<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 29, 1997
REGISTRATION NOS. 333-16307 AND 333-16307-01
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 1 ON FORM S-3
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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VANSTAR CORPORATION
VANSTAR FINANCING TRUST
(Exact name of registrant as specified in its charter)
DELAWARE 94-2376431
DELAWARE 51-6504920
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
H. CHRISTOPHER COVINGTON, ESQ. COPY TO:
SENIOR VICE PRESIDENT, STANLEY R. HULLER, ESQ.
GENERAL COUNSEL AND SECRETARY ARTER & HADDEN
1100 ABERNATHY ROAD 1100 ABERNATHY ROAD 1717 MAIN STREET
BUILDING 500, SUITE 1200 BUILDING 500, SUITE 1200 SUITE 4100
ATLANTA, GEORGIA 30328 ATLANTA, GEORGIA 30328 DALLAS, TEXAS 75201-4605
(770) 522-4700 (770) 522-4700 (214) 761-2100
(Name, address, including (Address, including zip
zip code, and telephone code, and telephone
number, including area number, including area code,
code, of agent for service) of registrant's principal
executive offices)
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box: / /
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, as amended (the "Securities Act"), other than securities offered
only in connection with dividend or interest reinvestment plans, check the
following box: /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective Registration Statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
4,025,000 TRUST CONVERTIBLE PREFERRED SECURITIES
VANSTAR FINANCING TRUST
6 3/4% TRUST CONVERTIBLE PREFERRED SECURITIES
(LIQUIDATION AMOUNT $50 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY,
AND CONVERTIBLE INTO COMMON STOCK OF,
VANSTAR CORPORATION
-------------------------------
The 6 3/4% Trust Convertible Securities (the "Preferred Securities")
offered hereby represent preferred undivided beneficial interests in the
assets of Vanstar Financing Trust, a statutory business trust formed under
the laws of the State of Delaware ("Vanstar Financing Trust" or the "Trust").
3,500,000 Preferred Securities were issued and sold (the "Original Offering")
on October 2, 1996 (the "Original Offering Date") and 525,000 Preferred
Securities were issued and sold (the "Over-Allotment Offering") on October
28, 1996 by the Trust to the Initial Purchasers (as defined herein) and were
simultaneously sold by the Initial Purchasers in transactions exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), in the United States to persons reasonably believed by the
Initial Purchasers of the Preferred Securities to be "qualified institutional
buyers" (as defined in Rule 144A under the Securities Act), to institutional
"accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under
the Securities Act) and outside the United States to non-U.S. persons in
offshore transactions in reliance on Regulation S under the Securities Act.
Vanstar Corporation, a Delaware corporation (the "Company" or "Vanstar"),
owns all of the common securities issued by the Trust (the "Common
Securities") which together with the Preferred Securities represent undivided
beneficial interests in the assets of the Trust (the Common Securities and
the Preferred Securities are hereinafter collectively referred to as the
"Trust Securities"). The Trust exists for the sole purpose of issuing the
Trust Securities and investing the proceeds thereof in an equivalent
principal amount of 6 3/4% Convertible Subordinated Debentures due 2016 (the
"Convertible Debentures") issued by the Company. Upon an event of default
under the Declaration (as defined herein), the holders of the Preferred
Securities will have a preference over the holders of the Common Securities
with respect to payments in respect of distributions and payments upon
redemption, liquidation and otherwise.
The Preferred Securities, the Convertible Debentures, the Vanstar common
stock, par value $.001 per share (the "Company Common Stock") issuable upon
conversion thereof and the associated Guarantee (as defined herein) (to the
extent offered pursuant to this Prospectus, collectively, the "Offered
Securities") may be offered and sold from time to time by the holders named
in this Prospectus or in any supplement to this Prospectus (a "Prospectus
Supplement") or by their transferees, pledgees, donees or successors pursuant
to this Prospectus. The Offered Securities may be sold by the Selling Holders
(as defined herein) from time to time directly to purchasers or through
agents, underwriters or dealers. See "Plan of Distribution" and "Selling
Holders." If required, the names of any such agents or underwriters involved
in the sale of the Offered Securities and the applicable agent's commission,
dealer's purchase price or underwriter's discount, if any, will be set forth
in a Prospectus Supplement. The Selling Holders will receive all of the net
proceeds from the sale of the Offered Securities and, in the event of an
underwritten offering of the Offered Securities, will pay all underwriting
discounts, selling commissions and transfer taxes, if any, applicable to any
such sale. The Company is responsible for payment of all other expenses
incident to the offer and sale of the Offered Securities. The Selling Holders
and any broker/dealers, agents or underwriters which participate in the
distribution of the Offered Securities may be deemed to be underwriters
within the meaning of the Securities Act, and any commission received by them
in a profit on the resale of the Offered Securities purchased by them may be
deemed to be underwriting commissions or discounts under the Securities Act.
See "Plan of Distribution" for a description of indemnification arrangements.
(CONTINUED ON FOLLOWING PAGE)
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THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 9.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS AUGUST ___, 1997.
<PAGE>
(CONTINUED FROM FRONT COVER)
Each Preferred Security is convertible at the option of the holder
thereof into 1.739 shares of Company Common Stock, subject to adjustment in
certain circumstances. The Company Common Stock is listed on the New York
Stock Exchange (the "NYSE") under the symbol "VST." On August 27, 1997, the
closing price of the Company Common Stock on the NYSE Composite Tape was
$16.38 per share. The Preferred Securities have been designated for trading
on the PORTAL Market since the Original Offering Date. However, Preferred
Securities resold pursuant to this Prospectus will no longer be eligible for
trading in such PORTAL Market. The Company and the Trust do not currently
intend to list the Preferred Securities resold pursuant to this Prospectus on
any securities exchange or to seek approval for quotation through any
automated quotation system. Accordingly, there can be no assurance as to the
development or liquidity of any market for the Preferred Securities resold
under this Prospectus.
Holders of the Preferred Securities are entitled to receive cumulative
cash distributions at an annual rate of 6 3/4% of the liquidation amount of
$50 per Preferred Security, accruing from the Original Offering Date, and
payable quarterly in arrears on each January 1, April 1, July 1 and October 1
(or the first business day thereafter if a payment date falls on a holiday).
See "Description of the Preferred Securities - Distributions." The payment of
distributions out of moneys held by the Trust and payments on liquidation of
the Trust or the redemption of Preferred Securities, as described below, are
guaranteed by the Company (the "Guarantee") to the extent the Trust has funds
available therefor as described under "Description of the Guarantee." The
Guarantee, when taken together with the Company's obligations under the
Indenture (as defined herein) pursuant to which the Convertible Debentures
were issued and its obligations under the Declaration, including its
obligations to pay costs, expenses, debts and liabilities of the Trust (other
than with respect to the Trust Securities), provides a full and unconditional
guarantee of amounts due on the Preferred Securities. The Company's
obligations under the Guarantee rank (i) subordinate and junior to all other
liabilities of the Company except any liabilities that may be PARI PASSU by
their terms, (ii) PARI PASSU in right of payment with the most senior
preferred stock issued from time to time by the Company and with any
guarantee now or hereafter entered into by the Company in respect of any
preferred or preference stock or any preferred securities of any affiliate of
the Company and (iii) senior to the Company Common Stock. See "Description of
the Guarantee." The obligations of the Company under the Convertible
Debentures are subordinate and junior in right of payment to Senior
Indebtedness (as defined herein) of the Company, which aggregated
approximately $206 million at July 31, 1997. In addition, the Company's
obligations under the Guarantee and the Convertible Debentures are
effectively subordinated to all liabilities of its subsidiaries. See
"Description of the Convertible Debentures - Subordination."
The distribution rate and the distribution payment dates and other
payment dates for the Preferred Securities correspond to the interest rate
and interest payment dates and other payment dates, respectively, for the
Convertible Debentures, which are and will continue to be the sole assets of
the Trust. If the Company fails to make principal or interest payments on the
Convertible Debentures, the Trust will not have sufficient funds to make
distributions on the Preferred Securities, in which event the Guarantee will
not apply to such distributions until the Trust has sufficient funds
available therefor.
The Company has the right to defer payments of interest on the
Convertible Debentures at any time for up to 20 consecutive quarters (each,
an "Extension Period"), but not beyond the maturity of the Convertible
Debentures. If interest payments are so deferred, distributions on the
Preferred Securities also will be deferred. During any Extension Period,
distributions will continue to accrue with interest thereon (to the extent
permitted by applicable law) at a rate of 6 3/4% per annum compounded
quarterly. During any Extension Period, holders of Preferred Securities will
be required to include such deferred interest in their gross income for
United States Federal income tax purposes in advance of receipt of the cash
distributions with respect to such deferred interest payments. Moreover, if a
holder of Preferred Securities converts its Preferred Securities into Company
Common Stock during any Extension Period, the holder will not receive any
cash related to the deferred distributions. There could be multiple Extension
Periods of varying lengths throughout the term of the Convertible Debentures
(but distributions would continue to accumulate quarterly and accrue interest
until the end of any such Extension Period). See "Risk Factors - Option to
Extend Interest Payment Period; Tax Consequences," "Description of the
Preferred Securities - Distributions," "Description of the Convertible
Debentures - Option to Extend Interest Payment Period" and "Certain United
States Federal Income Tax Considerations." The Company has not previously
exercised, and does not have any current intention of exercising, its right
to defer payments of interest by extending the interest payment period on the
Convertible Debentures.
The Convertible Debentures are redeemable by the Company, in whole or in
part, from time to time, on or after October 5, 1999 at the redemption prices
set forth herein. The Convertible Debentures may also be redeemed in certain
circumstances upon the occurrence of a Tax Event (as defined herein). If the
Company redeems the Convertible
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Debentures, the Trust must redeem on a PRO RATA basis Trust Securities having
an aggregate liquidation amount equal to the aggregate principal amount of
the Convertible Debentures so redeemed at a redemption price corresponding to
the redemption price of the Convertible Debentures plus accrued and unpaid
distributions thereon to the date fixed for redemption. See "Description of
the Preferred Securities - Redemption." The Preferred Securities will be
redeemed upon the maturity of the Convertible Debentures. In addition, the
Trust will be dissolved, except in certain limited circumstances, upon the
occurrence of a Tax Event arising from a change in law or a change in legal
interpretation regarding tax matters. In certain circumstances involving a
Tax Event, the Company will have the right to redeem the Convertible
Debentures. The Trust will also be dissolved upon the occurrence of an
Investment Company Event (as defined herein). Upon dissolution of the Trust,
the Convertible Debentures will be distributed to the holders of the Trust
Securities, on a pro rata basis, in lieu of any cash distribution. If the
Convertible Debentures are distributed to the holders of the Trust
Securities, the Company will use its best efforts to cause the Convertible
Debentures to be listed on the NYSE or such other national securities
exchange or similar organization on which the Preferred Securities are then
listed or quoted. See "Description of the Preferred Securities - Special
Event Redemption or Distribution" and "Description of the Convertible
Debentures."
Upon the liquidation, winding up or termination of the Trust, the holders
of the Preferred Securities will be entitled to receive for each Preferred
Security a liquidation amount of $50 plus accrued and unpaid distributions
thereon (including interest thereon) to the date of payment, unless, in
connection with such dissolution, Convertible Debentures are distributed to
the holders of the Preferred Securities. See "Description of the Preferred
Securities - Liquidation Distribution Upon Dissolution."
3
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy and information statements and
other information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy and information statements and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's Regional Offices
located at Seven World Trade Center, Suite 1300, New York, New York 10048 and
at the Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Reports, proxy and information statements and other
information filed electronically by the Company with the Commission are
available at the Commission's Web site at http://www.sec.gov. In addition,
copies of such material can be obtained from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Such reports, proxy and information statements and other
information concerning the Company may also be inspected at the offices of
the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a Registration Statement on
Form S-3 (together with all amendments and exhibits thereto, the
"Registration Statement") under the Securities Act with respect to the
Offered Securities. This Prospectus, which constitutes part of the
Registration Statement, does not contain all of the information set forth in
the Registration Statement, a certain portion of which has been omitted as
permitted by the Rules and Regulations of the Commission. For further
information with respect to the Company and the Offered Securities, reference
is made to the Registration Statement, which is on file at the offices of the
Commission and may be obtained upon payment of the fee prescribed by the
Commission, or may be examined without charge at the offices of the
Commission or at the Commission's Web site. Statements contained in this
Prospectus as to the contents of any documents referred to are not
necessarily complete, and in each such instance, are qualified in all
respects by reference to the applicable documents filed with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission under
the Exchange Act are hereby incorporated by reference into this Prospectus:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
April 30, 1997; and
(2) The description of the Company Common Stock contained in the Company's
Registration Statement on Form 8-A filed with the Commission on
February 8, 1996 and in any amendments or reports filed for the
purpose of updating such description.
All reports and other documents filed by the Company with the Commission
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the
date of this Prospectus and prior to the termination of the offering of the
Offered Securities made hereby shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing of such
reports and documents. Any statement contained herein or in a document
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus and the Registration Statement to the extent
that a subsequently filed document which also is, or is deemed to be,
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus or the
Registration Statement.
Upon written or oral request, the Company will provide without charge to
each person to whom a copy of this Prospectus is delivered a copy of any and
all of the documents incorporated herein by reference (other than exhibits to
such documents, unless such exhibits are specifically incorporated by
reference into this Prospectus or any document incorporated by reference
herein). Requests should be directed to Vanstar Corporation, Building 500,
Suite 1200, 1100 Abernathy Road, Atlanta, Georgia 30328, Attention: H.
Christopher Covington, Esq., Senior Vice President, General Counsel and
Secretary, telephone (770) 522-4700.
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<PAGE>
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
Certain of the matters discussed in this Prospectus include
forward-looking statements that involve risks and uncertainties. Among the
risks and uncertainties to which the Company is subject are the risks
inherent in the Company's substantial indebtedness, the fact that the Company
has experienced significant fluctuations in revenues and operating results,
the risks associated with managing the Company's inventory and service
offerings in light of product life cycles and technological change, the risks
associated with implementing management responses to changing technology and
market conditions, the Company's relationship with its significant customers,
intense price competition in the Company's markets and the Company's
dependence upon its key vendors. As a result, the actual results realized by
the Company could differ materially from the statements made herein. Words or
phrases such as "will continue," "anticipate," "expect," "believe," "intend,"
"estimate," "project," "plan" or similar expressions are intended to identify
forward-looking statements. Potential investors in this offering are
cautioned not to place undue reliance on the forward-looking statements made
in this Prospectus, which speak only as of the date hereof.
-------------------------------
This Prospectus includes product names, trade names and trademarks of the
Company and its subsidiaries and of other companies.
-3-
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION, INCLUDING "RISK FACTORS" AND THE CONSOLIDATED FINANCIAL
STATEMENTS AND NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS OR
INCORPORATED HEREIN BY REFERENCE. THIS PROSPECTUS CONTAINS FORWARD-LOOKING
STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL
RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE
FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE
INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS." SEE "SAFE
HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995."
THE COMPANY
The Company is a leading provider of services and products designed to
build, manage and enhance personal computer ("PC") network infrastructures
for Fortune 1000 companies and other large enterprises. The Company provides
customized, integrated solutions for its customers' network infrastructure
needs by combining a comprehensive offering of value-added services with its
expertise in sourcing and distributing PC hardware, network products,
computer peripherals and software from many vendors. The Company's services
are organized around an integrated model called "Life Cycle Management." Life
Cycle Management includes design and consulting, acquisition and deployment,
operation and support, and enhancement and migration services to support the
customers' PC network infrastructure throughout its life cycle. Service
delivery is optimized through the application of automated systems, highly
trained technical personnel and proven, repeatable processes to support the
customer's network infrastructure throughout its entire life cycle.
The principal executive offices of the Company are located at 1100
Abernathy Road, Building 500, Suite 1200, Atlanta, Georgia 30328, and its
telephone number is (770) 522-4700.
THE OFFERING
The Issuer Vanstar Financing Trust, a Delaware statutory business
trust. The sole asset of the Trust is $207,474,200
aggregate principal amount of the 6 3/4% Convertible
Subordinated Debentures due 2016.
Securities Offered 4,025,000 6 3/4% Trust Convertible Preferred
Securities, 6 3/4% Convertible Subordinated Debentures,
Company Common Stock issuable upon conversion thereof,
and the associated Guarantee.
Selling Holders The Preferred Securities were originally issued by the
Trust and sold by the Initial Purchasers in
transactions exempt from registration under the
Securities Act to (i) "qualified institutional buyers"
pursuant to Rule 144A under the Securities Act, (ii)
institutional "accredited investors" pursuant to
Rule 501(a)(1), (2), (3) or (7) under the Securities
Act and (iii) non-U.S. persons in offshore transactions
under Regulation S promulgated under the Securities
Act. These purchasers or their transferees, pledgees,
donees or successors may from time to time offer and
sell the Offered Securities pursuant to this
Prospectus. See "Selling Holders." Prior to a sale of
any of the Offered Securities held by a Selling Holder
pursuant to this Prospectus, those Offered Securities
will be eligible for trading in the PORTAL Market.
Offered Securities resold pursuant to this Prospectus
will no longer be eligible for trading in the PORTAL
Market.
Distributions Distributions on the Preferred Securities have accrued
from the Original Offering Date and are payable at the
annual rate of 6 3/4% of the liquidation preference of
$50 per Preferred Security. Subject to the distribution
deferral provisions described below, distributions are
payable quarterly in arrears on each January 1,
April 1, July 1 and October 1 (or the first business
day thereafter if a payment date falls on a holiday).
Corporate holders of Preferred Securities will not be
entitled to a dividends-received deduction.
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<PAGE>
Option to Extend The ability of the Trust to pay distributions on the
Distribution Payment Preferred Securities is solely dependent on its receipt
Period of interest payments on the Convertible Debentures. The
Company has the right at any time, and from time to
time, to defer the interest payments due on the
Convertible Debentures for successive periods not
exceeding 20 consecutive quarters for each such
Extension Period. As a consequence of such extension,
quarterly distributions on the Preferred Securities
would be deferred by the Trust (but would continue to
accumulate quarterly and would accrue interest) until
the end of any such Extension Period. The Company will
give written notice of deferral of an interest payment
to the Trust, and the Trust will give notice thereof to
the holders of the Preferred Securities. See "Risk
Factors - Option to Extend Interest Payment Period; Tax
Consequences," "Description of the Preferred
Securities - Distributions" and "Description of the
Convertible Debentures - Option to Extend Interest
Payment Period." If an extension of an interest payment
occurs, the holders of the Preferred Securities will
continue to accrue income for United States Federal
income tax purposes in advance of any corresponding
cash distribution. Moreover, if a holder of Preferred
Securities converts its Preferred Securities into
Company Common Stock during an Extension Period, the
holder will not receive any cash related to the
deferred distributions. See "Risk Factors - Option to
Extend Interest Payment Period; Tax Consequences" and
"Certain United States Federal Income Tax
Considerations - Potential Extension of Interest
Payment Period and Original Issue Discount."
Rights Upon Deferral During any Extension Period, interest on the
of Distributions Convertible Debentures will compound quarterly and
quarterly distributions (compounded quarterly at the
distribution rate) will accrue on the Preferred
Securities. The Company has agreed, among other things,
not to declare or pay any dividend on any class of its
capital stock during any Extension Period, subject to
the right of the Company to pay dividends or
distributions in shares of Company Common Stock on
Company Common Stock or on the preferred stock, par
value $.01 per share, of the Company (the "Preferred
Stock"), and to certain other exceptions. See
"Description of the Convertible Debentures - Option to
Extend Interest Payment Period" and "Description of the
Guarantee - Certain Covenants of the Company."
Conversion into Each Preferred Security is convertible at the option of
Company Common Stock the holder into shares of Company Common Stock, at the
rate of 1.739 shares of Company Common Stock for each
Preferred Security (equivalent to a conversion price of
$28.75 per share of Company Common Stock), subject to
adjustment in certain circumstances. The closing price
of Company Common Stock on the NYSE Composite Tape on
August 27, 1997 was $16.38 per share. In connection
with any conversion of a Preferred Security, the
Conversion Agent (as defined herein) will exchange such
Preferred Security for the appropriate principal amount
of Convertible Debentures and immediately convert such
Convertible Debentures into shares of Company Common
Stock. No fractional shares of Company Common Stock
will be issued as a result of conversion, but in lieu
thereof such fractional interest will be paid by the
Company in cash. See "Description of the Preferred
Securities - Conversion Rights."
Liquidation Amount Upon any liquidation of the Trust, holders will be
entitled to receive $50 per Preferred Security plus an
amount equal to any accrued and unpaid distributions
thereon to the date of payment, unless Convertible
Debentures are distributed to such holders. See
"Description of the Preferred Securities - Liquidation
Distribution Upon Dissolution."
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<PAGE>
Redemption The Convertible Debentures will be redeemable for cash,
at the option of the Company, in whole or in part, from
time to time, on or after October 5, 1999 at the prices
specified herein. Upon any redemption of the
Convertible Debentures, the Preferred Securities will
be redeemed at the applicable redemption price. The
Preferred Securities will not have a stated maturity
date, although they will be subject to mandatory
redemption upon the repayment of the Convertible
Debentures at their stated maturity (October 1, 2016),
upon acceleration, upon earlier redemption or
otherwise. See "Description of the Preferred Securities
- Redemption" and "Description of the Convertible
Debentures - Optional Redemption."
Guarantee The Company has irrevocably guaranteed, to the extent
set forth herein, the payment in full of (i) the
distributions on the Preferred Securities to the extent
of funds of the Trust available therefor, (ii) the
amount payable upon redemption of the Preferred
Securities to the extent of funds of the Trust
available therefor and (iii) generally, the liquidation
preference of the Preferred Securities to the extent of
the assets of the Trust available for distribution to
holders of Preferred Securities. The Guarantee is
unsecured and (i) subordinate and junior to all other
liabilities of the Company except any liabilities that
may be PARI PASSU expressly by their terms, (ii) PARI
PASSU in right of payment with the most senior
preferred stock issued from time to time by the Company
and with any guarantee now or hereafter entered into by
the Company in respect of any preferred or preference
stock or preferred securities of any affiliate of the
Company and (iii) senior to Company Common Stock. Upon
the liquidation, dissolution or winding up of the
Company, its obligations under the Guarantee will rank
junior to all of its other liabilities, except as
aforesaid, and, as a result, funds may not be available
for payment under the Guarantee. See "Risk Factors -
Ranking of Obligations Under Guarantee and Convertible
Debentures," "Description of the Guarantee" and
"Description of the Convertible Debentures -
Subordination."
Voting Rights Generally, holders of the Preferred Securities do not
have any voting rights. See "Description of the
Preferred Securities - Voting Rights."
Tax Event or Investment Upon the occurrence of a Tax Event or an Investment
Company Event Company Event (each as defined herein), except in
Redemption or certain limited circumstances, the Issuer Trustees (as
Distribution defined herein) shall cause the liquidation of the
Trust and cause the Convertible Debentures to be
distributed to the holders of the Preferred Securities.
In certain circumstances involving a Tax Event, the
Company will have the right to redeem the Convertible
Debentures, in whole (but not in part), at the
applicable redemption price plus accrued and unpaid
interest, in lieu of a distribution of the Convertible
Debentures, in which event the Trust Securities will be
redeemed at the applicable redemption price. See
"Description of the Preferred Securities - Special Event
Redemption or Distribution."
Convertible Debentures The Convertible Debentures are unsecured obligations of
the Company. The Convertible Debentures mature on
October 1, 2016, and bear interest at the rate of
6 3/4% per annum, payable quarterly in arrears.
Interest payments may be extended from time to time by
the Company for successive periods not exceeding 20
consecutive quarters for each such period (during which
interest will continue to accrue and compound
quarterly). Prior to the termination of any Extension
Period, the Company may further extend the Extension
Period provided that such Extension Period, together
with all previous and further extensions thereof, may
not exceed 20 consecutive quarters and may not extend
beyond the stated maturity date of the Convertible
Debentures. Upon the termination of any Extension
Period and the payment of all amounts then due, the
Company may commence a new Extension Period, subject to
the preceding
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sentence. No interest shall be due and payable during
an Extension Period until the end of such period.
During an Extension Period, the Company and its
subsidiaries (other than its wholly-owned subsidiaries)
will be prohibited from paying dividends on any class
of their preferred or common stock (except for (i)
dividends or distributions in shares of Company
Common Stock on Company Common Stock or on the
Preferred Stock, (ii) purchases or acquisitions of
shares of Company Common Stock made in connection with
employee benefit plans of the Company or its
subsidiaries in the ordinary course of business or
purchases made from employees or officers pursuant to
employment agreements, subject to certain limitations,
(iii) conversions or exchanges of common stock of one
class into common stock of another class, and
(iv) purchases of fractional interests in shares of the
Company's capital stock pursuant to the conversion or
exchange provisions of any of the Company's securities
being converted or exchanged) and making certain other
restricted payments until quarterly interest payments
are resumed and all accumulated and unpaid interest
(including any interest thereon) on the Convertible
Debentures is made current. The Convertible Debentures
have provisions with respect to interest, optional
redemption and conversion into the Company Common Stock
and certain other terms substantially similar to those
of the Preferred Securities. See "Description of the
Convertible Debentures."
Form of Preferred Beneficial interests in the Preferred Securities resold
Securities pursuant to this Prospectus will be evidenced by, and
transfers thereof will be effected only through,
records maintained by DTC (as defined herein) in a
single, permanent global security bearing a CUSIP
number distinct from the CUSIP number for the Preferred
Securities issued in the Original Offering and the
Over-Allotment Offering. Except under the limited
circumstances described herein, Preferred Securities in
certificated form will not be issued in exchange for an
interest in the global certificate or certificates. In
the event of a transfer of securities that were issued
in fully registered, certificated form, the holder of
such certificates will be required to exchange them for
interests in the global certificates representing the
number of Preferred Securities transferred. See
"Description of the Preferred Securities - Book-Entry
Only Issuance - The Depository Trust Company."
Use of Proceeds The Selling Holders will receive all of the proceeds
from the sale of the Offered Securities. Neither the
Company nor the Trust will receive any proceeds from
the sale of the Offered Securities.
Trading The Company Common Stock is listed on the NYSE under
the symbol "VST." The Preferred Securities are eligible
for trading in the PORTAL Market until resold pursuant
to this Prospectus. The Company and the Trust do not
currently intend to list the Preferred Securities on
any securities exchange or to seek approval for
quotation through any automated quotation system.
