of the exchange notes pursuant to
the exchange offer.
FORM AND DENOMINATION........ The exchange notes will be issued in fully
registered form only in denominations of
$1,000 and integral multiples of $1,000 in
excess thereof.
LIMITATION ON LIENS.......... We may not grant a lien on the capital shares
of DP&L, our primary subsidiary, to secure our
indebtedness without similarly securing the
exchange notes, with certain exceptions. See
"Description of the Exchange Notes--Limitation
on Liens."
TENDERS, EXPIRATION
DATE, WITHDRAWAL............. The exchange offer will expire at 5:00 p.m.
New York City time on February 4, 2002, unless
it is extended. If you decide to exchange your
old notes for exchange notes, you must
acknowledge that you are not engaging in, and
do not intend to engage in, a distribution of
the exchange notes. If you decide to tender
your old notes pursuant to the exchange offer,
you may withdraw them at any time prior to
February 4, 2002. If we decide for any reason
not to accept any old notes for exchange, your
old notes will be returned to you at our
expense promptly after the expiration or
termination of the exchange offer.
6
FAILURE TO TENDER
OLD NOTES.................... If you do not tender your old notes or we do
not accept your tender because, among other
things, you invalidly tendered your old notes,
you will not be entitled to any further
registration rights under the registration
rights agreement, except under limited
circumstances. However, your old notes will
remain outstanding and entitled to the
benefits of the indenture.
MATERIAL UNITED STATES
TAX CONSEQUENCES............. Your exchange of old notes for exchange notes
pursuant to the exchange offer should not
result in any income, gain or loss to you for
United States federal income tax purposes. See
"Material United States Federal Income Tax
Considerations."
EXCHANGE AGENT............... Bank One Trust Company, National Association
is serving as exchange agent in connection
with the exchange offer. The address,
telephone number and facsimile number of the
exchange agent are set forth under "The
Exchange Offer -- Exchange Agent."
TRUSTEE, REGISTRAR
AND PAYING AGENT............. Bank One Trust Company, National Association.
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DPL INC.
DPL Inc. was organized in 1985 as a holding company and is a diversified
regional merchant energy company. Our principal subsidiary is The Dayton Power
and Light Company (also referred to in this prospectus by its acronym, DP&L), a
public utility incorporated under the laws of the State of Ohio in 1911. DP&L
sells electricity to residential, commercial and governmental customers in a
6,000 square mile area of West Central Ohio. Electricity for its 24 county
service area is generated at eight power plants and is distributed to 500,000
retail customers. Principal industries served include electrical machinery,
automotive and other transportation equipment, non-electrical machinery,
agriculture, paper, and rubber and plastic products. DP&L's sales reflect the
general economic conditions and seasonal weather patterns of the area.
DPL and its subsidiaries are exempt from registration with the
Securities and Exchange Commission under the Public Utility Holding Company Act
of 1935 because its utility business operates solely in the State of Ohio.
Our principal executive offices are located at Courthouse Plaza Southwest,
Dayton, Ohio 45402. Our telephone number is (937) 224-6000.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth our historical ratios of earnings to fixed
charges for the periods indicated.
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
2001 2000 2000 1999 1998 1997 1996
---- ---- ---- ---- ---- ---- ----
Ratios of Earnings
to Fixed Charges.... 3.24 2.06 2.95 4.00 4.33 4.32 4.10
For purposes of computing the foregoing ratios:
o Earnings consist of pre-tax income from continuing operations plus
fixed charges; and
o Fixed charges consist of interest on indebtedness, trust preferred
distributions by our subsidiary (including original issue discount
amortization) and the portion of rental payments on operating leases
estimated to represent an interest component.
We recognized original issue discount of $50 million in 2000 related to the
February 2000 issuance by our subsidiary, DPL Capital Trust I, of $550 million
trust preferred securities. Excluding this original issue discount amortization
and the $183 million pre-tax gain on the October 2000 sale of our natural gas
retail distribution business, the ratio of earnings to fixed charges for the
nine months ended September 30, 2000 and the year ended December 31, 2000 was
2.47 and 2.47, respectively.
8
CAPITALIZATION
The following table shows our consolidated capitalization at September 30,
2001. Our consolidated capitalization will not be affected by the exchange
offer.
SEPTEMBER 30, 2001
------------------
Long-Term Debt (excluding current portion)........... $2,150.9 65.1%
Company Obligated Mandatorily Redeemable
Trust Preferred Securities of Subsidiary
Holding Solely Parent Debentures................... 292.3 8.8%
Preferred Stock:
With Mandatory Redemption Provisions............ 0.1 ---
Without Mandatory Redemption Provisions......... 22.9 0.7%
Common Shareholders' Equity.......................... 838.1 25.4%
--------- -------
Total Capitalization............................ $3,304.3 100.0%
======== ======
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934, and in accordance therewith, we file annual, quarterly and current
reports, proxy statements and other information with the SEC. You may read and
copy any documents we file at the SEC's public reference room, 450 Fifth Street,
N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference room. Our SEC filings are also available to
the public on the SEC's web site at http://www.sec.gov and through the New York
Stock Exchange, 20 Broad Street, New York, New York 10005, on which our common
stock is listed.
We incorporate by reference into this prospectus the following documents
that we have filed with the SEC:
o Annual Report on Form 10-K for the fiscal year ended December 31,
2000;
o Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
2001; and
o Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
2001.
o Quarterly Report on Form 10-Q for the fiscal quarter ended September
30, 2001.
o Current Report on Form 8-K dated August 23, 2001.
o Current Report on Form 8-K dated August 31, 2001.
o Current Report on Form 8-K dated September 25, 2001.
In addition, all documents filed by us pursuant to Section 13, 14 or 15(d) of
the Exchange Act, subsequent to the date of this Prospectus and prior to the
termination of this offering, shall be deemed to be incorporated by reference in
this Prospectus and to be a part of this Prospectus from the date of filing of
such documents.
You may obtain copies of these documents from us, without charge, by
calling or writing to us at:
DPL Inc.
Financial Activities
Box 8825
Dayton, Ohio 45401
(937) 259-7150
9
USE OF PROCEEDS
We will not receive any proceeds from the issuance of the exchange notes in
exchange for the old notes tendered pursuant to the exchange offer. In
consideration for the issuance of the exchange notes as contemplated by this
prospectus, we will receive in exchange an identical principal amount of
outstanding notes, which have terms substantially identical to the exchange
notes. We will retire and cancel all of the outstanding notes surrendered in
exchange for the exchange notes, and such outstanding notes may not be reissued.
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER; TERMS OF THE EXCHANGE OFFER
We issued and sold the old notes on August 31, 2001 to the initial
purchasers in a private transaction not subject to the registration requirements
of the Securities Act. The initial purchasers then offered and sold the old
notes only
o to "Qualified Institutional Buyers" (as defined in Rule 144A under the
Securities Act) in reliance on the exemption from the registration
requirements of the Securities Act provided by Rule 144A;
o to a limited number of institutional "Accredited Investors" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)
that, prior to their purchase of old notes, executed and delivered to
the initial purchasers a letter containing certain representations and
agreements; and
o outside the United States to non-U.S. persons in offshore transactions
(as defined in Regulation S under the Securities Act) in compliance
with Regulation S under the Securities Act.
In connection with the sale of the old notes, we entered into a
registration rights agreement with the initial purchasers which obligated us to:
o file a registration statement with the Commission for an offer to
exchange the old notes for the exchange notes within 120 days of the
issuance of the old notes;
o use our reasonable best efforts to cause the registration statement to
be declared effective within 180 days after the issuance of the old
notes;
o promptly after the registration statement has been declared effective,
offer exchange notes in exchange for surrender of the old notes; and
o use our reasonable best efforts to keep the exchange offer open for at
least 30 days after the date notice of the exchange offer has been
mailed to the holders of the old notes.
The exchange notes have terms identical to the old notes, except that the
exchange notes do not have transfer restrictions or any terms relating to
registration rights and do not provide for the liquidated damages set forth in
the registration rights agreement payable by us in the event that we are unable
to fulfill certain of our obligations under the registration rights agreement. A
holder that tenders an old note pursuant to the exchange offer and does not
withdraw it will receive an exchange note in the same principal amount as the
tendered old note. Interest on each exchange note will accrue from the date of
the last interest payment on the old note tendered. If no interest has been paid
on the old notes, interest will accrue from the date of issuance of the old
notes.
PROCEDURES FOR TENDERING OLD NOTES
The tender to us of old notes by a holder as set forth below and the
acceptance of the old notes by us will constitute a binding agreement between
the tendering holder and us upon the terms and subject to the conditions set
forth in this prospectus and in the accompanying letter of transmittal. Except
as set forth below, a holder who wishes to tender old notes for exchange
pursuant to the exchange offer must transmit a properly completed and duly
10
executed letter of transmittal, including all other documents required by such
letter of transmittal, to Bank One Trust Company, National Association, who is
acting as our exchange agent, at the address set forth below under "Exchange
Agent" on or prior to the expiration date. In addition, on or prior to the
expiration date,
o certificates for such old notes must be received by the exchange
agent; or
o a timely confirmation of a book-entry transfer of these old notes, if
this procedure is available, into the exchange agent's account at DTC
pursuant to the procedure for book-entry transfer described below,
must be received by the exchange agent; or
o the holder must comply with the guaranteed delivery procedures
described below.
The method of delivery of old notes, letters of transmittal and all other
required documents is at the election and risk of the holders. If such delivery
is by mail, we recommend that you use registered mail, properly insured, with
return receipt requested. In all cases, sufficient time should be allowed to
assure timely delivery. No letters of transmittal or old notes should be sent to
DPL.
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the old notes surrendered for exchange
pursuant thereto are tendered:
o by a registered holder of the old notes who has not completed the box
entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on the letter of transmittal; or
o for the account of an eligible institution.
If signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, are required to be guaranteed, such guarantees must be by an
eligible institution, which is a firm that is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States. If old notes are registered in the name of a
person other than the person signing the letter of transmittal, the old notes
surrendered for exchange must be endorsed by, or be accompanied by a written
instrument or instruments of transfer or exchange, in satisfactory form as
determined by us in our sole discretion, duly executed by the registered holder
with the signature thereon guaranteed by an eligible institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of old notes tendered for exchange will be determined by
us in our sole discretion, and our determination will be final and binding on
all parties. We reserve the absolute right:
o to reject any and all tenders of any particular old notes not properly
tendered or to not accept any particular old notes which acceptance
might, in our judgment or the judgment of our counsel, be unlawful;
and
o to waive any defects or irregularities or conditions of the exchange
offer as to any particular old notes either before or after the
expiration date (including the right to waive the ineligibility of any
holder who seeks to tender old notes in the exchange offer).
Unless waived, any defects or irregularities in connection with the tender
of old notes for exchange must be cured within such reasonable period of time as
we determine. Neither we, the exchange agent nor any other person will be under
any duty to give notification of any defect or irregularity with respect to any
tender of old notes for exchange, nor will we or any of them incur any liability
for failure to give such notification.
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions set forth in this prospectus
and in the accompanying letter of transmittal, we will:
11
o accept for exchange old notes, which are properly tendered on or prior
to the expiration date and not withdrawn as permitted below; and
o use our reasonable best efforts to keep the exchange offer open for
not less than 30 days, or longer if required by applicable law, after
the date notice of the exchange offer is mailed to the holders of the
old notes.
The term "expiration date" means 5:00 p.m., New York City time, on February
4, 2002; provided, however, that if we, in our sole discretion, have extended
the period of time for which the exchange offer is open, the term "expiration
date" means the latest time and date to which the exchange offer is extended.
As of the date of this prospectus, $400,000,000 in aggregate principal
amount of the old notes were outstanding. The exchange offer is not conditioned
upon any minimum principal amount of old notes being tendered. This prospectus,
together with the letter of transmittal, is first being sent on or about the
date set forth on the cover page to all holders of old notes at the addresses
set forth in the security register maintained by the trustee.
We expressly reserve the right:
o at any time or from time to time, to extend the period of time during
which the exchange offer is open, and thereby delay acceptance of any
old notes; and
o to amend or terminate the exchange offer, and not to accept for
exchange any old notes not previously accepted for exchange, upon the
occurrence of any of the conditions of the exchange offer specified
below under "Certain Conditions to the Exchange Offer."
We will give written notice of any extension, amendment, non-acceptance or
termination to the holders of the old notes as promptly as practicable, such
notice in the case of any extension to be issued by means of a press release or
other public announcement no later than 5:00 p.m., New York City time, on the
previous expiration date. Without limiting the manner in which we may choose to
make any public announcement and subject to applicable law, we shall have no
obligation to publish, advertise or otherwise communicate any such public
announcement other than by issuing a release to the Dow Jones News Service.
Old notes that are not tendered for exchange or are tendered but not
accepted in connection with the exchange offer will remain outstanding and be
entitled to the benefits of the indenture, but will not be entitled to any
further registration rights under the registration rights agreement, except
under limited circumstances. We intend to conduct the exchange offer in
accordance with the applicable requirements of the Exchange Act and the relevant
rules and regulations of the SEC.
If the letter of transmittal is signed by a person or persons other than
the registered holder or holders of old notes, such old notes must be endorsed
or accompanied by appropriate powers of attorney, in either case signed exactly
as the name or names of the registered holder or holders that appear on the old
notes.
By executing, or otherwise becoming bound by, a letter of transmittal, each
holder of the old notes, other than certain specified holders, will represent
that:
o it is not our affiliate;
o any exchange notes to be received by it were acquired in the ordinary
course of its business; and
o it has no arrangement with any person to participate in the
distribution, within the meaning of the Securities Act, of the
exchange notes.
If the tendering holder is a broker-dealer that will receive exchange notes
for its own account in exchange for the old notes that were acquired as a result
of market-making activities or other trading activities, it will be required to
12
acknowledge that it will deliver a prospectus in connection with any resale of
such exchange notes. See "--Resale of the Exchange Notes."
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the exchange offer,
we will accept, promptly after the expiration date, all old notes properly
tendered and will issue exchange notes promptly after acceptance of the old
notes. See "Certain Conditions to the Exchange Offer" below. For purposes of the
exchange offer, we will be deemed to have accepted properly tendered old notes
for exchange if and when we have given oral (confirmed in writing) or written
notice thereof to the exchange agent.
In all cases, issuance of exchange notes for the old notes that are
accepted for exchange pursuant to the exchange offer will be made only after
timely receipt by the exchange agent of certificates for such old notes or a
timely book-entry confirmation of such old notes into the exchange agent's
account at DTC pursuant to the book-entry transfer procedures described below, a
properly completed and duly executed letter of transmittal and all other
required documents. If any tendered old notes are not accepted for any reason
set forth in the terms and conditions of the exchange offer or if certificates
representing old notes are submitted for a greater principal amount than the
holder desires to exchange, such unaccepted or non-exchanged old notes will be
returned without expense to the tendering holder thereof (or, in the case of old
notes tendered by book-entry transfer into the exchange agent's account at DTC
pursuant to the book-entry transfer procedures described below, such
non-exchanged old notes will be credited to an account maintained with DTC) as
promptly as practicable after the expiration or termination of the exchange
offer.
BOOK-ENTRY TRANSFER
Promptly after the date of this prospectus, the exchange agent will make a
request to establish an account with respect to the old notes at DTC for
purposes of the exchange offer. Any financial institution that is a participant
in DTC's systems may make book-entry delivery of old notes by causing DTC to
transfer such old notes into the exchange agent's account in accordance with
DTC's Automated Tender Offer Program ("ATOP"), procedures for transfer. However,
the exchange for the old notes so tendered will only be made after timely
confirmation of such book-entry transfer of old notes into the exchange agent's
account, and timely receipt by the exchange agent of an agent's message and any
other documents required by the letter of transmittal. The term "agent's
message" means a message, transmitted by DTC and received by the exchange agent
and forming a part of a book-entry confirmation, which states that DTC has
received an express acknowledgment from a participant tendering old notes that
are the subject of such book-entry confirmation, that such participant has
received and agrees to be bound by the terms of the letter of transmittal, and
that we may enforce such agreement against such participant.
Although delivery of old notes may be effected through book-entry transfer
into the exchange agent's account at DTC, the letter of transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees and any other required documents, must in any case be
delivered to and received by the exchange agent at its address set forth under
"--Exchange Agent" on or prior to the expiration date, or the guaranteed
delivery procedure set forth below must be complied with.
Delivery of documents to DTC in accordance with its procedures does not
constitute delivery to the exchange agent.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the old notes desires to tender such old notes
and (1) the old notes are not immediately available, (2) time will not permit
such holder's old notes or other required documents to reach the exchange agent
before the expiration date of the exchange offer, or (3) the procedure for
book-entry transfer cannot be completed on a timely basis, a tender may be
effected if:
o the tender is made through an eligible institution;
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o prior to the expiration date of the exchange offer, the exchange agent
receives from such eligible institution a properly completed and duly
executed letter of transmittal (or a facsimile letter of transmittal)
and notice of guaranteed delivery, substantially in the form provided
by us (by telegram, telex, facsimile transmission, mail or hand
delivery),
o setting forth the name and address of the holder of old notes and the
amount of old notes tendered, stating that the tender is being made
thereby and guaranteeing that within five New York Stock Exchange
trading days after the date of execution of the notice of guaranteed
delivery, the certificates of all physically tendered old notes, in
proper form for transfer, or a book-entry confirmation, as the case
may be, and any other documents required by the letter of transmittal
will be deposited by the eligible institution with the exchange agent;
and
o the certificates for all physically tendered old notes, in proper form
for transfer, or a book-entry confirmation, as the case may be, and
all other documents required by the letter of transmittal, are
received by the exchange agent within five New York Stock Exchange
trading days after the date of execution of the notice of guaranteed
delivery.
WITHDRAWAL RIGHTS
Tenders of old notes may be withdrawn at any time prior to the expiration
date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the exchange agent at one of the addresses set forth below under
"Exchange Agent." Any such notice of withdrawal must specify:
o the name of the person having tendered the old notes to be withdrawn;
o the old notes to be withdrawn (including the principal amount of such
old notes); and
o where certificates for old notes have been transmitted, the name in
which such old notes are registered, if different from that of the
withdrawing holder.
If certificates for old notes have been delivered or otherwise identified
to the exchange agent, then, prior to the release of such certificates, the
withdrawing holder must also submit the serial numbers of the particular
certificates to be withdrawn and a signed notice of withdrawal with signatures
guaranteed by an eligible institution unless such holder is an eligible
institution. If old notes have been tendered pursuant to the procedure for
book-entry transfer described above, any notice of withdrawal must specify the
name and number of the account at DTC to be credited with the withdrawn old
notes and otherwise comply with the procedures of such facility. All questions
as to the validity, form and eligibility (including time of receipt) of such
notices will be determined by us in our sole discretion, and our determination
will be final and binding on all parties.
Any old notes so withdrawn will be deemed not to have been validly tendered
for exchange for purposes of the exchange offer. Any old notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to its holder without cost to such holder (or, in the case of old notes
tendered by book-entry transfer into the exchange agent's account at DTC
pursuant to the book-entry transfer procedures described above, such old notes
will be credited to an account maintained with DTC for the old notes) as soon as
practicable after withdrawal, rejection of tender or termination of the exchange
offer. Properly withdrawn old notes may be re-tendered by following one of the
procedures described under "Procedures for Tendering Old Notes" above at any
time on or prior to the expiration date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the exchange offer, we are not
required to accept for exchange, or to issue exchange notes in exchange for old
notes, and we may terminate or amend the exchange offer, if at any time before
the acceptance of such old notes for exchange or the exchange of the exchange
notes for such old notes, such acceptance or issuance would violate applicable
law or any interpretation of the SEC's staff.