Accordingly, there can be no assurance as to the
development or liquidity of any market for the
Preferred Securities resold, as Offered Securities,
under this Prospectus.
Risk Factors An investment in the Offered Securities involves a high
degree of risk. See "Risk Factors" for a discussion of
certain factors that should be considered in evaluating
an investment in the Offered Securities.
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Ratio of Earnings to The following table sets forth the ratio of earnings to
Fixed Charges fixed charges for the Company for the periods
presented. The ratio is computed by dividing (x) the
sum of income before provision for income taxes,
discontinued operations, extraordinary items and fixed
charges, less capitalized interest by (y) fixed
charges. Fixed charges consist of interest on all
indebtedness, amortization of debt expense and discount
or premium related to indebtedness and the interest
element of rental expense. Earnings were inadequate to
cover fixed charges for the fiscal year ended
September 30, 1993 and the seven months ended April 30,
1994 in the amounts of $25.5 million and $11.6 million,
respectively. See "Risk Factors - Substantial
Indebtedness and Fixed Obligations and Dependence on
IBMCC; Interest Rate Sensitivity."
Fiscal Year Ended
Fiscal Year Ended Seven Months April 30,
September 30, Ended ------------------
1993 April 30, 1994 1995 1996 1997
------------------ -------------- ---- ---- ----
-- -- 1.06 1.32 3.33
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RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS AND INCORPORATED
HEREIN BY REFERENCE, THE FOLLOWING RISK FACTORS SHOULD BE CONSIDERED CAREFULLY
IN EVALUATING THE TRUST, THE COMPANY AND THE COMPANY'S BUSINESS BEFORE
PURCHASING THE OFFERED SECURITIES. THIS PROSPECTUS CONTAINS FORWARD-LOOKING
STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS
COULD DIFFER MATERIALLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING
STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT
LIMITED TO, THOSE DISCUSSED BELOW. SEE "SAFE HARBOR STATEMENT UNDER PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995."
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES
The Company has the right under the Indenture to defer interest payments
from time to time on the Convertible Debentures for successive periods not
exceeding 20 consecutive quarterly interest periods during which no interest
shall be due and payable, PROVIDED, that no such Extension Period may extend
beyond the maturity date of the Convertible Debentures. Upon the termination of
any Extension Period and the payment of all amounts then due, the Company may
select a new Extension Period, subject to the requirements described herein. As
a consequence of such extension, quarterly distributions on the Preferred
Securities would be deferred (although such distributions would continue to
accrue with interest thereon compounded quarterly) by the Trust during any such
Extension Period. In the event that this right is exercised, then, during such
period the Company (i) may not, and shall not allow any of its subsidiaries
(other than its wholly-owned subsidiaries) to, declare or pay dividends on, make
distributions with respect to or redeem, purchase or acquire, or make a
liquidation payment with respect to, any of their capital stock (except for
(a) dividends or distributions in shares of Company Common Stock on Company
Common Stock or on the Preferred Stock, (b) purchases or acquisitions of Company
Common Stock made in connection with employee benefit plans of the Company or
its subsidiaries in the ordinary course of business or pursuant to employment
agreements with officers or employees of the Company or its subsidiaries
(subject to certain limitations), (c) conversions or exchanges of common stock
of one class into common stock of another class and (d) purchases of fractional
interests in shares of the Company's capital stock pursuant to the conversion or
exchange provisions of any of the Company's securities being converted or
exchanged), (ii) may not, and shall not allow any of its subsidiaries to, make
any payment of interest, principal or premium, if any, on or repay, repurchase
or redeem any debt securities issued by the Company that rank PARI PASSU with or
junior to the Convertible Debentures, and (iii) may not, and shall not allow any
of its subsidiaries to, make any guarantee payments with respect to the
foregoing. There could be multiple Extension Periods of varying lengths
throughout the term of the Convertible Debentures. See "Description of the
Preferred Securities - Distributions" and "Description of the Convertible
Debentures - Option to Extend Interest Payment Period."
Should the Company exercise the right to defer payments of interest on the
Convertible Debentures, each holder of Preferred Securities will continue to
accrue income (as original issue discount) in respect of the deferred interest
allocable to its Preferred Securities for United States Federal income tax
purposes, which will be allocated but not distributed to holders of record of
Preferred Securities (and by such record holders to any beneficial holders). As
a result, each such holder of Preferred Securities will recognize income for
United States Federal income tax purposes in advance of the receipt of cash and
will not receive the cash from the Trust related to such income if such holder
disposes of its Preferred Securities (or beneficial interest therein) prior to
the record date for the date on which distributions of such amounts are made.
Moreover, if a holder of Preferred Securities converts its Preferred Securities
into Company Common Stock during any Extension Period, the holder will not
receive any cash related to the deferred distributions. Should the Company
determine to exercise its deferral right in the future, the market price of the
Preferred Securities is likely to be affected. A holder that disposes of or
converts its Preferred Securities during any Extension Period, therefore, might
not receive the same return on its investment as a holder that continues to hold
its Preferred Securities. In addition, as a result of the existence of the right
to defer interest payments, the market price of the Preferred Securities (which
represent an undivided beneficial interest in the Convertible Debentures) may be
more volatile than other similar securities where the issuer does not have such
rights to defer interest payments. See "Certain United States Federal Income Tax
Considerations - Potential Extension of Interest Payment Period and Original
Issue Discount."
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RIGHTS UNDER THE GUARANTEE
The Guarantee Trustee (as defined herein) will hold the Guarantee for the
benefit of the holders of the Preferred Securities. The Guarantee guarantees to
the holders of the Preferred Securities the payment of (i) any accrued and
unpaid distributions that are required to be paid on the Preferred Securities,
to the extent the Trust has funds available therefor, (ii) the applicable
redemption price with respect to the Preferred Securities called for redemption
by the Trust, to the extent the Trust has funds available therefor, and
(iii) upon a voluntary or involuntary dissolution, winding up or termination of
the Trust (other than in connection with a distribution of the Convertible
Debentures to holders of Preferred Securities or a redemption of all of the
Preferred Securities), the lesser of (a) the aggregate of the liquidation amount
and all accrued and unpaid distributions on the Preferred Securities to the date
of payment, to the extent the Trust has funds available therefor, and (b) the
amount of assets of the Trust remaining available for distribution to holders of
the Preferred Securities upon the liquidation of the Trust. The holders of a
majority in liquidation amount of the Preferred Securities have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Guarantee Trustee or to direct the exercise of any trust or
power conferred upon the Guarantee Trustee under the Guarantee. Notwithstanding
the foregoing, any holder of Preferred Securities may institute a legal
proceeding directly against the Company to enforce the obligations of the
Guarantor under the Guarantee without first instituting a legal proceeding
against the Trust, the Guarantee Trustee, or any other person or entity. If the
Company were to default on the obligation to pay amounts payable on the
Convertible Debentures, the Trust would lack available funds for the payment of
distributions or amounts payable on redemption of the Preferred Securities or
otherwise, and in such event, holders of the Preferred Securities would not be
able to rely upon the Guarantee for payment of such amounts. Instead, a holder
of the Preferred Securities would be required to rely on the enforcement (i) by
the Property Trustee (as defined herein) of its rights, as registered holder of
the Convertible Debentures, against the Company pursuant to the terms of the
Convertible Debentures or (ii) by such holder of Preferred Securities of its
right against the Company to enforce payments on the Convertible Debentures. See
"Description of the Guarantee" and "Description of the Convertible Debentures."
The Declaration provides that each holder of Preferred Securities, by acceptance
thereof, agrees to the provisions of the Guarantee and the Indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Declaration Event of Default (as defined herein) occurs and is
continuing, then the holders of Preferred Securities would rely on the
enforcement by the Property Trustee of its rights as the sole holder of the
Convertible Debentures against the Company. In addition, the holders of a
majority in liquidation amount of the Preferred Securities will have the right
to direct the time, method and place of conducting any proceeding for any remedy
available to the Property Trustee or to direct the exercise of any trust or
power conferred upon the Property Trustee under the Declaration, including the
right to direct the Property Trustee to exercise the remedies available to it
under the Indenture as a holder of the Convertible Debentures. If the Property
Trustee fails to enforce its rights under the Convertible Debentures, any holder
of Preferred Securities may directly institute a legal proceeding against the
Company to enforce the Property Trustee's rights under the Convertible
Debentures. Notwithstanding the foregoing, if a Declaration Event of Default has
occurred and is continuing and such event is attributable to the failure of the
Company to pay interest or principal on the Convertible Debentures on the date
such interest or principal is otherwise payable (or in the case of redemption,
on the redemption date), then a holder of Preferred Securities may directly
institute a proceeding for enforcement of payment to such holder of the
principal of or interest on the Convertible Debentures having a principal amount
equal to the aggregate liquidation amount of the Preferred Securities of such
holder (a "Direct Action") on or after the respective due date specified in the
Convertible Debentures. In connection with such Direct Action, the Company will
be subrogated to the rights of such holder of Preferred Securities under the
Declaration to the extent of any payment made by the Company to such holder of
Preferred Securities in such Direct Action. The holders of Preferred Securities
will not be able to exercise directly any other remedy available to the holders
of the Convertible Debentures. See "Description of Preferred Securities -
Declaration Events of Default."
ABSENCE OF PUBLIC MARKET; SPECIAL EVENT REDEMPTION OR DISTRIBUTION
The Preferred Securities are eligible for trading in the PORTAL Market
until resold in a transaction pursuant to this Prospectus. Thus, purchasers of
Preferred Securities in transactions pursuant to this Prospectus will not be
able to sell any Preferred Securities so acquired in the PORTAL Market. The
Company and the Trust do not currently intend to list the Preferred Securities
resold pursuant to this Prospectus on any securities exchange or to seek
approval for quotation thereof
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<PAGE>
through any automated quotation system. The Initial Purchasers currently make
a market in the Preferred Securities, but are not obligated to do so and may
discontinue such market making at any time. The market making activities of
the Initial Purchasers, and any other person making such a market, will be
subject to the limits imposed by the Securities Act and the Exchange Act.
Accordingly, there can be no assurance regarding the maintenance or liquidity
of any existing market for the Preferred Securities or that any other market
therefor will develop. The trading price of the Preferred Securities may be
adversely affected by the liquidity or absence of a trading market therefor.
Upon the occurrence of a Tax Event or an Investment Company Act Event (each
as defined herein, and each, a "Special Event"), the Trust will be dissolved,
except in the limited circumstance described below, with the result that the
Convertible Debentures would be distributed to the holders of the Trust
Securities in connection with the liquidation of the Trust. In certain
circumstances, the Company has the right to redeem the Convertible Debentures,
in whole (but not in part), in lieu of a distribution of the Convertible
Debentures by the Trust, in which event the Trust will redeem the Preferred
Securities. See "Description of the Preferred Securities - Special Event
Redemption or Distribution."
Under current United States Federal income tax law, a distribution of
Convertible Debentures upon the dissolution of the Trust would not be a taxable
event to holders of the Preferred Securities. Upon the occurrence of a Special
Event, however, a dissolution of the Trust in which holders of the Preferred
Securities receive cash would be a taxable event to such holders. See "Certain
Federal Income Tax Considerations - Receipt of Convertible Debentures or Cash
Upon Liquidation of the Trust."
There can be no assurance as to the market prices for the Convertible
Debentures that may be distributed in exchange for Preferred Securities if a
dissolution or liquidation of the Trust were to occur. Accordingly, the
Preferred Securities that an investor may purchase, or the Convertible
Debentures that a holder of Preferred Securities may receive on dissolution and
liquidation of the Trust, may trade at a discount to the price that the investor
paid to purchase the Preferred Securities offered hereby. Because holders of
Preferred Securities may receive Convertible Debentures upon the occurrence of a
Special Event, prospective purchasers of Preferred Securities also are making an
investment decision with regard to the Convertible Debentures and should
carefully review all the information regarding the Convertible Debentures
contained herein. See "Description of the Preferred Securities - Special Event
Redemption or Distribution" and "Description of the Convertible Debentures -
General."
RANKING OF OBLIGATIONS UNDER GUARANTEE AND CONVERTIBLE DEBENTURES
The Company's obligations under the Guarantee rank (i) subordinate and
junior to all other liabilities of the Company except any liabilities that
may be PARI PASSU expressly by their terms, (ii) PARI PASSU in right of
payment with the most senior preferred stock issued from time to time by the
Company and with any guarantee now or hereafter entered into by the Company
in respect of any preferred or preference stock or preferred securities of
any affiliate of the Company and (iii) senior to the Company Common Stock.
The obligations of the Company under the Convertible Debentures are
subordinate and junior in right of payment to Senior Indebtedness of the
Company. No payment of principal of (including redemption payments, if any),
premium, if any, or interest on, the Convertible Debentures may be made if
(i) any Senior Indebtedness of the Company is not paid when due and any
applicable grace period with respect to such default has ended and such
default has not been cured, been waived or ceased to exist or (ii) the
maturity of any Senior Indebtedness of the Company has been accelerated
because of a default. At July 31, 1997, Senior Indebtedness of the Company
aggregated approximately $206 million. There are no terms of the Preferred
Securities, the Convertible Debentures or the Guarantee that limit the
ability of the Company or its subsidiaries to incur additional indebtedness
or liabilities, including indebtedness or liabilities that would rank senior
or effectively senior to the Convertible Debentures and the Guarantee. See
"Description of the Guarantee - Status of the Guarantee; Subordination" and
"Description of the Convertible Debentures - Subordination."
LIMITATIONS ON REDEMPTION OF DEBENTURES
The Company's ability to redeem the Convertible Debentures for cash, either
in connection with an optional redemption on or after October 5, 1999 or in
certain circumstances in connection with a Tax Event, is subject to limitations.
There can be no assurance that the Company would have sufficient financial
resources, or would be able to arrange financing, to pay the applicable
redemption price for the Convertible Debentures. In addition, the terms of the
Company's
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Financing Program Agreement (the "Financing Program Agreement") with IBM
Credit Corporation ("IBMCC") presently prohibit the Company from redeeming
the Convertible Debentures for cash, even following the occurrence of a Tax
Event. In the event a cash redemption by the Company following a Tax Event
were to be prohibited by the terms of the Financing Program Agreement, the
Company would be required to bear the burden of the change in tax treatment
that triggered the Tax Event. Any future financing arrangement to which the
Company becomes a party may contain a similar prohibition. See "- Substantial
Indebtedness and Fixed Obligations; Dependence on IBMCC; Interest Rate
Sensitivity."
CHANGES IN TAX LAWS
On August 5, 1997, President Clinton signed the Taxpayer Relief Act of 1997
(the "1997 Tax Act"). During the legislative proceedings leading to the
enactment of the 1997 Tax Act, amendments were proposed that, among other
things, would have treated as equity for federal income tax purposes instruments
with a maximum term of more than 20 years that are not shown as indebtedness on
the consolidated balance sheet of the issuer. The 1997 Tax Act does not include
those proposed amendments. There can be no assurance, however, that any proposed
legislation enacted after the date hereof will not otherwise adversely affect
the tax treatment of the Convertible Debentures. If legislation is enacted that
adversely affects the tax treatment of the Convertible Debentures, such
legislation could result in the distribution of the Convertible Debentures to
holders of the Preferred Securities or, in certain limited circumstances, the
redemption of such securities by the Company and the distribution of the
resulting cash in redemption of the Preferred Securities. See "Description of
the Preferred Securities - Special Event Redemption or Distribution."
SIGNIFICANT FLUCTUATIONS IN REVENUES AND OPERATING RESULTS
The Company's quarterly and annual revenues and operating results have
varied significantly in the past and are likely to continue to do so in the
future. In addition, the Company experienced operating losses in the fiscal
year ended September 30, 1993 and during the seven months ended April 30,
1994. Revenues and operating results may fluctuate as a result of the demand
for the Company's products and services, the introduction of new hardware and
software technologies offering improved features, the introduction of new
services by the Company and its competitors, changes in the level of
operating expenses, the timing of major service projects, inventory
adjustments, competitive conditions and economic conditions generally. In
particular, the Company's operating results are highly sensitive to changes
in the mix of the Company's product and service revenues, product margins and
interest rates. Further, the purchase of the Company's products and services
generally involves a significant commitment of capital, with the attendant
delays frequently associated with large capital expenditures and
authorization procedures within an organization. For these and other reasons,
the Company's operating results are subject to a number of significant risks
over which the Company has little or no control, including customers'
technology life cycle needs, budgetary constraints and internal authorization
reviews. The Company has also, from time to time in the past, experienced
revenue fluctuations because of shortages of supply from certain vendors.
Shortages of supplies from vendors have previously occurred due primarily to
credit limitations placed on the Company. Future limitations of credit by
vendors could have a material adverse effect on the Company. In addition, the
general availability of certain products, particularly state-of-the-art
computing and data communications products, is occasionally restricted. While
the Company has not historically experienced significant product supply
shortages, other than due to credit restrictions as described above, any such
shortages in the future could have a material adverse effect on the Company.
The Company may also experience fluctuations in its operating costs in the
future as it continues to make acquisitions, implement new information
management systems and adjust its business strategy in the light of changing
technology and market conditions. Accordingly, the Company believes that
period-to-period comparisons of its operating results should not be relied
upon as an indication of future performance. In addition, the results of any
quarterly period are not necessarily indicative of results to be expected for
a full fiscal year.
SUBSTANTIAL INDEBTEDNESS AND FIXED OBLIGATIONS; DEPENDENCE ON IBMCC; INTEREST
RATE SENSITIVITY
The Company's business requires significant working capital to finance
product inventory and accounts receivable. The Company funds a significant
portion of its working capital requirements through its Financing Program
Agreement. As of July 31, 1997, the Company's outstanding indebtedness under the
Financing Program Agreement was approximately $347 million, out of total
availability of $350 million. Borrowings under the Financing Program Agreement
are secured by certain assets of the Company, including accounts receivable,
inventory and equipment. The
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Financing Program Agreement is currently available through October 31, 1997.
In the event of a termination of the Financing Program Agreement, the
outstanding borrowings thereunder mature at the end of the term of the line
of credit. Borrowings under the Financing Program Agreement bear interest at
various rates, depending upon the type of collateral advanced upon, equal in
each case to a predetermined margin over an established benchmark rate, such as
the London Interbank Offer Rate. As a result, the Company's operating results
are sensitive to changes in market interest rates. There can be no assurance
that IBMCC will continue to finance the Company's operations, or if such
financing is not continued, that the Company will be able to secure
additional debt financing.
Effective December 20, 1996, the Company established a revolving funding
trade receivables securitization facility (the "Securitization Facility"), which
currently provides the Company with up to $200 million in available credit. In
connection with the Securitization Facility, the Company sells, on a revolving
basis through a wholly-owned subsidiary, an undivided interest in certain of its
trade receivables existing from time to time and which meet certain eligibility
requirements ("Pooled Receivables"). As of July 31, 1997, the gross proceeds of
those sales totaled $172.8 million. Proceeds received with respect to Pooled
Receivables sold from time to time are affected by then market interest rates,
among other factors.
On October 2, 1996 and October 26, 1996, the Trust issued 3,500,000 and
525,000 Preferred Securities to the Initial Purchasers. In addition, the
Trust issued 124,484 Common Securities to the Company. The proceeds of these
sales were invested by the Trust in $207,474,200 aggregate principal amount
of the Convertible Debentures. The Preferred Securities are mandatorily
redeemable upon the maturity of the Convertible Debentures on October 1, 2016
or earlier to the extent of any redemption by the Company of any Convertible
Debentures. Subject to the Company's right to defer interest payments
thereunder, the Company is obligated to make quarterly interest payments
under the Convertible Debentures of approximately $3.5 million. See
"Description of the Convertible Debentures - Option to Extend Interest
Payment Period."
As of July 31, 1997, the Company's total amount of debt outstanding
(including debt evidenced by the Convertible Debentures) was approximately
$867 million and the Company had stockholders' equity of approximately $173
million. In addition to its substantial indebtedness, the Company has
significant other long-term liabilities and obligations. There can be no
assurance that the Company's operating results will be sufficient for payment
of all of its fixed obligations when due. The degree to which the Company is
leveraged could have important consequences to holders of the Preferred
Securities, including the following: (i) the Company's ability to obtain
other financing in the future may be impaired or may be available only on
terms dilutive to the holders of the Company Common Stock; (ii) a substantial
portion of the Company's cash flow from operations must be dedicated to the
payment of principal and interest on its indebtedness; and (iii) a high
degree of leverage may make the Company more vulnerable to economic downturns
and may limit its ability to withstand competitive pressures. The Company's
ability to make scheduled payments on or, to the extent not restricted
pursuant to the terms thereof, to refinance its indebtedness depends on its
financial and operating performance, which is subject to prevailing economic
conditions and to financial, business and other factors beyond its control.
The Indenture does not limit the amount of additional indebtedness that the
Company or any of its subsidiaries can create, incur, assume or guarantee.
The Financing Program Agreement also has certain restrictive covenants
limiting the Company's ability to pay dividends on the Company Common Stock
and expressly prohibiting it from redeeming the Convertible Debentures for
cash, even following the occurrence of a Tax Event. In the event a cash
redemption by the Company following a Tax Event were prohibited, the Company
would be required to bear the burden of the change in tax treatment that
triggered the Tax Event.
DEPENDENCE ON KEY VENDORS AND PRODUCT SUPPLY
A significant portion of the Company's revenue is derived from sales of PC
network hardware, peripherals and software, including products of various major
vendors. Some of these revenues relate to sales made pursuant to fixed-price,
long-term contracts with governmental entities. The Company's agreements with
those vendors from which it purchases products directly, generally contain
provisions for periodic renewals and for termination by the vendor without
cause, generally upon relatively short notice. The loss of a major vendor, the
deterioration of the Company's relationship with a major vendor or the failure
of the Company to establish good relationships with major new vendors as they
develop could have a material adverse effect on the Company's business. As is
typical in its industry, the Company receives credits from
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most of its vendors for market development, which are used to offset a
portion of the Company's sales and marketing expense. Any change in the
availability of these credits could materially adversely affect the Company's
operating results. The Company is also dependent, in part, upon vendor
financing for working capital requirements. The failure of the Company to
obtain vendor financing on satisfactory terms and conditions could have a
material adverse effect on the Company's business, financial condition and
results of operations.
The personal computer industry experiences product supply shortages and
customer order backlogs from time to time due to the inability of certain
manufacturers to supply certain products on a timely basis. In addition, certain
vendors have initiated new channels of distribution that increase competition
for the available product supply. There can be no assurance that vendors will be
able to maintain an adequate supply of products to fulfill the Company's
customer orders on a timely basis. The Company has experienced product supply
shortages in the past and expects to experience such shortages from time to time
in the future. Failure to obtain adequate product supplies or fulfill customer
orders on a timely basis could have a material adverse effect on the Company's
business, financial condition and results of operations.
RISKS ASSOCIATED WITH RAPID TECHNOLOGICAL CHANGE; DEPENDENCE ON INFORMATION
SYSTEMS
The markets for the Company's product and service offerings are
characterized by rapidly changing technology and frequent new product and
service offerings. The introduction of new technologies can render existing
products and services obsolete or unmarketable. The Company's continued success
will depend on its ability to enhance existing products and services and to
develop and introduce, on a timely and cost-effective basis, new products and
services that keep pace with technological developments and address increasingly
sophisticated customer requirements. The Company's business, financial condition
and results of operations could be materially adversely affected if the Company
were to incur delays in sourcing and developing product and service enhancements
or new products and services or if such product and service enhancements or new
products and services did not gain market acceptance. In addition, the Company
depends upon complex information management systems in connection with its own
business. These systems support, among other things, inventory management, order
processing, shipping, receiving and accounting. The Company also utilizes
information management systems to receive orders from customers and to manage
its help desk, dispatch, repair, installation, move/add/changes and asset
management services. Operation of the Company's information management systems
requires significant numbers of highly skilled personnel, significant capital
investments and a continuing level of operating expense. In the event that any
of the Company's information management systems should fail or experience
significant downtime, the Company could be prevented from taking customer
orders, printing product pickup lists, shipping product or delivering services
in a timely manner. Failure of certain information management systems might also
place the Company at a significant disadvantage in determining appropriate
product pricing or maintaining appropriate inventory levels. A failure of the
Company's information management systems which impacts any of these functions,
even for a short period, could have a material adverse effect on the Company's
operating results. In addition, the inability of the Company to attract and
retain the highly skilled personnel necessary to implement, maintain and operate
its information management systems, or any delay in the Company's ability to
apply the benefits of its information management systems to its business could
have a material adverse effect on operating results. See "- Dependence On and
Need to Recruit and Retain Key Management and Technical Personnel."
CONCENTRATION OF REVENUES
During the fiscal years ended April 30, 1995, 1996 and 1997, Microsoft
Corporation accounted for 10.8%, 12.0% and 9.5%, respectively, of the
Company's total revenues for such fiscal periods. During such periods, no
other customer accounted for more than 10% of the Company's total revenues.
However, during fiscal 1997, the Company derived approximately 54% of its
revenues from its 50 largest customers. To the extent that the Company is
successful in expanding its relationship with new and existing customers
among large enterprises such as the Fortune 1000, its revenues may become
more concentrated. While the Company seeks to build long-term customer
relationships, revenues from any particular customer can fluctuate from
period to period due to such customer's purchasing patterns. Any termination
or significant disruption of the Company's relationships with any of its
principal customers could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, a
deterioration in the financial condition of any of its principal customers
could expose the Company to the possibility of large accounts receivable
write-offs, which would materially adversely affect the Company's financial
condition and results of operations.
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INTENSE COMPETITION
The markets in which the Company operates are characterized by intense
competition from several types of technical service providers and computer
related equipment vendors, including mainframe and mid-range computer
manufacturers and outsourcers entering the personal computer services
marketplace. These include Digital Equipment Corporation MultiVendor Services,
Electronic Data Systems Corporation, Hewlett-Packard Company Multi-Vendor
Services and IBM Global Services. Other competitors include VARs, systems
integrators and third-party service companies, including CompuCom Systems, Inc.,
DecisionOne Corporation, Entex Information Services, Inc, InaCom Corp.,
MicroAge, Inc. and Technology Service Solutions. The Company's markets require
it to maintain sales personnel to compete for commercial customers and to have
employees experienced in responding to the competitive bidding requirements of
government-related customers. The Company expects to face further competition
from new market entrants and possible alliances between competitors in the
future. Certain of the Company's current and potential competitors have greater
financial, technical, marketing and other resources than the Company. As a
result, they may be able to respond more quickly to new or emerging technologies
and changes in customer requirements, to devote greater resources to the
development, promotion and sale of their products and services or be more
effective in responding in competitive bidding situations than the Company. No
assurance can be given that the Company will be able to compete successfully
against current and future competitors.
CONTROL OF THE COMPANY
As of June 1, 1997, Warburg, Pincus Capital Company, L.P. ("CapCo"), which
is controlled by Warburg, Pincus & Co., beneficially owned an aggregate of
16,482,501 shares of Company Common Stock (representing approximately 38.4% of
the issued and outstanding shares of Company Common Stock as of such date). Due
to its ownership position, CapCo has significant influence over the management
and policies of the Company. CapCo's ownership position also may render it more
difficult for a third party to effect a change of control of the Company without
the consent of CapCo and may thereby discourage third parties from any attempt
to acquire control of the Company, which could have a material adverse effect on
the price of the Company Common Stock.
Moreover, as of June 1, 1997, the principal stockholders (including Capco),
directors and executive officers of the Company beneficially owned approximately
45.8% of the Company Common Stock. As a result, such stockholders, if they act
in concert, may be able to effectively control the election of members of the
Company's Board of Directors and generally to exercise control over the
Company's corporate actions.
GOVERNMENT CONTRACTS
The Company and its subsidiaries act as prime contractors and
subcontractors to various governmental entities, including agencies of the
United States government. The Company and its subsidiaries primarily provide
computer equipment and related products to governmental entities pursuant to
fixed price contracts. Under the contracts, the Company is obligated to deliver
products at a fixed price when and if ordered. All of the equipment sold by the
Company to governmental entities under those contracts is acquired from third
parties at then-prevailing market prices. Thus, the Company bears the burden of
any manufacturers' price increases and benefits from price decreases. The
Company's government contracts are subject to specific procurement regulations
and a variety of socio-economic and other requirements. Failure to comply with
such regulations and requirements could lead to suspension or debarment, for
cause, from additional government contracting or subcontracting, either
permanently or for a period of time. Among the causes for debarment are
violations of various statutes, including those related to employment practices,
the protection of the environment and the accuracy of records. In addition,
government contractors are subject to oversight audits by government
representatives and may become subject to profit and cost control limitations.
Although certain of the Company's government contracts have a term of
several years, appropriations for purchases under such contracts are typically
made on a fiscal-year basis only. In addition, even if appropriations are made
for purchases by a governmental entity, that entity may not utilize all of its
appropriations authority with respect to acquisitions of equipment from the
Company. Consequently, there can be no assurance regarding the actual volume of
sales that may be made thereunder, if any, during any period of time. Finally,
government contracts are typically subject to
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termination, in whole or in part, without notice at the convenience of the
government or agency involved. Any substantial reduction in purchases by
governmental entities could have a material adverse effect on the Company.
DEPENDENCE ON AND NEED TO RECRUIT AND RETAIN KEY MANAGEMENT AND TECHNICAL
PERSONNEL
The Company's success depends to a significant extent on its ability to
attract and retain key personnel. In particular, the Company is dependent on its
senior management team and technical personnel. The Company has significantly
expanded its technical staff, including its systems engineering force, in recent
years. As of July 31, 1997, the Company employed over 4,100 technical
professionals. Competition for such technical personnel is intense and no
assurance can be given that the Company will be able to recruit and retain such
personnel. The failure to recruit and retain management and technical personnel
could have a material adverse effect on the Company's growth, revenues and
results of operations. In addition, the Company's growth resulting from
expanding operations and acquisitions has placed significant demands on the
Company's management, operational and technical resources. Such growth is
expected to continue to challenge the Company's sales, marketing, technical and
support personnel and senior management. The Company's future performance will
depend in part on its ability to manage expanding domestic and international
operations and to adapt its operational systems to respond to changes in its
business. In particular, the Company's success will depend on its ability to
attract, retain and train adequate numbers of technical field personnel and
effectively integrate any acquired business operations.
ANTI-TAKEOVER EFFECTS OF UNISSUED PREFERRED STOCK AND DELAWARE LAW
Certain provisions of the Company's Restated Certificate of Incorporation
(the "Certificate of Incorporation") and Delaware law may be deemed to have
an anti-takeover effect. The Certificate of Incorporation provides that the
Board of Directors may issue additional shares of Company Common Stock or
establish one or more classes or series of Preferred Stock with such
designations, relative voting rights, dividend rates, liquidation and other
rights, preferences and limitations as the Board of Directors deems
appropriate without stockholder approval. In addition, the Company is subject
to the anti-takeover provisions of Section 203 of the Delaware General
Corporation Law (the "DGCL"). In general, the statute prohibits a
publicly-held Delaware corporation from engaging in a business combination
with an "interested stockholder" for a period of three years after the date
of the transaction in which the person became an interested stockholder,
unless the business combination is approved in a prescribed manner. Each of
the foregoing provisions gives the Board of Directors, acting without
stockholder approval, the ability to prevent, or render more difficult or
costly, the completion of a takeover transaction that stockholders might view
as being in their best interests, including a takeover transaction that might
result in a premium over the market price for the shares of Company Common
Stock.
LIMITED VOTING RIGHTS
Holders of Preferred Securities will have limited voting rights and will
not be entitled to vote to appoint, remove or replace, or to increase or
decrease the number of Issuer Trustees. See "Description of the Preferred
Securities - Voting Rights."
THE COMPANY
The Company is a leading provider of services and products designed to
build, manage and enhance personal computer ("PC") network infrastructures for
Fortune 1000 companies and other large enterprises. The Company provides
customized, integrated solutions for its customers' network by combining a
comprehensive offering of value-added services with its expertise in sourcing
and distributing PC hardware, network products, computer peripherals and
software from many vendors. The Company's services are organized around an
integrated model called "Life Cycle Management." Life Cycle Management includes
design and consulting, acquisition and deployment, operation and support, and
enhancement and migration to support the customers' network throughout its life
cycle. Service delivery is optimized through the proper application of
automated systems, highly trained technical personnel and proven, repeatable
processes to support the customer's PC network infrastructure throughout its
entire life cycle. The Company Common Stock was listed on the NYSE following its
IPO on March 11, 1996 and trades under the symbol "VST."
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The Company was incorporated in Delaware in September 1987 under the name
"ComputerLand Corporation" following the acquisition by William Y. Tauscher,
CapCo and Richard H. Bard of the majority of the capital stock of the Company's
predecessor, IMS Associates, Inc. ("IMS"), which was originally incorporated in
1976. IMS was merged with the Company after such acquisition. At the time of the
acquisition, the Company operated and franchised computer retail stores in the
United States.
The executive offices of the Company are located at 1100 Abernathy Road,
Building 500, Suite 1200, Atlanta, Georgia 30328, and the telephone number of
the executive offices is (770) 522-4700.
VANSTAR FINANCING TRUST
The Trust is a statutory business trust formed under Delaware law pursuant
to (i) the Declaration of Trust dated as of September 25, 1996, as amended by
the Amended and Restated Declaration of Trust dated as of October 2, 1996 (the
"Declaration") executed by the Company as sponsor of the Trust, and the trustees
of the Trust (the "Issuer Trustees") and (ii) the filing of a certificate of
trust with the Secretary of State of the State of Delaware on September 25,
1996. The Company owns, directly or indirectly, all of the Common Securities,
which have an aggregate liquidation amount equal to 3% of the total capital of
the Trust. The Common Securities of the Trust rank PARI PASSU, and payments will
be made thereon PRO RATA, with the Preferred Securities, except that, upon the
occurrence and during the continuance of an event of default under the
Declaration, the rights of the holders of the Common Securities to payment in
respect of distributions and payments upon liquidation, redemption and otherwise
will be subordinated to the rights of the holders of the Preferred Securities.
The assets of the Trust consist entirely of the Convertible Debentures. The
Trust exists for the exclusive purpose of (i) issuing and selling the Trust
Securities representing undivided beneficial interests in the assets of the
Trust, (ii) investing the gross proceeds of the Preferred Securities in the
Convertible Debentures and (iii) engaging in only those other activities
necessary or incidental thereto.
Pursuant to the Declaration, the number of Issuer Trustees is currently
five. Three of the Issuer Trustees (the "Regular Trustees") are individuals who
are employees or officers of or who are otherwise affiliated with the Company.
The fourth trustee is a financial institution that is unaffiliated with the
Company (the "Property Trustee"). The fifth trustee is an entity unaffiliated
with the Company that maintains its principal place of business in the State of
Delaware (the "Delaware Trustee"). The Property Trustee currently serves as
Delaware Trustee. Leslie J. Alvarez, Kauko Aronaho and H. Christopher Covington
currently serve as the Regular Trustees. Wilmington Trust Company, a Delaware
banking corporation, currently acts as Property Trustee and as Delaware Trustee
and will continue in such capacities until, in each case, removed or replaced by
the holder of the Common Securities. Wilmington Trust Company also currently
acts as trustee under the Guarantee (the "Guarantee Trustee") and as trustee
under the Indenture (the "Indenture Trustee").
The Property Trustee holds title to the Convertible Debentures for the
benefit of the holders of the Trust Securities, and the Property Trustee has the
power to exercise all rights, powers and privileges under the Indenture as the
holder of the Convertible Debentures. In addition, the Property Trustee
maintains exclusive control of a segregated non-interest bearing bank account
(the "Property Account") to hold all payments made in respect of the Convertible
Debentures for the benefit of the holders of the Trust Securities. The Guarantee
Trustee holds the Guarantee for the benefit of the holders of the Preferred
Securities. The Company, as the holder of all the Common Securities, currently
has the right to appoint, remove or replace any of the Issuer Trustees and to
increase or decrease the number of trustees; PROVIDED that the number of
trustees shall be at least three; PROVIDED, FURTHER that at least one trustee
shall be a Delaware Trustee, at least one trustee shall be a Property Trustee
(which may also be the Delaware Trustee) and at least one trustee shall be a
Regular Trustee. The Company has agreed to pay all fees and expenses related to
the Trust. See "Description of the Convertible Debentures."
The rights of the holders of the Preferred Securities, including economic
rights, rights to information and voting rights, are as set forth in the
Declaration and the Delaware Business Trust Act, as amended (the "Trust Act").
See "Description of the Preferred Securities." The Declaration, the Indenture
and the Guarantee also incorporate by reference the terms of the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"). The Declaration, the
Indenture and the Guarantee were qualified under the Trust Indenture Act upon
effectiveness of the Registration Statement to which this Prospectus forms a
part.
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The place of business and the telephone number of the Trust are the
principal executive offices and telephone number of the Company. See "The
Company."
ACCOUNTING TREATMENT
For financial reporting purposes, the Trust is treated as a subsidiary of
the Company and, accordingly, the accounts of the Trust are included in the
consolidated financial statements of the Company. The Preferred Securities are
presented as a separate line item in the consolidated balance sheet of the
Company entitled "Company-obligated mandatorily redeemable convertible preferred
securities of subsidiary trust holding solely convertible subordinated debt
securities of the Company" and appropriate disclosures about the Preferred
Securities, the Guarantee and the Convertible Debentures are included in the
notes to the Company's consolidated financial statements. For financial
reporting purposes, the Company records distributions payable on the Preferred
Securities as a financing charge to earnings in the Company's consolidated
statement of income.
RECENT DEVELOPMENTS
On July 3, 1997, a trust claiming to have purchased shares of Company
Common Stock filed suit in Superior Court of the State of California, County of
Santa Clara, against the following persons or entities: the Company; certain
directors and officers of the Company; the Company's principal stockholder,
CapCo, and certain of its affiliates; and Robertson Stephens & Co., Alex. Brown
& Sons, Inc. and The Robinson-Humphrey Company, Inc., each of which served as an
underwriter in the Company's initial public offering, and the first two of
which were Initial Purchasers. The plaintiff also seeks class action status
under California law and purports to represent a class of purchasers of Company
Common Stock between March 11, 1996 and January 23, 1997. In its original
complaint, the plaintiff purports to state three causes of action under
California law, alleging generally, among other things, that the defendants made
false or misleading statements or concealed information regarding the Company
and that the plaintiff, as a holder of Company Common Stock, suffered damage as
a result thereof. The plaintiff seeks compensatory and punitive damages in an
unspecified amount, together with other relief. The suit is entitled DAVID T.
O'NEAL TRUST, DATED 4/1/77, V. VANSTAR CORPORATION, ET AL, Case No. CV767266.
The Company believes that the plaintiff's allegations are without merit and
intends to defend the suit vigorously.
On July 7, 1997, the Company, through a wholly-owned subsidiary, acquired
certain of the assets and assumed certain of the liabilities of Sysorex
Information Systems, Inc. ("Sysorex"), a government technology provider which
reported revenues of approximately $150 million for its fiscal year ended
September 30, 1996. The purchase price was approximately $46.0 million,
including net liabilities assumed of approximately $11.0 million, subject to
certain post-closing adjustments, and a contingent payment of 500,000 shares of
Company Common Stock, based upon the future financial performance of the
acquired business. Sysorex is a prime government contractor to various United
States Government agencies. Under contracts with governmental entities, Sysorex
has agreed to deliver computer hardware and software, generally at fixed prices,
when and if ordered by the entities involved. Sysorex operates independently of
the Company's Government Systems Group, which will continue to maintain and
pursue relationships with systems integrators delivering services to
governmental entities. See "Risk Factors - Government Contracts."
DESCRIPTION OF THE PREFERRED SECURITIES
The following summary of certain material terms and provisions of the
Preferred Securities does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the Declaration. The Preferred
Securities were issued pursuant to the terms of the Declaration. The Declaration
incorporates by reference terms of the Trust Indenture Act. The Declaration was
qualified under the Trust Indenture Act upon effectiveness of the Registration
Statement of which this Prospectus forms a part. The Property Trustee will act
as indenture trustee for the Declaration for purposes of compliance with the
Trust Indenture Act. Capitalized terms not otherwise defined herein have the
meanings assigned to them in the Declaration.
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GENERAL
The Preferred Securities were issued in fully registered form without
interest coupons. Bearer Preferred Securities were not issued.
The Declaration authorized the Regular Trustees to issue the Trust
Securities on behalf of the Trust. The Preferred Securities represent undivided
beneficial ownership interests in the assets of the Trust and entitle the
holders thereof to a preference in certain circumstances with respect to
distributions and amounts payable on redemption or liquidation over the Common
Securities, as well as other benefits as described in the Declaration.
All of the Common Securities are owned by the Company. The Common
Securities rank PARI PASSU, and payments will be made thereon on a PRO RATA
basis, with the Preferred Securities, except that upon the occurrence of a
Declaration Event of Default, the rights of the holders of the Common Securities
to receive payment of periodic distributions and payments upon liquidation,
redemption and otherwise will be subordinated to the rights of the holders of
Preferred Securities. See "- Subordination of Common Securities." Title to the
Convertible Debentures is held by the Property Trustee for the benefit of the
holders of the Trust Securities. The Declaration does not permit the issuance by
the Trust of any securities other than the Trust Securities or the incurrence of
any indebtedness by the Trust. The payment of distributions out of money held by
the Trust, and payments upon redemption of the Preferred Securities or
liquidation of the Trust, are guaranteed by the Company to the extent described
under "Description of the Guarantee." The Guarantee is held by the Guarantee
Trustee for the benefit of the holders of the Preferred Securities. The
Guarantee does not cover payment of distributions when the Trust does not have
sufficient available funds to pay such distributions. In such event, the remedy
of a holder of Preferred Securities is to (i) vote to direct the Property
Trustee to enforce the Property Trustee's rights under the Convertible
Debentures or (ii) if the failure of the Trust to pay distributions is
attributable to the failure of the Company to pay interest or principal on the
Convertible Debentures, to institute a proceeding directly against the Company
for enforcement of payment to such holder of the principal of or interest on the
Convertible Debentures having a principal amount equal to the aggregate
liquidation amount of the Preferred Securities of such holder on or after the
respective due date specified in the Convertible Debentures. See "- Voting
Rights."
DISTRIBUTIONS
Distributions on Preferred Securities are fixed at a rate per annum of
6 3/4% of the stated liquidation amount of $50 per Preferred Security.
Distributions in arrears for more than one quarter will bear interest thereon
at a rate per annum of 6 3/4% thereof compounded quarterly. The term
"distribution" as used herein includes any such interest (including any
Additional Interest and Liquidated Damages, each as defined herein) payable
unless otherwise stated. The amount of distributions payable for any period
is computed on the basis of a 360-day year of twelve 30-day months.
Distributions on the Preferred Securities are cumulative, accrued from the
Original Offering Date and are payable quarterly in arrears on each January 1,
April 1, July 1 and October 1, when, as and if available for payment, by the
Property Trustee, except as otherwise described below. The Company has the right
under the Indenture to defer interest, during which period no interest shall be
due and payable. As a consequence of such extension, quarterly distributions on
the Preferred Securities would be deferred (though such distributions would
continue to accrue with interest) during any such extended interest payment
period. In the event that the Company exercises this right, then, during such
period, the Company (a) shall not, and shall not allow any of its subsidiaries
(other than its wholly-owned subsidiaries) to, declare or pay dividends on, make
distributions with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to, any of its capital stock (except for (i)
dividends or distributions in shares of Company Common Stock on Company
Common Stock or on its Preferred Stock, (ii) purchases or acquisitions of
shares of Company Common Stock made in connection with any employee benefit
plan of the Company or its subsidiaries in the ordinary course of business or
pursuant to employment agreements with officers or employees of the Company
or its subsidiaries entered into in the ordinary course of business, provided
that such repurchases by the Company made from officers or employees of the
Company or its subsidiaries pursuant to employment agreements shall be made
at a price not to exceed market value on the date of any such repurchase and
shall not exceed $1 million in the aggregate for all such employees and
officers, (iii) conversions or exchanges of common stock of one class into
common stock of another class or (iv) purchases of fractional interests in
shares of the Company's capital stock pursuant to the conversion or exchange
provisions of any of the Company's securities being converted or exchanged),
(b) shall not, and shall not allow any of its subsidiaries to, make any
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payment of interest, principal of or premium, if any, on, or repay,
repurchase or redeem any debt securities issued by the Company that rank
junior to or PARI PASSU with the Convertible Debentures and (c) shall not,
and shall not allow any of its subsidiaries to, make any guarantee payments
with respect to the foregoing (other than such payments made pursuant to the
Guarantee). Prior to the termination of any such Extension Period, the
Company may further extend such Extension Period; PROVIDED, HOWEVER, that
such Extension Period, together with all previous and further extensions
thereof, may not exceed 20 consecutive quarters and that such Extension
Period may not extend beyond the maturity date of the Convertible Debentures.
Upon the termination of any Extension Period and the payment of all amounts
then due, the Company may commence a new Extension Period, subject to the
above requirements. Consequently, there could be multiple Extension Periods
of varying lengths throughout the term of the Convertible Debentures. See
"Description of the Convertible Debentures - Interest" and "Description of
the Convertible Debentures - Option to Extend Interest Payment Period." If
distributions are deferred, the deferred distributions and accrued interest
thereon shall be paid to the holders of record of Preferred Securities as
they appear on the books and records of the Trust on the record date next
following the termination of such deferral period.
Distributions on the Preferred Securities will be made to the extent that
the Trust has funds available for the payment of such distributions in the
Property Account. Amounts available to the Trust for distribution to the holders
of the Preferred Securities will be limited to payments received by the Trust
from the Company for the Convertible Debentures net of taxes, if any, imposed on
the Trust with respect thereto. See "Description of the Convertible Debentures."
The payment of distributions out of funds held by the Trust is guaranteed by the
Company, as set forth under "Description of the Guarantee."
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the books and records of the Trust on the relevant
record dates, which will be fifteen days prior to the relevant payment dates.
Subject to any applicable laws and regulations and the provisions of the
Declaration, each such payment will be made as described under "- Book-Entry
Only Issuance - The Depository Trust Company" below. In the event that any date
on which distributions are payable on the Preferred Securities is not a Business
Day, payment of the distribution payable on such date will be made on the next
succeeding day which is a Business Day (without any distribution or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date. A "Business Day" shall mean any day other than a day on which
banking institutions in New York, New York, San Francisco, California or
Wilmington, Delaware are authorized or required by law to close.
CONVERSION RIGHTS
GENERAL. Each Preferred Security is convertible at any time prior to the
close of business on the Business Day immediately preceding the date of
repayment of such Preferred Security, whether at maturity or upon redemption, at
the option of the holder thereof and in the manner described below, into the
number of shares of Company Common Stock obtained by dividing the liquidation
amount of such Preferred Security ($50 per Preferred Security) by the applicable
conversion price (initially $28.75 per share of Company Common Stock), rounded
to the nearest thousandth of a share (equivalent to a conversion rate of 1.739
shares of Company Common Stock per Preferred Security). The conversion price is
subject to adjustment as described under "- Conversion Price Adjustments -
General" and "- Conversion Price Adjustment - Merger, Consolidation or Sale of
Assets of the Company" below. The Trust has covenanted in the Declaration not to
convert Convertible Debentures held by it except pursuant to a notice of
conversion delivered to the Property Trustee, as conversion agent (the
"Conversion Agent"), by a holder of Preferred Securities. A holder of a
Preferred Security wishing to exercise its conversion right shall deliver an
irrevocable conversion notice, together, if the Preferred Security is a
Certificated Security (as defined herein), with such Certificated Security, to
the Conversion Agent, which shall, on behalf of such holder, exchange such
Preferred Security for a portion of the Convertible Debentures and immediately
convert such Convertible Debentures into Company Common Stock. Holders may
obtain copies of the required form of the conversion notice from the Conversion
Agent. Procedures for converting book-entry Preferred Securities into shares of
Company Common Stock will differ, as described under "- Book-Entry Only Issuance
- - The Depository Trust Company."
Holders of Preferred Securities at the close of business on a distribution
record date will be entitled to receive the distribution payable on such
Preferred Securities on the corresponding distribution payment date
notwithstanding the conversion of such Preferred Securities following such
distribution record date but prior to such distribution payment date.
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Except as provided in the immediately preceding sentence, neither the Trust
nor the Company will make, or will be required to make, any payment,
allowance or adjustment for accumulated and unpaid distributions, whether or
not in arrears, on the converted Preferred Securities. The Company will make
no payment or allowance for distributions on the shares of Company Common
Stock issued upon such conversion, except to the extent that such shares of
Company Common Stock are held of record on the record date for any such
distributions and except as provided in the preceding sentence. Each
conversion will be deemed to have been effected immediately prior to the
close of business on the day on which the related conversion notice was
received by the Conversion Agent.
No fractional shares of Company Common Stock will be issued as a result of
conversion, but in lieu thereof such fractional interest will be paid by the
Company in cash based on the last reported sale price of Company Common Stock on
the date such Preferred Securities are surrendered for conversion.
CONVERSION PRICE ADJUSTMENTS - GENERAL. The conversion price is subject to
adjustment in certain events, including (a) the issuance of shares of Company
Common Stock as a dividend or a distribution with respect to Company Common
Stock, (b) subdivisions, combinations and reclassifications of Company Common
Stock, (c) the issuance to all holders of Company Common Stock of rights or
warrants entitling them (for a period not exceeding 45 days) to subscribe for
shares of Company Common Stock at less than the then Current Market Price (as
defined below) of the Company Common Stock, (d) the distribution to holders of
Company Common Stock of evidences of indebtedness of the Company, securities or
capital stock, cash or assets (including securities, but excluding those rights,
warrants, dividends and distributions referred to above and dividends and
distributions paid exclusively in cash), (e) the payment of dividends (and other
distributions) on Company Common Stock paid exclusively in cash, excluding cash
dividends if the annualized per share amount thereof does not exceed 10% of the
Current Market Price of Company Common Stock as of the trading day immediately
preceding the date of declaration of such dividend (such adjustment being
limited to the amount in excess of 10% of such Current Market Price), and
(f) payment to holders of Company Common Stock in respect of a tender or
exchange offer by the Company or any subsidiary for Company Common Stock at a
price in excess of the then Current Market Price of Company Common Stock as of
the trading day next succeeding the last date tenders or exchanges may be made
pursuant to such tender or exchange offer. "Current Market Price" means the
average of the daily closing prices for the five consecutive trading days
selected by the Company commencing not more than 20 trading days before, and
ending not later than, the earlier of the day in question or, if applicable, the
day before the "ex" date with respect to the issuance or distribution in
question.
The Company from time to time may reduce the conversion price of the
Convertible Debentures (and thus the conversion price of the Preferred
Securities) by any amount selected by the Company for any period of at least
20 days, in which case the Company shall give at least 15 days' notice of such
reduction. The Company may, at its option, make such reductions in the
conversion price, in addition to those set forth above, as the Company's Board
of Directors deems advisable to avoid or diminish any income tax to holders of
Company Common Stock resulting from any dividend or distribution of stock (or
rights to acquire stock) or from any event treated as such for income tax
purposes. See "Certain United States Federal Income Tax Considerations -
Adjustment of Conversion Price."
No adjustment of the conversion price will be made upon the issuance of any
shares of Company Common Stock pursuant to any present or future plan providing
for the reinvestment of dividends or interest payable on securities of the
Company and the investment of additional optional amounts in shares of Company
Common Stock under any such plan. No adjustment in the conversion price will be
required unless such adjustment would require a change of at least one percent
(1%) in the price then in effect; PROVIDED, HOWEVER, that any adjustment that
would not be required to be made shall be carried forward and taken into account
in any subsequent adjustment. If any action would require adjustment of the
conversion price pursuant to more than one of the provisions described above,
only one adjustment shall be made and such adjustment shall be the amount of
adjustment that has the highest absolute value to the holder of the Preferred
Securities.