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The condition in the paragraph immediately above is for our sole benefit
and may be asserted by us regardless of the circumstances giving rise to such
condition. Our failure at any time to exercise the foregoing rights is not to be
deemed a waiver of any such right and each such right shall be deemed an ongoing
right which may be asserted at any time and from time to time.
In addition, we will not accept for exchange any old notes tendered, and no
exchange notes will be issued in exchange for any such old notes, if at such
time any stop order is threatened or in effect with respect to the registration
statement of which this prospectus constitutes a part or the qualification of
the indenture under the Trust Indenture Act.
EXCHANGE AGENT
Bank One Trust Company, National Association has been appointed as the
exchange agent for the exchange offer. All executed letters of transmittal
should be directed to the exchange agent at one of the addresses set forth
below. Questions and requests for assistance, requests for additional copies of
this prospectus or of the letter of transmittal and requests for notices of
guaranteed delivery should be directed to the exchange agent, addressed as
follows:
Deliver To:
Bank One Trust Company, National Association, Exchange Agent
By Registered or Certified Mail:
One North State Street
9th Floor
Chicago, IL 60602
Attention: Exchanges
By Facsimile:
312-407-8853
To Confirm by Telephone or for Information:
(800) 524-9472
Delivery to an address other than as set forth above or transmission of
instructions via facsimile other than as set forth above does not constitute a
valid delivery.
FEES AND EXPENSES
The principal solicitation is being made by mail; however, additional
solicitation may be made by telegraph, telecopy, telephone or in person by our
officers, regular employees, affiliates and agents. We will not pay any
additional compensation to any such officers and employees who engage in
soliciting tenders. We will not make any payment to brokers, dealers, or others
soliciting acceptances of the exchange offer. However, we will pay the exchange
agent reasonable and customary fees for its services and will reimburse it for
its reasonable out-of-pocket expenses in connection therewith.
The estimated cash expenses to be incurred in connection with the exchange
offer will be paid by us and are estimated in the aggregate to be $200,000.
ACCOUNTING TREATMENT
The exchange notes will be recorded at the same carrying value as the old
notes. Accordingly, DPL will not recognize any gain or loss for accounting
purposes. DPL intends to amortize the expenses of the exchange offer and
issuance of the old notes over the term of the exchange notes.
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RESALE OF THE EXCHANGE NOTES
Based on an interpretation by the SEC's staff contained in several
no-action letters issued to third parties, we believe that the exchange notes
issued pursuant to the exchange offer may be offered for resale, resold and
otherwise transferred after the exchange offer by any holder of exchange notes
(other than a holder which is our "affiliate" within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, if such holder:
o acquires the exchange notes in the ordinary course of his or her
business; and
o does not intend to participate, and has no arrangement with any person
to participate, in a distribution of the exchange notes.
Any holder of the old notes who tenders in the exchange offer with the
intention to participate, or for the purpose of participating, in a distribution
of the exchange notes may not rely on the position of the staff of the
Commission enunciated in the "Exxon Capital Holdings Corporation" or similar
no-action letters (the Exxon Capital Letters) but rather must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. In addition, any such resale transaction
should be covered by an effective registration statement containing the selling
security holders information required by Item 507 of Regulation S-K of the
Securities Act. Each broker-dealer that receives exchange notes for its own
account in exchange for the old notes, where such old notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, may be a statutory underwriter and must acknowledge that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such exchange notes.
By tendering in the exchange offer, each holder will represent to us (which
representation may be contained in the Letter of Transmittal) to the effect
that:
o it is not our affiliate;
o it is not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any person to participate in, a
distribution of the exchange notes to be issued in the exchange offer;
and
o it is acquiring the exchange notes in its ordinary course of business.
Each holder will acknowledge and agree that any broker-dealer and any such
holder using the exchange Offer to participate in a distribution of the exchange
notes acquired in the exchange offer:
o could not under Commission policy as in effect on the date of the
registration rights agreement rely on the position of the Commission
enunciated in the Exxon Capital letters;
o must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with a secondary resale
transaction and that such secondary resale transaction must be covered
by an effective registration statement containing the selling security
holder information required by Item 507 of Regulation S-K if the
resales are of exchange notes obtained by such Holder in exchange for
old notes acquired by such Holder directly from us or our affiliate.
DESCRIPTION OF THE EXCHANGE NOTES
The old notes were, and the exchange notes will be, issued pursuant to an
indenture dated as of March 1, 2000, between us and Bank One Trust Company,
National Association and an officer's certificate establishing the old notes and
the exchange notes. Selected provisions of the exchange notes and the indenture,
including the officer's certificate pursuant to which the terms of the exchange
notes were established, are summarized below. This summary is not complete. You
should read those documents for a better understanding of all of the provisions
of those documents that may be important to you.
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GENERAL
The indenture provides for the issuance by us of debt securities, including
the notes, and other unsecured evidences of indebtedness in series from time to
time ("debt securities") in an unlimited amount. We have previously issued two
series of debt securities under the indenture in the aggregate principal amount
of $425 million. In an exchange offer similar to that described in this
prospectus, the first series of debt securities was exchanged for the second
series. The exchange notes issued pursuant to this exchange offering will be
issued as a series of debt securities under the indenture and will be our
unsecured obligations that, so long as they are unsecured, will rank equally in
right of payment of principal and interest with all of our other existing and
future senior unsecured and unsubordinated debt. As of September 30, 2001, our
aggregate outstanding debt that would have ranked equally with the exchange
notes was approximately $1,084 million. The indenture provides that we may not
grant a lien on the capital shares of DP&L to secure our indebtedness, as
defined in the indenture, without similarly securing the exchange notes, with
certain exceptions. However, the indenture does not limit the aggregate amount
of debt we or our subsidiaries may incur. We are a holding company that derives
substantially all of our income from our operating subsidiaries. Our operating
subsidiaries are separate and distinct legal entities and will have no
obligation, contingent or otherwise, to pay any dividends or make any other
distributions to us or to otherwise pay amounts due with respect to the exchange
notes or to make funds available for such payments. The exchange notes,
therefore, will be effectively subordinated to debt and preferred stock at the
subsidiary level. As of September 30, 2001, our subsidiaries, including DP&L,
had approximately $690 million of aggregate outstanding debt and preferred
stock.
PRINCIPAL AMOUNT, INTEREST AND MATURITY
The exchange notes are initially being offered in the aggregate principal
amount of $400,000,000. The indenture permits us to "reopen" the offering of the
old notes without the consent of the holders of the exchange notes. Accordingly,
the principal amount of exchange notes may be increased in the future on the
same terms and conditions and with the same CUSIP numbers) as the exchange notes
being offered by this prospectus. Exchange of the old notes for the exchange
notes or beneficial interests therein may be made in minimum denominations of
$1,000 and in integral multiples of $1,000 over such amount.
The exchange notes will mature on September 1, 2011 and are not subject to
any sinking fund provision. The exchange notes will bear interest from the date
of original issuance thereof at the rate per annum shown on the cover page of
this prospectus, payable semi-annually in arrears on March 1 and September 1 of
each year, commencing March 1, 2002. Interest will be paid to the persons in
whose names exchange notes are registered at the close of business on the
February 15 or August 15 next preceding each semi-annual interest payment date.
The amount of interest payable for any period will be computed on the basis of a
360-day year of twelve 30-day months and for any period shorter than a full
month, on the basis of the actual number of days elapsed. In the event that any
date on which interest is payable on the exchange notes is not a business day,
the payment of the interest payable on such date will be made on the next
succeeding day which is a business day (and without any interest or other
payment in respect of any such delay), with the same force and effect as if made
on the date the payment was originally payable. The term "business day" means
any day, other than a Saturday or Sunday, or which is not a day on which banking
institutions or trust companies in The City of New York are generally authorized
or required by law, regulation or executive order to remain closed.
We will make principal and interest payments on the exchange notes, other
than certificated notes, to Cede & Co. (as nominee of DTC) so long as Cede & Co.
is the registered owner. Disbursement of such payments to DTC's participants is
the responsibility of DTC, and disbursement of such payments to the beneficial
owners of the exchange notes is the responsibility of DTC participants and
indirect participants in DTC, all as described below under "Book-Entry, Delivery
and Form."
OPTIONAL REDEMPTION
We may redeem the exchange notes, in whole or in part, at any time prior to
maturity at a redemption price equal to the Make-Whole Amount, as described
below, plus accrued interest, if any, to the redemption date with respect to the
exchange notes, or portion thereof, being redeemed.
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"Comparable Treasury Issue" means, with respect to any redemption date, the
United States Treasury security selected by the Quotation Agent as having a
maturity comparable to the time period from the redemption date to September 1,
2011 that would be utilized, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate debt securities
of comparable maturity to the time period. If no United States Treasury security
has a maturity which is within a period from three months before to three months
after September 1, 2011, the two most closely corresponding United States
Treasury securities will be used as the Comparable Treasury Issue, and the
Treasury Rate will be interpolated and extrapolated on a straight-line basis,
rounding to the nearest month using such securities.
"Comparable Treasury Price" means (1) the average of up to five Reference
Treasury Dealer Quotations for such redemption date, after excluding the highest
and lowest Reference Treasury Dealer Quotations or (2) if the trustee obtains
fewer than five such Reference Treasury Dealer Quotations, the average of all
such Quotations.