CONVERSION PRICE ADJUSTMENT - MERGER, CONSOLIDATION OR SALE OF ASSETS OF THE
COMPANY. In the event that any transaction shall occur (including, without
limitation, and with certain exceptions, (a) recapitalization or
reclassification of the Company Common Stock, (b) consolidation of the Company
with, or merger of the Company into, any other Person, or any merger of another
Person into the Company, (c) any sale, transfer or lease of all or substantially
all of the assets of the Company or (d) any compulsory share exchange) pursuant
to which either shares of Company Common Stock shall be converted into the right
to receive other securities, cash or other property, or, in the case of a sale
or transfer of all or
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substantially all of the assets of the Company, the holders of Company Common
Stock shall be entitled to receive other securities, cash or other property,
then appropriate provision shall be made so that the holder of each Preferred
Security then outstanding shall have the right thereafter to convert such
Preferred Security only into:
(x) in the case of any such transaction that does not constitute a
Common Stock Fundamental Change (as defined below) and subject to funds
being legally available for such purpose under applicable law at the time
of such conversion, the kind and amount of the securities, cash or other
property that would have been receivable upon such recapitalization,
reclassification, consolidation, merger, sale, transfer or share exchange
by a holder of the number of shares of Company Common Stock issuable upon
conversion of such Preferred Security immediately prior to such
recapitalization, reclassification, consolidation, merger, sale, transfer
or share exchange, after giving effect, in the case of any Non-Stock
Fundamental Change (as defined below), to any adjustment in the conversion
price in accordance with clause (i) of the following paragraph, and
(y) in the case of any such transaction that constitutes a Common
Stock Fundamental Change, common stock of the kind received by holders of
Company Common Stock as a result of such Common Stock Fundamental Change in
an amount determined in accordance with clause (ii) of the following
paragraph.
The Company shall require that the Person formed by such consolidation or
resulting from such merger or that acquires such assets or that acquires the
Company's shares, as the case may be, expressly assume all obligations under the
Indenture, the Declaration, the Guarantee and all outstanding Convertible
Debentures by becoming a party to the Declaration and the Guarantee and by
entering into a supplemental indenture to the Indenture (as applicable) and to
amend each of the foregoing to provide for such right with respect to the
Convertible Debentures and in turn the Preferred Securities. Such amendments and
supplemental indentures shall provide for adjustments that, for events
subsequent to the effective date thereof, shall be as nearly equivalent as may
be practicable to the relevant adjustments provided for in the preceding
paragraphs and in this paragraph.
Notwithstanding any other provision in the preceding paragraphs to the
contrary, if any Fundamental Change (as defined below) occurs, then the
conversion price in effect will be adjusted immediately after such Fundamental
Change as follows:
(i) in the case of a Non-Stock Fundamental Change, the conversion
price of the Preferred Securities immediately following such Non-Stock
Fundamental Change shall be the lower of (A) the conversion price in effect
immediately prior to such Non-Stock Fundamental Change, but after giving
effect to any other prior adjustments effected pursuant to the preceding
paragraphs, and (B) the product of (1) the greater of the Applicable Price
(as defined below) and the then applicable Reference Market Price (as
defined below) and (2) a fraction, the numerator of which is $50 and the
denominator of which is (x) the amount of the redemption price for one
Preferred Security if the redemption date were the date of such Non-Stock
Fundamental Change (or, for the period commencing on the first date of
original issuance of the Preferred Securities and through October 1, 1997
and the twelve-month periods commencing October 1, 1997 and October 1,
1998, the product of 1.06750, 1.06075 and 1.05400, respectively, times $50)
plus (y) any then-accrued and unpaid distributions on one Preferred
Security; and
(ii) in the case of a Common Stock Fundamental Change, the conversion
price of the Preferred Securities immediately following such Common Stock
Fundamental Change shall be the conversion price in effect immediately
prior to such Common Stock Fundamental Change, but after giving effect to
any other prior adjustments effected pursuant to the preceding paragraphs,
multiplied by a fraction, the numerator of which is the Purchaser Stock
Price (as defined below) and the denominator of which is the Applicable
Price; PROVIDED, HOWEVER, that in the event of a Common Stock Fundamental
Change in which (A) 100% of the value of the consideration received by a
holder of Company Common Stock is common stock of the successor, acquiror
or other third party (and cash, if any, paid with respect to any fractional
interests in such common stock resulting from such Common Stock Fundamental
Change) and (B) all of the Company Common Stock shall have been exchanged
for, converted into or acquired for, common stock of the successor,
acquiror or other third party (and any cash with respect to fractional
interests), the conversion price of the Preferred Securities immediately
following such Common Stock Fundamental Change shall be the conversion
price in effect immediately prior to
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such Common Stock Fundamental Change multiplied by a fraction, the numerator
of which is one (1) and the denominator of which is the number of shares of
common stock of the successor, acquiror or other third party received by
a holder of one share of Company Common Stock as a result of such Common
Stock Fundamental Change.
Depending upon whether a Fundamental Change is a Non-Stock Fundamental
Change or a Common Stock Fundamental Change, a holder may receive significantly
different consideration upon conversion. In the event of a Non-Stock Fundamental
Change, the holder has the right to convert Preferred Securities into the kind
and amount of the shares of stock and other securities or property or assets
(including cash), except as otherwise provided above, as is determined by the
number of shares of Company Common Stock receivable upon conversion at the
conversion price as adjusted in accordance with clause (i) of the preceding
paragraph. However, in the event of a Common Stock Fundamental Change in which
less than 100% of the value of the consideration received by a holder of Company
Common Stock is common stock of the successor, acquiror or other third party, a
holder of a Preferred Security who converts such Preferred Security following
the Common Stock Fundamental Change will receive consideration in the form of
such common stock only, whereas a holder who converted such Preferred Security
prior to the Common Stock Fundamental Change would have received consideration
in the form of such common stock as well as any other securities or assets
(which may include cash) issuable upon conversion of such Preferred Security
immediately prior to such Common Stock Fundamental Change.
The term "Applicable Price" means (i) in the event of a Non-Stock
Fundamental Change in which the holders of Company Common Stock receive only
cash, the amount of cash received by a holder of one share of Company Common
Stock and (ii) in the event of any other Fundamental Change, the average of the
daily Closing Price (as defined in the Indenture) for one share of Company
Common Stock during the 10 Trading Days (as defined in the Indenture)
immediately prior to the record date for the determination of the holders of
Company Common Stock entitled to receive cash, securities, property or other
assets in connection with such Fundamental Change or, if there is no such record
date, prior to the date upon which the holders of Company Common Stock shall
have the right to receive such cash, securities, property or other assets.
The term "Common Stock Fundamental Change" means any Fundamental Change in
which more than 50% of the value (as determined in good faith by the Board of
Directors of the Company) of the consideration received by holders of Company
Common Stock consists of common stock that, for the 10 Trading Days immediately
prior to such Fundamental Change, has been admitted for listing or admitted for
listing subject to notice of issuance on a national securities exchange or
quoted on Nasdaq; PROVIDED, HOWEVER, that a Fundamental Change shall not be a
Common Stock Fundamental Change unless either (i) the Company continues to exist
after the occurrence of such Fundamental Change and the outstanding Preferred
Securities continue to exist as outstanding Preferred Securities, or (ii) not
later than the occurrence of such Fundamental Change, all obligations of the
Company under the Indenture, the Declaration, the Guarantee and all outstanding
Convertible Debentures are expressly assumed by the Person succeeding to the
business of the Company by becoming a party to the Declaration and the Guarantee
and by entering into a supplemental indenture to the Indenture (as applicable),
which obligations shall include the right of the holders of the Preferred
Securities to convert the Preferred Securities (and the Convertible Debentures)
into the common stock of such successor entity and providing for adjustments
that, for events subsequent to the effective date thereof, shall be as nearly
equivalent as may be practicable to the relevant adjustments provided for in the
preceding paragraphs and in this paragraph.
The term "Fundamental Change" means the occurrence of any transaction or
event or series of transactions or events pursuant to which all or substantially
all of the Company Common Stock shall be exchanged for, converted into, acquired
for or shall constitute solely the right to receive cash, securities, property
or other assets (whether by means of an exchange offer, liquidation, tender
offer, consolidation, merger, combination, reclassification, recapitalization or
otherwise); PROVIDED, HOWEVER, in the case of any such series of transactions or
events, for purposes of adjustment of the conversion price, such Fundamental
Change shall be deemed to have occurred when substantially all of the Company
Common Stock shall have been exchanged for, converted into or acquired for, or
shall constitute solely the right to receive, such cash, securities, property or
other assets, but the adjustment shall be based upon the consideration that the
holders of Company Common Stock received in the transaction or event as a result
of which more than 50% of the Company Common Stock shall have been exchanged
for, converted into or acquired for, or shall constitute solely the right to
receive, such cash, securities, property or other assets.
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The term "Non-Stock Fundamental Change" means any Fundamental Change other
than a Common Stock Fundamental Change.
The term "Purchaser Stock Price" means, with respect to any Common Stock
Fundamental Change, the average of the daily Closing Price for one share of the
common stock received by holders of Company Common Stock in such Common Stock
Fundamental Change during the 10 Trading Days immediately prior to the date
fixed for the determination of the holders of Company Common Stock entitled to
receive such common stock or, if there is no such date, prior to the date upon
which the holders of Company Common Stock shall have the right to receive such
common stock.
The term "Reference Market Price" shall initially mean $16.25 (which is an
amount equal to 66 2/3% of the reported last sale price for Company Common
Stock on the NYSE on September 26, 1996) and, in the event of any adjustment
to the conversion price other than as a result of a Fundamental Change, the
Reference Market Price shall also be adjusted so that the ratio of the
Reference Market Price to the conversion price after giving effect to any
such adjustment shall always be the same as the ratio of the initial
Reference Market Price to the initial conversion price of $28.75 per share.
No adjustment to the conversion price will be required to be made in any
case until cumulative adjustments amount to 1% or more of the conversion price.
Conversion price adjustments or omissions in making such adjustments may,
under certain circumstances, be deemed to be distributions that could be taxable
as dividends to holders of Preferred Securities or to the holders of Company
Common Stock. See "Certain United States Federal Income Tax Considerations."
REDEMPTION
The Convertible Debentures will mature on October 1, 2016 and may be
redeemed, in whole or in part, at any time after October 5, 1999 or at any time
in certain circumstances upon the occurrence of a Tax Event (in whole, but not
in part). In the event of a redemption following the occurrence of a Tax Event,
the redemption price will, in the case of a redemption during the periods
commencing on October 2, 1996 through October 4, 1997 and the twelve month
periods commencing October 5, 1997 and October 5, 1998, be the product of
1.06750, 1.06075 and 1.05400, respectively, times $50, in each case plus accrued
and unpaid interest and Liquidated Damages, if any. Commencing with October 5,
1999, the redemption price will be the optional redemption price for the
Convertible Debentures. See "Description of the Convertible Debentures -
Optional Redemption." Upon the repayment of the Convertible Debentures, whether
at maturity or upon redemption, the proceeds from such repayment shall
simultaneously be applied to redeem Trust Securities having an aggregate
liquidation amount equal to the Convertible Debentures so repaid or redeemed at
the applicable redemption price, together with accrued and unpaid distributions
through the date of redemption; PROVIDED, HOWEVER, that holders of the Trust
Securities shall be given not less than 30 nor more than 60 days' notice of such
redemption. See "- Special Event Redemption or Distribution," "- Redemption
Procedures," "Description of the Convertible Debentures - General" and
"Description of the Convertible Debentures - Optional Redemption."
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
If, at any time, a Tax Event or an Investment Company Event shall occur and
be continuing, the Trust shall, unless the Convertible Debentures are redeemed
in the limited circumstances described below, be dissolved with the result that,
after satisfaction of creditors, if any, of the Trust, Convertible Debentures
with an aggregate principal amount equal to the aggregate stated liquidation
amount of, with an interest rate identical to the distribution rate of, and
accrued and unpaid interest equal to accrued and unpaid distributions on, and
having the same record date for payment as the Preferred Securities and the
Common Securities outstanding at such time would be distributed on a PRO RATA
basis to the holders of the Preferred Securities and the Common Securities in
liquidation of such holders' interests in the Trust, within 90 days following
the occurrence of such Special Event; PROVIDED, HOWEVER, that in the case of the
occurrence of a Tax Event, as a condition of such dissolution and distribution,
the Regular Trustees shall have received an opinion of nationally recognized
independent tax counsel experienced in such matters (a "No Recognition
Opinion"), which opinion may rely on published revenue rulings of the Internal
Revenue Service, to the effect that the holders of the Preferred Securities will
not recognize any income, gain or loss for United States Federal income tax
purposes as a result of such dissolution and distribution of Convertible
Debentures; and, PROVIDED, FURTHER, that if at the time there is available to
the Trust the opportunity to eliminate,
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within such 90-day period, the Special Event by taking some ministerial
action, such as filing a form or making an election, or pursuing some other
similar reasonable measure which in the sole judgment of the Company has or
will cause no adverse effect on the Trust, the Company or the holders of the
Trust Securities and will involve no material cost, the Trust will pursue
such measure in lieu of dissolution. Furthermore, if in the case of the
occurrence of a Tax Event, (i) the Regular Trustees have received an opinion
(a "Redemption Tax Opinion") of nationally recognized independent tax counsel
experienced in such matters that, as a result of a Tax Event, there is more
than an insubstantial risk that the Company would be precluded from deducting
the interest on the Convertible Debentures for United States Federal income
tax purposes even if the Convertible Debentures were distributed to the
holders of Preferred Securities and Common Securities in liquidation of such
holders' interests in the Trust as described above or (ii) the Regular
Trustees shall have been informed by such tax counsel that a No Recognition
Opinion cannot be delivered to the Trust, the Company shall have the right,
upon not less than 30 nor more than 60 days' notice, to cause the redemption
of the Convertible Debentures in whole (but not in part) for cash within 90
days following the occurrence of such Tax Event, and promptly following such
redemption, the Preferred Securities and Common Securities will be redeemed
by the Trust at the applicable redemption price; PROVIDED, HOWEVER, that if
at the time there is available to the Company or the Trust the opportunity to
eliminate, within such 90-day period, the Tax Event by taking some
ministerial action, such as filing a form or making an election, or pursuing
some other similar reasonable measure which in the sole judgment of the
Company has or will cause no adverse effect on the Trust, the Company or the
holders of the Trust Securities and will involve no material cost, the
Company or the Trust will pursue such measure in lieu of redemption.
"Tax Event" means that the Regular Trustees shall have received an opinion
of nationally recognized independent tax counsel experienced in such matters (a
"Dissolution Tax Opinion") to the effect that as a result of (a) any amendment
to, or change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, (b) any amendment to, or change in, an
interpretation or application of any such laws or regulations by any legislative
body, court, governmental agency or regulatory authority (including the
enactment of any legislation and the publication of any judicial decision or
regulatory determination), (c) any interpretation or pronouncement that provides
for a position with respect to such laws or regulations that differs from the
theretofore generally accepted position or (d) any action taken by any
governmental agency or regulatory authority, which amendment or change is
enacted, promulgated, issued or announced or which interpretation or
pronouncement is issued or announced or which action is taken, in each case,
after the date of this Prospectus (collectively, a "Change in Tax Law"), there
is more than an insubstantial risk that (i) the Trust is, or will be within
90 days of the date thereof, subject to United States Federal income tax with
respect to interest accrued or received on the Convertible Debentures, (ii) the
Trust is, or will be within 90 days of the date thereof, subject to more than a
DE MINIMIS amount of other taxes, duties or other governmental charges or
(iii) interest payable by the Company on the Convertible Debentures is not, or
within 90 days of the date thereof will not be, deductible for United States
Federal income tax purposes. Notwithstanding anything in the previous sentence
to the contrary, a Tax Event shall not include any Change in Tax Law that
requires the Company for United States Federal income tax purposes to defer
taking a deduction for any original issue discount ("OID") that accrues with
respect to the Convertible Debentures until the interest payment related to such
OID is paid in money; PROVIDED, that such Change in Tax Law does not create more
than an insubstantial risk that the Company will be prevented from taking a
deduction for OID accruing with respect to the Convertible Debentures at a date
that is no later than the date the interest payment related to such OID is
actually paid by the Company in money.
"Investment Company Event" means that the Regular Trustees shall have
received an opinion of nationally recognized independent counsel experienced in
practice under the Investment Company Act of 1940, as amended (the 1940 Act),
that as a result of the occurrence of a change in law or regulation or a change
in interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority (a "Change in 1940 Act Law"),
there is more than an insubstantial risk that the Trust is or will be considered
an "investment company" which is required to be registered under the 1940 Act,
which Change in 1940 Act Law becomes effective on or after September 26, 1996.
On the date fixed for any distribution of Convertible Debentures, upon
dissolution of the Trust, (i) the Preferred Securities and the Common Securities
will no longer be deemed to be outstanding and (ii) certificates representing
Trust Securities will be deemed to represent beneficial interests in the
Convertible Debentures having an aggregate principal amount equal to the stated
liquidation amount of, and bearing accrued and unpaid interest equal to accrued
and unpaid distributions on, such Trust Securities until such certificates are
presented to the Company or the Company's agent for transfer or reissuance.
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There can be no assurance as to the market price for the Convertible
Debentures which may be distributed in exchange for Preferred Securities if a
dissolution and liquidation of the Trust were to occur. Accordingly, the
Convertible Debentures which the investor may subsequently receive on
dissolution and liquidation of the Trust may trade at a discount to the price of
the Preferred Securities exchanged.
REDEMPTION PROCEDURES
The Trust may not redeem fewer than all of the outstanding Preferred
Securities unless all accrued and unpaid distributions have been paid on all
Preferred Securities for all quarterly distribution periods terminating on or
prior to the date of redemption.
In the event of any redemption in part, the Trust shall not be required to
(i) issue, register the transfer of or exchange any Preferred Security during a
period beginning at the opening of business 15 days before any selection for
redemption of Preferred Securities and ending at the close of business on the
earliest date on which the relevant notice of redemption is deemed to have been
given to all holders of Preferred Securities to be so redeemed and (ii) register
the transfer of or exchange of any Preferred Securities so selected for
redemption, in whole or in part, except for the unredeemed portion of any
Preferred Securities being redeemed in part.
If the Trust gives a notice of redemption in respect of Preferred
Securities (which notice will be irrevocable), and if the Company has paid to
the Property Trustee a sufficient amount of cash in connection with the related
redemption or maturity of the Convertible Debentures, then, by 12:00 noon, New
York time, on the redemption date, the Trust will irrevocably deposit with DTC
funds sufficient to pay the amount payable on redemption of all book-entry
certificates and will give DTC irrevocable instructions and authority to pay
such amount in respect of Preferred Securities represented by the Global
Certificates (as defined herein) and will irrevocably deposit with the paying
agent for the Preferred Securities funds sufficient to pay such amount in
respect of any Certificated Securities and will give such paying agent
irrevocable instructions and authority to pay such amount to the holders of
Certificated Securities upon surrender of their certificates. If notice of
redemption shall have been given and funds are deposited as required, then upon
the date of such deposit, all rights of holders of such Preferred Securities so
called for redemption will cease, except the right of the holders of such
Preferred Securities to receive the applicable redemption price, but without
interest on such Redemption Price. In the event that any date fixed for
redemption of Preferred Securities is not a Business Day, then payment of the
amount payable on such date will be made on the next succeeding day which is a
Business Day (without any interest or other payment in respect of any such
delay), except that, if such Business Day falls in the next calendar year, such
payment will be made on the immediately preceding Business Day. In the event
that payment of the applicable redemption price in respect of Preferred
Securities is improperly withheld or refused and not paid either by the Trust or
by the Company pursuant to the Guarantee described under "Description of the
Guarantee," distributions on such Preferred Securities will continue to accrue
at the then applicable rate, from the original redemption date to the date of
payment, in which case the actual payment date will be considered the date fixed
for redemption for purposes of calculating the amount payable upon redemption
(other than for calculating any premium).
In the event that fewer than all of the outstanding Preferred Securities
are to be redeemed, the Preferred Securities will be redeemed PRO RATA.
Subject to the foregoing and applicable law (including, without limitation,
United States Federal securities laws), the Company or its subsidiaries may at
any time and from time to time purchase outstanding Preferred Securities by
tender, in the open market or by private agreement.
SUBORDINATION OF COMMON SECURITIES
Payment of distributions on, and the amount payable upon redemption of, the
Trust Securities, as applicable, shall be made PRO RATA based on the liquidation
amount of the Trust Securities; PROVIDED, HOWEVER, that if on any distribution
date or redemption date a Declaration Event of Default shall have occurred and
be continuing, no payment of any distribution on, or amount payable upon
redemption of, any Common Security, and no other payment on account of the
redemption, liquidation or other acquisition of Common Securities, shall be made
unless payment in full in cash of all
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accumulated and unpaid distributions on all outstanding Preferred Securities
for all distribution periods terminating on or prior thereto, or in the case
of payment of the amount payable upon redemption of the Preferred Securities,
the full amount of such amount in respect of all outstanding Preferred
Securities, shall have been made or provided for, and all funds available to
the Property Trustee shall first be applied to the payment in full in cash of
all distributions on, or the amount payable upon redemption of, Preferred
Securities then due and payable.
In the case of any Declaration Event of Default, the holder of Common
Securities will be deemed to have waived any such Declaration Event of Default
until all such Declaration Events of Default with respect to the Preferred
Securities have been cured, waived or otherwise eliminated. Until any such
Declaration Events of Default with respect to the Preferred Securities have been
so cured, waived or otherwise eliminated, the Property Trustee shall act solely
on behalf of the holders of the Preferred Securities and not the holder of the
Common Securities, and only the holders of the Preferred Securities will have
the right to direct the Property Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of the Trust (each a "Liquidation"), the then holders
of the Preferred Securities will be entitled to receive out of the assets of the
Trust, after satisfaction of liabilities to creditors, distributions in an
amount equal to the aggregate of the stated liquidation amount of $50 per
Preferred Security plus accrued and unpaid distributions thereon to the date of
payment (the "Liquidation Distribution"), unless, in connection with such
Liquidation, Convertible Debentures in an aggregate stated principal amount
equal to the aggregate stated liquidation amount of, with an interest rate
identical to the distribution rate of, and accrued and unpaid interest equal to
accrued and unpaid distributions on, the Preferred Securities shall have been
distributed on a PRO RATA basis to holders of the Preferred Securities.
If, upon any such Liquidation, the Liquidation Distribution can be paid
only in part because the Trust has insufficient assets available to pay in full
the aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Preferred Securities shall be paid on a PRO RATA basis. The holders
of the Common Securities will be entitled to receive distributions upon any such
dissolution PRO RATA with the holders of the Preferred Securities, except that
if a Declaration Event of Default has occurred and is continuing, the Preferred
Securities shall have a preference over the Common Securities with regard to
such distributions.
Pursuant to the Declaration, the Trust will terminate (i) on October 1,
2025, the expiration of the term of the Trust, (ii) upon the bankruptcy of the
Company, (iii) upon the filing of a certificate of dissolution or the equivalent
with respect to the Company the filing of a certificate of cancellation with
respect to the Trust after having obtained the consent of at least a majority in
liquidation amount of the Trust Securities, voting together as a single class,
to file such certificate of cancellation, or the revocation of the charter of
the Company and the expiration of 90 days after the date of revocation without a
reinstatement thereof, (iv) upon the distribution of all of the Convertible
Debentures upon the occurrence of a Special Event, (v) upon the entry of a
decree of a judicial dissolution of the Company or the Trust or (vi) upon the
redemption or conversion of all the Preferred Securities.
MERGER, CONSOLIDATION OR AMALGAMATION OF THE TRUST
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety, to any corporation or other entity, except as
described below. The Trust may, with the consent of a majority of the Regular
Trustees and without the consent of the holders of the Trust Securities, the
Property Trustee or the Delaware Trustee, consolidate, amalgamate, merge with or
into, or be replaced by a trust organized as such under the laws of any State of
the United States; PROVIDED, that (i) if the Trust is not the survivor, such
successor entity either (x) expressly assumes all of the obligations of the
Trust under the Trust Securities or (y) substitutes for the Preferred Securities
other securities having substantially the same terms as the Securities (the
"Successor Securities"), so long as the Successor Securities rank the same as
the Securities rank with respect to distributions, assets and payments, (ii) the
Company expressly acknowledges a trustee of such successor entity possessing the
same powers and duties as the Property Trustee as the holder of the Convertible
Debentures, (iii) the Preferred Securities or any Successor Securities are
listed, or any Successor Securities will be listed upon notification of
issuance, on any national securities exchange or with another organization on
which the Preferred Securities are then listed or quoted, (iv) such merger,
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consolidation, amalgamation or replacement does not cause the Preferred
Securities (including any Successor Securities) to be downgraded by any
nationally recognized statistical rating organization, (v) such merger,
consolidation, amalgamation or replacement does not adversely affect the rights,
preferences and privileges of the holders of the Preferred Securities (including
any Successor Securities) in any material respect (other than with respect to
any dilution of the holders' interest in the new entity), (vi) such successor
entity has a purpose substantially identical to that of the Trust, (vii) the
Company guarantees the obligations of such successor entity under the Successor
Securities to the same extent as provided by the Guarantee and (viii) prior to
such merger, consolidation, amalgamation or replacement, the Company has
received an opinion of a nationally recognized independent counsel to the Trust
reasonably acceptable to the Property Trustee experienced in such matters to the
effect that: (A) such merger, consolidation, amalgamation or replacement will
not adversely affect the rights, preferences and privileges of the holders of
the Trust Securities (including any Successor Securities) in any material
respect (other than with respect to any dilution of the holders' interest in the
new entity), (B) following such merger, consolidation amalgamation or
replacement, neither the Trust nor such successor entity will be required to
register as an investment company under the 1940 Act and (C) following such
merger, consolidation, amalgamation or replacement, the Trust (or such successor
trust) will be treated as a grantor trust for United States Federal income tax
purposes.
Notwithstanding the foregoing, the Trust shall not, except with the consent
of holders of 100% in liquidation amount of the Common Securities, consolidate,
amalgamate, merge with or into, or be replaced by any other entity or permit any
other entity to consolidate, amalgamate, merge with or into, or replace it, if
such consolidation, amalgamation, merger or replacement would cause the Trust or
the successor entity to be classified as other than a grantor trust for United
States Federal income tax purposes.
DECLARATION EVENTS OF DEFAULT
An event of default under the Indenture (an "Indenture Event of Default")
constitutes an event of default under the Declaration with respect to the Trust
Securities (a "Declaration Event of Default"); PROVIDED, HOWEVER, that pursuant
to the Declaration, the holder of the Common Securities will be deemed to have
waived any Declaration Event of Default with respect to the Common Securities
until all Declaration Events of Default with respect to the Preferred Securities
have been cured, waived or otherwise eliminated. Until such Declaration Events
of Default with respect to the Preferred Securities have been so cured, waived
or otherwise eliminated, the Property Trustee will be deemed to be acting solely
on behalf of the holders of the Preferred Securities and only the holders of the
Preferred Securities will have the right to direct the Property Trustee with
respect to certain matters under the Declaration and, therefore the Indenture.
If the Property Trustee fails to enforce its rights under the Convertible
Debentures after a holder of Preferred Securities has made a written request,
such holder of record of Preferred Securities may directly institute a legal
proceeding against the Company to enforce the Property Trustee's rights under
the Convertible Debentures without first instituting any legal proceeding
against the Property Trustee or any other person or entity. Notwithstanding the
foregoing, if a Declaration Event of Default has occurred and is continuing and
such event is attributable to the failure of the Company to pay interest or
principal on the Convertible Debentures on the date such interest or principal
is otherwise payable (or in the case of redemption, the redemption date), then a
holder of Preferred Securities may directly institute a proceeding for
enforcement of payment to such holder directly of the principal of or interest
on the Convertible Debentures having a principal amount equal to the aggregate
liquidation amount of the Preferred Securities of such holder on or after the
respective due date specified in the Convertible Debentures. In connection with
such Direct Action, the Company will be subrogated to the rights of such holder
of Preferred Securities under the Declaration to the extent of any payment made
to such holder of Preferred Securities in such Direct Action. The holders of
Preferred Securities will not be able to exercise directly any other remedy
available to the holders of the Convertible Debentures.
Upon the occurrence of a Declaration Event of Default, the Property Trustee
as the sole holder of the Convertible Debentures will have the right under the
Indenture to declare the principal of and interest on the Convertible Debentures
to be immediately due and payable. The Company and the Trust are each required
to file annually with the Property Trustee an officers' certificate as to its
compliance with all conditions and covenants under the Declaration.
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VOTING RIGHTS
Except as described herein, under the Trust Act, the Trust Indenture Act
and under "Description of the Guarantee - Amendments and Assignment," and as
otherwise required by law and the Declaration, the holders of the Preferred
Securities will have no voting rights.
Subject to the requirement of the Property Trustee obtaining a tax opinion
in certain circumstances set forth in the last sentence of this paragraph, the
holders of a majority in liquidation amount of the Preferred Securities have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Property Trustee, or direct the exercise of any trust or
power conferred upon the Property Trustee under the Declaration, including the
right to direct the Property Trustee, as holder of the Convertible Debentures,
to (i) exercise the remedies available to it under the Indenture as a holder of
the Convertible Debentures, (ii) waive any past Indenture Event of Default that
is waivable under the Indenture, (iii) exercise any right to rescind or annul a
declaration that the principal of all the Convertible Debentures shall be due
and payable or (iv) consent to any amendment, modification, or termination of
the Indenture or the Convertible Debentures where such consent shall be
required; PROVIDED, HOWEVER, that where a consent or action under the Indenture
would require the consent or act of the holders of more than a majority of the
aggregate principal amount of Convertible Debentures affected thereby, only the
holders of the percentage of the aggregate stated liquidation amount of the
Preferred Securities which is at least equal to the percentage required under
the Indenture may direct the Property Trustee to give such consent or take such
action. If the Property Trustee fails to enforce its rights under the
Convertible Debentures after a holder of record of Preferred Securities has made
a written request, such holder of record of Preferred Securities may directly
institute a legal proceeding directly against the Company to enforce the
Property Trustee's rights under the Convertible Debentures without first
instituting any legal proceeding against the Property Trustee or any other
person or entity. Notwithstanding the foregoing, if a Declaration Event of
Default has occurred and is continuing and such event is attributable to the
failure of the Company to pay interest or principal on the Convertible
Debentures on the date such interest or principal is otherwise payable (or in
the case of redemption on the redemption date), then a holder of Preferred
Securities may directly institute a proceeding for enforcement of payment to
such holder of the principal of or interest on the Convertible Debentures having
a principal amount equal to the aggregate liquidation amount of the Preferred
Securities of such holder on or after the respective due date specified in the
Convertible Debentures. The Property Trustee shall notify all holders of the
Preferred Securities of any notice of default received from the Indenture
Trustee with respect to the Convertible Debentures. Such notice shall state that
such Indenture Event of Default also constitutes a Declaration Event of Default.
The Property Trustee shall be under no obligation to take any of the actions
described in clause (i), (ii) or (iii) above unless the Property Trustee has
obtained an opinion of independent tax counsel to the effect that as a result of
such action, the Trust will not fail to be classified as a grantor trust for
United States Federal income tax purposes and each holder will be treated as
owning an undivided beneficial interest in the Convertible Debentures.
In the event the consent of the Property Trustee, as the holder of the
Convertible Debentures, is required under the Indenture with respect to any
amendment, modification or termination of the Indenture, the Property Trustee
shall request the direction of the holders of the Trust Securities with respect
to such amendment, modification or termination and shall vote with respect to
such amendment, modification or termination as directed by a majority in
liquidation amount of the Trust Securities voting together as a single class;
PROVIDED, HOWEVER, that where a consent under the Indenture would require the
consent of the holders of more than a majority of the aggregate principal amount
of the Convertible Debentures, the Property Trustee may only give such consent
at the direction of the holders of at least the same proportion in aggregate
stated liquidation amount of the Trust Securities. The Property Trustee shall
not take any such action in accordance with the directions of the holders of the
Trust Securities unless the Property Trustee has obtained an opinion of tax
counsel to the effect that for the purposes of United States Federal income tax
the Trust will not be classified as other than a grantor trust.
A waiver of an Indenture Event of Default will constitute a waiver of the
corresponding Declaration Event of Default.
Any required approval or direction of holders of Preferred Securities may
be given at a separate meeting of holders of Preferred Securities convened for
such purpose, at a meeting of all of the holders of Trust Securities or pursuant
to written consent. The Regular Trustees will cause a notice of any meeting at
which holders of Preferred Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be
mailed to each holder of record of Preferred Securities. Each such notice will
include a statement setting forth the following information:
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(i) the date of such meeting or the date by which such action is to be taken;
(ii) a description of any resolution proposed for adoption at such meeting on
which such holders are entitled to vote or of such matter upon which written
consent is sought; and (iii) instructions for the delivery of proxies or
consents. No vote or consent of the holders of Preferred Securities will be
required for the Trust to redeem and cancel Preferred Securities or
distribute Convertible Debentures in accordance with the Declaration.
Notwithstanding that holders of Preferred Securities are entitled to vote
or consent under any of the circumstances described above, any of the Preferred
Securities that are owned at such time by the Company or any entity directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, the Company, shall not be entitled to vote or consent and shall,
for purposes of such vote or consent, be treated as if such Preferred Securities
were not outstanding.
The procedures by which holders of Preferred Securities represented by the
Global Certificates may exercise their voting rights are described below. See
"- Book-Entry Only Issuance - The Depository Trust Company."
Holders of the Preferred Securities have no rights to appoint or remove the
Regular Trustees, who may be appointed, removed or replaced solely by the
Company as the holder of all of the Common Securities.
MODIFICATION OF THE DECLARATION
The Declaration may be modified and amended if approved by the Regular
Trustees (and in certain circumstances the Property Trustee and the Delaware
Trustee), PROVIDED that if any proposed amendment provides for, or the Regular
Trustees otherwise propose to effect, (i) any action that would adversely affect
the powers, preferences or special rights of the Trust Securities, whether by
way of amendment to the Declaration or otherwise, or (ii) the dissolution,
winding-up or termination of the Trust other than pursuant to the terms of the
Declaration, then the holders of the Trust Securities voting together as a
single class will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of at
least a majority in liquidation amount of the Trust Securities affected thereby;
PROVIDED that if any amendment or proposal referred to in clause (i) above would
adversely affect only the Preferred Securities or the Common Securities, then
only the affected class will be entitled to vote on such amendment or proposal
and such amendment or proposal shall not be effective except with the approval
of at least a majority in liquidation amount of such class of securities.
Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause the Trust to
be classified for purposes of United States Federal income taxation as other
than a grantor trust, (ii) reduce or otherwise adversely affect the powers of
the Property Trustee or (iii) cause the Trust to be deemed an "investment
company" which is required to be registered under the 1940 Act.
REGISTRATION RIGHTS
In connection with the Original Offering, the Company and the Trust entered
into a registration rights agreement with the Initial Purchasers (the
"Registration Rights Agreement") pursuant to which the Company and the Trust
would, at the Company's expense, for the benefit of the holders of the Preferred
Securities, the Guarantee, the Convertible Debentures and the shares of Company
Common Stock issuable upon conversion of the Convertible Debentures (together,
the "Registrable Securities"), (i) file with the Commission within 75
calendar days after the date of issuance of the Preferred Securities
(December 16, 1996), a registration statement (the "Shelf Registration
Statement") covering resales of the Registrable Securities, (ii) use their
reasonable efforts to cause the Shelf Registration Statement to be declared
effective under the Securities Act within 135 calendar days after the date of
the issuance of the Preferred Securities (February 14, 1997) and (iii) use their
reasonable efforts to keep effective the Shelf Registration Statement until
three years after the date it is declared effective or such earlier date as all
Registrable Securities shall have been disposed of or on which all Registrable
Securities held by persons that are not affiliates of the Company or the Trust
may be resold without registration pursuant to Rule 144(k) under the Securities
Act (the "Effectiveness Period"). The Registration Statement of which this
Prospectus forms a part has been filed by the Company and the Trust pursuant to
their respective obligations under the Registration Rights Agreement. The
Company will provide to each holder of Registrable Securities copies of this
Prospectus, notify each holder when the Shelf Registration Statement has become
effective and take certain other actions as
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are required to permit unrestricted resales of the Registrable Securities. A
holder of Registrable Securities that sells such Registrable Securities
pursuant to the Shelf Registration Statement will be required to be named as
a selling security holder herein and, to the extent required by the Act, to
deliver a copy of this Prospectus to purchasers, will be subject to certain
of the civil liability provisions under the Securities Act in connection with
such sales and will be bound by the provisions of the Registration Rights
Agreement, including certain indemnification obligations.
The Company will be permitted under certain circumstances (whether or not
controlled by, or within the control of, the Company) to suspend the use of this
Prospectus which is part of the Shelf Registration Statement for a period not to
exceed 30 consecutive days or 90 days, whether or not consecutive, during any
12-month period. In the event that the Shelf Registration Statement ceases to be
effective during the Effectiveness Period for more than 30 consecutive days or
any 90 days, whether or not consecutive, during any 12-month period, then the
interest rate borne by the Debentures and the distribution rate borne by the
Preferred Securities would each increase by an additional one-half of one
percent (0.50%) per annum from such 31st or 91st day, as applicable.
The Company and the Trust agreed in the Registration Rights Agreement to
use their reasonable efforts to cause the Preferred Securities and the Company
Common Stock issuable upon conversion of the Debentures to be listed on the NYSE
upon effectiveness of the Shelf Registration Statement. However, due to the fact
that the Trust is unable to meet all of the listing requirements of the NYSE for
the Preferred Securities sold pursuant to this Prospectus, the Company and the
Trust will not immediately seek to list such Preferred Securities on the NYSE or
any other securities exchange or to obtain approval for quotation through any
automated quotation system. The Company and the Trust intend to reevaluate
listing the Preferred Securities on the NYSE if and to the extent the listing
and maintenance requirements of the exchange applicable thereto are met in the
future.
The summary herein of certain provisions of the Registration Rights
Agreement is subject to, and is qualified in its entirety by reference to, all
the provisions of the Registration Rights Agreement, a copy of which is
available upon request to the Company or the Initial Purchasers.
BOOK-ENTRY ONLY ISSUANCE - THE DEPOSITORY TRUST COMPANY
The description of book-entry procedures in this Prospectus includes
summaries of certain rules and operating procedures of The Depository Trust
Company, New York, New York ("DTC") that affect transfers of interest in the
global certificate or certificates issued in connection with sales of Preferred
Securities made pursuant to this Prospectus. Except to the extent that Preferred
Securities were initially sold in the Original Offering or the Over-Allotment
Offering to institutional "accredited investors" (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act) or in offshore transactions pursuant
to Regulation S under the Securities Act, the Preferred Securities were issued
only as fully registered securities registered in the name of Cede & Co. (as
nominee for DTC). One or more fully registered global Preferred Security
certificates (the "Global Certificates") bearing a CUSIP number distinct from
the CUSIP number for the Preferred Securities issued in the Original Offering
and the Over-Allotment Offering will be issued, representing, in the aggregate,
Preferred Securities sold pursuant to this Prospectus or any other prospectus
constituting a part of the Registration Statement, and will be deposited with
DTC. In the event of a transfer of securities that were issued in fully
registered, certificated form, the holder of such certificates will be required
to exchange them for interests in the appropriate Global Certificates
representing the number of Preferred Securities being transferred.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Participants in DTC
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. DTC is owned by a number of its
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others such as securities brokers and
dealers, banks and trust
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companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("Indirect Participants"). The
rules applicable to DTC and its Participants are on file with the Commission.
Purchases of Preferred Securities within the DTC system must be made by or
through Participants, which will receive a credit for the Preferred Securities
on DTC's records. The ownership interest of each actual purchaser of Preferred
Securities ("Beneficial Owner") is in turn to be recorded on the Participants'
and Indirect Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchases, but Beneficial Owners are expected to
receive written confirmations providing details of the transactions, as well as
periodic statements of their holdings, from the Participants or Indirect
Participants through which the Beneficial Owners purchased Preferred Securities.
Transfers of ownership interests in the Preferred Securities are to be
accomplished by entries made on the books of Participants and Indirect
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in Preferred
Securities, except in the event that use of the book-entry system for the
Preferred Securities is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Preferred
Securities; DTC's records reflect only the identity of the Participants to whose
accounts such Preferred Securities are credited, which may or may not be the
Beneficial Owners. The Participants and Indirect Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Certificate, DTC or such nominee, as the case may be, will be considered
the sole owner or holder of the Preferred Securities represented thereby for all
purposes under the Declaration and the Preferred Securities. No beneficial owner
of an interest in a Global Certificate will be able to transfer that interest
except in accordance with DTC's applicable procedures, in addition to those
provided for under the Declaration.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Preferred Securities (including the presentation of
Preferred Securities for exchange as described below) only at the direction of
one or more Participants to whose account the DTC interests in the Global
Certificates are credited and only in respect of such portion of the aggregate
liquidation amount of Preferred Securities as to which such Participant or
Participants has or have given such direction. However, if there is a
Declaration Event of Default under the Preferred Securities, DTC will exchange
the Global Certificates for Certificated Securities, which it will distribute to
its Participants.
Conveyance of notices and other communications by DTC to Participants, by
Participants to Indirect Participants, and by Participants and Indirect
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
Redemption notices in respect of the Preferred Securities held in
book-entry form will be sent to DTC or its nominee. If less than all of the
Preferred Securities are being redeemed, DTC will determine the amount of the
interest of each Participant to be redeemed in accordance with its procedures.
Although voting with respect to the Preferred Securities is limited, in
those cases where a vote is required, neither DTC nor its nominee will itself
consent or vote with respect to Preferred Securities. Under its usual
procedures, DTC would mail an Omnibus Proxy to the Trust as soon as possible
after the record date. The Omnibus Proxy assigns DTC's consenting or voting
rights to those Participants to whose accounts the Preferred Securities are
credited on the record date (identified in a listing attached to the Omnibus
Proxy).
Distributions on the Preferred Securities held in book-entry form will be
made to DTC in immediately available funds. DTC's practice is to credit
Participants' accounts on the relevant payment date in accordance with their
respective holdings shown on DTC's records unless DTC has reason to believe that
it will not receive payments on such payment date. Payments by Participants and
Indirect Participants to Beneficial Owners will be governed by standing
instructions and customary practices and will be the responsibility of such
Participants and Indirect Participants and not of DTC, the Trust, or the Company
subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of distributions to DTC is the responsibility of the
Trust, disbursement of such payments to Participants is the responsibility of
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DTC, and disbursement of such payments to the Beneficial Owners is the
responsibility of Participants and Indirect Participants.
Except as provided herein, a Beneficial Owner of an interest in a Global
Certificate will not be entitled to receive physical delivery of Preferred
Securities. Accordingly, each Beneficial Owner must rely on the procedures of
DTC to exercise any rights under the Preferred Securities.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Certificates among Participants of DTC, DTC
is under no obligation to perform or continue to perform such procedures, and
such procedures may be discontinued at any time. None of the Company, the Trust
or the Trustee will have any responsibility for the performance by DTC or its
Participants or Indirect Participants under the rules and procedures governing
DTC. DTC may discontinue providing its services as securities depository with
respect to the Preferred Securities at any time by giving notice to the Trust.
Under such circumstances, in the event that a successor securities depository is
not obtained, Preferred Security certificates are required to be printed and
delivered. Additionally, the Trust (with the consent of the Company) may decide
to discontinue use of the system of book-entry transfers through DTC (or a
successor depository). In that event, certificates for the Preferred Securities
will be printed and delivered. In each of the above circumstances, the Company
will appoint a paying agent with respect to the Preferred Securities.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in the global Preferred
Securities as represented by a Global Certificate.
PAYMENT AND PAYING AGENCY
Payments in respect of the Preferred Securities represented by the Global
Certificates shall be made to DTC, which shall credit the relevant accounts at
DTC on the applicable distribution dates or, in the case of certificated
securities, such payments shall be made by check mailed to the address of the
holder entitled thereto as such address as shall appear on the Register. The
Paying Agent is currently Wilmington Trust Company. The Paying Agent shall be
permitted to resign as Paying Agent upon 30 days' written notice to the Issuer
Trustees. In the event that Wilmington Trust Company shall no longer be the
Paying Agent, the Trustee shall appoint a successor to act as Paying Agent
(which shall be a bank or company).
REGISTRAR, TRANSFER AGENT, PAYING AGENT AND CONVERSION AGENT
The Property Trustee acts as Registrar, Transfer Agent, Paying Agent and
Conversion Agent for the Preferred Securities.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of the Trust but upon payment (with the giving of such
indemnity as the Trust or the Company may require) in respect of any tax or
other government charges which may be imposed in relation to it.
The Trust will not be required to register or cause to be registered the
transfer of Preferred Securities after such Preferred Securities have been
called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Company and certain of its subsidiaries may maintain deposit accounts
and conduct other banking transactions with the Property Trustee in the ordinary
course of their businesses. The Property Trustee, prior to the occurrence of a
default with respect to the Trust Securities, has undertaken to perform only
such duties as are specifically set forth in the Declaration and, after default,
shall exercise the same degree of care as a prudent individual would exercise in
the conduct of his or her own affairs. Subject to such provisions, the Property
Trustee is under no obligation to exercise any of the powers vested in it by the
Declaration at the request of any holder of Preferred Securities, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The
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holders of Preferred Securities will not be required to offer such indemnity
in the event such holders, by exercising their voting rights, direct the
Property Trustee to take any action following a Declaration Event of Default.
GOVERNING LAW
The Declaration and the Preferred Securities are governed by, and shall be
construed in accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The Regular Trustees are authorized and directed to conduct the affairs of
and to operate the Trust in such a way that the Trust will not be deemed to be
an "investment company" required to be registered under the 1940 Act or
characterized as other than a grantor trust for United States Federal income tax
purposes so that the Convertible Debentures will be treated as indebtedness of
the Company for United States Federal income tax purposes. In this connection,
the Regular Trustees are authorized to take any action, not inconsistent with
applicable law, the certificate of trust or the Declaration that the Regular
Trustees determine in their discretion to be necessary or desirable for such
purposes as long as such action does not adversely affect the interests of the
holders of the Preferred Securities.
Holders of the Preferred Securities have no preemptive rights.
DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the Guarantee which
was executed and delivered by the Company for the benefit of the holders from
time to time of Preferred Securities. The summary does not purport to be
complete and is subject in all respects to the provisions of, and is qualified
in its entirety by reference to, the Guarantee. The Guarantee incorporates by
reference the terms of the Trust Indenture Act. The Guarantee was qualified
under the Trust Indenture Act upon effectiveness of the Registration Statement
of which this Prospectus forms a part. The Guarantee Trustee holds the Guarantee
for the benefit of the holders of the Preferred Securities.
GENERAL
Pursuant to and to the extent set forth in the Guarantee, the Company has
irrevocably and unconditionally agreed to pay in full to the holders of the
Preferred Securities (except to the extent paid by the Trust), as and when due,
regardless of any defense, right of set off or counterclaim which the Trust may
have or assert, the following payments (the "Guarantee Payments"), without
duplication: (i) any accrued and unpaid distributions that are required to be
paid on the Preferred Securities to the extent the Trust has funds available
therefor, (ii) the applicable redemption price with respect to any Preferred
Securities called for redemption by the Trust, to the extent the Trust has funds
available therefor, and (iii) upon a voluntary or involuntary dissolution,
winding-up or termination of the Trust (other than in connection with the
distribution of Convertible Debentures to the holders of Preferred Securities or
the redemption of all the Preferred Securities), the lesser of (a) the aggregate
of the liquidation amount and all accrued and unpaid distributions on the
Preferred Securities to the date of payment, to the extent the Trust has funds
available therefor, and (b) the amount of assets of the Trust remaining
available for distribution to holders of Preferred Securities upon the
liquidation of the Trust. The holders of a majority in liquidation amount of the
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee or
to direct the exercise of any trust or power conferred upon the Guarantee
Trustee under the Guarantee. Any holder of Preferred Securities may directly
institute a legal proceeding against the Company to enforce the obligations of
the Company under the Guarantee without first instituting a legal proceeding
against the Trust, the Guarantee Trustee or any other person or entity. If the
Company were to default on its obligation to pay amounts payable on the
Convertible Debentures, the Trust would lack available funds for the payment of
distributions or amounts payable on redemption of the Preferred Securities or
otherwise, and in such event holders of the Preferred Securities would not be
able to rely upon the Guarantee for payment of such amounts. Instead, a holder
of the Preferred Securities would be required to rely on the enforcement (i) by
the Property Trustee of its rights, as registered holder of the Convertible
Debentures, against the Company pursuant to the terms of the Convertible
Debentures or (ii) by such holder of Preferred Securities of its right against
the Company to enforce payments on the Convertible Debentures.
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See "Description of the Convertible Debentures." The Declaration provides
that each holder of Preferred Securities, by acceptance thereof, agrees to
the provisions of the Guarantee and the Indenture.
The Guarantee does not apply to any payment of distributions or the
Redemption Price, or to payments upon the dissolution, winding-up or termination
of the Trust, except to the extent the Trust shall have funds available
therefor. If the Company does not make interest payments on the Convertible
Debentures, the Trust will not pay distributions on the Preferred Securities and
will not have funds available therefor. See "Description of the Convertible
Debentures." The Guarantee, when taken together with the Company's obligations
under the Convertible Debentures, the Indenture and the Declaration, including
its obligations to pay costs, expenses, debts and liabilities of the Trust
(other than with respect to the Trust Securities), provides a full and
unconditional guarantee by the Company of payments due on the Preferred
Securities issued by the Trust.
The Company has also agreed separately to irrevocably and unconditionally
guarantee the obligations of the Trust with respect to the Common Securities
(the "Common Securities Guarantee") to the same extent as the Guarantee, except
that upon the occurrence and during the continuation of a Declaration Event of
Default, holders of Preferred Securities shall have priority over holders of
Common Securities with respect to distributions and payments on liquidation,
redemption or otherwise.
CERTAIN COVENANTS OF THE COMPANY
In the Guarantee, the Company has covenanted that, so long as any Preferred
Securities remain outstanding, if (i) the Company has exercised its option to
defer interest payments on the Convertible Debentures by extending the interest
payment period and such extension shall be continuing, (ii) the Company shall be
in default with respect to its payment or other obligations under the Guarantee
or (iii) there shall have occurred and be continuing any event that, with the
giving of notice or the lapse of time or both, would constitute an Indenture
Event of Default, then the Company (a) shall not, and shall not allow any of its
subsidiaries (other than its wholly owned subsidiaries) to, declare or pay
dividends on, make distributions with respect to, or redeem, purchase or
acquire, or make a liquidation payment with respect to, any of its capital stock
(except for (i) dividends or distributions in shares of Company Common Stock on
Company Common Stock or on its Preferred Stock, (ii) purchases or acquisitions
of shares of Company Common Stock made in connection with employee benefit plans
of the Company or its subsidiaries in the ordinary course of business or
pursuant to employment agreements with officers or employees of the Company or
its subsidiaries entered into in the ordinary course of business, provided that
repurchases by the Company or its subsidiaries made from officers or employees
of the Company or its subsidiaries pursuant to employment agreements shall be
made at a price not to exceed market value on the date of any such repurchase
and shall not exceed $1 million in the aggregate for all such employees and
officers, (iii) conversions or exchanges of any class of common stock into any
other class of common stock or (iv) purchases of fractional interests in shares
of the Company's capital stock pursuant to the conversion or exchange provisions
of any of the Company's securities being converted or exchanged), (b) shall not,
and shall not allow any of its subsidiaries to, make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities of the Company that rank junior to or PARI PASSU with the Convertible
Debentures and (c) shall not, and shall not allow any of its subsidiaries to,
make any guarantee payments with respect to the foregoing (other than such
payments made pursuant to the Guarantee).
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially adversely affect
the rights of holders of Preferred Securities (in which case no vote will be
required), the Guarantee may be amended only with the prior approval of the
holders of at least a majority in liquidation amount of all the outstanding
Preferred Securities. The manner of obtaining any such approval of holders of
the Preferred Securities will be as set forth under "Description of the
Preferred Securities - Voting Rights." All guarantees and agreements contained
in the Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Company and shall inure to the benefit of the holders of
the Preferred Securities then outstanding. Except in connection with any
permitted merger or consolidation of the Company with or into another entity or
any permitted sale, transfer or lease of the Company's assets to another entity
as described below under "Description of the Convertible Debentures -
Consolidation, Merger and Sale of Assets," the Company may not assign its rights
or delegate its obligations under the Guarantee without the prior approval of
the holders of at least a majority of the aggregate stated liquidation amount of
the Preferred Securities then outstanding.
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TERMINATION OF THE GUARANTEE
The Guarantee will terminate as to each holder of Preferred Securities
(i) upon full payment of the applicable redemption price of all Preferred
Securities, (ii) upon distribution of the Convertible Debentures held by the
Trust to the holders of the Preferred Securities, (iii) upon liquidation of the
Trust and full payment of fee amounts payable in accordance with the Declaration
or (iv) upon the distribution of Company Common Stock to such holder in respect
of the conversion of such holder's Preferred Securities into Company Common
Stock, and will terminate completely upon full payment of the amounts payable in
accordance with the Declaration. The Guarantee will continue to be effective or
will be reinstated, as the case may be, if at any time any holder of Preferred
Securities must restore payment of any sum paid under such Preferred Securities
or such Guarantee.