The "Make-Whole Amount" will be equal to the greater of (1) 100% of the
principal amount of the exchange notes being redeemed or (2) as determined by a
Quotation Agent as of the redemption date, the sum of the present value of the
scheduled payments of principal and interest on such exchange notes from the
redemption date to September 1, 2011, discounted to the redemption date on a
semi-annual basis' (assuming a 360-day year consisting of twelve 30-day months)
at a discount rate equal to the Treasury Rate plus 25 basis points.
"Quotation Agent" means Morgan Stanley & Co. Incorporated and its
successors as selected by us; provided, however, that if any of the foregoing
ceases to be a primary United States Government securities dealer in New York
City (a "Primary Treasury Dealer"), we will substitute therefor another Primary
Treasury Dealer.
"Reference Treasury Dealer" means (1) Morgan Stanley & Co. Incorporated and
its successors; provided, however, that if any of the foregoing ceases to be a
Primary Treasury Dealer, we shall substitute therefor another Primary Treasury
Dealer and (2) up to four other Primary Treasury Dealers selected by the trustee
after consultation with us.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the trustee by such Reference Treasury Dealer at 5:00 p.m., New York
City time, on the third business day preceding such redemption date.
"Treasury Rate" means (1) the yield, under the heading which represents the
average for the immediately prior week, appearing in the most recently published
statistical release designated "H.15 (519)" or any successor publication which
is published weekly by the Federal Reserve and which establishes yields on
actively traded United States Treasury securities adjusted to constant maturity
under the caption "Treasury Constant Maturities," for the maturity corresponding
to the time period from the redemption date to September 1, 2011 (if no maturity
is within three months before or after such time period, yields for the two
published maturities most closely corresponding to such time period will be
determined and the Treasury Rate shall be interpolated or extrapolated from such
yields on a straight-line basis, rounding to the nearest month) or (2) if such
release (or any successor release) is not published during the week preceding
the calculation date or does not contain such yields, the rate per annum equal
to the semi-annual equivalent yield to maturity of the Comparable Treasury
Issue, calculated using a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date. The Treasury Rate will be calculated on the third business
day preceding the redemption date.
Notice of any redemption will be mailed at least 30 days but no more than
60 days before the redemption date to each holder of exchange notes to be
redeemed. If, at the time notice of redemption is given, the redemption moneys
are not held by the trustee, the redemption may be made subject to their receipt
on or before the date fixed for redemption and such notice shall be of no effect
unless such moneys are so received. Upon payment of the redemption price, on and
after the redemption date interest will cease to accrue on the exchange notes or
portions thereof called for redemption.
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PAYMENT AND PAYING AGENTS
Interest on each exchange note on each interest payment date will be paid
to the person in whose name such note is registered as of the close of business
on the regular record date relating to that interest payment date; provided,
however, that interest payable at maturity (whether at stated maturity, upon
redemption or otherwise, a "maturity") will be paid to the person to whom
principal is paid. However, if there has been a default in the payment of
interest on any note, such defaulted interest may be payable to the person in
whose name such exchange note is registered as of the close of business on a
date selected by the trustee which is not more than 15 days and not less than 10
days prior to the date we propose for payment of such defaulted interest or in
any other lawful manner not inconsistent with the requirements of any securities
exchange on which such note may be listed, if the trustee deems such manner of
payment practicable.
The principal of and premium, if any, and interest on, the exchange notes
at maturity will be payable upon presentation of the exchange notes at the
designated corporate trust operations office of Bank One Trust Company, National
Association in the City of New York, as our paying agent. We may change the
place of payment on the exchange notes, may appoint one or more additional
paying agents (including us) and may remove any paying agent, all at our
discretion.
REGISTRATION AND TRANSFER
The transfer of exchange notes may be registered, and exchange notes may be
exchanged for other notes of the same series, of authorized denominations and of
like tenor and aggregate principal amount, at the corporate trust office of Bank
One in the City of Chicago, as security registrar for the exchange notes. We may
change the place for registration of transfer and exchange of the exchange notes
and may designate one or more additional places for such registration and
exchange, all at our discretion. No service charge will be made for any transfer
or exchange of the exchange notes, but we may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of the exchange notes.
We will not be required to execute or to provide for the registration of
transfer of, or the exchange of, (a) any exchange notes during a period of 15
days prior to giving any notice of redemption or (b) any exchange notes selected
for redemption in whole or in part, except the unredeemed portion of any
exchange notes being redeemed in part.
DEFEASANCE
The principal amount of any series of debt securities issued under the
indenture, including the exchange notes, will be deemed to have been paid for
purposes of the indenture and our entire indebtedness in respect of the
indenture will be deemed to have been satisfied and discharged upon fulfillment
of certain conditions if there has been irrevocably deposited with the trustee
or any paying agent, in trust: (a) money in an amount which will be sufficient,
or (b) in the case of a deposit made prior to the maturity of the debt
securities, eligible obligations (as defined below), the principal of and the
interest on which when due, without any regard to reinvestment thereof, will
provide moneys which, together with the money, if any, deposited with or held by
the trustee, will be sufficient, or (c) a combination of (a) and (b) which will
be sufficient, to pay when due the principal of and premium, if any, and
interest, if any, due and to become due on the debt securities of such series
that are outstanding. For this purpose, "eligible obligations" include direct
obligations of, or obligations unconditionally guaranteed by, the United States
entitled to the benefit of the full faith and credit thereof and certificates,
depositary receipts or other instruments which evidence a direct ownership
interest in such obligations or in any specific interest or principal payments
due in respect thereof and which do not contain provisions permitting the
redemption or other prepayment thereof at the option of the issuer thereof.
LIMITATION ON LIENS
The indenture provides that, except as otherwise specified with respect to
a particular series of debt securities, so long as any debt securities of any
series are outstanding, including the exchange notes, we will not pledge,
mortgage, hypothecate or grant a security interest in, or permit any mortgage,
pledge, security interest or other lien upon, any capital shares of DP&L now or
hereafter owned by us to secure any Indebtedness (as described below), without
making effective provision whereby the outstanding debt securities will (so long
as such other Indebtedness is so secured) be equally and ratably secured with
any and all such other Indebtedness and any other indebtedness similarly
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entitled to be equally and ratably secured. This restriction does not apply to,
or prevent the creation or existence of,
o any mortgage, pledge, security interest, lien or encumbrance upon any
such capital shares created at the time of the acquisition of such
capital shares by us or within one year after such time to secure all
or a portion of the purchase price for such capital shares;
o any mortgage, pledge, security interest, lien or encumbrance upon any
such capital shares existing thereon at the time of the acquisition
thereof by us (whether or not the obligations secured thereby are
assumed by us); or
o any extension, renewal or refunding of any mortgage, pledge, security
interest, lien or encumbrance described in the first two bullets on
capital shares of DP&L theretofore subject thereto (or substantially
the same capital shares) or any portion thereof.
In addition, this restriction will not apply to, and there will be excluded
in computing secured Indebtedness for the purpose of such restriction,
Indebtedness secured by any judgment, levy, execution, attachment or other
similar lien arising in connection with court proceedings, provided that either
(1) the execution or enforcement of each such lien is effectively stayed within
30 days after entry of the corresponding judgment (or the corresponding judgment
has been discharged within such 30 day period) and the claims secured thereby
are being contested in good faith by appropriate proceedings timely commenced
and diligently prosecuted; (2) the payment of each such lien is covered in full
by insurance and the insurance company has not denied or contested coverage
thereof; or (3) so long as each such lien is adequately bonded, any appropriate
legal proceedings that may have been duly initiated for the review of the
corresponding judgment, decree or order have not been fully terminated or the
period within which such proceedings may be initiated has not expired.
Notwithstanding the foregoing, except as otherwise specified with respect
to a particular series of debt securities, we may, without securing the debt
securities of that series, including the exchange notes, pledge, mortgage,
hypothecate or grant a security interest in, or permit any mortgage, pledge,
security interest or other lien (in addition to liens expressly permitted as
described in the preceding paragraphs) upon, capital shares of DP&L now or
hereafter owned by us to secure any Indebtedness (which would otherwise be
subject to the foregoing restriction) in an aggregate amount which, together
with all other such Indebtedness, does not exceed 10% of Consolidated
Capitalization. As of September 30, 2001, our Consolidated Capitalization was
approximately $3.3 billion.
"Assets" of any person means the whole or any part of its business,
property, assets, cash and receivables.
"Consolidated Capitalization" means the sum obtained by adding (1)
Consolidated Shareholders' Equity, (2) Consolidated Indebtedness for money
borrowed (exclusive of any Consolidated Indebtedness which is due and payable
within one year of the date such sum is determined) and, without duplication,
(3) any of our preference or preferred shares or of any Consolidated
Subsidiaries which is subject to mandatory redemption or sinking fund
provisions.
"Consolidated Indebtedness" means total indebtedness as shown on the
consolidated balance sheet of us and our Consolidated Subsidiaries.
"Consolidated Shareholders' Equity" means our total Assets and of our
Consolidated Subsidiaries less all of our liabilities and of our Consolidated
Subsidiaries. As used in the foregoing definition, "liabilities" (1) means all
obligations which would, in accordance with generally accepted accounting
principles in the United States, be classified on a balance sheet as
liabilities, including without limitation, (a) indebtedness secured by our
property or of any of our Consolidated Subsidiaries whether or not we or such
Consolidated Subsidiary are liable for the payment thereof unless, in the case
that we or such Consolidated Subsidiary are not so liable, such property has not
been included among our Assets or those of such Consolidated Subsidiary on such
balance sheet, (b) deferred liabilities and (c) indebtedness of ours or any of
our Consolidated Subsidiaries that is expressly subordinated in right and
priority of payment to other liabilities of ours or such Consolidated Subsidiary
and (2) includes our preference or preferred stock or of any Consolidated
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Subsidiary only to the extent of any such preference or preferred stock that is
subject to mandatory redemption or sinking fund provisions.
"Consolidated Subsidiary" means at any date any Subsidiary the financial
statements of which under generally accepted accounting principles in the United
States would be consolidated with ours in our consolidated financial statements
as of such date. "Indebtedness" means
o all indebtedness, whether or not represented by bonds, debentures,
notes or other securities, created or assumed by us for the repayment
of money borrowed;
o all indebtedness for money borrowed secured by a lien upon property
owned by us and upon which indebtedness for money borrowed by us
customarily pays interest, even though we have not assumed or become
liable for the payment of such indebtedness for money borrowed; and
o all indebtedness of others for money borrowed which is guaranteed as
to payment of principal by us or in effect guaranteed by us through a
contingent agreement to purchase such indebtedness, but excluding from
this definition any other contingent obligation of ours in respect of
indebtedness for money borrowed or other obligations incurred by
others.
"Subsidiary" means a corporation more than 50% of the outstanding voting
stock of which is owned, directly or indirectly, by us or by one or more other
Subsidiaries, or by us and one or more other Subsidiaries. For the purposes of
this definition, "voting stock" means stock that ordinarily has voting power for
the election of directors, whether at all times or only so long as no senior
class of stock has such voting power by reason of any contingency.
CONSOLIDATION, MERGER AND SALE OF ASSETS
Under the terms of the indenture, we may not 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 (i) the entity formed by such
consolidation or into which we are merged or the entity which acquires by
conveyance or transfer, or which leases, our property and assets substantially
as an entirety will be an entity organized and validly existing under the laws
of any domestic jurisdiction of the United States and such entity expressly
assumes our obligations on all debt securities and under the indenture, (ii)
immediately after giving effect to the transaction, 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, and (iii) we have delivered to
the trustee an officer's certificate and an opinion of counsel as provided in
the indenture, as well as an opinion of independent tax counsel to the effect
that the contemplated actions will not cause the holders of the exchange notes
to recognize income, gain or loss for United States federal income tax purposes
as a result of such consolidation, merger or sale of assets and the holders of
the exchange notes will be subject to United States federal income tax on the
same amounts, in the same manner and at the same times as would have been the
case if such consolidation, merger or sale of assets had not occurred. The terms
of the indenture do not restrict us in a merger in which we are the surviving
entity.
EVENTS OF DEFAULT
Each of the following will constitute an event of default under the
indenture with respect to the debt securities of any series, including the
exchange notes:
o failure to pay any interest on the debt securities of such series
within 30 days after the same becomes due and payable;
o failure to pay principal or premium, if any, on the debt securities of
such series when due and payable;
o default in the payment of any sinking fund installment, when and as
due;
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o failure to perform, or breach of, any of our other covenants or
warranties in the indenture (other than a covenant or warranty in the
indenture solely for the benefit of one or more series of debt
securities other than such series) for 60 days after written notice to
us by the trustee, or to us and the trustee by the holders of at least
33% in principal amount of the debt securities of such series
outstanding under the indenture as provided in the indenture; or
o certain events in bankruptcy, insolvency or reorganization with
respect to us.
Additional events of default for a series of debt securities may be
specified at the time such series is created. An event of default with respect
to the debt securities of a particular series may not necessarily constitute an
event of default with respect to debt securities of any other series issued
under the indenture.
REMEDIES
If an event of default due to the default in payment of principal of or
interest on, or payment of any sinking fund installment with respect to, any
series of debt securities or due to the default in the performance or breach of
any of our other covenants or warranties applicable to the debt securities of
such series but not applicable to all series occurs and is continuing, then
either the trustee or the holders of 33% in principal amount of the outstanding
debt securities of such series may declare the principal of all of the debt
securities of such series and interest accrued thereon to be due and payable
immediately. If there is an event of default due to the default in the
performance of any other covenants or agreements in the indenture applicable to
all outstanding debt securities, either the trustee or the holders of not less
than 33% in principal amount of all outstanding debt securities, considered as
one class, and not the holders of the debt securities of any one of such series,
may make such declaration of acceleration. In certain events of bankruptcy,
insolvency, reorganization, assignment or receivership with respect to us, the
principal and interest on the exchange notes will automatically become due and
payable.
At any time after the declaration of acceleration with respect to the debt
securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained, the event or events of default
giving rise to such declaration of acceleration will, without further act, be
deemed to have been waived, and such declaration and its consequences will,
without further act, be deemed to have been rescinded and annulled, if:
(1) we have paid or deposited with the trustee a sum sufficient to pay:
o all overdue interest on all debt securities of such series;
o the principal of and premium, if any, on any debt securities of
such series which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate or
rates prescribed therefor in such debt securities;
o interest upon overdue interest at the rate or rates prescribed
therefor in such debt securities, to the extent that payment of
such interest is lawful;
o all amounts due to the trustee under the indenture; and
(2) any other event or events of default with respect to debt securities
of such series, other than the nonpayment of the principal of and
accrued interest on the debt securities of such series which has
become due solely by such declaration of acceleration, have been cured
or waived as provided in the indenture.
Subject to the provisions of the indenture relating to the duties of the
trustee, in case an event of default occurs and is continuing, the trustee will
be under no obligation to exercise any of its rights or powers under the
indenture at the request or direction of any of the holders, unless such holders
have offered to the trustee reasonable indemnity. If an event of default has
occurred and is continuing in, respect of a series of debt securities, subject
to such provisions for the indemnification of the trustee, the holders of a
majority in principal amount of the outstanding debt securities of such series
will have the right to direct the time, method and place of conducting any
22
proceeding for any remedy available to the trustee, or exercising any trust or
power conferred on the trustee, with respect to the debt securities of such
series; provided, however, that if an event of default occurs and is continuing
with respect to more than one series of debt securities, the holders of a
majority in aggregate principal amount of the outstanding debt securities of all
such series, considered as one class, will have the right to make such
direction, and not the holders of the debt securities of any one of such series;
and provided further that such direction will not be in conflict with any rule
of law or with the indenture.
No holder of debt securities of any series will have any right to institute
any proceeding with respect to the indenture, or for the appointment of a
receiver or a trustee, or for any other remedy thereunder, unless (1) such
holder has previously given to the trustee written notice of a continuing event
of default with respect to the debt securities of such series, (2) the holders
of a majority in aggregate principal amount of the outstanding debt securities
of all series in respect of which an event of default has occurred and is
continuing, considered as one class, have made written request to the trustee,
and such holder or holders have offered reasonable indemnity to the trustee to
institute such proceeding in respect of such event of default in its own name as
trustee and (3) the trustee has failed to institute any proceeding, and has not
received from the holders of a majority in aggregate principal amount of the
outstanding debt securities of such series a direction inconsistent with such
request, within 60 days after such notice, request and offer. However, such
limitations do not apply to a suit instituted by a holder of a debt security for
the enforcement of payment of the principal of or any premium or interest on
such debt security on or after the applicable due date specified in such debt
security.
We will be required to furnish to the trustee annually a statement by an
appropriate officer as to such officer's knowledge of our compliance with all
conditions and covenants under the indenture, such compliance to be determined
without regard to any period of grace or requirement of notice under the
indenture.
MODIFICATION AND WAIVER
Without the consent of any holder of debt securities, we and the trustee
may enter into one or more supplemental indentures for any of the following
purposes:
o to evidence the assumption by any permitted successor to us of our
covenants in the indenture and in the debt securities, so long as we
obtain an opinion of independent tax counsel to the effect that the
actions contemplated by the supplemental indenture will not cause the
holders of the exchange notes to recognize income, gain or loss for
United States federal income tax purposes as a result of such actions
and the holders of the exchange notes will be subject to United States
federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such actions had not
occurred; or
o to add one or more of our covenants or other provisions for the
benefit of all holders or for the benefit of the holders of, or to
remain in effect only so long as there will be outstanding, debt
securities of one or more specified series, or one or more specified
tranches thereof, or to surrender any right or power conferred upon us
by the indenture; or
o to add any additional events of default with respect to outstanding
debt securities; or
o to change or eliminate any provision of the indenture or to add any
new provision to the indenture, provided that if such change,
elimination or addition will adversely affect the interests of the
holders of debt securities of any series or tranche in any material
respect, such change, elimination or addition will become effective
with respect to such series or tranche only
- when the consent of the holders of debt securities of such
series or tranche has been obtained in accordance with the
indenture, or
- when no debt securities of such series or tranche remain
outstanding under the indenture; or
o to provide collateral security for all but not part of the debt
securities; or
23
o to establish the form or terms of debt securities of any other series
or tranche as permitted by the Indenture; or
o to provide for the authentication and delivery of bearer securities
and coupons appertaining thereto representing interest, if any,
thereon and for the procedures for the registration, exchange and
replacement thereof and for the giving of notice to, and the
solicitation of the vote or consent of, the holders thereof, and for
any and all other matters incidental thereto; or
o to evidence and provide for the acceptance of appointment of a
successor trustee with respect to the debt securities of one or more
series and to add to or change any of the provisions of the indenture
as will be necessary to provide for or to facilitate the
administration of the trusts under the indenture by more than one
trustee; or
o to provide for the procedures required to permit the utilization of a
noncertificated system of registration for the debt securities of all
or any series or tranche; or
o to change any place where
- the principal of and premium, if any, and interest, if any,
on all or any series or tranche of debt securities will be
payable,
- all or any series or tranche of debt securities may be
surrendered for registration of transfer or exchange and
- notices and demands to or upon us in respect of debt
securities and the indenture may be served; or
o to cure any ambiguity or inconsistency or to add or change any other
provisions with respect to matters and questions arising under the
indenture, provided such changes or additions will not adversely
affect the interests of the holders of debt securities of any series
or tranche in any material respect.