STATUS OF THE GUARANTEE; SUBORDINATION
The Guarantee constitutes an unsecured obligation of the Company and ranks
(i) subordinate and junior to all other liabilities of the Company except any
liabilities that may be PARI PASSU expressly by their terms, (ii) PARI PASSU in
right of payment with the most senior preferred stock issued from time to time
by the Company and with any guarantee now or hereafter entered into by the
Company in respect of any preferred or preference stock or preferred securities
of any affiliate of the Company and (iii) senior to the common stock of the
Company. The terms of the Preferred Securities provide that each holder of
Preferred Securities by acceptance thereof agrees to the subordination
provisions and other terms of the Guarantee.
The Guarantee constitutes a guarantee of payment and not of collection
(that is, the guaranteed party may directly institute a legal proceeding against
the Company to enforce its rights under the Guarantee without instituting a
legal proceeding against any other person or entity including the Trust).
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of a default with respect to
the Guarantee, has undertaken to perform only such duties as are specifically
set forth in the Guarantee and, after default with respect to the Guarantee,
shall exercise the same degree of care as a prudent man would exercise in the
conduct of his own affairs. Subject to such provision, the Guarantee Trustee is
under no obligation to exercise any of the powers vested in it by the Guarantee
at the request of any holder of Preferred Securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred thereby.
GOVERNING LAW
The Guarantee is governed by, and shall be construed in accordance with,
the laws of the State of New York.
DESCRIPTION OF THE CONVERTIBLE DEBENTURES
Set forth below is a description of the specific terms of the Convertible
Debentures in which the Trust has invested the proceeds from the issuance and
sale of the Trust Securities. The following description does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the Indenture (the "Indenture") among the Company and the Indenture Trustee, a
copy of which may be obtained from the Company upon request. Certain capitalized
terms used herein are defined in the Indenture. The Indenture was qualified
under the Trust Indenture Act upon effectiveness of the Registration Statement
of which this Prospectus forms a part.
Under certain circumstances involving the dissolution of the Trust
following the occurrence of a Special Event, Convertible Debentures may be
distributed to the holders of the Trust Securities in liquidation of the Trust.
See "Description of the Preferred Securities - Special Event Redemption or
Distribution."
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GENERAL
The Convertible Debentures have been issued as unsecured debt under the
Indenture. The Convertible Debentures were limited in aggregate principal amount
to $207.5 million, such amount being the sum of the aggregate stated liquidation
amount of the Preferred Securities and the Common Securities.
The Convertible Debentures are not subject to a sinking fund provision. The
entire principal amount of the Convertible Debentures will become due and
payable, together with any accrued and unpaid interest thereon, including
Compounded Interest (as defined herein) and Additional Interest, if any, on
October 1, 2016.
The Convertible Debentures, if distributed to holders of Preferred
Securities in liquidation of such holders' interest in the Trust, will initially
be issued in the same form as the Preferred Securities that such Convertible
Debentures replace. Any Global Certificate will be replaced with one or more
Global Securities (as defined under "- Book-Entry and Settlement"). Under
certain limited circumstances, Convertible Debentures may be issued in
certificated form in exchange for a Global Security. In the event that
Convertible Debentures are issued in certificated form, such Convertible
Debentures will be in denominations of $50 and integral multiples thereof and
may be transferred or exchanged at the offices described below.
Payments on Convertible Debentures issued as a Global Security will be made
to DTC, a successor depository or, in the event that no depository is used, to a
Paying Agent for the Convertible Debentures. In the event Convertible Debentures
are issued in certificated form, principal and interest will be payable, the
transfer of the Convertible Debentures will be registrable and Convertible
Debentures will be exchangeable for Convertible Debentures of other
denominations of a like aggregate principal amount at the corporate trust office
of the Indenture Trustee, or an agent of the Indenture Trustee, in The City of
New York; PROVIDED, HOWEVER, that unless the Convertible Debentures are held by
the Trust or any successor permissible under "Description of the Preferred
Securities - Merger, Consolidation or Amalgamation of the Trust," payment of
interest may be made at the option of the Company by check mailed to the address
of the persons entitled thereto.
There are no covenants or provisions in the Indenture that afford holders
of Convertible Debentures protection in the event of a highly leveraged
transaction or other similar transaction involving the Company that may
adversely affect such holders.
INTEREST
Each Convertible Debenture bears interest at the rate of 6 3/4% per annum
from the Original Offering Date, payable quarterly in arrears on January 1,
April 1, July 1 and October 1 (each, an "Interest Payment Date"), commencing
January 1, 1997, to the person in whose name such Convertible Debenture is
registered, subject to certain exceptions, at the close of business on the
Business Day next preceding such Interest Payment Date. If any Preferred
Securities are held in certificated form, the record date for each Interest
Payment Date shall be 15 days prior to such Interest Payment Date.
The amount of interest payable for any period is computed on the basis of a
360-day year of twelve 30-day months. The amount of interest payable for any
period shorter than a full quarterly period is computed on the basis of the
actual number of days elapsed. In the event that any date on which interest is
payable on the Convertible Debentures is not a Business Day, then payment of the
interest payable on such date will be made on the next succeeding day which is a
Business Day (without any interest or other payment in respect of any such
delay), except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company has the right at any time during the term of the Convertible
Debentures to defer interest payments from time to time by extending the
interest payment period for successive periods not exceeding 20 consecutive
quarters for each such period; PROVIDED no Extension Period may extend beyond
the maturity date of the Convertible Debentures. At the end of each Extension
Period, the Company shall pay all interest then accrued and unpaid (including
any Additional
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Interest and Liquidated Damages) together with interest thereon compounded
quarterly at the rate specified for the Convertible Debentures to the extent
permitted by applicable law ("Compounded Interest"); PROVIDED that during any
Extension Period, the Company (a) shall not, and shall not allow any of its
subsidiaries (other than its wholly-owned subsidiaries) to, declare or pay
dividends on, make distributions with respect to, or redeem, purchase or
acquire, or make a liquidation payment with respect to, any of its capital
stock (except for (i) dividends or distributions in shares of Company Common
Stock on Company Common Stock or on its Preferred Stock, (ii) purchases or
acquisitions of shares of Company Common Stock made in connection with any
employee benefit plan of the Company or its subsidiaries in the ordinary
course of business or pursuant to employment agreements with officers or
employees of the Company or its subsidiaries entered into in the ordinary
course of business, provided that repurchases by the Company made from
officers or employees of the Company or its subsidiaries pursuant to
employment agreements shall be made at a price not to exceed the market value
on the date of any such repurchase and shall not exceed $1 million in the
aggregate for all such employees and officers, (iii) conversions or exchanges
of any shares of any class of common stock into any other class of common
stock and (iv) purchases of fractional interests of shares of the Company's
capital stock pursuant to the conversion or exchange provisions of any of the
Company's securities being converted or exchanged), (b) shall not, and shall
not allow any of its subsidiaries to, make any payment of interest, principal
or premium, if any, on or repay, repurchase or redeem, any debt securities
issued by the Company that rank junior to or PARI PASSU with the Convertible
Debentures and (c) shall not, and shall not allow any of its subsidiaries to,
make any guarantee payments with respect to the foregoing. Prior to the
termination of any such Extension Period, the Company may further extend such
Extension Period; PROVIDED, that such Extension Period together with all
previous and further extensions thereof may not exceed 20 consecutive
quarters and may not extend beyond the maturity of the Convertible
Debentures. Upon the termination of any Extension Period and the payment of
all amounts then due, the Company may commence a new Extension Period,
subject to the above requirements. No interest during an Extension Period,
except at the end thereof, shall be due and payable. The Company does not
have any current intention of exercising its right to defer payments of
interest by extending the interest payment period on the Convertible
Debentures. If the Property Trustee shall be the sole holder of the
Convertible Debentures, the Company shall give the Regular Trustees, the
Property Trustee and the Indenture Trustee notice of its selection of such
Extension Period at least one Business Day prior to the earlier of (i) the
date the distributions on the Preferred Securities are payable or (ii) the
date the Trust is required to give notice to the NYSE (or any applicable
self-regulatory organization) or to holders of the Preferred Securities of
the record date or the date such distribution is payable, but in any event
not less than ten Business Days prior to such record date. The Trust shall
give notice of the selection of such Extension Period to the holders of the
Preferred Securities. If the Property Trustee shall not be the sole holder of
the Convertible Debentures, the Company shall give the holders of the
Convertible Debentures notice of its selection of such Extension Period at
least ten Business Days prior to the earlier of (i) the Interest Payment Date
or (ii) the date the Company is required to give notice to the NYSE (or any
applicable self-regulatory organization) or to holders of the Convertible
Debentures of the record or payment date of such related interest payment,
but in any event not less than two Business Days prior to such record date.
ADDITIONAL INTEREST
If at any time while the Property Trustee is the holder of the Convertible
Debentures, the Trust or the Property Trustee would be required to pay any
taxes, duties, assessments or governmental charges of whatever nature (other
than withholding taxes) imposed by the United States, or any other taxing
authority, then, in any such case, the Company will pay as additional interest
("Additional Interest") such amounts as shall be required so that the net
amounts received and retained by the Trust after paying any such taxes, duties,
assessments or governmental charges will be not less than the amounts the Trust
would have received had no such taxes, duties, assessments or governmental
charges been imposed.
CONVERSION OF THE CONVERTIBLE DEBENTURES
The Convertible Debentures are convertible into Company Common Stock at the
option of the holders of the Convertible Debentures at any time prior to the
close of business on the Business Day immediately preceding the date of
repayment of such Convertible Debentures, whether at maturity or upon
redemption, at the initial conversion price set forth on the cover page of this
Prospectus subject to the conversion price adjustments described under
"Description of the Preferred Securities - Conversion Rights." The Trust has
covenanted not to convert Convertible Debentures held by it except pursuant to a
notice of conversion delivered to the Conversion Agent by a holder of Preferred
Securities. Upon surrender of a Preferred Security to the Conversion Agent for
conversion, the Trust will distribute $50 principal amount of the Convertible
Debentures to the Conversion Agent on behalf of the holder of the Preferred
Securities so converted,
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whereupon the Conversion Agent will convert such Convertible Debentures to
Company Common Stock on behalf of such holder. The Company's delivery to the
holders of the Convertible Debentures (through the Conversion Agent) of the
fixed number of shares of Company Common Stock into which the Convertible
Debentures are convertible (together with the cash payment, if any, in lieu
of fractional shares) will be deemed to satisfy the Company's obligation to
pay the principal amount of the Convertible Debentures so converted, and the
accrued and unpaid interest thereon attributable to the period from the last
date to which interest has been paid or duly provided for, PROVIDED, HOWEVER,
that if any Convertible Debenture is converted after a record date for
payment of interest, the interest payable on the related interest payment
date with respect to such Convertible Debenture shall be paid to the Trust
(which will distribute such interest to the holder of the Preferred
Securities on the record date) or other holder of Convertible Debentures as
of the record date, as the case may be, despite such conversion.
OPTIONAL REDEMPTION
The Company shall have the right to redeem the Convertible Debentures, in
whole or in part, at any time or from time to time on or after October 5, 1999
upon not less than 30 nor more than 60 days' notice, at the following optional
redemption prices (expressed as a percentage of the principal amount of
Convertible Debentures), if redeemed during the 12-month period beginning
October 1 of the year shown below (October 5, in the case of 1999):
REDEMPTION
YEAR PRICE
---- ----------
1999 104.725%
2000 104.050
2001 103.375
2002 102.700
2003 102.025
2004 101.350
2005 100.675
2006 and thereafter 100.000
plus, in each case, accrued and unpaid interest, including Additional Interest
and Liquidated Damages, if any, to the redemption date.
If a partial redemption of the Preferred Securities resulting from a
partial redemption of the Convertible Debentures would result in the delisting
of the Preferred Securities, the Company may only redeem Convertible Debentures
in whole.
SUBORDINATION
The Indenture provides that the Convertible Debentures are subordinate and
junior in right of payment to all existing and future Senior Indebtedness of the
Company. No payment of principal of (including redemption payments, if any),
premium, if any, or interest on, the Convertible Debentures may be made if
(i) any Senior Indebtedness of the Company is not paid when due and any
applicable grace period with respect to such default has ended and such default
has not been cured or waived, or ceased to exist or (ii) the maturity of any
Senior Indebtedness of the Company has been accelerated because of a default.
Upon any distribution of assets of the Company to creditors upon any
dissolution, winding up, liquidation or reorganization, whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other proceedings, all
principal of, and premium, if any, and interest due or to become due on, all
Senior Indebtedness of the Company must be paid in full before the holders of
the Convertible Debentures are entitled to receive or retain any payment. Upon
satisfaction of all claims related to all Senior Indebtedness of the Company
then outstanding, the rights of the holders of the Preferred Securities will be
subrogated to the rights of the holders of Senior Indebtedness of the Company to
receive payments or distributions applicable to Senior Indebtedness until all
amounts owing on the Convertible Debentures are paid in full.
The term "Senior Indebtedness" means in respect of the Company: (i) the
principal, premium, if any, and interest in respect of (A) indebtedness of such
obligor for money borrowed and (B) indebtedness evidenced by securities,
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debentures, bonds, notes or other similar instruments issued by such obligor or
credit facilities with lending institutions or commercial lenders, (ii) all
capital lease obligations of such obligor, (iii) all obligations of such obligor
issued or assumed as the deferred purchase price of property, all conditional
sale obligations of such obligor and all obligations of such obligor under any
title retention agreement (but excluding trade accounts payable arising in the
ordinary course of business), (iv) all obligations of such obligor for the
reimbursement of any letter of credit, banker's acceptance, security purchase
facility or similar credit transaction, (v) commitment or standby fees due and
payable to lending institutions with respect to credit facilities available to
the Company, (vi) obligations under interest rate and currency swaps, floors,
caps and other arrangements intended to fix interest rate obligations, (vii) all
obligations of the type referred to in clauses (i) through (vi) above of other
persons for the payment of which such obligor is responsible or liable as
obligor, guarantor or otherwise, and (viii) all obligations of the type referred
to in clauses (i) through (vii) above of other persons secured by any lien on
any property or asset of such obligor (whether or not such obligation is assumed
by such obligor), except for (1) the Convertible Debentures, (2) any such
indebtedness that is by its terms subordinated to or PARI PASSU with the
Convertible Debentures and (3) any indebtedness between or among such obligor or
its affiliates, including all other debt securities and guarantees in respect of
those debt securities issued to any other trust, or trustee of such trust,
partnership or other entity affiliated with the Company that is, directly or
indirectly, a financing vehicle of the Company (a "Financing Entity") in
connection with the issuance by such Financing Entity of preferred securities or
other securities that rank PARI PASSU with, or junior to, the Preferred
Securities. Such Senior Indebtedness shall continue to be Senior Indebtedness
and entitled to the benefits of the subordination provisions irrespective of any
amendment, modification or waiver of any term of such Senior Indebtedness.
The Convertible Debentures are obligations exclusively of the Company.
Certain of the Company's operations are conducted through subsidiaries. To the
extent that the Company conducts any material part of its operations in the
future through subsidiaries, the cash flow and the consequent ability to service
debt, including the Convertible Debentures of the Company, may become dependent
upon the earnings of such subsidiaries and the distribution of those earnings
to, or upon loans, royalties, license fees or other payments of funds by those
subsidiaries, to the Company. The Company's subsidiaries are and will in the
future be separate and distinct legal entities and will have no obligation,
contingent or otherwise, to pay any amounts due pursuant to the Convertible
Debentures or to make any funds available therefor, whether by dividends, loans
or other payments. In addition, the payment of dividends and the making of loans
and advances to the Company by its subsidiaries are subject to certain statutory
or contractual restrictions, are dependent upon the earnings of such
subsidiaries and are subject to various business considerations.
Any right of the Company to receive assets of its subsidiaries upon their
liquidation or reorganization (and the consequent right of the holders of the
Convertible Debentures to participate in these assets) will be effectively
subordinated to the claims of any such subsidiary's creditors (including trade
creditors), except to the extent that the Company is itself recognized as a
creditor of such subsidiary, in which case the claims of the Company would still
be subordinate to any security interests in the assets of such subsidiary and
any indebtedness of such subsidiary senior to that held by the Company.
The Indenture does not limit the aggregate amount of Senior Indebtedness
that may be issued by the Company or its subsidiaries. At July 31, 1997, Senior
Indebtedness of the Company aggregated approximately $206 million.
CERTAIN COVENANTS
In the Indenture, the Company has covenanted (i) to directly or indirectly
maintain 100% ownership of the Common Securities of the Trust; PROVIDED,
HOWEVER, that any permitted successor of the Company under the Indenture may
succeed to the Company ownership; (ii) not to cause, as sponsor of the Trust, or
to permit, as holder of the Common Securities, the dissolution, winding-up or
termination of the Trust, except in connection with certain mergers,
consolidations or amalgamations; and (iii) to use its reasonable efforts to
cause the Trust (x) to remain a statutory business trust, except in connection
with the distribution of Convertible Debentures to the holders of Trust
Securities in liquidation of the Trust, the redemption of all of the Trust
Securities of the Trust, or certain mergers, consolidations or amalgamations,
each as permitted by the Declaration, and (y) to otherwise continue to be
classified as a grantor trust for United States Federal income tax purposes.
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CONSOLIDATION, MERGER AND SALE OF ASSETS
The Indenture provides that the Company will not consolidate with or merge
into any other entity or convey, transfer or lease its assets substantially as
an entirety unless (a) if the Company is not the survivor, the successor is a
corporation organized in the United States and expressly assumes the due and
punctual payment of the principal of (and premium, if any) and interest on all
Convertible Debentures issued thereunder and the performance of every other
covenant of the Indenture on the part of the Company as the case may be, and
(b) immediately thereafter no event of default under the Indenture and no event
which, after notice or lapse of time, or both, would become an event of default
under the Indenture, shall have happened and be continuing. Upon any such
consolidation, merger, conveyance or transfer, the successor corporation shall
succeed to and be substituted for the Company under the Indenture and thereafter
the predecessor corporation shall be relieved of all obligations and covenants
under the Indenture and the Convertible Debentures.
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of the Preferred Securities in connection with
the involuntary or voluntary dissolution, winding-up or liquidation of the Trust
as a result of the occurrence of a Special Event, the Convertible Debentures
will be issued in the same form as the Preferred Securities which such
Convertible Debentures replace. Any Global Certificate will be replaced by one
or more global certificates (each a "Global Security") registered in the name of
the depository or its nominee. Except under the limited circumstances described
below, the Convertible Debentures represented by the Global Security will not be
exchangeable for, and will not otherwise be issuable as, Convertible Debentures
in definitive form. The Global Securities described above may not be transferred
except by the depository to a nominee of the depository or by a nominee of the
depository to the depository or another nominee of the depository or to a
successor depository or its nominee.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in such a Global
Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Convertible
Debentures in definitive form and will not be considered the holders thereof for
any purpose under the Indenture, and no Global Security representing Convertible
Debentures shall be exchangeable, except for another Global Security of like
denomination and tenor to be registered in the name of the depository or its
nominee or to a successor depository or its nominee. Accordingly, each
Beneficial Owner must rely on the procedures of DTC or if such person is not a
Participant, on the procedures of the Participant through which such person owns
its interest to exercise any rights of a holder under the Indenture.
THE DEPOSITORY
If Convertible Debentures are distributed to holders of Preferred
Securities in liquidation of such holders' interests in the Trust and a Global
Security is issued, DTC will act as securities depository for the Convertible
Debentures represented by such Global Security. For a description of DTC and the
specific terms of the depository arrangements, see "Description of the Preferred
Securities - Book-Entry Only Issuance - The Depository Trust Company." As of the
date of this Prospectus, the description therein of DTC's book-entry system and
DTC's practices as they relate to purchases, transfers, notices and payments
with respect to the Preferred Securities apply in all material respects to any
debt obligations represented by one or more Global Securities held by DTC. The
Company may appoint a successor to DTC or any successor depository in the event
DTC or such successor depository is unable or unwilling to continue as a
depository for the Global Securities.
None of the Company, the Trust, the Indenture Trustee, any paying agent and
any other agent of the Company or the Indenture Trustee has any responsibility
or liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests in a Global Security for such
Convertible Debentures or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
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DISCONTINUANCE OF THE DEPOSITORY'S SERVICES
A Global Security shall be exchangeable for Convertible Debentures
registered in the names of persons other than the Depository or its nominee only
if (i) the Depository notifies the Company that it is unwilling or unable to
continue as a depository for such Global Security and no successor depository
shall have been appointed, (ii) the Depository, at any time, ceases to be a
clearing agency registered under the Exchange Act at which time the Depository
is required to be so registered to act as such depository and no successor
depository shall have been appointed, (iii) the Company in its sole discretion,
determines that such Global Security shall be so exchangeable or (iv) there
shall have occurred an Event of Default with respect to such Convertible
Debentures. Any Global Security that is exchangeable pursuant to the preceding
sentence shall be exchangeable for Convertible Debentures registered in such
names as the Depository shall direct. It is expected that such instructions will
be based upon directions received by the Depository from its Participants with
respect to ownership of beneficial interests in such Global Security.
EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events, which has occurred and is continuing, constitutes an "Event of Default"
with respect to the Convertible Debentures: (i) failure for 30 days to pay
interest on the Convertible Debentures, including any Additional Interest,
Compounded Interest and Liquidated Damages in respect thereof, when due,
provided that a valid extension of an interest payment period will not
constitute a default in the payment of interest (including any Additional
Interest, Compounded Interest or Liquidated Damages) for this purpose;
(ii) failure to pay principal of or premium, if any, on the Convertible
Debentures when due whether at maturity, upon redemption, by declaration or
otherwise; (iii) failure by the Company to deliver shares of Company Common
Stock upon an election by a holder of Preferred Securities to convert such
Preferred Securities; (iv) failure to observe or perform any other covenant
contained in the Indenture for 60 days after notice to the Company by the
Trustee or by the holders of not less than 25% in aggregate outstanding
principal amount of the Convertible Debentures; (v) default under any bond,
debenture or any other evidence relating to indebtedness for money borrowed of
the Company or any of its significant subsidiaries having an aggregate
outstanding principal amount in excess of $20 million, which default shall have
resulted in such indebtedness being accelerated, or failure to pay when due
(beyond any applicable grace periods) any such indebtedness, without such
indebtedness being discharged, such acceleration having been rescinded or
annulled or such failure to pay having been cured or waived, within 30 days
after receipt of notice thereof by the Company from the Trustee or by the
Company and the Trustee from the holders of not less than 25% in aggregate
principal amount at maturity of the Convertible Debentures then outstanding;
(vi) the dissolution, winding up or termination of the Trust, except in
connection with the distribution of Convertible Debentures to the holders of
Preferred Securities in liquidation of the trust upon the redemption of all
outstanding Preferred Securities and in connection with certain mergers,
consolidations or amalgamations permitted by the Declaration; or (vii) certain
events in bankruptcy, insolvency or reorganization of the Company or any of its
significant subsidiaries.
The Trustee or the holders of not less than 25% in aggregate outstanding
principal amount of the Convertible Debentures may declare the principal of and
interest on the Convertible Debentures due and payable immediately on the
occurrence of an Event of Default; PROVIDED, HOWEVER, that, after such
acceleration, but before a judgment or decree based on acceleration, the holders
of a majority in aggregate principal amount of outstanding Convertible
Debentures may, under certain circumstances, rescind and annul such acceleration
if all Events of Default, other than the nonpayment of accelerated principal,
have been cured or waived as provided in the Indenture. For information as to
waiver of Defaults, see "- Modifications and Amendments of the Indenture."
Notwithstanding the foregoing, if an Indenture Event of Default has
occurred and is continuing and such event is attributable to the failure of the
Company to pay interest or principal on the Convertible Debentures on the date
such interest or principal is otherwise payable, the Company acknowledges that,
in such event, a holder of Preferred Securities may institute a Direct Action
for payment on or after the respective due date specified in the Convertible
Debentures. The Company may not amend the Indenture to remove the foregoing
right to bring a Direct Action without the prior written consent of all the
holders of Preferred Securities. Notwithstanding any payment made to such holder
of Preferred Securities by the Company in connection with a Direct Action, the
Company shall remain obligated to pay the principal of or interest on the
Convertible Debentures held by the Trust or the Property Trustee and the Company
shall be subrogated to the rights of the holder of such Preferred Securities
with respect to payments on the Preferred Securities to the extent of any
payments
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made by the Company to such holder in any Direct Action. The holders of
Preferred Securities will not be able to exercise directly any other remedy
available to the holders of the Convertible Debentures.
The holders of not less than a majority in principal amount of the
outstanding Convertible Debentures may on behalf of the holders of all the
Convertible Debentures waive any past defaults except (i) a default in payment
of the principal of (or premium, if any) or interest, if any, on any Convertible
Debentures and (ii) a default in respect of a covenant or provision of the
Indenture which cannot be amended or modified without the consent of the holder
of each Convertible Debenture; PROVIDED, HOWEVER, that if the Convertible
Debentures are held by the Trust or a trustee of such Trust, such waiver or
modulation to such waiver shall not be effective until the holders of a majority
in liquidation amount of Trust Securities shall have consented to such waiver or
modification to such waiver; and PROVIDED FURTHER, that if the consent of the
holder of each outstanding Convertible Debenture is required, such waiver shall
not be effective until each holder of the Trust Securities shall have consented
to such waiver.
Except as provided above, a default under any other indebtedness of the
Company would not constitute an Event of Default under the Convertible
Debentures.
Subject to the provisions of the Indenture relating to the duties of the
Indenture Trustee in case an Event of Default shall occur and be continuing, the
Indenture Trustee will be under no obligation to exercise any of its rights or
powers under the Indenture at the request or direction of any holders of
Convertible Debentures, unless such holders shall have offered to the Indenture
Trustee reasonable security or indemnity. Subject to such provisions for the
indemnification of the Indenture Trustee, the holders of a majority in aggregate
principal amount of the Convertible Debentures then outstanding will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Indenture Trustee, or exercising any trust or powers
conferred on the Indenture Trustee.