The holders of a majority in aggregate principal amount of the debt
securities of all series then outstanding may waive our compliance with certain
restrictive provisions of the indenture. The holders of a majority in principal
amount of the outstanding debt securities of any series may waive any past
default under the indenture with respect to such series, except a default in the
payment of principal, premium, or interest and certain covenants and provisions
of the indenture that cannot be modified or be amended without the consent of
the holder of each outstanding debt security of such series affected.
Without limiting the generality of the foregoing, if the Trust Indenture
Act is amended after the date of the indenture in such a way as to require
changes to the indenture or the incorporation therein of additional provisions
or so as to permit changes to, or the elimination of, provisions which, at the
date of the indenture or at any time thereafter, were required by the Trust
Indenture Act to be contained in the indenture, the indenture will be deemed to
have been amended so as to conform to such amendment of the Trust Indenture Act
or to effect such changes, additions or elimination, and we and the trustee may,
without the consent of any holders, enter into one or more supplemental
indentures to evidence or effect such amendment.
Except as provided above, the consent of the holders of a majority in
aggregate principal amount of the debt securities of all series then
outstanding, considered as one class, is required for the purpose, of adding any
provisions to, or changing in any manner, or eliminating any of the provisions
of, the indenture or modifying in any manner the rights of the holders of such
debt securities under the indenture pursuant to one or more supplemental
indentures; provided, however, that if less than all of the series of debt
securities outstanding are directly affected by a proposed supplemental
indenture, then the consent only of the holders of a majority in aggregate
principal amount of outstanding debt securities of all series so directly
affected, considered as one class, will be required; and provided further that
if the debt securities of any series has been issued in more than one tranche
and if the proposed supplemental indenture will directly affect the rights of
the holders of debt securities of one or more, but less than all, of such
24
tranches, then the consent only of the holders of a majority in aggregate
principal amount of the outstanding debt securities of all tranches so directly
affected, considered as one class, will be required; and provided further that
no such amendment or modification may
o change the stated maturity of the principal of, or any installment of
principal of or interest on, any debt security, or reduce the
principal amount thereof or the rate of interest thereon (or the
amount of any installment of interest thereon) or change the method of
calculating such rate or reduce any premium payable upon the
redemption thereof, or change the coin or currency (or other property)
in which any debt security or any premium or the interest thereon is
payable, or impair the right to institute suit for the enforcement of
any such payment on or after the stated maturity of any debt security
(or, in the case of redemption, on or after the redemption date)
without, in any such case, the consent of the holder of such debt
security,
o reduce the percentage in principal amount of the outstanding debt
securities of any series, or any tranche thereof, the consent of the
holders of which is required for any such supplemental indenture, or
the consent of the holders of which is required for any waiver of
compliance with any provision of the indenture or any default
thereunder and its consequences, or reduce the requirements for quorum
or voting, without, in any such case, the consent of the holder of
each outstanding debt security of such series or tranche, or
o modify certain of the provisions of the indenture relating to
supplemental indentures, waivers of certain covenants and waivers of
past defaults with respect to the debt securities of any series or
tranche, without the consent of the holder of each outstanding debt
security affected thereby. A supplemental indenture which changes or
eliminates any covenant or other provision of the indenture which has
expressly been included solely for the benefit of one or more
particular series of debt securities or one or more tranches thereof,
or modifies the rights of the holders of debt securities of such
series or tranche with respect to such covenant or other provision,
will be deemed not to affect the rights under the indenture of the
holders of the debt securities of any other series or tranche.
The indenture provides that in determining whether the holders of the
requisite principal amount of the outstanding debt securities have given any
request, demand, authorization, direction, notice, consent or waiver under the
indenture, or whether a quorum is present at the meeting of the holders of debt
securities, debt securities owned by us or any other obligor upon the debt
securities or any affiliate of ours or of such other obligor (unless we, such
affiliate or such obligor own all debt securities outstanding under the
indenture, determined without regard to this provision) will be disregarded and
deemed not to be outstanding.
If we solicit from holders any request, demand, authorization, direction,
notice, consent, election, waiver or other act, we may, at our option, fix in
advance a record date for the determination of holders entitled to give such
request, demand, authorization, direction, notice, consent, election, waiver or
other such act, but we will have no obligation to do so. If such a record date
is fixed, such request, demand, authorization, direction, notice, consent,
election, waiver or other act may be given before or after such record date, but
only the holders of record at the close of business on such record date will be
deemed to be holders for the purposes of determining whether holders of the
requisite proportion of the outstanding debt securities have authorized or
agreed or consented to such request, demand, authorization, direction, notice,
consent, election, waiver or other act, and for that purpose the outstanding
debt securities will be computed as of the record date. Any request, demand,
authorization, direction, notice, consent, election, waiver or other act of a
holder will bind every future holder of the same debt security and the holder of
every debt security issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof in respect of anything done, omitted or
suffered to be done by the trustee or us in reliance thereon, whether or not
notation of such action is made upon such debt security.
RESIGNATION OF TRUSTEE
The trustee may resign at any time by giving written notice thereof to us
or may be removed at any time with respect to the debt securities of any series
by act of the holders of a majority in principal amount of that series of debt
securities then outstanding delivered to the trustee and us. No resignation or
25
removal of the trustee and no appointment of a successor trustee will become
effective until the acceptance of appointment by a successor trustee in
accordance with the requirements of the indenture. So long as no event of
default or event which, after notice or lapse of time, or both, would become an
event of default has occurred and is continuing and except with respect to a
trustee appointed by act of the holders, if we have delivered to the trustee a
resolution of our board of directors appointing a successor trustee and such
successor has accepted such appointment in accordance with the terms of the
indenture, the trustee will be deemed to have resigned and the successor will be
deemed to have been appointed as trustee in accordance with the indenture.
NOTICES
Notices to holders of debt securities will be given by first class mail to
the addresses of such holders as they may appear in the security register
therefor.
GOVERNING LAW
The indenture and the debt securities are to be governed by, and to be
construed in accordance with, the laws of the State of New York.
REGARDING THE TRUSTEE
The trustee under the indenture is Bank One Trust Company, National
Association. We and DP&L also maintain various banking, trust and other
relationships with Bank One Trust Company, National Association, and its
affiliates.
BOOK-ENTRY, DELIVERY AND FORM
GENERAL
The exchange notes will be issued in the form of one or more fully
registered securities in global form. The global notes will be deposited with,
or on behalf of, The Depository Trust Company and registered in the name of The
Depositary Trust Company or its nominee.
Upon issuance of the global notes, The Depositary Trust Company or its
nominee will credit, on its book-entry registration and transfer system, the
respective principal amount of the individual beneficial interests represented
by such global notes to the accounts of persons who have accounts with the
depository. Ownership of beneficial interests in the global notes will be shown
on, and the transfer of that ownership will be effected only through, records
maintained by The Depositary Trust Company or its nominee (with respect to the
participants' interests) for the global notes, or by participants or persons
that hold interests through participants (with respect to beneficial interests
of persons other than participants). The laws of some jurisdictions may require
that certain purchasers of securities take physical delivery of the securities
in definitive form. These limits and laws may impair the ability to transfer or
pledge beneficial interests in the global notes.
So long as The Depositary Trust Company, or its nominee, is the registered
holder of any global notes, The Depositary Trust Company or such nominee, as the
case may be, will be considered the sole legal owner of the global notes for all
purposes under the indenture and the exchange notes. Except as set forth below,
owners of beneficial interests in global notes will not be entitled to have
their global notes registered in their names, will not receive or be entitled to
receive physical delivery in exchange therefor and will not be considered to be
the owners or holders of their global notes for any purpose under the securities
or the indenture. We understand that under existing industry practice, in the
event an owner of a beneficial interest in a global note desires, to take any
action that The Depositary Trust Company, as the holder of the global note, is
entitled to take, The Depositary Trust Company would authorize the participants
to take that action, and that the participants would authorize beneficial owners
owning through those participants to take that action or would otherwise act
upon the instructions of beneficial owners owning through them.
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Any payment of principal or interest due on the exchange notes on any
interest payment date or at maturity will be made available by us to the trustee
by that date. As soon as practicable thereafter, the trustee will make those
payments to The Depositary Trust Company or its nominee, as its nominee, as the
case may be, as the registered owner of the global notes representing the
exchange notes in accordance with existing arrangements between the trustee and
The Depositary Trust Company.
We expect that The Depositary Trust Company or its nominee, upon receipt of
any payment of principal or interest in respect of the global notes, will credit
immediately the accounts of the related participants with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of the global notes as shown on the records of The Depositary Trust Company. We
also expect that payments by participants to owners of beneficial interests in
the global notes held through the participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such participants.
Neither us, nor the trustee, nor any payment agent for the global notes
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in any of the
global notes or for maintaining, supervising or reviewing any records relating
to the beneficial ownership interests or for other aspects of the relationship
between The Depositary Trust Company and its participants or the relationship
between the participants and the owners of beneficial interests in the global
notes owning through the participants.
Unless and until exchanged in whole or in part for securities in definitive
form in accordance with the terms of the securities, the global notes may not be
transferred except as a whole by the The Depositary Trust Company to a nominee
of The Depositary Trust Company or by a nominee of the The Depositary Trust
Company to The Depositary Trust Company or another nominee of The Depositary
Trust Company or by The Depositary Trust Company or any such nominee to a
successor of The Depositary Trust Company or a nominee of each successor.
Although The Depositary Trust Company has agreed to the foregoing
procedures in order to facilitate transfers of interests in the global notes
among participants of The Depositary Trust Company, it is under no obligation to
perform or continue to perform those procedures, and those procedures may be
discontinued at any time. Neither the trustee nor us will have any
responsibility for the performance by The Depositary Trust Company or its
participants or indirect participants of their respective obligations under the
rules and procedures governing their operations. We and the trustee may
conclusively rely on, and shall be protected in relying on, instructions from
The Depositary Trust Company for all purposes.