No holder of any Convertible Debenture has any right to institute any
proceeding with respect to the Indenture or for any remedy thereunder, unless
(i) such holder shall have previously given to Indenture Trustee written notice
of a continuing Event of Default, (ii) if the Trust is not the sole holder of
Convertible Debentures, the holders of at least 25% in aggregate principal
amount of the Convertible Debentures then Outstanding shall also have made
written request, (iii) such holder has offered reasonable indemnity to the
Indenture Trustee to institute such proceeding as Indenture Trustee, (iv) the
Indenture Trustee shall have failed to institute such Proceeding within 60 days
of such notice and (v) the Indenture Trustee shall not have received from the
holders of a majority in aggregate principal amount of the outstanding
Convertible Debentures a direction inconsistent with such request. However, such
limitations do not apply to a suit instituted by a holder of a Convertible
Debenture for enforcement of payment of the principal of or interest on such
Convertible Debenture on or after the respective due dates expressed in such
Convertible Debenture.
The Company is required to file annually with the Indenture Trustee and the
Property Trustee a certificate as to whether or not the Company is in compliance
with all the conditions and covenants under the Indenture.
MODIFICATIONS AND AMENDMENTS OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Indenture
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the outstanding Convertible Debentures, to modify
the Indenture or the rights of the holders of Convertible Debentures; PROVIDED,
HOWEVER, that no such modification may, without the consent of the holder of
each outstanding Convertible Debenture affected thereby, (i) extend the stated
maturity of the Convertible Debentures or reduce the principal amount thereof,
or reduce the rate or extend the time of payment of interest thereon, or reduce
any premium payable upon the redemption thereof, or adversely affect the right
to convert Convertible Debentures or (ii) reduce the percentage in aggregate
principal amount of outstanding Convertible Debentures, the holders of which are
required to consent to any such supplemental indenture.
In addition, the Company and the Indenture Trustee may execute, without the
consent of any holder of Convertible Debentures, any supplemental indenture to
cure any ambiguities, to comply with the Trust Indenture Act and for certain
other customary purposes.
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GOVERNING LAW
The Indenture and the Convertible Debentures are governed by, and shall be
construed in accordance with, the laws of the State of New York.
INFORMATION CONCERNING THE INDENTURE TRUSTEE
The Indenture Trustee, prior to default, has undertaken to perform only
such duties as are specifically set forth in the Indenture and, after default,
shall exercise the same degree of care as a prudent individual would exercise in
the conduct of his or her own affairs. Subject to such provision, the Indenture
Trustee is under no obligation to exercise any of the powers vested in it by the
Indenture at the request of any holder of Convertible Debentures, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The Indenture Trustee is not required to expend
or risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Indenture Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
EFFECT OF OBLIGATIONS UNDER THE CONVERTIBLE
DEBENTURES AND THE GUARANTEE
As set forth in the Declaration, the sole purpose of the Trust is to issue
the Trust Securities evidencing undivided beneficial interests in the assets of
the Trust and to invest the proceeds from such issuance and sale in the
Convertible Debentures.
As long as payments of interest and other payments are made when due on the
Convertible Debentures, such payments will be sufficient to cover distributions
and payments due on the Trust Securities because of the following factors:
(i) the aggregate principal amount of Convertible Debentures will be equal to
the sum of the aggregate stated liquidation amount of the Trust Securities;
(ii) the interest rate and the interest and other payment dates on the
Convertible Debentures will match the distribution rate and distribution and
other payment dates for the Preferred Securities; (iii) pursuant to the
Indenture, the Company shall, directly or indirectly, pay all, and the Trust
shall not be obligated to pay any, costs, expenses, debt and obligations of the
Trust other than with respect to the Trust Securities; and (iv) the Declaration
further provides that the Issuer Trustees will not cause or permit the Trust to,
among other things, engage in any activity that is not consistent with the
purposes of the Trust.
Payments of distributions (to the extent funds therefor are available) and
other payments due on the Preferred Securities (to the extent funds therefor are
available) are guaranteed by the Company as and to the extent set forth under
"Description of the Guarantee." If the Company does not make interest payments
on the Convertible Debentures purchased by the Trust, the Trust will not have
sufficient funds to pay distributions on the Preferred Securities. The Guarantee
is a guarantee with respect to the Preferred Securities from the time of its
issuance but does not apply to any payment of distributions unless and until the
Trust has sufficient funds for the payment of such distributions.
The Guarantee covers the payment of distributions and other payments on the
Preferred Securities only if and to the extent that the Company has made a
payment of interest or principal on the Convertible Debentures held by the Trust
as its sole asset. The Guarantee, when taken together with the Company's
obligations under the Convertible Debentures and the Indenture and its
obligations under the Declaration, including its obligations to pay costs,
expenses, debts and liabilities of the Trust (other than with respect to the
Trust Securities), provide a full and unconditional guarantee of amounts due on
the Preferred Securities.
If the Company fails to make interest or other payments on the Convertible
Debentures when due (taking account of any Extension Period), the Declaration
provides a mechanism whereby the holders of the Preferred Securities, using the
procedures described in "Description of the Preferred Securities - Book-Entry
Only Issuance - The Depository Trust Company" and "Description of the Preferred
Securities - Voting Rights," may direct the Property Trustee to enforce its
rights under the Convertible Debentures. If the Property Trustee fails to
enforce its rights under the Convertible Debentures, any holder of Preferred
Securities may directly institute a legal proceeding against the Company to
enforce the Property Trustee rights under the Convertible Debentures without
first instituting any legal proceeding against the Property Trustee or any other
person or entity. Notwithstanding the foregoing, if a Declaration Event of
Default has occurred and is
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continuing and such event is attributable to the failure of the Company to
pay interest or principal on the Convertible Debentures on the date such
interest or principal is otherwise available (or in the case of redemption,
on the redemption date), then a holder of Preferred Securities may institute
a Direct Action for payment on or after the respective due date specified in
the Convertible Debentures. In connection with such Direct Action, the
Company will be subrogated to the rights of such holder of Preferred
Securities under the Declaration to the extent of any payment made by the
Company to such holder of Preferred Securities in such Direct Action. The
Company, under the Guarantee, acknowledges that the Guarantee Trustee shall
enforce the Guarantee on behalf of the holders of the Preferred Securities.
If the Company fails to make payments under the Guarantee, the Guarantee
provides a mechanism whereby the holders of the Preferred Securities may
direct the Guarantee Trustee to enforce its rights thereunder. Any holder of
Preferred Securities may directly institute a legal proceeding against the
Company to enforce the Guarantee Trustee's rights under the Guarantee without
first instituting a legal proceeding against the Trust, the Guarantee Trustee
or any other person or entity.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
In the opinion of Arter & Hadden, special United States tax counsel to the
Company and the Trust, the following is a summary of certain of the material
United States Federal income tax consequences of the purchase, ownership,
disposition and conversion of Preferred Securities. Unless otherwise stated,
this summary deals only with Preferred Securities held as capital assets. This
summary addresses the United States Federal income tax considerations to holders
of Preferred Securities who are citizens or residents of the United States or
any political subdivision thereof or therein, or estates or trusts the income of
which is subject to United States Federal income taxation regardless of its
source or other holders who are otherwise subject to United States federal
income taxation on a net income basis with respect to Preferred Securities
("U.S. Holders") and does not address the tax consequences to holders of
Preferred Securities who are not U.S. Holders. This summary does not deal with
special classes of holders such as banks, thrifts, real estate investment
trusts, regulated investment companies, insurance companies, dealers in
securities or currencies, tax-exempt investors, or persons that will hold the
Preferred Securities as other than a capital asset. This summary also does not
address the tax consequences to persons that have a functional currency other
than the U.S. Dollar or the tax consequences to shareholders, partners or
beneficiaries of a holder of Preferred Securities. Further, it does not include
any description of any alternative minimum tax consequences or the tax laws of
any state or local government or of any foreign government that may be
applicable to the Preferred Securities. This summary is based on the Code,
Treasury regulations thereunder and administrative and judicial interpretations
thereof, as of the date hereof, all of which are subject to change, possibly on
a retroactive basis.
CLASSIFICATION OF THE CONVERTIBLE DEBENTURES
The Company has taken the position that the Convertible Debentures will be
classified for United States Federal income tax purposes as indebtedness of the
Company under current law, and, by acceptance of a Preferred Security, each
holder covenants to treat the Convertible Debentures as indebtedness and the
Preferred Securities as evidence of an indirect beneficial ownership interest in
the Convertible Debentures. No assurance can be given, however, that such
position of the Company will not be challenged by the Internal Revenue Service
or, if challenged, that such a challenge will not be successful. The remainder
of this discussion assumes that the Convertible Debentures will be classified as
indebtedness of the Company for United States Federal income tax purposes.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Preferred Securities, Arter &
Hadden, special United States tax counsel to the Company and the Trust, has
rendered its opinion in connection with the Original Offering and the
Over-Allotment Offering to the effect that, under then current law and assuming
full compliance with the terms of the Declaration and the Indenture (and certain
other documents relating to the offering referred to herein), and based on
certain facts and assumptions contained in such opinion, the Trust was
classified for United Stated Federal income tax purposes as a grantor trust and
not as an association taxable as a corporation. Accordingly, for United States
Federal income tax purposes, each holder of Preferred Securities generally will
be considered the owner of an undivided interest in the Convertible
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Debentures, and each holder will be required to include in its gross income
any original issue discount accrued with respect to its allocable share of
those Convertible Debentures.
POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD AND ORIGINAL ISSUE DISCOUNT
Because the Company has the option, under the terms of the Convertible
Debentures, to defer payments of interest by extending interest payment periods
for up to 20 quarters, all of the stated interest payments on the Convertible
Debentures will be treated as "original issue discount." Holders of debt
instruments issued with OID must include that discount in income on an economic
accrual basis before the receipt of cash attributable to the interest,
regardless of their method of tax accounting. Generally, all of a holder's
taxable interest income with respect to the Convertible Debentures will be
accounted for as OID. Actual payments and distributions of stated interest
(including payments of accrued interest upon conversion of the Convertible
Debentures) will not, however, be separately reported as taxable income. The
amount of OID that accrues in any quarter will approximately equal the amount of
the interest that accrues on the Convertible Debentures in that quarter at the
stated interest rate. In the event that the interest payment period is extended,
holders will continue to accrue OID approximately equal to the amount of the
interest payment due at the end of the extended interest payment period on an
economic accrual basis over the length of the extended interest payment period.
Corporate holders of Preferred Securities will not be entitled to a
dividends-received deduction with respect to any income recognized with respect
to the Preferred Securities.
MARKET DISCOUNT AND ACQUISITION PREMIUM
Holders of Preferred Securities other than a holder who purchased the
Preferred Securities upon original issuance may be considered to have acquired
their undivided interests in the Convertible Debentures with market discount or
acquisition premium as such phrases are defined for United States Federal income
tax purposes. Such holders are advised to consult their tax advisors as to the
income tax consequences of the acquisition, ownership and disposition of the
Preferred Securities.
RECEIPT OF CONVERTIBLE DEBENTURES OR CASH UPON LIQUIDATION OF THE TRUST
Under certain circumstances, as described under the caption "Description of
the Preferred Securities-Special Event Redemption or Distribution," Convertible
Debentures may be distributed to holders in exchange for the Preferred
Securities and in liquidation of the Trust. Under current law, such a
distribution to holders, for United States Federal income tax purposes, would be
treated as a nontaxable event to each holder, and each holder would receive an
aggregate tax basis in the Convertible Debentures equal to such holder's
aggregate tax basis in its Preferred Securities. A holder's holding period in
the Convertible Debentures so received in liquidation of the Trust would include
the period during which the Preferred Securities were held by such holder. If,
however, the related Special Event is a Tax Event which results in the Trust
being treated as an association taxable as a corporation, the distribution would
likely constitute a taxable event to holders of the Preferred Securities, in
which event the Company, if it elected to eliminate the Trust, would generally
be required to cause the redemption of the Convertible Debentures for cash and
distribute the redemption proceeds to the holders in liquidation of the Trust.
Under certain circumstances described herein (see "Description of the
Preferred Securities"), the Convertible Debentures may be redeemed for cash and
the proceeds of such redemption distributed to holders in redemption of their
Preferred Securities. Under current law, such a redemption would, for United
States Federal income tax purposes, constitute a taxable disposition of the
redeemed Preferred Securities, and a holder would recognize gain or loss as if
it sold such redeemed Preferred Securities for cash. See "- Sales of Preferred
Securities."
SALES OF PREFERRED SECURITIES
A holder that sells Preferred Securities will recognize gain or loss equal
to the difference between the amount realized on the sale of the Preferred
Securities and the holder's adjusted tax basis in such Preferred Securities. A
holder's adjusted tax basis in the Preferred Securities generally will be its
initial purchase price increased by OID previously includible in such holder's
gross income to the date of disposition and decreased by payments received on
the Preferred
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Securities to the date of disposition. Such gain will be a capital gain or
loss. Net capital gains of individuals are subject to varying tax rates
depending upon the holding period of the Preferred Securities.
The Preferred Securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest with respect to the underlying
Convertible Debentures. A holder who disposes of or converts his Preferred
Securities between record dates for payments of distributions thereon will be
required to include accrued but unpaid interest on the Convertible Debentures
through the date of disposition or conversion in income as ordinary income, and
to add such amount to his adjusted tax basis in his PRO RATA share of the
underlying Convertible Debentures deemed disposed of or converted. To the extent
the selling price is less than the holder's adjusted tax basis (which basis will
include, in the form of OID, all accrued but unpaid interest), a holder will
recognize a capital loss. Subject to certain limited exceptions, capital losses
cannot be applied to offset ordinary income for United States Federal income tax
purposes.
CHANGES IN TAX LAWS
During the legislative proceedings leading to the enactment of the 1997 Tax
Act, amendments were proposed that, among other things, would have treated as
equity for federal income tax purposes instruments with a maximum term of more
than 20 years that are not shown as indebtedness on the consolidated balance
sheet of the issuer. The 1997 Tax Act does not include those proposed
amendments. There can be no assurance, however, that any proposed legislation
enacted after the date hereof will not otherwise adversely affect the tax
treatment of the Convertible Debentures. If legislation is enacted that
adversely affects the tax treatment of the Convertible Debentures, such
legislation could result in the distribution of the Convertible Debentures to
holders of the Preferred Securities or, in certain limited circumstances, the
redemption of such securities by the Company and the distribution of the
resulting cash in redemption of the Preferred Securities. See "Description of
the Preferred Securities - Special Event Redemption or Distribution."
CONVERSION OF PREFERRED SECURITIES INTO COMMON STOCK
A holder will not recognize income, gain or loss upon the conversion,
through the Conversion Agent, of Preferred Securities into Company Common Stock.
A holder will, however, recognize gain upon the receipt of cash in lieu of a
fractional share of Company Common Stock equal to the amount of cash received
less the holder's tax basis in such fractional share. A holder's tax basis in
the Company Common Stock received upon conversion should generally be equal to
the holder's tax basis in the Preferred Securities delivered to the Conversion
Agent for conversion less the basis allocated to any fractional share for which
cash is received and less the amount of cash a holder receives in payment of
accrued interest on the Convertible Debentures. A holder's holding period in the
Company Common Stock received upon conversion of its Preferred Securities should
generally begin on the date the holder acquired the Preferred Securities
delivered to the Conversion Agent for conversion.
ADJUSTMENT OF CONVERSION PRICE
Treasury Regulations promulgated under Section 305 of the Code would treat
holders of Preferred Securities as having received a constructive distribution
from the Company in the event the conversion ratio of the Convertible Debentures
were adjusted if (i) as a result of such adjustment, the proportionate interest
(measured by the quantum of Company Common Stock into or for which the
Convertible Debentures are convertible) of the holders of the Preferred
Securities in the assets or earnings and profits of the Company were increased
and (ii) the adjustment was not made pursuant to a bona fide, reasonable
antidilution formula. An adjustment in the conversion ratio would not be
considered made pursuant to such a formula if the adjustment was made to
compensate for certain taxable distributions with respect to the Company Common
Stock. Thus, under certain circumstances, a reduction in the conversion price
for the holders may result in deemed dividend income to holders to the extent of
the current or accumulated earnings and profits of the Company. Holders of the
Preferred Securities would be required to include their allocable share of such
deemed dividend income in gross income but would not receive any cash related
thereto.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Generally, income on the Preferred Securities will be reported to holders
on Forms 1099, which forms should be mailed to holders of Preferred Securities
by January 31 following each calendar year.
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Payments made on, and proceeds from the sale of, the Preferred Securities
may be subject to a "backup" withholding tax of 31% unless the holder complies
with certain identification requirements. Any withheld amounts will be allowed
as a credit against the holder's United States Federal income tax, provided the
required information is provided to the Internal Revenue Service.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO
THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN
AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL
OR OTHER TAX LAWS.
CERTAIN ERISA CONSIDERATIONS
Generally, an employee benefit plan ("Plan") that is subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
Section 4975 of the Code, may purchase Preferred Securities, subject to the
investing fiduciary's determination that the investment in Preferred Securities
satisfies ERISA's fiduciary standards and other requirements applicable to
investments by the Plan.
The Department of Labor ("DOL") has issued a regulation (29 C.F.R.
Section 2510.3-101) (the "DOL Regulation") defining what constitutes the assets
of a Plan. The DOL Regulation provides that, as a general rule, the underlying
assets and properties of corporations, partnerships, trusts and certain other
entities in which a Plan makes an "equity" investment will be deemed for
purposes of ERISA to be assets of the investing plan unless certain exceptions
apply.
There can be no assurance that any of the exceptions set forth in the DOL
Regulation will apply to the purchase of Preferred Securities offered hereby
and, as a result, an investing Plan's assets could be considered to include an
undivided interest in the Convertible Debentures and any other assets held in
the Trust. In the event that assets of the Trust are considered assets of an
investing Plan, the Company, the Issuer Trustees and other persons, in providing
services with respect to the Convertible Debentures, may be considered
fiduciaries to such Plan and subject to the fiduciary responsibility provisions
of Title I of ERISA and the prohibited transaction provisions of Section 4975 of
the Code with respect to transactions involving such assets unless a statutory
or administrative exemption applies.
The Company and/or any of its affiliates may be considered a "party in
interest" (within the meaning of ERISA) or a "disqualified person" (within the
meaning of Section 4975 of the Code) with respect to a Plan. The acquisition and
ownership of Preferred Securities by a Plan (or by an individual retirement
arrangement or other plan described in Section 4975(e)(1) of the Code) with
respect to which the Company or any of its affiliates is considered a party in
interest or a disqualified person may constitute or result in a prohibited
transaction under ERISA or Section 4975 of the Code, unless such Preferred
Securities are acquired pursuant to and in accordance with an applicable
exemption.
As a result, any Plan with respect to which the Company or any of its
affiliates is a party in interest or a disqualified person should not acquire
Preferred Securities unless such Preferred Securities are acquired pursuant to
and in accordance with an applicable prohibited transaction exemption. A Plan or
other entity whose assets include Plan assets subject to ERISA or Section 4975
of the Code proposing to acquire Preferred Securities should consult with its
own counsel.
SELLING HOLDERS
The Preferred Securities were originally issued by the Trust and sold by
Robertson, Stephens & Company LLC, Alex. Brown & Sons Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and The Robinson-Humphrey Company, Inc.
(collectively, the "Initial Purchasers") in transactions exempt from the
registration requirements of the Securities Act, to persons believed by such
Initial Purchasers to be "qualified institutional buyers" (as defined in Rule
144A of the Securities Act), to "institutional accredited investors" (as defined
in Rule 501(a)(1), (2), (3) or (7) under the
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Securities Act) or outside the United States to non-U.S. persons in off-shore
transactions in reliance on Regulation S under the Securities Act. Those
purchasers, or their transferees, pledgees, donees or successors (the
"Selling Holders"), may from time to time offer and sell pursuant to this
Prospectus any or all of the Offered Securities.
The following table sets forth the name of each Selling Holder known by the
Company as of the date of this Prospectus and the number of Preferred Securities
that may be offered by each such party hereunder. None of the Selling Holders
has, as of the date information was provided by them, converted any Preferred
Securities into Company Common Stock. In addition, to the extent that any
Selling Holder has held any position or office, been employed by or otherwise
had any material relationship with the Company or any of its affiliates during
the three years preceding the date of this Prospectus such position, office,
employment or relationship is noted in footnotes to the table. The number of
Preferred Securities that may actually be sold by any Selling Holder will be
determined by such Selling Holder, and may depend upon a number of factors,
including, among other things, the market price of the Preferred Securities from
time to time. Because each of the Selling Holders may offer all, some or none of
the Preferred Securities held by such party, and because the offering
contemplated by this Prospectus is currently not being underwritten, no estimate
can be given as to the number of Preferred Securities that will be held by any
Selling Holder upon or prior to the termination of this offering. See "Plan of
Distribution." Except as otherwise specifically indicated below, the table below
sets forth information as of August 28, 1997, concerning the beneficial
ownership of the Preferred Securities by the Selling Holders. All information as
to beneficial ownership has been furnished by the Selling Holder in question.
One or more of the Selling Holders may have, in transactions exempt from the
registration requirements of the Securities Act, sold, transferred or otherwise
disposed of all or a portion of their Preferred Securities since the date upon
which they provided information regarding their holdings of Preferred
Securities.
NO. OF
PREFERRED SECURITIES PREFERRED
OWNED BEFORE OFFERING SECURITIES
--------------------- OFFERED IN
NAME OF SELLING HOLDER NUMBER PERCENT(1) THE OFFERING
- -------------------------------------- --------------------- ------------
1. Robertson, Stephens &
Co. LLP (2) 77,250(3) 1.9% 77,250
2. Alpine Associates 70,000(3) 1.7 70,000
3. McMahan Securities Co. L.P. 10,000(3) * 10,000
4. Carrigaholt Capital (Bermuda) L.P. 17,500(3) * 17,500
5. The Class 1C Company, Ltd. 17,500(3) * 17,500
6. Donaldson, Lufkin & Jenrette
Securities Corporation(4) 282,000(3) 7.0 282,000
7. Lipper Convertibles, L.P. 20,000(3) * 20,000
8. Offshore Strategies 41,000(3) 1.0 41,000
9. Laterman Strategies 90'S LLC 29,050(3) * 29,050
10. Laterman and Co. 4,450(3) * 4,450
11. OCM Convertible Trust 78,100(3) 1.9 78,100
12. OCM Convertible Limited
Partnership 4,600(3) * 4,600
13. Delta Airlines Master Trust 53,900(3) 1.3 53,900
14. State Employees Retirement Fund
of the State of Delaware 19,400(3) * 19,400
15. State of Connecticut Combined
Investment Funds 60,400(3) 1.5 60,400
16. Vanguard Convertible
Securities Fund, Inc. 44,000(3) 1.1 44,000
17. Hughes Aircraft Company Master
Retirement Trust 24,000(3) * 24,000
18. The TCW Group, Inc. 215,600(3) 5.4 215,600
19. Triton Capital Holdings 10,000(3) * 10,000
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NO. OF
PREFERRED SECURITIES PREFERRED
OWNED BEFORE OFFERING SECURITIES
--------------------- OFFERED IN
NAME OF SELLING HOLDER NUMBER PERCENT(1) THE OFFERING
- -------------------------------------- --------------------- ------------
20. JMG Convertible Investments LLP 31,500(3) * 31,500
21. Swiss Bank Corporation -
London Branch 21,500(3) * 21,500
22. Forum Capital Markets LP 25,000(3) * 25,000
23. Ramius Fund, Ltd. 12,000(3) * 12,000
24. Palladin Partners, L.P. 2,000(3) * 2,000
25. Glen Eagles Fund Ltd. 12,000(3) * 12,000
26. Colonial Penn Life Insurance Co. 1,000(3) * 1,000
27. Colonial Penn Insurance Co. 1,000(3) * 1,000
28. Gershon Partners, L.P. 2,000(3) * 2,000
29. United National Life Insurance 1,665(3) * 1,665
30. Lincoln National Life Insurance 88,910(3) 2.2 88,910
31. Lincoln National Convertible
Securities Fund 34,935(3) * 34,935
32. Weirton Trust 9,490(3) * 9,490
33. Hillside Capital Incorporated
Corporate Account 2,600(3) * 2,600
34. Thermo Electron Balance
Investment Fund 7,000(3) * 7,000
35. General Motors Employees
Domestic Group Trust 140,000(3) 3.5 140,000
36. Defined Benefit Plan of ICI
American Holdings, Inc. 9,200(3) * 9,200
37. First Church of Christ,
Scientist-Endowment 2,500(3) * 2,500
38. Christian Science Trustees for
Gifts and Endowments 2,500(3) * 2,500
39. Defined Benefit Plans of
Zeneca Holdings, Inc. 6,200(3) * 6,200
40. Delaware State Employees
Retirement Fund 30,000(3) * 30,000
41. Motors Insurance Corp. 10,000(3) * 10,000
42. General Motors Hourly Rate Employees
Pension Plan. General Motors
Retirement Program for Salaried
Employees 150,000(3) 3.7 150,000
43. Employers Reinsurance Corp. 30,000(3) * 30,000
44. American Investors Life Insurance
Company, Inc. 25,000(3) * 25,000
45. Reliant Trading 99,220(3) 2.5 99,220
46. Sheperd Trading Limited 142,780(3) 3.5 142,780
47. Robertson, Stephens & Co. LLP(2) 48,450(5)(6) 1.2 48,450
48. Donaldson, Lufkin & Jenrette
Securities Corporation(4) 20,000(5)(6) * 20,000
49. ICI American Holdings Pension 5,500(6) * 5,500
50. Zeneca Holdings Pension 5,500(6) * 5,500
51. State of Delaware Retirement Fund
- Froley, Revy 13,000(6) * 13,000
52. Prim Board 20,000(6) * 20,000
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NO. OF
PREFERRED SECURITIES PREFERRED
OWNED BEFORE OFFERING SECURITIES
--------------------- OFFERED IN
NAME OF SELLING HOLDER NUMBER PERCENT(1) THE OFFERING
- -------------------------------------- --------------------- ------------
53. Starvest Discretionary 3,500(6) * 3,500
54. Oregon Equity Fund 36,200(6) * 36,200
55. Allstate Insurance Company 35,000(6) * 35,000
56. Lazard Freres & Co. LLC 40,500(6) 1.0 40,500
57. Putnam Voyager Fund 27,100(6) * 27,100
58. Putnam Convertible Income-Growth
Trust 168,000(6) 4.2 168,000
59. Putnam Balanced Retirement Fund 10,300(6) * 10,300
60. Putnam Variable Trust - Putnam VT
Voyager Fund 6,700(6) * 6,700
61. Putnam Variable Trust - Putnam New
Opportunities Fund 9,000(6) * 9,000
62. Museum of Fine Arts, Boston 3,000(6) * 3,000
63. Boston College Endowment 7,000(6) * 7,000
64. Promutual 15,500(6) * 15,500
65. Hartford Fire Insurance Company 15,000(6) * 15,000
66. Employers' Reinsurance Corporation 20,000(6) * 20,000
67. Putnam Convertible Opportunities and
Income Trust 13,450(6) * 13,450
68. New Hampshire State Retirement
System 18,500(6) * 18,500
69. Putnam New Opportunities Fund 66,800(6) 1.7 66,800
70. Robertson, Stephens & Co. LLP(2) 195,150(5)(7) 3.9 195,150
71. Donaldson, Lufkin & Jenrette
Securities Corporation(4) 20,000(5)(7) * 20,000
72. Paloma Securities L.L.C. 42,500(7) 1.1 42,500
73. Alex. Brown & Sons Incorporated(8) 5,000(7) * 5,000
74. Smith Barney, Inc. 25,000(7) * 25,000
75. Robertson, Stephens & Co. LLP(2) 46,600(5)(9) 1.2 46,600
76. Mainstay Convertible Fund 65,000(9) 1.6 65,000
77. CFW-C,L.P.(10) 50,000(9) 1.2 50,000
78. Lehman Brothers, Inc. 139,160(9) 3.5 139,160
79. Credit Suisse First Boston Corporation. 24,800(9) * 24,800
80. Prudential Securities, Inc. 10,000(9) * 10,000
81. Robertson, Stephens & Co. LLP(2) 41,500(5)(11) 1.0 41,500
82. Reliant Trading 44,874(5)(12) 1.1 44,874
83. Shepherd Trading Limited 64,726(5)(12) 1.6 64,726
84. Baird, Patrick & Co. Inc. 10,000(12) * 10,000
85. Natwest Securities Corp. 232,500(13) 5.8 232,500
86. Robertson, Stephens & Co. LLP(2) 10,100(5)(13) * 10,100
87. Bond Fund Series - Oppenheimer
Bond Fund for Growth 35,000(13) * 35,000
88. Credit Research & Trading LLC. 5,000(13) * 5,000
89. Deutsche Morgan Grenfell, Inc. 3,500 * 3,500
90. Robertson, Stephens & Co. LLP(2) 29,100(5) * 29,100
91. American Century - Twentieth Century
Heritage Fund 200,000 5.0 200,000
92. Lazard Freres & Co. LLC 20,000(5) * 20,000
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<PAGE>
- --------------------
* Represents less than one percent (1%).