CERTIFICATED NOTES
Securities that are originally issued to institutional "accredited
investors" who are not qualified institutional buyers will be sold in
certificated form.
The global notes shall be exchangeable for corresponding certificated
securities registered in the name of persons other than The Depositary Trust
Company or its nominee only if:
o The Depositary Trust Company (a) notifies us that it is unwilling or
unable to continue as the depositary for any of the global notes or
(b) at any time ceases to be a clearing agency registered under the
exchange act,
o there shall have occurred and be continuing an event of default (as
defined in the indenture) with respect to the applicable securities or
o We execute and deliver to the trustee an order that the global notes
shall be so exchangeable.
Any certificated securities will be issued only in fully registered form
and shall be issued without coupons in minimum denominations of $1,000 and in
integral multiples of $1,000. Any certificated securities so issued will be
registered in the names and in the denominations as The Depositary Trust Company
shall request.
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THE CLEARING SYSTEM
The Depositary Trust Company has advised us as follows: The Depositary
Trust Company 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. The Depositary Trust Company was created to hold securities of
institutions that have accounts with The Depositary Trust Company
("participants") and to facilitate the clearance and settlement of securities
transactions among it participants in such securities through electronic
book-entry changes in accounts of participants, thereby eliminating the need for
physical movement of securities certificates. The Depositary Trust Company's
participants include securities brokers and dealers (which may include the
initial purchasers of the old notes), bank, trust companies, clearing
corporations and certain other organizations. Access to The Depositary Trust
Company's book-entry system is also available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, whether directly or indirectly.
LACK OF PUBLIC MARKET
The exchange notes are new issues of securities for which there is
currently no active trading market. If any exchange notes are traded after their
initial issuance, they may trade at a discount from their face value, depending
upon prevailing interest rates, the market for similar securities and other
factors, including general economic conditions and our financial condition,
performance and prospects.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary describes certain United States federal income tax
consequences of the purchase, ownership and disposition of the exchange notes as
of the date of this prospectus and represents the opinion of Thelen Reid &
Priest LLP, our counsel, insofar as it relates to matters of law or legal
conclusions. Except where noted, it deals only with exchange notes held as
capital assets within the meaning of Section 1221 of the Internal Revenue Code
of 1986, as amended, and does not deal with special situations, such as those of
dealers in securities or currencies, banks, financial institutions, tax-exempt
organizations, life insurance companies, real estate investment trusts,
regulated investment companies, persons holding exchange notes as a part of a
hedging or conversion transaction or a straddle, persons who mark to market
their securities, United States Holders (as defined below) whose functional
currency is not the United States dollar, or persons who are not United States
Holders. In addition, this discussion does not address the tax consequences to
persons who purchase exchange notes other than pursuant to their initial
issuance and distribution. It also does not include any description of any
alternative minimum tax consequences or of the tax laws of any state, local or
foreign jurisdiction. Furthermore, the discussion below is based upon the
provisions of the Internal Revenue Code and income tax regulations,
administrative rulings and judicial decisions under the Internal Revenue Code as
of the date of this prospectus, and those authorities may be repealed, revoked
or modified at any time, with either forward-looking or retroactive effect, so
as to result in United States federal income tax consequences different from
those discussed below.
PROSPECTIVE PURCHASERS OF EXCHANGE NOTES ARE ADVISED TO CONSULT WITH THEIR TAX
ADVISORS AS TO THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF EXCHANGE NOTES IN LIGHT OF THEIR
PARTICULAR CIRCUMSTANCES, AS WELL AS THE EFFECTS OF ANY STATE, LOCAL, FOREIGN OR
OTHER TAX LAWS.
As used herein, a "United States Holder" means a beneficial owner of an
exchange note that is, for United States federal income tax purposes, a citizen
or resident of the United States, a corporation or other entity treated as a
corporation for United States federal income tax purposes, created or organized
in or under the laws of the United States or any political subdivision thereof,
an estate, the income of which is subject to United States federal income
taxation regardless of its source, or a trust, the administration of which is
subject to the primary supervision of a court within the United States and for
which one or more United States persons have the authority to control all
substantial decisions. As used herein, the term "Non-United States Holder" means
a beneficial owner of an exchange note that is not a United States Holder.
28
UNITED STATES HOLDERS
Payments of Interest
Stated interest on an exchange note will generally be taxable to a United
States Holder as ordinary income at the time it is paid or accrued in accordance
with the United States Holder's method of accounting for tax purposes.
Sale, Exchange and Redemption of the Exchange Notes
Upon the sale, exchange, redemption or other taxable disposition of
exchange notes, a United States Holder will recognize gain or loss equal to the
difference between the amount realized upon the disposition, other than amounts
attributable to accrued but unpaid interest, and the holder's adjusted tax basis
in the exchange notes. A United States Holder's adjusted tax basis will be, in
general, its initial purchase price for the exchange notes, net of accrued
interest. Such gain or loss will be capital gain or loss and will be long-term
capital gain or loss if at the time of the disposition, the exchange notes have
been held for more than one year. Under current law, the deductibility of
capital losses is subject to limitations. The net capital gains of individuals
are taxed at lower rates than ordinary income.
Neither the exchange of old notes for exchange notes in the exchange offer
nor the SEC registration of exchange notes will constitute a taxable exchange of
the exchange notes for United States federal income tax purposes. Thus, there
will be no material United States federal income tax consequences to a United
States Holder as a result of (i) exchanging exchange notes for exchange notes in
the exchange offer or (ii) the SEC registration of exchange notes. Accordingly,
the holder of exchange notes received pursuant to the exchange offer will have
the same adjusted tax basis and holding period in its exchange notes as such
holder had in its original notes immediately prior to the exchange.
NON-UNITED STATES HOLDERS
Payments of Interest
Subject to the discussion below concerning backup withholding, no
withholding of United States federal income tax will be required with respect to
the payment by us or any paying agent of principal or interest on an exchange
note held by a Non-United States Holder, provided that the beneficial owner (1)
does not actually or constructively own 10% or more of the total combined voting
power of all classes of our stock entitled to vote within the meaning of Section
871(h)(3) of the Internal Revenue Code and the regulations thereunder; (2) is
not a controlled foreign corporation related, directly or indirectly, to us
through stock ownership; (3) is not a bank whose receipt of interest on an
exchange note is described in Section 881(c)(3)(A) of the Internal Revenue Code;
and (4) satisfies the statement requirement, described generally below, set
forth in Section 871(h) and Section 881(c) of the Internal Revenue Code and the
regulations thereunder.
To satisfy the requirement referred to in clause (4) above, the beneficial
owner of an exchange note, or a financial institution holding the exchange note
on behalf of such owner, must provide, in accordance with specified procedures,
us or our paying agent with a statement to the effect that the beneficial owner
is not a United States person. These requirements will be met if (1) the
beneficial owner provides its name and address, and certifies, under penalties
of perjury, that it is not a United States person, which certification should be
made on an IRS Form W-8BEN; or (2) a financial institution holding the exchange
note on behalf of the beneficial owner certifies, under penalties of perjury,
that such statement has been received by it and furnishes a paying agent with a
copy thereof.
In the event that any of the above requirements is not satisfied, we will
nonetheless not withhold United States federal income tax on interest paid to a
Non-United States Holder if we receive IRS Form W-8ECI from the Non-United
States Holder, establishing that such income is effectively connected with the
conduct of a trade or business in the United States, unless we have knowledge to
the contrary. Interest paid to a Non-United States Holder that is effectively
connected with the conduct by the holder of a trade or business in the United
States is generally taxed at the graduated rates that are applicable to United
States persons. In the case of a Non-United States Holder that is a corporation,
such effectively connected income may also be subject to the United States
29
federal branch profits tax, which is generally imposed on a foreign corporation
on the deemed repatriation from the United States of effectively connected
earnings and profits, at a 30% rate, unless the rate is reduced or eliminated by
an applicable income tax treaty and the Non-United States Holder is a qualified
resident of the treaty country.
Sale, Exchange and Redemption of the Exchange Notes
A Non-United States Holder generally will not be subject to United States
federal income tax with respect to gain recognized on a sale, exchange or
redemption of an exchange note unless (1) the gain is effectively connected with
a trade or business of the Non-United States Holder in the United States; (2) in
the case of a Non-United States Holder who is an individual and holds the
exchange note as a capital asset, such holder is present in the United States
for 183 or more days in the taxable year of the sale or other disposition and
certain other conditions are met; or (3) the Non-United States Holder is subject
to tax pursuant to certain provisions of the Internal Revenue Code applicable to
United States expatriates. However, any amount attributable to accrued but
unpaid interest on the exchange note will be treated in the same manner as
payments of interest made to such Non-United States Holder, as described above.
Gain derived by a Non-United States Holder from the sale or other
disposition of an exchange note that is effectively connected with the conduct
by the holder of a trade or business in the United States is generally taxed at
the graduated rates that are applicable to United States persons. In the case of
a Non-United States Holder that is a corporation, such effectively connected
income may also be subject to the United States federal branch profits tax. If
any individual Non-United States Holder falls under clause (2) of the preceding
paragraph, such holder will be subject to a flat 30% tax on the gain derived
from the sale or other disposition, which may be offset by certain United States
source capital losses recognized within the same taxable year as such sale or
other disposition.
Neither the exchange of old notes for exchange notes in the exchange offer
nor the SEC registration of exchange notes will constitute a taxable exchange of
the exchange notes for United States federal income tax purposes. Thus, there
will be no material United States federal income tax consequences to a
Non-United States Holder as a result of (i) exchanging exchange notes for
exchange notes in the exchange offer or (ii) the SEC registration of exchange
notes. Accordingly, the holder of exchange notes received pursuant to the
exchange offer will have the same adjusted tax basis and holding period in its
exchange notes as such holder had in its original notes immediately prior to the
exchange.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Payments of interest on, or the proceeds from the sale, retirement or other
disposition of exchange notes are subject to information reporting unless the
United States Holder establishes an exemption.
Payments of the interest on, or the proceeds from the sale, retirement, or
other disposition of the exchange notes may be subject to "backup withholding"
tax of 30.5% (subject to phase-in reductions) if the United States Holder, among
other things, (1) fails to furnish his or her social security number or other
taxpayer identification number ("TIN") to the payor responsible for backup
withholding (for example, the United States Holder's securities broker) on Form
W-9 or a substantially similar form signed under penalty of perjury, (2)
furnishes such payor an incorrect TIN, (3) fails to provide such payor with a
certified statement, signed under penalties of perjury, that the TIN provided to
the payor is correct and that the United States Holder is not subject to backup
withholding or (4) fails to properly report interest and dividends on his or her
tax return. Backup withholding does not apply to certain payments made to exempt
recipients, such as corporations.
Non-United States Holders will not be subject to information reporting or
backup withholding on payments made by us or our paying agent if a statement
described in clause (4) under "Non-United States Holders-Payments of Interest"
has been received and the payor has no actual knowledge that the beneficial
owner is a United States person.
In addition, backup withholding and information reporting will not apply to
payments of principal or interest on the exchange notes paid or collected by a
foreign office of a custodian, nominee or other foreign agent on behalf of a
Non-United States Holder, or if a foreign office of a broker pays the proceeds
of the sale of exchange notes to a Non-United States Holder. If, however, such
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nominee, custodian, agent or broker is, for United States federal income tax
purposes, a United States person, a controlled foreign corporation or a foreign
person that derives 50% or more of its gross income for certain periods from the
conduct of a U.S. trade or business, or a foreign partnership with certain
connections to the United States, such payments will not be subject to backup
withholding (unless the payor has actual knowledge that the payee is a United
States person) but will be subject to information reporting unless (i) such
custodian, nominee, agent or broker has documentary evidence that the beneficial
owner is not a United States person and certain other conditions are met or (ii)
the beneficial owner otherwise establishes an exemption.
Payments of principal or interest on the exchange notes paid to a
Non-United States Holder by a United States office of a custodian, nominee or
agent, or payment of the proceeds of a sale of exchange notes by the United
States office of a broker will be subject to backup withholding and information
reporting unless (i) the Non-United States Holder provides the statement
described above that such holder is not a United States person and the payor
does not have actual knowledge to the contrary or (ii) the beneficial owner
otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will be allowed as
a credit or a refund against such holder's United States federal income tax
liability, if certain required information is provided to the Internal Revenue
Service.
ERISA MATTERS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain requirements upon employee benefit plans subject thereto ("ERISA
Plans") and on those persons who are fiduciaries with respect to ERISA Plans. In
particular, investments by ERISA Plans are subject to ERISA's general fiduciary
requirements, including the requirements of investment prudence and
diversification and the requirement that an ERISA Plan's investments be made in
accordance with its governing documents. A fiduciary of an ERISA Plan should
consider the fiduciary standards under ERISA in the context of the particular
circumstances of the investing ERISA Plan before authorizing an investment in
the exchange notes. Such fiduciary should determine whether an investment in the
exchange notes satisfies ERISA's diversification and prudence requirements and
whether the investment is in accordance with the documents and instruments
governing the plan.
In addition, ERISA and the Internal Revenue Code prohibit a wide range of
transactions ("Prohibited Transactions") involving ERISA Plans or other employee
benefit plans that are not subject to ERISA but that are subject to Section 4975
of the Internal Revenue Code, such as individual retirement accounts (together
with ERISA Plans, "Plans") and persons who have certain specified relationships
to the Plan ("parties in interest," within the meaning of ERISA, and
"disqualified persons," within the meaning of the Internal Revenue Code). If
engaged in by a Plan, such transactions may require "correction" and may cause a
Plan fiduciary to incur certain liabilities and the parties in interest or
disqualified persons to be subject to excise taxes, unless a statutory or
administrative exemption is available.
Certain statutory or administrative exemptions (each, a "Prohibited
Transaction Class Exemption" or "PTCE") may be available under ERISA to exempt
the purchase, holding and/or disposition of any exchange notes by a Plan.
Included among the administrative exemptions are: PTCE 90-1, regarding
investments by insurance company pooled separate accounts; PTCE 91-38, regarding
investments by bank collective investment funds; PTCE 84-14, regarding
transactions effected by a qualified professional asset manager; PTCE 95-60,
regarding investments by insurance company general accounts; and PTCE 96-23,
regarding investments by an in-house professional asset manager. Certain of the
exemptions, however, do not afford relief from the prohibition on self-dealing
contained in Section 406(b) of ERISA and Section 4975(c)(1)(E)-(F) of the
Internal Revenue Code. In addition, there can be no assurance that any of these
administrative exemptions will be available with respect to any particular
transaction involving the exchange notes. In addition to the Prohibited
Transaction Class Exemptions, an individual exemption may apply to the initial
purchase, holding and secondary market resales of exchange notes by a Plan,
provided certain specified conditions are met.
Governmental plans and certain church plans (each as defined under ERISA)
are not subject to the prohibited transaction rules of ERISA or the Internal
Revenue Code. Such plans, however, may be subject to federal, state or local
laws or regulations that may affect their investment in the exchange notes. Any
fiduciary of such a governmental or church plan considering a purchase of the
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exchange notes must determine the need for, and the availability, if necessary,
of any exemptive relief under any such laws or regulations.
The foregoing discussion is general in nature and is not intended to be all
inclusive. Any fiduciary of an ERISA Plan, a Plan, a governmental plan or a
church plan considering the purchase and holding of the exchange notes should
consult with its legal advisors regarding the consequences of such purchase and
holding. By its purchase and acceptance of exchange notes, each holder will be
deemed to have represented and warranted that either (1) no ERISA Plan assets
have been used to purchase such exchange notes, or (2) one or more prohibited
transaction statutory or administrative exemptions applies such that the use of
such ERISA Plan assets to purchase and hold such exchange notes will not
constitute a non-exempt Prohibited Transaction.
EACH ERISA PLAN FIDUCIARY (AND EACH FIDUCIARY FOR A GOVERNMENTAL OR CHURCH
PLAN SUBJECT TO RULES SIMILAR TO THOSE IMPOSED ON ERISA PLANS UNDER ERISA)
SHOULD CONSULT WITH ITS LEGAL ADVISOR CONCERNING AN INVESTMENT IN ANY OF THE
EXCHANGE NOTES.
PLAN OF DISTRIBUTION
As more fully discussed in the section of this prospectus entitled "THE
EXCHANGE OFFER - Resale of Exchange Notes", based on an interpretation by the
SEC's staff contained in several no-action letters issued to third parties, we
believe that the exchange notes issued pursuant to the exchange offer may be
offered for resale, resold and otherwise transferred after the exchange offer by
any holder of exchange notes (other than a holder which is our "affiliate"
within the meaning of Rule 405 under the Securities Act) without compliance with
the registration and prospectus delivery provisions of the Securities Act, if
such holder:
o acquires the exchange notes in the ordinary course of his or her
business; and
o does not intend to participate, and has no arrangement with any person
to participate, in a distribution of the exchange notes.
Each participating broker-dealer in connection with the exchange offer must
acknowledge that it will deliver a prospectus in connection with any resale of
exchange notes. This prospectus, as it may be amended or supplemented from time
to time, may be used by a participating broker-dealer in connection with resales
of exchange notes received in exchange for old notes where such old notes were
acquired as a result of market-making activities or other trading activities. We
have agreed that we will make this prospectus, as amended or supplemented,
available to any participating broker-dealer for use in connection with any such
resale and participating broker-dealers shall be authorized to deliver this
prospectus for a period ending upon the earlier of the expiration of the 90th
day after the exchange offer has been completed or such time as such
broker-dealers no longer own any registrable securities, which we define in the
registration rights agreement.
We will not receive any proceeds from any sales of the exchange notes by
participating broker-dealers. Exchange notes received by participating
broker-dealers for their own account pursuant to the exchange offer may be sold
from time to time, in one or more transactions in the over-the-counter market,
in negotiated transactions, through the writing of options on the exchange notes
or a combination of such methods of resale, at market prices prevailing at the
time of resale, at prices related to the prevailing market prices or at
negotiated prices. Any resale may be made directly to purchasers or to or
through brokers or dealers who may receive compensation in the form of
commissions or concessions from any participating broker-dealer that resells the
exchange notes that were received by it for its own account pursuant to the
exchange offer. Any broker or dealer that participates in a distribution of the
exchange notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any resale of exchange notes and any omissions
or concessions received by any persons may be deemed to be underwriting
compensation under the Securities Act. The letter of transmittal states that by
acknowledging that it will deliver and by delivering a prospectus, a
participating broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
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We will promptly send additional copies of this prospectus and any
amendment or supplement to this prospectus to any participating broker-dealer
that requests such documents in the letter of transmittal. See "The Exchange
Offer."
LEGAL MATTERS
The validity of the exchange notes will be passed upon for us by Stephen F.
Koziar, Jr., Group Vice President and our General Counsel and by Thelen Reid &
Priest LLP, New York, New York. In addition, matters of federal income tax law
and federal securities law will be passed upon by Thelen Reid & Priest LLP. In
giving these opinions, as to matters of Ohio law, Thelen Reid & Priest LLP may
rely on the opinion of Mr. Koziar and, as to matters of New York law, Mr. Koziar
may rely on the opinion of Thelen Reid & Priest LLP.
EXPERTS
Our consolidated financial statements incorporated in this prospectus by
reference to the 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 the authority of said firm as experts in
auditing and accounting.
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