(1) Percentage indicated is based upon 4,025,000 Preferred Securities
outstanding.
(2) Robertson, Stephens & Company LLC, an affiliate of Robertson, Stephens &
Co. LLP ("Robertson, Stephens") has in the past provided to the Company
and/or its affiliates investment banking and/or investment advisory
services including (i) acting as lead Initial Purchaser in the Original
Offering and the Over-Allotment Offering and (ii) acting as lead
underwriter in the Company's IPO. In each case, Robertson, Stephens has
received only customary fees in connection with the provision of such
services.
(3) The Preferred Securities held by each of these Selling Holders were
previously included in the First Prospectus Supplement dated February 6,
1997 to this Prospectus, which such First Prospectus Supplement was filed
with the Commission pursuant to Rule 424(b)(3) of the Securities Act.
Information concerning beneficial ownership of the referenced Preferred
Securities and the Selling Holders is as of February 6, 1997.
(4) Donaldson Lufkin & Jenrette Securities Corporation ("DLJ") has in the past
provided the Company and/or its affiliates investment banking and/or
investment advisory services including (i) participation in the
underwriting syndicate in the Company's IPO, (ii) acting as one of the
Initial Purchasers in the Original Offering and the Over-Allotment Offering
and (iii) acting as the exclusive agent to, and financial advisor of, the
Company in connection with the Securitization Facility. In each case, DLJ
has received only customary fees in connection with the provision of such
services. In addition, DLJ executed an agreement with the Company on
May 24, 1996 granting DLJ the right to receive an aggregate of $20 million
in payments during May, June and July of 1997 out of the amounts collected
from receivables owed to the Company by Merisel FAB under the distribution
and services agreements dated as of January 31, 1994, as amended, between
the Company and Merisel. DLJ paid the Company $15.6 million for the right
to receive these payments.
(5) Represents additional Preferred Securities not previously listed.
(6) The Preferred Securities held by each of these Selling Holders were
previously included in the Second Prospectus Supplement dated February 27,
1997 to this Prospectus, which such Second Prospectus Supplement was filed
with the Commission pursuant to Rule 424(b)(3) of the Securities Act.
Information concerning beneficial ownership of the referenced Preferred
Securities and the Selling Holders is as of February 27, 1997.
(7) The Preferred Securities held by each of these Selling Holders were
previously included in the Third Prospectus Supplement dated March 18, 1997
to this Prospectus, which such Third Prospectus Supplement was filed with
the Commission pursuant to Rule 424(b)(3) of the Securities Act.
Information concerning beneficial ownership of the referenced Preferred
Securities and the Selling Holders is as of March 18, 1997.
(8) Alex. Brown & Sons Incorporated ("AB&Sons") has in the past provided to the
Company and/or its affiliates investment banking and/or investment advisory
services including (i) participation in the underwriting syndicate in the
Company's IPO and (ii) acting as one of the Initial Purchasers in the
Original Offering and the Over-Allotment Offering. In each case, AB&Sons
received only customary fees in connection with the provision of such
services.
(9) The Preferred Securities held by each of these Selling Holders were
previously included in the Fourth Prospectus Supplement dated April 3, 1997
to this Prospectus, which such Fourth Prospectus Supplement was filed with
the Commission pursuant to Rule 424(b)(3) of the Securities Act.
Information concerning beneficial ownership of the referenced Preferred
Securities and the Selling Holders is as of April 3, 1997.
(10) Does not include 175,000 shares of the Preferred Securities held by
CFW-C,L.P. which were previously listed in the Registration Statement and
sold to CFW-C,L.P. on a registered basis.
(11) The Preferred Securities held by each of these Selling Holders were
previously included in the Fifth Prospectus Supplement dated April 10, 1997
to this Prospectus, which such Fifth Prospectus Supplement was filed with
the Commission pursuant to Rule 424(b)(3) of the Securities Act.
Information concerning beneficial ownership of the referenced Preferred
Securities and the Selling Holders is as of April 10, 1997.
(12) The Preferred Securities held by each of these Selling Holders were
previously included in the Sixth Prospectus Supplement dated April 23, 1997
to this Prospectus, which such Sixth Prospectus Supplement was filed with
the Commission pursuant to Rule 424(b)(3) of the Securities Act.
Information concerning beneficial ownership of the referenced Preferred
Securities and the Selling Holders is as of April 23, 1997.
(13) The Preferred Securities held by each of these Selling Holders were
previously included in the Seventh Prospectus Supplement dated June 10,
1997 to this Prospectus, which such Seventh Prospectus Supplement was filed
with the Commission pursuant to Rule 424(b)(3) of the Securities Act.
Information concerning beneficial ownership of the referenced Preferred
Securities and the Selling Holders is as of June 10, 1997.
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<PAGE>
The Company and the Trust have filed a Registration Statement on Form S-3
(of which this Prospectus forms a part) with the Commission in order to
register the Offered Securities in accordance with the provisions of the
Registration Rights Agreement. The Registration Rights Agreement obligated
the Company and the Trust to, among other things, file a Registration
Statement with regard to the Preferred Securities prior to December 16, 1996
and keep such Registration Statement effective until three years after the
date it was declared effective or such earlier date as all Registrable
Securities shall have been disposed of or on which all Registrable Securities
held by persons that are not affiliates of the Company or the Trust may be
sold without registration pursuant to Rule 144(k) under the Securities Act,
or any successor provision. The Selling Holders may choose to sell the
Offered Securities from time to time upon notice to the Company and the
Trust. See "Plan of Distribution."
This Prospectus may be supplemented from time to time in connection with
the addition of one or more parties to the list of Selling Holders to set
forth the name and the number of Preferred Securities beneficially owned by
such additional Selling Holder intending to sell such Preferred Securities,
and the number of Preferred Securities to be offered. The Prospectus
Supplement will also disclose whether such additional Selling Holder selling
in connection with such Prospectus Supplement has held any position or office
with, been employed by or otherwise has a material relationship with, the
Company or any of its affiliates during the three years prior to the date of
the Prospectus Supplement.
PLAN OF DISTRIBUTION
The Company will receive no proceeds from the sale of the Offered
Securities. The Offered Securities may be sold from time to time to
purchasers directly by the Selling Holders. Alternatively, the Selling
Holders may from time to time offer the Offered Securities to or through
underwriters, broker/dealers or agents, who may receive compensation in the
form of underwriting discounts, concessions or commissions from the Selling
Holders or the purchasers of such securities for whom they may act as agents.
The Selling Holders and any underwriters, broker/dealers or agents that
participate in the distribution of the Offered Securities may be deemed to be
"underwriters" within the meaning of the Securities Act and any profit on the
sale of such securities and any discounts, commissions, concessions or other
compensation received by such underwriter, broker/dealer or agent may be
deemed to be underwriting discounts and commissions under the Securities Act.
Any dealer or broker participating in any distribution of the Offered
Securities may be required to deliver a copy of this Prospectus, including
the Prospectus Supplement, to any person who purchases any of the Offered
Securities from or through such dealer or broker.
The Offered Securities may be sold from time to time in one or more
transactions at fixed prices, at the prevailing market prices at the time of
sale, at varying prices determined at the time of sale or at negotiated
prices. The sale of the Offered Securities may be effectuated in transactions
(which may involve crosses or block transactions) (i) on any national
securities exchange or quotation service on which the Offered Securities may
be listed or quoted at the time of sale, (ii) in the over-the-counter market,
(iii) in transactions otherwise than on such exchanges or in the
over-the-counter market, or (iv) through the writing and exercise of options.
At the time a particular offering of the Offered Securities is made, a
Prospectus Supplement, if required, will be distributed which will set forth
the aggregate amount of the type of Offered Securities being offered and the
terms of the Offering, including the name or names of any underwriters,
broker/dealers or agents, any discounts, commissions and other terms
constituting compensation from the Selling Holders, if any, and any
discounts, commissions or concessions allowed or reallowed to be paid to
broker/dealers, if any. In order to comply with certain states' securities
laws, if applicable, the Offered Securities will be sold in such
jurisdictions only through registered or licensed brokers or dealers. In
certain states, the Offered Securities may not be sold unless the Offered
Securities have been registered and qualify for sale in such state, or unless
an exemption from registration or qualification is available and is obtained.
The Selling Holders will be subject to applicable provisions of the
Exchange Act and rules and regulations thereunder, which provisions may limit
the timing of purchases and sales of any of the Offered Securities by the
Selling Holders. The foregoing may affect the marketability of such
securities.
Pursuant to the Registration Rights Agreement, the Company shall pay all
expenses of the registration of the Offered Securities including, without
limitation, Commission filing fees and expenses of compliance with state
securities or
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<PAGE>
"blue sky" laws; provided, however, that the Selling Holders will pay all
underwriting discounts, selling commissions and transfer taxes, if any, in
the event of an underwritten offering of the Offered Securities.
The Company and the Trust have agreed, jointly and severally, to
indemnify the Selling Holders against certain civil liabilities, including
certain liabilities under the Securities Act, and to provide such Selling
Holders with the right to contribution in connection therewith. In addition,
the Selling Holders, severally, have agreed to indemnify the Company and the
Trust against certain civil liabilities, including certain liabilities under
the Securities Act, and to provide each of them with the right to
contribution in connection therewith.
LEGAL MATTERS
The validity of the Offered Securities and certain United States Federal
income taxation matters have been passed upon for the Company and the Trust
by Arter & Hadden, Dallas, Texas.
EXPERTS
The consolidated financial statements of Vanstar Corporation included in
the Company's Annual Report on Form 10-K for the fiscal year ended April 30,
1997 incorporated herein by reference have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon incorporated
herein by reference. Such consolidated financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
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<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALES PERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE TRUST, THE SELLING HOLDERS
OR ANY OF THEIR AGENTS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN
ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN
SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
SUCH DATE.
-------------------------------
TABLE OF CONTENTS
PAGE
Available Information 2
Incorporation of Certain Documents by Reference 2
Safe Harbor Statement Under the
Private Securities Litigation Reform Act of 1995 3
Summary 4
Risk Factors 9
The Company 16
Vanstar Financing Trust 17
Recent Developments 18
Description of the Preferred Securities 18
Description of the Guarantee 34
Description of the Convertible Debentures 36
Effect of Obligations Under the Convertible Debentures and
the Guarantee 44
Certain United States Federal Income Tax Considerations 45
Certain ERISA Consideration 48
Selling Holders 48
Plan of Distribution 53
Legal Matters 54
Experts 54
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
VANSTAR FINANCING TRUST
4,025,000
6 3/4% TRUST CONVERTIBLE PREFERRED SECURITIES
(LIQUIDATION AMOUNT $50 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY,
AND CONVERTIBLE INTO COMMON STOCK OF,
VANSTAR CORPORATION
[LOGO]
DATED , 1997.
------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in connection with
the sale and distribution of the securities being registered other than
underwriting discounts and commissions. All of the amounts shown are
estimated except the Securities and Exchange Commission and NASD registration
fees.
Securities and Exchange Commission filing fee $ 67,694
NASD filing fee 22,840
Accounting fees and expenses 100,000
Legal fees and expenses (exclusive of Blue Sky) 400,000
Printing and engraving expenses 150,000
Transfer agent fees and expenses 40,000
Blue Sky fees and expenses 7,500
Rating Agency Fee 112,500
Miscellaneous 10,000
--------
Total $910,534
--------
--------
The Company will bear all of the foregoing fees and expenses.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to Section 102(b)(7) of the Delaware General Corporation Law
(the "DGCL"), Article VI of the Registrant's Restated Certificate of
Incorporation (the "Certificate of Incorporation") eliminates the liability
of the Registrant's directors to the Registrant or its stockholders, except
for liabilities related to breach of duty of loyalty, actions not in good
faith and certain other liabilities.
Section 145 of the DGCL provides for indemnification by the Registrant of
its directors and officers. In addition, Article IX, Section 1 of the
Registrant's Restated By-Laws (the "By-laws") requires the Registrant to
indemnify any current or former director or officer to the fullest extent
permitted by the DGCL. In addition, the Registrant has entered into indemnity
agreements with its directors which obligate the Registrant to indemnify such
directors to the fullest extent permitted by the DGCL. The Registrant has
also obtained officers and directors liability insurance which insures
against liabilities that officers and directors of the Registrant may incur
in such capacities.
The Declaration provides for full indemnification of any Regular Trustee,
the Delaware Trustee and the Property Trustee, any affiliate of any such
Trustee, any officers, directors, shareholders, members, partners, employees,
representatives or agents of any such Trustee and any officer, employee or
agent of the Trust or its affiliates (each an "Indemnified Person") by the
Company in connection with any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Trust) by reason of such
Indemnified Person's status as an Indemnified Person against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit
or proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Trust, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The Declaration also provides that the
Company shall indemnify, to the fullest extent permitted by law, any
Indemnified Person in connection with any threatened, pending or completed
action or suit by or in the right of the Trust by reason of such Indemnified
Person's status as an Indemnified Person against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with
the defense or settlement of such action or suit if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Trust and except that no such indemnification shall be made
in respect of any claim, issue or matter as to which such Indemnified Person
shall have been adjudged to be liable to the Trust unless the appropriate
court shall determine upon application that, despite the adjudication of
liability, such person is fairly and reasonably entitled to indemnity for
such expenses which such court shall deem
II-1
<PAGE>
proper. Further, the Declaration provides that expenses (including legal
fees) incurred by an Indemnified Person in defending any such claim, demand,
action, suit or proceeding, shall from time to time be advanced by the
Company prior to the final disposition of such claim, demand, action, suit or
proceeding upon receipt by or an undertaking by or on behalf of the
Indemnified Person to repay such amount if it shall be determined that the
Indemnified Person is not entitled to be indemnified for the underlying cause
of action as authorized by the Declaration.
The Selling Holders will be indemnified by the Company and the Trust,
jointly and severally, against certain civil liabilities, including certain
liabilities under the Securities Act or will be entitled to contribution in
connection therewith. The Company and the Trust will be indemnified by the
Selling Holders severally against certain civil liabilities, including
certain liabilities under the Securities Act or will be entitled to
contribution in connection therewith.
ITEM 16. EXHIBITS.
The following is a list of all exhibits filed as part of this
Registration Statement on Form S-3.
EXHIBIT NO. DESCRIPTION OF EXHIBITS
*4.1 Certificate of Trust of Vanstar Financing Trust
*4.2 Amended and Restated Declaration of Trust of Vanstar Financing
Trust dated as of October 2, 1996 among Jeffrey S. Rubin,
Leslie J. Alvarez, John J. Dunican, Jr. and Wilmington Trust
Company as trustees and Vanstar Corporation as sponsor
*4.3 Indenture dated as of October 2, 1996 between Vanstar Corporation
as issuer and Wilmington Trust Company as trustee
4.4 Form of 6 3/4% Preferred Securities (included as Exhibit A-1 to
Exhibit 4.2 above)
4.5 Form of 6 3/4% Convertible Subordinated Debentures Due 2016
(included as Exhibit B to Exhibit 4.2 above)
*4.6 Preferred Securities Guarantee Agreement dated October 2, 1996
between Vanstar Corporation as guarantor and Wilmington Trust
Company as preferred guarantee trustee
*5.1 Opinion of Arter & Hadden (including the consent of such firm) as
to the legality of the Vanstar Corporation Common Stock, 6 3/4%
Convertible Subordinated Debentures Due 2016, 6 3/4% Preferred
Securities and the Preferred Securities Guarantee being registered
hereby and as to certain tax matters
*8.1 Opinion of Arter & Hadden (including the consent of such firm) as
to certain tax matters (included in Exhibit 5.1 above)
**12.1 Statement re Computation of Ratio of Earnings to Fixed Charges
*23.1 Consent of Arter & Hadden (previously included as part of its
opinion filed as Exhibit 5.1 hereto)
**23.2 Consent of Ernst & Young LLP, independent auditors
*24.1 Power of Attorney (previously included on signature page hereto)
*25.1 Form T-1 Statement of Eligibility and Qualification under the
Trust Indenture Act of 1939, as amended (the Trust Indenture Act),
of Wilmington Trust Company as Trustee under the Indenture
relating to the 6 3/4% Convertible Subordinated Debentures Due
2016
*25.2 Form T-1 Statement of Eligibility under the Trust Indenture Act
of Wilmington Trust Company as Property Trustee under the Amended
and Restated Declaration of Trust
*25.3 Form T-1 Statement of Eligibility under the Trust Indenture Act of
Wilmington Trust Company as Preferred Guarantee Trustee under the
Preferred Securities Guarantee Agreement
- -----------
* Filed previously with the original submission of this Registration
Statement (then on Form S-1).
** Filed herewith.
ITEM 17. UNDERTAKINGS.
(a) RULE 415 OFFERING. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement: (i) To include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii)
To reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective
amendment thereof) which,
II-2
<PAGE>
individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement; (iii) To include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement; (2) That, for the purpose of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof; (3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) FILINGS INCORPORATING SUBSEQUENT EXCHANGE ACT DOCUMENTS BY
REFERENCE. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the Registrant's Annual Report pursuant to Section 13(a) or Section 15(d) of
the Securities Exchange Act of 1934, as amended, that is incorporated by
reference in the Registration Statement, shall be deemed to be a new
Registration Statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(h) REQUEST FOR ACCELERATION OF EFFECTIVE DATE. Insofar as
indemnification for liabilities arising out of the Securities Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by each director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Atlanta, State of Georgia, on the
28th day of August, 1997.
VANSTAR CORPORATION
By: /s/ William Y. Tauscher
------------------------------------
William Y. Tauscher
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on the 28th day of August, 1997, by the
following persons in the capacities indicated:
<TABLE>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ William Y. Tauscher
- -------------------------------- Chairman of the Board, Chief Executive Officer and
William Y. Tauscher Director (PRINCIPAL EXECUTIVE OFFICER)
/s/ Kauko Aronaho
- -------------------------------- Senior Vice President and Chief Financial Officer
Kauko Aronaho (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
/s/ Jay S. Amato*
- -------------------------------- President, Chief Operating Officer and Director
Jay S. Amato
/s/ John W. Amerman*
- -------------------------------- Director
John W. Amerman
/s/ Richard H. Bard*
- -------------------------------- Director
Richard H. Bard
/s/ Stephen W. Fillo*
- -------------------------------- Director
Stephen W. Fillo
/s/ Stewart K. P. Gross*
- -------------------------------- Director
Stewart K. P. Gross
/s/ William H. Janeway*
- -------------------------------- Director
William H. Janeway
/s/ John R. Oltman*
- -------------------------------- Director
John R. Oltman
/s/ John L. Vogelstein*
- -------------------------------- Director
John L. Vogelstein
/s/ Josh S. Weston*
- -------------------------------- Director
Josh S. Weston
*By: /s/ H. Christopher Covington
- ---------------------------------
H. Christopher Covington
ATTORNEY AND AGENT-IN-FACT
</TABLE>
II-3
<PAGE>
TRUST SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on the 28th day of August, 1997, by the
following persons in the capacities indicated:
VANSTAR FINANCING TRUST
By: /s/ Leslie J. Alvarez
-------------------------------------
Leslie J. Alvarez,
Regular Trustee
By: /s/ H. Christopher Covington
-------------------------------------
H. Christopher Covington,
Regular Trustee
II-4
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBITS
- ----------- -----------------------
*4.1 Certificate of Trust of Vanstar Financing Trust
*4.2 Amended and Restated Declaration of Trust of Vanstar Financing Trust
dated as of October 2, 1996 among Jeffrey S. Rubin, Leslie J.
Alvarez, John J. Dunican, Jr. and Wilmington Trust Company as
trustees and Vanstar Corporation as sponsor
*4.3 Indenture dated as of October 2, 1996 between Vanstar Corporation as
issuer and Wilmington Trust Company as trustee
4.4 Form of 6 3/4% Preferred Securities (included as Exhibit A-1 to
Exhibit 4.2 above)
4.5 Form of 6 3/4% Convertible Subordinated Debentures Due 2016 (included
as Exhibit B to Exhibit 4.2 above)
*4.6 Preferred Securities Guarantee Agreement dated October 2, 1996
between Vanstar Corporation as guarantor and Wilmington Trust Company
as preferred guarantee trustee
*5.1 Opinion of Arter & Hadden (including the consent of such firm) as to
the legality of the Vanstar Corporation Common Stock, 6 3/4%
Convertible Subordinated Debentures Due 2016, 6 3/4% Preferred
Securities and the Preferred Securities Guarantee being registered
hereby and as to certain tax matters
*8.1 Opinion of Arter & Hadden (including the consent of such firm) as to
certain tax matters (included in Exhibit 5.1 above)
**12.1 Statement re Computation of Ratio of Earnings to Fixed Charges
*23.1 Consent of Arter & Hadden (previously included as part of its opinion
filed as Exhibit 5.1 hereto)
**23.2 Consent of Ernst & Young LLP, independent auditors
*24.1 Power of Attorney (previously included on the signature page
hereto)
*25.1 Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939, as amended (the Trust Indenture Act), of
Wilmington Trust Company as Trustee under the Indenture relating to
the 6 3/4% Convertible Subordinated Debentures Due 2016
*25.2 Form T-1 Statement of Eligibility under the Trust Indenture Act of
Wilmington Trust Company as Property Trustee under the Amended and
Restated Declaration of Trust
*25.3 Form T-1 Statement of Eligibility under the Trust Indenture Act of
Wilmington Trust Company as Preferred Guarantee Trustee under the
Preferred Securities Guarantee Agreement
- ---------------
* Filed previously with the original submission of this Registration
Statement (then on Form S-1).
** Filed herewith.
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<PAGE>
EXHIBIT 12.1
VANSTAR CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
FISCAL YEAR SEVEN MONTHS FISCAL YEAR ENDED
ENDED ENDED APRIL 30,
SEPTEMBER 30, APRIL 30, ---------------------------
1993 1994 1995 1996 1997
------------- ------------ ------- ------- -------
<S> <C> <C> <C> <C> <C>
Earnings:
Income from continuing operations before
provisions for income taxes............ $(25,492) $(11,615) $ 2,149 $12,782 $54,903
Add:
Interest expense...................... 23,045 12,789 32,555 35,804 17,061
Portion of rents representative
of the interest factor.............. 5,067 2,900 4,733 4,600 6,467
-------- -------- ------- ------- -------
Earnings........................... $ 2,620 $ 4,074 $39,437 $53,186 $78,431
-------- -------- ------- ------- -------
-------- -------- ------- ------- -------
Fixed charges:
Interest expense......................... $ 23,045 $ 12,789 $32,555 $35,804 $17,061
Portion of rents representative
of the interest factor................. 5,067 2,900 4,733 4,600 6,467
-------- -------- ------- ------- -------
Total fixed charges................... $ 28,112 $ 15,689 $37,288 $40,404 $23,528
-------- -------- ------- ------- -------
-------- -------- ------- ------- -------
Ratio of earnings to fixed charges.......... 0.09 0.26 1.06 1.32 3.33
-------- -------- ------- ------- -------
-------- -------- ------- ------- -------
Excess (deficiency) of earnings over
fixed charges............................. $(25,492) $(11,615) $ 2,149 $12,782 $54,903
-------- -------- ------- ------- -------
-------- -------- ------- ------- -------
</TABLE>
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Post-Effective Amendment No. 1 on Form S-3 to the Registration Statement to
Form S-1 and related Prospectus of Vanstar Corporation and Vanstar Financing
Trust for the registration of 4,025,000 Trust Convertible Preferred
Securities and to the incorporation by reference therein of our reports dated
June 10, 1997 (except to Note 15, as to which the date is July 7, 1997), with
respect to the consolidated financial statements and schedule of Vanstar
Corporation included in its Annual Report (Form 10-K) for the year ended
April 30, 1997, filed with the Securities and Exchange Commission.
Ernst & Young LLP
Atlanta, Georgia
August 25, 1997
